Good morning, and welcome to HealthStream's Fourth Quarter and Full Year 2025 Earnings Conference Call. At this time, I would like to inform you that the conference is being recorded. [Operator Instructions] I would now like to 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 fourth quarter and full year 2025 results. Also on the conference call with me 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 certain non-GAAP financial measures relating to the company's past and future expected performance on this call. The most directly comparable GAAP financial metrics and reconciliations are included in the earnings release that we issued yesterday. So with that start, I'll now turn the call over to CEO, Bobby Frist.

Thank you, Mollie. Good morning, everyone, and welcome to our fourth quarter and full year 2025 earnings call. We do have a lot to talk about this morning, and there are several topics. We'll definitely cover the topic of the emerging landscape with AI. We're going to talk about our financial performance for the quarter and the full year. We'll go through some business and product updates at the end and turn it back over to you guys for questions. So nothing like the numbers first. Let's just kind of jump in. We finished the full year 2025 with revenues up 4.3% and adjusted EBITDA up 7.5% year-over-year. For the fourth quarter, revenues were up 7.4% and adjusted EBITDA was up 16.4% year-over-year. And then looking forward to 2026, probably the reason we're all on the call today, we expect HealthStream to show continued growth in each of the areas where we provide financial guidance as we anticipate revenue between $323 million and $330 million. Net income between $20.4 million and $22.8 million and adjusted EBITDA between $73 million and $77 million. These guidance ranges do 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 our rather newer career networks, which we'll 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 HealthStream is positioned relative to the emerging context of AI and which trends we think or categories of…

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. I apologize for that. We were leading up to the fourth category, which is our ecosystem. And with that, you can have a great business vertical, a great data profile or a great platform. You can even have all 3. 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. Something that AI cannot create is an ecosystem of millions of individual caregivers, like those choosing NurseGrid or myCNAjobs, 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. Combining those elements with our 30-plus years of experience and our hStream platform architecture, and 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 on the call, I want to briefly summarize our business for the benefit of anyone who's new to the HealthStream story. And this is something we do every quarter. First and foremost, keep in mind that HealthStream is a health care technology company dedicated to developing, credentialing and scheduling the health care workforce through SaaS-based applications, each of which are becoming more valuable because of the interoperability they are achieving through our hStream technology platform. We've also started to open our sales…

Hi Scotty, Mollie. By the way, sorry, I didn't realize that dropped. So I was beautifully ad libbing on the script. But thank goodness, we had such a solid script. And Mollie, you jumped right in as needed. So fantastic. I just caught the last minute of your presentation. Nice job. We're fine. But I did do a lot of great ad libbing, which maybe people were grateful. I didn't go off script, at least those that helped develop it. So thank you, Mollie. And 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 Q&A, and I'll pick it up in the last third as well. So Scotty, you're on.

All right. Sounds good. Thanks, Mollie, and thanks, Bobby, and good morning, everyone. Before going over the financial results, I want to first point out several exciting events that took place during the fourth quarter. We completed 2 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 the fourth quarter and 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 interest of those employees with our shareholders. 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 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. 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%. Earnings per share was $0.09 per share, down from $0.16 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…

Thanks, Scotty. Well, let's see. Let's pick up here with the business updates at the last third year. So I'll start off as I usually do with some core business updates that cover our learning, credentialing and scheduling application suites. And then we'll talk about the newest career network, myCNAjobs. 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 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. Customer purchases -- the customers purchased a subscription to the Competency Suite for all of their employees, which comes in an unlimited use format. Key sales of the Competency Suite during the fourth quarter include some of the nation's top health care 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 the fourth quarter were up approximately 21% over the same quarter last year, and 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. Our next largest sale came from a referral from our partner, Virsys12 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 standardize on the CredentialStream across all…

[Operator Instructions] Our first question comes from Matt Hewitt from Craig-Hallum Capital Group.

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?

It's a fair question, Matt, but we don't report margins on a per product line basis. We've talked 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. 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 of our hosting services where we keep our content and our highly engaged applications. So we generally only comment on margins, not at a product level. 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 includes the high cost of goods of royalties. And so in general, all of 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 these -- some of these core services, the cost of goods underneath them as well.

And then maybe a second question. Press release and 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. And 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. And I'm just curious, one, is that there's 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 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.

Sure. What I tried to do is just give these categories where -- I mean, the world is changing, jobs are changing, business models are going to have to adapt. And there's definitely something real here to how AI changes everything. And so we first wouldn't say there's no threat to -- 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. And I think this idea of being a system of record is an important concept to differentiate kind of long-term winners from losers. And so 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. And so 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 HealthStream platform level than 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 that's changing at a really rapid pace. And so we can't say that we're going to conquer everything, but 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 in how we build our products more efficiently. And then on this one dimension, and 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 I apologize for that, Matt. 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. 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 one under assault.

Our next question comes from Constantine Davides from Citizens.

Maybe, Bobby, just a question on career network, that strategy. With something like myClinicalExchange that you've owned now for 5 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, sure. So 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's around $2 million we bought it. It's pushing over $6 million or $7 million now. And so 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 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. 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 their rotations were properly addressing their career opportunities and say, "Hey, we see you're doing your rotation in a hospital. We'd love for you to take a full-time job with us when you graduate. And so in other words, there's a huge disconnect between the hospital operations and the clinical student doing a rotation at that hospital. And so what we did was we built a little widget that goes on a product called MyTeam, where all the managers are in our network. And so we have this application that's broadly used by managers. And we were able to tell them that today, 3 students were doing rotations on the second floor of their hospital, and they'll be there the next 5 hours, and here's their names and their backgrounds, go say hi to them. And so we're able to directly connect these clinical rotating students that was kind of there as a previously almost a side…

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? And 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?

Yes. When we look at classifying legacy revenues, they are true legacy revenues, meaning they're on applications that we're no longer selling. And they're maintained and we allow our customers to renew on them. And they -- but we don't carry a quote on them. We don't sell them. And so they're effectively -- they maintain that legacy status. But they're supported. They're beloved applications. We do our best to keep customers happy on them until they decide to 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 in credentialing has been surpassed by the go-forward CredentialStream application. 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 are 2 or 3, they're now less than the revenue from CredentialStream. And that is also true in our scheduling business, where all the legacy businesses combined are less than the go-forward growing ShiftWizard revenue stream. And so we now have the majority of our work 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 going to go ahead and do it. Overall, our legacy revenues across the company and remember, 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 and year. So this revenue stream could continue for a long time until it's either transitioned or lost. But approximately -- a little less -- around about 10%…

Our next question comes from Ryan Daniels from William Blair.

Bobby, thanks for all the conversation on AI. I 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 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 more of that proprietary data such that you can withstand any future AI headwinds?

It certainly does. Super exciting. As I mentioned, AI is one of the 10 core elements of our platform that we're developing. And so 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. And several exciting products, enhancements, extensions where we're deploying capital are underway now. And 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. And specifically as it relates to data, we really are focused on trying to identify catalog, manage. And so investments are increasing in the area of kind of data management, data classification, 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 tenets 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 data relevant to each other through the hStream ID, another core tenet of the platform is critical. So 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. And I think in all cases, there's an increased emphasis and awareness of that from our Board to our operators.

And then maybe another one just on the AI marketplace. Again, very rational conversation of why you're relatively well positioned. But I'm curious, if you talk to your sales team, 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 CTOs kind of look at all the potential AI solutions out there? Or is it generally still business as usual on your sales cadence?

Well, let's see. I would characterize our fourth quarter as exceptionally strong. In some areas, it was just fantastic. And 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. And there are several of our products that are doing really well that are a complicated blend of SaaS technology, data and benchmarking, reporting capabilities, physical. In this case, the Internet connects to these physical manikins that evaluate the skill and then branded high-quality scientifically valid content. And so in that case, we're seeing that product growing very nicely and well positioned for continued growth. So in the fourth quarter, we saw wins in each of these areas, including things like our American Red Cross Resuscitation Suite, but 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 the fourth quarter. So I think there's hesitancy in thinking through all this, 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. I think there's more and more potential every quarter for us to position as a core consolidation platform. 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 of more ecology-like behavior than point solution or SaaS workflow behavior that we're seeing. So I hope that gives a little bit more color on it. Overall, I believe there's a tremendous amount of change coming to all businesses to almost all workforces. But on these 4 or 5 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.

Our next question comes from John Pinney from Canaccord Genuity.

Yes. This is Richard Close. Just a quick question, maybe a housekeeping, Scotty, to begin with. We jumped on late. And just curious whether you gave the acquisition contribution Virsys12 and MissionCare for the fourth quarter. And then just to clarify, you said $13 million from the acquisitions in the '26 guidance?

Yes. So the -- I guess the fourth quarter impact for both acquisitions combined was $1.6 million. And then you're correct on the full year guide was $13 million.

And then, Bobby, maybe just on the AI front to continue to go down that rabbit hole. I'm just curious if you can provide some examples in terms of how you guys are integrating Gen AI, agentic AI and into various offerings that you have. Again, I apologize, we got on late, if we missed that.

Yes. I think that road map will unfold in more detail over the course of the year. But needless to say, every one of our products has an AI road map. and really interesting and fascinating projects underway to take advantage of the benefits that we would expect from AI. And so the workflows are being 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-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. And I think we'll let that road map unfold over the course of the year. But every product manager is required to have an AI framework and an AI road map and all of our developers are now using AI. And many of you probably follow this in the last 30 days, there 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 tools. So there's an 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 hStream platform, AI is one of the 10, 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's going to impact workflows and applications. And so I hope -- I don't know I just have to give a generic answer now that it's in our road maps. 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 categories of impacts kind of are we better positioned or less better positioned to take advantage of the changes coming.

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

Yes. There's a lot of dimension to that. One is the CIOs of the country at these health systems are tired of having 400 point solutions. And so 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. And this is true. If you ask a CIO of a health system, 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 1 of the 3 big ones. ERP would be another. And then they have 500 point solutions. So 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. And 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 solutions like scheduling, credentialing and learning and make them interoperable. And then we're bringing this other dimension, which is the second point is which problems are you solving for me? And 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. And 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 is a ready-to-work 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 the recruiting of nurses. And so our dialogue isn't so much about just whether your budget of AI is going to shift, 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. So I tend to lean into those. 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. And so again, we just stick to the fundamentals of providing value to our customers on that journey. And then we can show how AI will facilitate those workflows.

So would you characterize the environment as not necessarily clients or potential clients being distracted by AI that they're still focused on these key areas of business improvement?

I think the smart ones are. I don't know how to say it the other way. I mean, yes, I mean, obviously, even just through this call, everyone is trying to understand the implications and impact of AI. And HealthStream is in that group, all the CIOs we talk to are in that group. So yes, it's 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, well, what is our cost of finding and developing a talented workforce and retaining them at the expense of our competitors. How do 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 HealthStream, including the unique dimensions like our career networks bring value to that equation. So 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. 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 patients business as is surgery. And here, I think AI is kind of an augmentation process instead of an automation or replacement. Now 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. But at its core, as I mentioned earlier, the nursing workforce is expected to grow. And I think they're going to grow and be more human through the use of AI. And those are the things that we talk to our customers about.

Our next question comes from Vincent Colicchio from Barrington Research.

Yes. 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?

Vince, it's so good that it took us about 3 years to put escalators in place. And we know it was kind of an industry norm. We had always focused on our negotiations around volume, commitment and term. 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 4 or 5 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 3 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 3- to 5-year contracts, that means, let's say, on average, every 4 years, a contract. Every 3.5 years of contract comes up for renewal. And then the escalator takes effect on the second year of the renewal, right? Because it comes in year 1 and then year 2. So 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. But it's underway and every renewal includes an escalator.

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

Thank you, everyone. I apologize for -- I was kind of head down and thinking about what I wanted to say, and I was telling this big story about AI. And I realized I looked up and my iPad had timed out. And I think Mollie Condra stepped in. Mollie, 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 contributions of 1,100 HealthStreamers in achieving these results. And 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.

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