HealthStream Q3 2024 Earnings Call Transcript

Quartr
Provided by Quartr
October 22, 2024

There are 9 speakers on the call.

Operator

Good morning, and welcome to Hillstream's Third Quarter 2024 Earnings Conference Call. At this time, I would like to inform you that this conference is being recorded and that all participants are in a listen only mode. At the request of the company, we will open the conference up for questions and answers after the presentation. I will now turn the conference over to Mollie Condra, Vice President, Investor Relations and Communications. Please go ahead, Ms.

Operator

Condra.

Speaker 1

Thank you, and good morning. Thank you for joining us today to discuss our quarter 2024 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.

Speaker 1

Information concerning these risks and other factors that could cause the results to differ from those forward looking statements are K-six filings with the SEC, including Forms 10 ks, 10 Q and our earnings release. Our regulatory measures mentioned adjusted EBITDA, which is a non GAAP financial measure. A table providing supplemental information on adjusted EBITDA and reconciling to net income attributable to HealthStream is included in the earnings release that we issued yesterday and may refer to in this call. So at this time, I'll turn the call over to CEO, Bobby Frist.

Speaker 2

Thank you, Molly. Good morning, everyone, and welcome to our Q3 2024 earnings call. We have a lot to cover today, and I'll just jump right in. We'll start with some basic financials. I'm pleased to report in the Q3, our financial performance showed year over year increases in each of the major categories we highlight in our earnings release.

Speaker 2

We delivered record quarterly revenues of $73,100,000 and record quarterly adjusted EBITDA of $17,700,000 Moreover, we're seeing strong sales pipelines on credential stream and our credentialing in credentialing, ShiftWizard in scheduling and on our new reporting and analytics and API related products that bolster our market leading health stream learning center. And so in that third one there, I'll talk a little bit about an exciting product rollout that's happening right now. We're also gaining traction in new markets, including the nursing school market, which is, we talk about these 2 communities that we're operating now that are growing. 1 is for students and 1 is for nurses. And we'll talk a little bit about both of those here in a few minutes.

Speaker 2

So in addition to the 3 core applications, we're operating and growing 2 growing communities, one for students and one for nurses. We'll talk about those a bit later. I'm excited about our ongoing progress towards the key development milestones in our hStream platforms. This underlying technology that we put quite a bit of time and capital into is starting to manifest, which ensures interoperability between and among our 3 primary application suites and now our 2 communities and one of the 2 communities actually a thriving social network. So we'll talk about that as well.

Speaker 2

As we kick off the call, I do want to go kind of back to the basics and summarize the basic business model for the benefit of anyone who's new to the HealthStream story. 1st and foremost, HealthStream is a healthcare technology company dedicated to developing, credentialing and scheduling the healthcare workforce through SaaS based solutions, each of which are becoming more valuable, we believe, because of the interoperability they are achieving through the hStream technology platform that we've been talking about now for a few years. 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. As I just mentioned, we have also started to open our sales channels directly to healthcare professionals and nursing students across the continuum of healthcare training.

Speaker 2

We are profitable. We have no interest bearing debt and a strong cash balance of $94,900,000 We are solely focused on healthcare and more specifically the healthcare workforce. The 12,300,000 healthcare professionals and nursing students in the United States comprise the core total addressable market for our SaaS solutions. Before turning it over to Scotty, our CFO, and having a more detailed financial discussion, I do want to highlight some of the successes we've achieved in each of our learning, credentialing and scheduling application suites during the quarter. Let's start with the learning application suite first, where our HealthStream Learning Center is the application that is the flagship product of this suite.

Speaker 2

And I want to highlight a key product launch that's happening, as I mentioned, right, kind of as we speak. In the last few weeks, we've started to roll it out. And that the name of that application is our Insights Plus solution. We have rebuilt our data reporting and analytics technology stack on leading technologies including Snowflake and Sigma. We have used those technologies to build Insights Plus, which is an upgrade to our base reporting tool for learning data.

Speaker 2

Learning data is one of the most critical assets we provide back to our customers and our aging architecture on reporting was something that was we needed to refresh. So today we're announcing after nearly 2 years of development, the launch of our Insights Plus reporting and new technology stacks. We're really excited about it as they roll out today. Insights Plus provides customers with an expanded and enhanced experience, including analytics tools focused on measuring the impact of their learning initiatives. Insights Plus has now replaced 2 legacy solutions, learning analytics and initiative management dashboard.

Speaker 2

Our customers' response to Insights Plus has been very positive with just over $2,000,000 in bookings in the 1st 3 quarters of the year. So we are obviously advanced positioning it and demoing along the way and now we're in the rollout phase. Customers are receiving the applications, the Insights Plus applications as we speak. And so this pipeline I mentioned is nearly 6 times the bookings for the predecessor products that we just talked about in the same period last year and 4 times our bookings budget for the FY 2024. So an area to highlight, it's exciting.

Speaker 2

We've talked a lot about how the development of the hStream platform could play into growth opportunities. And in the last 3 weeks, we're now able to start executing on a pipeline for our brand new analytics and reporting tool sets, which is an area that we're exciting to now announce as cutting edge for the market, market leading and helps modernize our suite of learning tool sets. So we're really excited about watching that roll out. And somewhat related, I want to talk about an update on customer adoption of our developer portal and APIs, specifically in this case, our learning API, which is a very robust and deep learning API, which essentially is able to emulate all the functions or many of the key functions of our learning management system, the HealthStream Learning Center. So this API, we're excited to say our customers are increasingly using the learning API to integrate our learning tools with their mission critical workflows.

Speaker 2

The number of customer organizations accessing the developer portal more than doubled over the last 12 months and a number of third party developers nearly doubled as well. More importantly, the number of integrations customers have built and put into production has nearly tripled. And so again, we've talked a lot about this hStream platform and the front door to the platform is the developer portal. And activity in the developer portal, as I just reported, continues to surge. And this means that the integration capabilities and interoperability we've been talking about is a key kind of strategic development for us.

Speaker 2

A great example that kind of pulls both of these things together is a large East Coast customer, which was renewing its HealthStream Learning Center contract in the last few quarters. And during that renewal, they add actually the 3rd quarter. They added Insights Plus to the contract renewal as well as some other additional products. The same customer has also built integrations to their ERP, their EHR and to HealthStream using the learning API we talked about. So this customer is kind of going deep using the tool sets of the hStream platform through accessing the developer portal.

Speaker 2

Financially, one of the integrations that they've done involves an automating training on and activation on their EHR. And so we're beginning to see the workflows of our learning system now kind of integrate with and interoperate with, in their case, their own EHR. Financially, the annual recurring revenue from this renewal increased 29% from approximately 1,760,000 dollars to approximately $2,270,000 So the renewal was very effective. Not only did they renew the base products, they added the Insights Plus and a few other products on renewal and of course extended the term and so we're excited to see a 29% growth in that customer. And some of that growth is attributable to this brand new product announcement, Insights Plus.

Speaker 2

And so this is just a good measure of expanding wallet share and an existing customer base on our learning application suite. So we're really excited and watching a customer dive in a little deeper and access the integration tool sets of the hStream platform. So the insights that they're gaining into their applications and into their learning initiatives are really exciting to us. Along the way, of course, they grew, so they added approximately 13,000 users to their base contract, which puts them well over 100,000 subscribers on our network, which is, again super exciting. It's a 5 year agreement.

Speaker 2

And importantly, for those who listen closely, we're beginning to roll out pricing escalators annual into our contracts to build in a little bit of base growth over time. And historically, I think you know the analysts on the call in a way that, that wasn't a strength of ours. We had always kind of kept pricing relatively flat. But in the last couple of quarters on renewals, we've been inserting pricing escalators in the contracts like most software companies do. And so in this 5 year agreement, it includes an annual 2.5% pricing escalator.

Speaker 2

And I know again, I think we reported we were 1% or 2% deployed on pricing escalators. As the year rolls on, every renewal, we are trying to insert them and with great success. But watch for that impact over a 3 year period as we add this kind of base type of growth into our agreements, which is exciting. Let's move on to the credentialing application suite because there are equally exciting things happening there. Revenues from sales of credential stream grew 34% over the Q3 last year.

Speaker 2

So again, the go forward SaaS application, that we're so excited about is it grew 34% over the Q3 of last year. And that included sales from new customers and customers who are migrating from legacy applications, some of the acquired companies that help us build our credential stream application suite and our customer base. Some of the health organizations who contracted for CredentialStream for their entire enterprise in the Q3 include UPMC, Sutter Health, University of Virginia Health System. So 3 really recognizable systems, either upgrading from legacy systems or new to HealthStream on the credential stream application suite. Really excited to see that motion and all during the Q3.

Speaker 2

On September 30, we issued a press release announcing 3 new and exciting developments in credentialing. So again, we talk a lot about CapEx efficiency and deployment. It's just fun to be in this period now throughout the Q4 and Q1 where we're launching a lot of the capital expenditure we made to build products. We're beginning to launch those capabilities into the market. So it's a rewarding time for us because a lot of these are long arm investments that have taken 24 months to build up and launch.

Speaker 2

So the announcements that were in the program, I'm going to kind of rattle through those real quick. In recognition of our innovative and differentiated approach to privileging, our privileged solution recently received a noteworthy patent. So we're kind of excited to see our intellectual property and our insights into the industry, no pun intended, but our insights began to manifest in unique products and in this case another additional patent. I think we have over a dozen patents now and a growing library because we feel we're delivering unique value into the market. 2nd, we announced that our hStream for credentialing package, remember each time a customer buys the application suite, they also purchase a subscription to the platform value bundle that we call hStream for credentialing.

Speaker 2

And that package now includes a wallet of pre validated provider data called provider portfolio. More on that later, but that means basically that providers who use credential stream no longer have to enter or validate a number of their credentials as those credentials are already prepopulated when the provider accesses his or her provider portfolio. So this new provider portfolio capability is kind of new to our network and it's going to reduce the credentialing processing workflows by having this pre populated, pre validated data on every provider in the country. So really excited about provider portfolio. Again, another one of those things that we're bringing to market now and just announced recently in a press release.

Speaker 2

This saves time and effort for the provider and the credentialing department alike. It just works both ways. We're really excited how it brings benefit. Finally, we introduced the integration. It's called My Learning feature in Credential Stream that now integrates with the HealthStream Learning Center.

Speaker 2

And so we just opened this discussion talking about our enterprise application, the HealthStream Learning Center. And now we're seeing some actual benefit between learning and credentialing application suites, which is really great. So this My Learning feature, this is a prime example of our ecosystem at work and we plan to begin offering into the provider credentialing workflow in order to meet them where they are. This allows us to notify physicians, for example, when they're in the physician hub that they have required learning that used to exist solely over in the learning application suite. And so now the 2 applications work together to streamline workflows and maybe letting a physician know they have some mandatory onboarding training with their new physician to that organization.

Speaker 2

And so this interoperability is beginning to be more demonstrable to customers. So those were our three announcements that we announced at a really big conference. And I think it's the NAMS conference, and we're excited to bring those out to market here all at one time. And then another thing happened that was great during the quarter. In the Q3 let's see.

Speaker 2

In the Q3, I was going to jump over now to the ShiftWizard application, and I'll wrap up this portion by kind of highlighting some activity in the ShiftWizard area. In the Q3, revenues from ShiftWizard grew 17% over the prior year quarter. Examples of new healthcare organizations that contracted for ShiftWizard in the Q3 include Grady Health System and Memorial Health, which were both competitive takeouts. So we're excited to see again competitive takeouts, meaning we're being chosen in the competitive landscape over the available options in the market. We're excited to announce that in Q3, ShiftWizard was recognized by Workday as the 1st and only healthcare scheduling solution that is certified integration partner and a gold tier innovation partner of Workday.

Speaker 2

So we're excited to have that announcement in the market. It shows how our applications sit alongside some of the bigger ERPs and how we are, again, working on capabilities like interoperability or in this case, just a really good partnership to take these unique solutions to market. So excited to further our relationship with Workday through this certified integration partner and gold tier innovation partner that we now have standing for. Finally, in Q3, we saw unprecedented growth in customer reviews for ShiftWizard on the Capterra site. So if you want to know what people think about ShiftWizard, our product, you can go to Capterra and check it out.

Speaker 2

And if you take the time to review some of these, you'll quickly understand why we're so excited about the future of ShiftWizard. So the consumer and customer reviews of our ShiftWizard application are rolling in and they're exciting to see the feedback on these advances in our products and technologies. I think I hit everything I wanted to in the opening here. I skipped a little bit around in the planned script, so I hope that was still useful. I'll turn it over to Scotty Roberts now to go into a deep dive on the financials.

Speaker 2

Scotty?

Speaker 3

All right. Thanks, Bobby, and good morning, everybody. So let's begin with the financial highlights for the Q3, and then after that, I'll go over the updated financial expectations as we head into the final quarter of the year. Unless otherwise noted, the comparisons will be against the same period of last year. Revenues for the quarter were $73,100,000 and they were up 3.9%.

Speaker 3

Operating income was $6,500,000 which was up 33.6%. Net income was $5,700,000 and it was up 48 percent. Our earnings per share was $0.19 per share, which is up from $0.13 per share. And adjusted EBITDA was $17,700,000 and it was up 9%. Revenues increased by $2,800,000 or 3.9 percent coming in at $73,100,000 compared to $70,300,000 in last year's Q3.

Speaker 3

Revenues from our subscription products accounted for 96% of total revenues and were $69,900,000 increasing by $2,500,000 or 3.6 percent and professional services revenues were $3,200,000 and increased by $300,000 or 10.8 percent. Subscription revenue growth was led by a variety of our innovative solutions, such as Credential Stream with 34% growth, ShiftWizard with 17% growth, our Stable solution with 38% growth and the DEA Mate course, a new solution that we launched in Q4 of last year. Growth in these products, among others, helped overcome some declines of our legacy products such as the AnSauce product suite, Echo and MSOW, which are often on premises as opposed to SaaS solutions. Taken together, the products I just mentioned, along with Quality Manager, resulted in 3rd quarter revenue declines of approximately $2,000,000 compared to the prior year Q3. Finally, revenues from professional services included approximately $400,000 from a one time payment associated with a customer acquisition.

Speaker 3

Our remaining performance obligations were $549,000,000 as of the end of the quarter compared to $511,000,000 for the same period of last year, and we expect approximately 43% of the revenue backlog to be converted over the next 12 months. Gross margin was 66.5 percent for both the current quarter and the prior year quarter. Our cloud hosting and software costs contributed most of the increase in cost of revenues over the prior year quarter, and growth in these two areas reflect investments in our technology infrastructure, including the hStream platform as well as some other solutions that were moving from data centers to the cloud. Operating expenses, excluding cost of revenues, increased by 0 point 6% and most of this year over year increase was from product development, which was up 11% and sales and marketing, which was up 1.8%. G and A costs declined by 9% and depreciation and amortization declined by 3.2%.

Speaker 3

And both of these declines primarily resulted from the recovery of sales taxes that we paid in prior years. The impact on G and A was a reduction of expense of approximately 400,000 dollars and a reduction of depreciation and amortization expense of approximately $200,000 These are non recurring transactions that positively benefited the 3rd quarter. Adjusted EBITDA, as I mentioned earlier, came in at $17,700,000 which was up 9%, and adjusted EBITDA margin was 24.2% compared to 23.1% last year. Now let's move over to our balance sheet metrics. We ended the quarter with cash and investment balances of $94,900,000 which is up from $83,000,000 last quarter.

Speaker 3

During the quarter, we deployed $6,800,000 for capital expenditures and paid $900,000 to shareholders through our dividend program. We also made $1,500,000 of income tax payments in the quarter. Our days sales outstanding improved to 37 days compared to 43 days last year. Year to date, our cash flows from operations were down 7.3 percent or $3,700,000 from the prior year coming in at $46,500,000 compared to $50,200,000 last year. And free cash flows were down 12.4 percent or $3,600,000 and were $25,200,000 compared to $28,800,000 last year.

Speaker 3

And the primary reason for the decline in both cash flows from operations and free cash flows resulted from about $3,600,000 more of income tax payments compared to the prior year. Our balance sheet remains strong with $94,900,000 of cash and no debt, providing us with several options to strategically deploy available capital to improve shareholder value. So let me take a moment here to describe our capital allocation approach and how we prioritize our use of capital. Our utmost priority is making organic investments back into the business, which is evident by our annual capital expenditure and R and D plans. The second is pursuing acquisition opportunities, which we have a long track record of executing.

Speaker 3

Third is returning a portion of our profits back to shareholders in the form of cash dividends. And our 4th priority is that our Board may authorize share repurchase programs, which we also have a successful track record of executing. From an M and A perspective, we maintain an active pipeline and we continue to evaluate opportunities that fit our criteria, which include industry, product and financial among others. And while the M and A markets in healthcare technology have been slower than usual over the past 18 months, we expect to see them begin to pick back up in the next 12 months. In respect to our dividend program, yesterday, our Board of Directors declared a quarterly cash dividend of 0.28 percent $0.08 per share to be paid in November.

Speaker 3

We currently do not have an active share repurchase program in place, though our Board continues to evaluate such programs as it deems appropriate. Now moving on to guidance. In our earnings release yesterday, we provided updated financial expectations for revenues, net income and adjusted EBITDA. We now expect consolidated revenues to range between $290,000,000 $292,000,000 We expect net income to range between $18,500,000 $19,500,000 and for adjusted EBITDA to range between 66 $1,000,000 $67,500,000 and we still expect capital expenditures to range between $28,000,000 $30,000,000

Speaker 1

As

Speaker 3

a reminder, this guidance does not include assumptions for any acquisitions that we may complete during the remainder of the year. As noted during our call last quarter, we expect the revenues to be around the lower end of the range or about $292,000,000 for the year, but we've revised our full year range to potentially come in a little lower than that, probably about around $1,000,000 or so lower. One of the primary reasons influencing a revised forecast is one that we discussed last quarter as well. We have a larger customer that is billed based on consumption of certain content, and this customer had a lag in consumption during the Q2, We expected that they would not only return to their normal rate of consumption in the second half of the year, but the customer would accelerate beyond their normal consumption rate in order to catch up from the 2nd quarter lag. And while we're pleased that the customer's consumption rate has now returned to a more normal level, their consumption did not accelerate above the normal level as we had been expecting.

Speaker 3

And for this reason, we're now estimating revenue to come in a little lower than we previously projected for the year. We also believe that we're well positioned for adjusted EBITDA to come in favorably, which is why we've raised the midpoint and narrowed the range to now be between $66,000,000 $67,500,000 Well, guys, that concludes my comments for this quarter's call. Thanks for your time as usual, and I'll now turn it over to Bobby for some additional updates.

Speaker 2

Thank you, Scotty. I'm going to dive into a few more areas and turn it over to questions. I want to start by reminding everyone that our hStream technology platform is the center of our platform as a service strategy. Increasingly, our own application suites are being powered at the platform level by hStream, and third parties are beginning to use our platform and its growing set of APIs to build or enhance their own solutions. Each of our subscription based core applications in learning, credentialing and scheduling is provided to customers via the hStream platform.

Speaker 2

Additionally, an hStream membership package that comes in the form of a subscription and is tailored to each of the 3 core application suites is concurrently purchased with the respective products, and we talked about it earlier. We call each of these packages, for example, hStream for learning, hStream for credentialing and hStream for scheduling. Each of these subscription products provide customers access to the hStream platform and it's a defined access, which APIs they get, for example, and exclusive applications, services, content and other benefits that comes with that value package. And I think each quarter we're just getting a little better at putting value into those value bundles. Last quarter we shared the news that our credentialing business is expanding to address the health plan market.

Speaker 2

And I'm proud to share that our growing momentum and positive market receptivity in that area. First, we officially announced our solution, Network by HealthStream, at the NAMS conference in late September. Our news plus our marketing efforts at NAMS helped us quickly generate a pipeline of opportunities at more than 3 dozen organizations. We expect that several of the opportunities will convert into sales over the next few months. Secondly, we formally partnered with the Verasys Corporation.

Speaker 2

There's a large footprint in the health plan market segment. The rationale behind this exciting partnership is to bring to market an innovative solution that is specifically tailored for health plans. Many health plans want a SaaS solution to manage their network provider data, but they also want to outsource the actual credentialing work. We believe that only the combined network by HealthStream that we talked about plus the Verus' solution can seamlessly fulfill both of these needs for health plans with 25,000, 50000 or more network members. So again, we think we're really well positioned with our new network by HealthStream product set and our new partnership announced recently with Verus' 3rd, we've built the industry's 1st marketplace of CVO services, service providers for health plans.

Speaker 2

Our CVO marketplace is launching with 2 initial members, the HealthStream CVO, we have a very small built in CVO, credential verification organization, and Verisys for large health plans. And so we have built into our marketplace the first two members are our own CVO and Verisys. We expect this marketplace to grow by adding both CVO members as well as customers in the quarters ahead. I also want to note that we've built a data portability feature within network by HealthStream, which from which health plans can send provider data via one click to the marketplace and the applicable marketplace member can send the verified information back the health plan's credential stream system. This unique data exchange is enabled by the hStream platform.

Speaker 2

Now let's move to our direct to professional and pre professional markets. I mentioned that we're managing these growing communities. One is actually a true social network and the other is semi social, but it's more of a community of students and a community of nurses. And so I want to talk a little bit about each of those. Our market expansion strategy over the last 18 months has included selling directly to end users like nurses, physicians or nursing students.

Speaker 2

And so that's kind of an expansion of our selling model. One of the ways we reach individual nurses is through our NurseGrid app, which has the NurseGrid learn capabilities. And again, this is a great example of using our platform technologies to learn API that we talked about to power essentially a little learning store in NurseGrid, the app. And so it's the learning NurseGrid app is now linked to a commerce enabled learning store called NurseGrid Learn. And as a reminder, NurseGrid is the number one most popular app for nurses based on ratings and downloads in the Apple Store, period.

Speaker 2

It now has over 600,000 monthly active users, and it is truly a growing and thriving social network. We think it's the largest social network for nurses on the planet, or at least in the United States. And it's growing at a very good clip since we acquired it where we started with about 180,000 monthly active users, it's grown to 600,000 monthly active users. Look for some exciting announcements around NurseGrid. But NurseGrid Learn was one of the first efforts to provide value to those nurses in that growing social network and it's doing quite well.

Speaker 2

In fact, through the NurseGrid Learn channel, we started to monetize the NurseGrid audience in a way that we think helps the nurses and also helps us generate financial opportunities. So we're excited about that. In the Q3 of 2024, e commerce sales through the NurseGrid Learn channel increased approximately 117% over the prior year quarter. And I'll give you an example product that is being provided through the NurseGrid Learn channel that historically was only sold B2B. So an example of this is our expanded ability to sell the STABLE program.

Speaker 2

The program is named STABLE is sold to individual nurses and it's a neonatal education program created by our partner Doctor. Chris Carlson. And it's a world renowned program for neonatal care. Prior to this year, our sales and marketing efforts for the STABLE program were focused on business to business sales and healthcare organizations essentially directly and only. The NurseGrid Learn and NurseGrid App, we now have expanded our reach by marketing STABL to individual nurses whose area of specialty aligns with those critical life saving knowledge and skills for sick infants.

Speaker 2

We believe it's a good example of how content we previously sold only through B2B channels is now finding an individual audience of purchasers as well. In the later part of 2023, we launched an initiative to begin selling directly to nursing students and nursing schools. Our application called My Clinical Exchange provides particularly useful gateway within HealthStream's ecosystem to reach nursing students as they seek to fulfill their clinical rotation requirements to graduate from nursing school. You can think of My Clinical Exchange as a bridge between students, their schools and the hospitals that host them for the rotations. Each of these groups uses My Clinical Exchange application to identify, schedule and manage clinical rotations, including facilitating important credentialing and onboarding functions for those students.

Speaker 2

Year to date, My Clinical Exchange students have either completed or scheduled over 285,000 clinical rotations. Every student who takes rotation through My Clinical Exchange becomes an individual member within HealthStream's ecosystem. Q3 2024 revenues from My Clinical Exchange were up 11% over the same period last year. We believe that both sets of healthcare professionals and nursing students will reap many benefits from accessing HealthStream directly throughout their careers, which is now made possible with our e commerce enabled hStream platform enabling capabilities like we've just talked about inside of My Clinical Exchange and NurseGrid, the social phenomena app. So, kind of we'll summarize by saying that if you're interested as an investor in a profitable, highly recurring revenue SaaS pass healthcare technology company that expect to deliver steady growth and is determined to share some of those gains directly to shareholders in the form of a dividend, maybe HealthStream is a company for you guys to look at.

Speaker 2

That's my sales pitch and I'm sticking to it. We're excited about the accomplishments of our team. And I want to tell you just a little bit about our culture here by telling about our streaming good value that we so much work into our fabric of our company, both in our attempts to assist in education during COVID nationally, our attempts to facilitate learning and development during the horrible hurricanes where we provided ongoing access to materials and information. We're living our streaming good value throughout our employee base. And in fact, each year we select a charitable organization to support as a company.

Speaker 2

And right now, 1100 employees are supporting the Alzheimer's Association for this year. And our recent HealthStream Olympics Challenge, we raised over $22,000 to fight Alzheimer's and other forms of dementia. We're honored to join thousands of others nationwide who are committed to this worthy goal. And I'm really proud of our 1100 HealthStreamers for living that value of streaming good. So we work into our fabric, both our innovation, the new market releases, our customer service and our focus on these charitable efforts to help make everything a little bit better.

Speaker 2

And I'm really proud of our accomplishments during the quarter. Thank you to HealthStreamers listening. Our analysts will now turn it over for Q and A to get the Q and A session started.

Operator

Thank you, sir. The question and answer session will begin at this time. And our first question is going to come from the line of Matt Hewitt with Craig Hallum. Your line is open. Please go ahead.

Speaker 4

Good morning and thank you for taking the questions. Maybe first up on the top line with revenue growth particularly. Your 3 year kind of objectives that you've rolled out previously have talked about getting to 7% to 10% growth with the new accelerators on the pricing side that's going to add a little bit of a goose to the top line. But what else could you do or what else do you see that could drive a little bit faster growth on the revenue side?

Speaker 2

Yes. Let me break down those objectives first and then comment on each of them. So the first was in that 3 year objective when we disclosed that as an objective in I think November of 2022 at Investor Day. And by the way, we're going to try to target another Investor Day early next year, probably in late January, early February. But we'll work on that announcement later.

Speaker 2

But in that meeting in November 2022, we did announce growth targeting 7%, 10%. But here's the breakdown. It was 5% to 7% organic. And it looks like this year we're going to come in around 4%. So we're right within striking distance to the bottom of that range and of course we'd love to be at the top of the range.

Speaker 2

But if you think of the organic growth profile we've been able to deliver, it looks like we'll wrap up this year around 4%, factoring in our new guidance we just issued. And so we're right within striking business that goal. We haven't quite hit it. We've hit it a couple of times in a few quarters since that announcement, but blended again this year we're looking at right about 4%. And you can hear all the excitement about the new products.

Speaker 2

So the answer is how can we do better is continue gaining traction with all these new products and some of these are brand new products like the Insights Plus application that we just talked about generating new revenue. And so as exciting all those are is like, well, why isn't the growth rate higher? And the answer is when you look inside, a lot of the ways we've built our market share is through acquisitions and sometimes we inherit legacy application suites. And we've addressed some of these that are more material like the ANSOS legacy application suite. And in general, we need to preserve those customers as customers and migrate them to our newer applications as we can.

Speaker 2

But occasionally, we struggle with that and we have to work through it. And so and then offset to Scottie just mentioned about $2,000,000 of our growth was negative growth from loss and attrition in some of those legacy applications to the market, so to competitors. Look, this is a ferociously competitive environment. We have dozens of competitors and talk about them and everyone's fighting for share. And we think on our new products, we're getting more than our fair share of our share and there's many new products to come.

Speaker 2

But we also work through these legacy issues. So we'll work on both sides of this equation, which is to reduce the attrition in these legacy applications. If we could reduce it by a little bit, our growth rate would pop up and continue launching new products as you've heard today and working in pricing escalators as you've heard today. And you hear that the core and the most important thing is the core go forward applications, CredentialStream, ShiftWizard, HealthStream Learning Center powered by things like Insights Plus and its family of products are picking up share and had really good year over year quarterly growth rate. So we'll hold to that.

Speaker 2

We'll try to reduce attrition and then hopefully that will bleed through a little better growth rates in the future. But looks like we'll wrap this year at about 4% and kick off some really good free cash flows and cash flows for the year.

Speaker 4

That's super helpful. Thanks, Bobby. And then maybe shifting gears here a little bit, The macro environment, the customer spending environment was pretty challenging last year. I think you noted it on several calls. It sounds like that's starting to show signs of improvement.

Speaker 4

Is that in fact what's happening? Are you seeing some improvement on the customer spending side? And is it your expectations that that will continue maybe even accelerate as we get into 2025?

Speaker 2

Well, we did open this call by talking about our pipelines and we feel good about our pipelines and credentialing and scheduling and with the new products and learning as well. So, we feel good about the pipeline. Now they need to materialize and to close deals in both in Q4, we have really good expectations and in Q1 and Q2, but the pipelines are strong. So the way again to work on this growth rate is to focus on retention in these legacy applications and being more successful in what I'll call retention and migration strategies. And we'll turn our attention to that next year and see if we can do better in those areas.

Speaker 2

But yes, I mean we open the call by talking about our confidence in the pipelines. I don't know if those are pipelines, they're not closed deals, so but they look good. We measure pipeline as a multiple of your objectives. And typically what you want to hear from a measured pipeline is 2 and 3 and 4 times coverage of the quotas you're setting essentially. And in those pipelines, in both cases, we see 3x coverage, which is kind of a for those that are in sales, I know that's a kind of a healthy sign of the opportunity.

Speaker 2

Again, they do need to matriculate and turn into actual contracts, but it feels good on the pipeline side.

Speaker 4

That's helpful. All right. Thank you.

Operator

Thank you. And one moment for our next question. And our next question is going to come from the line of Stephanie Davis with Barclays. Your line is open. Please go ahead.

Speaker 5

Hey, guys. Thank you so much for taking my questions. First one I have, you've been really bullish on expansion in the health plan channel. And I believe you mentioned in the prepared remarks. So I was wondering, just given some of the NCO earnings that we've been seeing lately, if there could be maybe a step back in spend as they kind of focus more internally?

Speaker 2

Yes. I'm not stepping in quite as close to that. We have teams focused on that and they're really excited about our positioning in that market. And I think from a cost standpoint, you did hear about some of the things like the interoperability between our credential stream application used on the hospital side and then used on the provider on the payer side of the insurer side. And I think those will provide efficiencies.

Speaker 2

And so we think we're competitively positioned to gain share and maybe be the more efficient provider in those areas. So even if they have some kind of pressure on them, my goal has always been take regulatory training. It's a mandate in regulatory training, be the lowest cost, highest quality provider in the industry and then you'll be selected even in a down market. And so maybe there's a little of that, but again, I'm less familiar with the overall pressures on that space. It's a new one for us.

Speaker 2

We have a team of people that are very familiar with that and they're excited about their pipeline. So I can't really characterize it. I can just say that I think the pipelines look good in that vertical for us and we think we have some synergies to offer them. We mentioned the wallet today as well that will provide them more efficient technologies than the current strategy they use.

Speaker 5

Helpful color. Another one on the sales channel. You're rolling out a ton of new products recently. You've got another one you announced earlier in the call. How are you thinking about kind of having a cohesive sunsetting too of some of these maybe debated sunsetting of keeping some of these legacy platforms on board?

Speaker 5

Right.

Speaker 2

Stephanie, it's a great point. We're trying to create some cohesive understanding of the hStream platform and its capabilities first. So I'd say the first half of next year before we do any kind of global repositioning of our capabilities, we're kind of repositioning at the product level now to show the enhanced capabilities. And you're right about the new products. So we have been working for many years and it's fun to be able to announce something like we've been working on Insights Plus for, I'd say about 18 months with, I don't know, 15 or more developers at least.

Speaker 2

And to watch it start to roll out and be in customers' hands in the last few weeks is super exciting. And both in that, as you pointed out, we're essentially able to retire old reporting engines, some of which were sold and some of which were included in our base subscriptions. But watching those get be sunset and replaced with a new one that generates higher NOV, which is new order value or contract value is exciting. And we do have another announcement. I'll just kind of tease this one out by hopefully by year end, we'll be announcing yet another new product.

Speaker 2

And to your point, the platform strategy enables more rapid development of products and generally a lower internal cost because you're using platform level services to build and piece together new capabilities that then turn into products. And so, I kind of obviously I'm excited that we're at that era where we're going to be able to more rapidly introduce more capabilities to our customers. And then as far as positioning and selling, I think in the second half of next year, we have the opportunity to really present maybe what we call a suite of suites. We'll go a little we'll slow walk this a little bit, but as you can really show the strategic and tactical and operational benefits of 3 application suites that truly work together, then you can begin to position a little bit more like the big guys position, more like an EHR and ERP, like where you kind of have a suite of suites that works together. And a lot of times CEOs of health systems pick their ERP based on the breadth of their offerings and how they work together.

Speaker 2

They don't always deliver on that interoperability promise, so we're being a little careful. And as we see these new capabilities manifest before we market them overly market them. But I'd say certainly by the second half of next year, we'll be attempting to position more robustly to the C suites of our customers. Our capability sets go beyond the areas they are originally intended to serve, just learning, serving HR and the Chief Medical Officer buying credentialing. I think in each area, I think we have the opportunity to demonstrate more capabilities in the second half of next year.

Speaker 5

Looking forward to hearing more at the Analyst Day. Thank you.

Operator

Thank you. One moment for our next question. And our next question comes from the line of Jared Haas with William Blair. Your line is open. Please go ahead.

Speaker 6

Hey, good morning and thanks for taking the questions. Maybe I'll ask one on the new reporting tool sets for the learning application suite. Nice to hear about the positive rollout there. And we're just hoping to hear a little bit more about any incremental functionality that's now available with this sort of next gen version of the reporting tool. I think you referred to the legacy tech stack as kind of aging architecture.

Speaker 6

And then just to clarify, is this something you'll push out as contracts come up for renewal over the next couple of years? Or can you actually go to clients a bit more proactively? It sounds like it's a pretty meaningful upgrade. So kind of wondering what the cadence of that looks like.

Speaker 2

Yes, great. I'm glad to comment on as much of that as I can. Of course, there are teams that are really detailed here. But, I will say this, we're excited for many reasons. One, the architecture of this new reporting capability for learning will be the same architecture we're used to enhancing reporting data analytics for all of our products across the company.

Speaker 2

Again, when you talk about a platform strategy, you expect leverage. And so this is the 1st rollout of new enterprise class reporting capabilities, analytics capabilities, benchmarking capabilities. And you're also right to know that it's built on much more modern, faster, scalable technologies. And we mentioned Snowflake, for example, the performance benchmarks are multiples better than our older engines. And so secondly, on the economics, if you take and look at its impact on learning, I would say not to oversimplify, but the older methods were slow getting people their data, harder to extract, less configurable, less able to integrate multiple data sources, essentially the old data warehousing technologies were just clunkier.

Speaker 2

And now we can pull data in from other applications into reporting capabilities. So the flexibility is just much, much greater as we release the basic insights that comes with the HLC replaces the old kind of reporting capabilities. And then insights plus provides a new level of analytics, helping measure learning effectiveness, for example. And there's minimal benchmarking service now, but that will come soon. And so yes, there's an upgrade economic pathway as well.

Speaker 2

So not only is it faster, better, smarter, more flexible and based on newer tech stack. And I think our customers one of the biggest things you do in learning is you pull data and you make sure you're compliant and you make sure you're on track and how you're comparing to others in the industry. How you're benchmarking your scores. What does your workforce know? What's the competency profile?

Speaker 2

So that use of data is critical and it's so great to be able to replace 15 year old architecture with a modern one and in the last 30 days start to really deploy it into our top accounts and get great feedback. So and again, we did mention it has incremental new order value, incremental contract value. So when you buy the Insights Plus, it's a buy up and results in incremental revenue growth for us. So for all those reasons, we're excited. And don't forget, you can expect announcements over the next 3 quarters on new reporting capabilities for other products built on the same new technical architecture.

Speaker 2

So watch for that as well. By the middle of next year, we expect to really lever these capabilities across our whole ecosystem, which again is reflective of the platform strategy. Thanks for the question.

Speaker 6

Great. That's great to hear. And then maybe as a follow-up, I'll switch gears a little bit just on capital allocation and specifically the M and A environment, thinking about the comment or the expectation that we could see that start to pick up over the next 12 months or so. I'm curious what's driving that inflection in your view. I guess is that just stability in the macro environment or something else that's maybe catalyzing some of those incremental opportunities here?

Speaker 6

And then, is there anything you would share in terms of areas of the solution set today that you think would make sense to bolster through M and A versus organic investment?

Speaker 2

Thanks. Yes. Great question. Lots to that question. I do think the macro conditions are improving for strategic buyers like us, meaning a little bit of a price recalibration for targets that maybe that's got a little frothy.

Speaker 2

That said, there's anywhere there's a really hot, really great company, there's also a lot of active bidding now. There's a lot of private equity money on the side that but I would say just overall the macro conditions for us, the way I view them through our lens are we think improving. And so we're working hard to try to make that a reality. And to finish the discussion earlier where we talked about the 7% to 10% growth, I broke it down into 2 pieces. I failed to talk about the 2nd piece.

Speaker 2

So the first piece was 5% to 7% organic, which we're going to deliver 4% this year, it looks like. The other was 1% to 3% inorganic. But remember, that was spread over multiple years. And so while we've been very quiet on the M and A front for, I'd say, 24 months now, somewhat intentionally, but also somewhat attributable to macro conditions. We've teed up some deals, decided they weren't the right fit.

Speaker 2

We've decided to focus on the core three apps and platform technology for 24 months. But now we're getting to where we feel we can fold things in. And I think the first things you'll see for us and hopefully in the next two quarters are small immaterial tuck ins, but they support existing lines of business. Yes, like categorically what will we launch. I think over the next couple of quarters, you'll see things that you will understand that fully be supportive of the businesses that we're currently in.

Speaker 2

So learning, credentialing and scheduling predominantly. And our 2 social networks that we talked about are 2 communities, 1 for students and 1 for nurses. And so I think you'll see investments early the next set of M and A we do in the next couple of quarters would be related relatable to those products. And then we might consider later second half of next year if things expanded our model. But we'll kind of slow walk around this and 24 months of inactivity followed by a couple of quarters and hopefully for example, we did just complete a minority investment, first one in quite some time a few weeks ago and it's about $1,000,000 investment, so it's immaterial small.

Speaker 2

But it's into a company that will bolster our business opportunities with NurseGrid Learn, the app we talked about. So we're super excited about that, watch for that announcement. But it's a little $1,000,000 capital deployment into a company that will improve our ability to service nurses on the NurseGrid network, we believe. And so we're super excited about that. We'll work on announcing that later.

Speaker 2

But smaller deals, probably anything done in the next quarter or 2 would be immaterial technically, measurably immaterial, but supportive of cut current lines. And then maybe later next year as things as we get where we want to be with our platform, we would expand the definition of our business by expanding the types of acquisitions we look at. Hope that helps characterize our M and A program, but we wanted to be active. We obviously have $95,000,000 of cash or almost $95,000,000 of cash. We have an untapped line of credit currently, it's $50,000,000 and probably have much more access to debt if we needed it.

Speaker 2

So we're going to be looking and we've teed up a few deals that we'll work on again immaterial in scope and nature, but show that there's some life in the pipeline. I hope I didn't drop. You guys still there? No.

Operator

Thank you. One moment for our next question. And our next question is going to come from the line of Richard Close with Canaccord Genuity. Your line is open. Please go ahead.

Speaker 7

Yes, thanks. Congratulations on the success. Bobby, I think it's been 2 quarters in a row now. You've given some examples of pretty significant growth in a customer on renewal. But you were, I mean, I guess, last quarter sort of warning us, not warning, but saying, hey, that's not necessarily completely normal in all cases.

Speaker 7

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

Speaker 2

Well, of course, it's our focus and we have 60 account managers that look at blending new products into every renewal. So we're getting a little better, I'd say, at showing showcasing more products at renewal and they're getting more logical because they feel like more extensions when they're interoperable or there's a case to be major interoperability in the near future. And so I hope, I mean, if you look at our sales organization, let's say it's 2 100 plus people, it's roughly 130 or so of quota carrying specialists, meaning they represent specific products and 60 or so are account managers that work on what you just talked about, creating a better blend and they really watch the renewals and focus on the ARR. The account management group focuses on the annual recurring revenue in account. And usually, if an account has 10 products, they drop 2 and add 3 or 4, you're trying to drive the ARR up.

Speaker 2

And so they're looking at changing the blend and mix of products in the accounts. And hopefully they continue to get better and better at that. The cases I gave today, which show growth, were critical because they featured the adoption of the platform technology, the APIs, and the other pull through products. So for that reason, we're excited. But you're right, we needed to be more typical than atypical, and we do have 60 people focused on making that happen.

Speaker 7

Okay. That's helpful. And then Scotty, maybe just a little bit more on the consumption contract or customer that led to the lowering of the revenue. Was there anything specific that the levels didn't accelerate as you expected for the second half? Anything in the call out?

Speaker 6

Yes. I

Speaker 3

mean, I think that's kind of what I explained on the call was that they did pick up in the Q3 versus the Q2, but just don't see the pathway to get to the, I guess, recoupment of the deficit that we saw in the Q2. So they didn't like over consume in a manner that we felt like it was going to push through to get to the deficit that we saw. So we kind of forecasting that to be a little bit off again.

Speaker 7

Okay. And then just really quick, on the product declines, when does that sort of move to the rearview mirror? Is that just like as things come up for renewal? How should is there any timeline we can sort of set in terms of that?

Speaker 2

Not yet, Richard, but I'll work on that. Here's what I would say. Right now, we've very carefully kind of classified our many lines of revenue by whether they're growth products, new products, we call them legacy products, which means they're supported and encouraged and maintained. Like if you look at even hand tossed right now, we call legacy product, but it's not a sunset product yet. And so we're not in the active phase of saying, look, we're actively sunsetting, we're changing the support models, we're not there yet.

Speaker 2

And so I think next year we'll get a little closer to the life cycles and trajectories of some of these core legacy products, which if you think about how we built credentialing, we bought a company called Morrissey, a company called Healthline. And they still have a lot of legacy customers and they're profitable customers. They're also the highest risk customers because our competitors try to convert them just like we do to newer software. And so if you think of Morrissey and Healthline and AnSaus as three examples of legacy, what we need to do in the coming year is figure out when legacy becomes sunsetting and none of those are sunsetting right now. We're still supporting them.

Speaker 2

Again, they contribute to our EBITDA and our overall cash flows, but they're definitely not growing. They're either shrinking by converting up to the, say, in this case, Credential Streamer Ship Blizzard or we're losing them to the market as they're also targets for our competitors. But we're supporting them. We're having our quarterly updates to them. We're having webinars to those customers.

Speaker 2

We're trying to maintain them because they are profit contributors to our business. And so right now, I would say on these three major ones, we just talked about Morrissey Healthline and AnSOS. We classify them as legacy customers and we service them really well or we try to improve our service to them. We do a little less frequent patching and updates, but we still maintain and make current their basic infrastructure and holding them for the day when they'll be ready or we'll be ready to ask them to make a firm migration. And so that's kind of where we are.

Speaker 2

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

Speaker 7

Okay. Thank you very much. Congratulations.

Operator

Thank you. And one moment for our next question. And our next question comes from the line of Konstantin Candidevies with Citizens JMP Securities. Your line is open. Please go ahead.

Speaker 8

Thanks. Bobby, just a couple of platform questions. First, I think it's been a couple of quarters since you've given this. I'm just wondering how many users have claimed an hStream ID at this point? And then second, I guess more of a bigger picture question, just when you're on the other side of this platform initiative, do you see it helping more in terms of accelerating the top line growth profile of the business or is the impact more going to be just in terms of the margin profile

Speaker 6

of HealthShare?

Speaker 2

Well, we wouldn't have undertaken this nearly 4 year journey and actually in many ways goes back before that where we started changing our strategies around data accumulation, things like that. So we wouldn't have undertaken this if we didn't think it'd provide a growth trajectory to the company, both hopefully operating leverage, shorter time to develop new products and better cross selling of products. And so I think we hope at the end of this rainbow is not just better core technologies, but better growth rate as well. So I just want to make sure we don't just talk about it as a tech stack. It's a tech stack that we think drives growth and allows us to think about growing in new and exciting ways.

Speaker 2

Somewhat related to that, when we integrate a partner, like I mentioned, we made a minority investment. And I'm going to go ahead and tell more about it because I misspoke. I just got texted to correct it. And so we put a $250,000 in. So again, very small investment into a small fintech startup called Planery.

Speaker 2

And now so I'm announcing that. And it'll be using our platform technologies to integrate their services, which we think their services will bring value to the 600,000 nurses in our NurseGrid network. And sometime before year end, we'll announce the integration of their capabilities in the NurseGrid and generate new financial opportunities for the company, leveraging our platform strategies, our platform technologies to achieve that rapidly. So Checkout Plantery, it's a fintech that provides money saving strategies to nurses that we think will be beloved as much as NurseGrid for helping nurses save money when they're eliminating student debt and paying off loans. And so when you think of an ecosystem powered by a platform, you think of new ways to generate growth and this little minority investment we just made of about $250,000 in Plannery as a good example of the kind of thinking that a true ecosystem, a true platform company can think about that wouldn't have been possible or even thought of as a revenue growth opportunity before the platform was built and executed on.

Speaker 2

As far as the end of the rainbow, there is no when you're a platform company, it's an endless pursuit. And so you have to have discipline in how much capital you put in, how fast you build it. But there won't be a crossing of the chasm here where we're kind of, oh, the platform is done. It just creates new opportunities to build and therefore and then but the new opportunities can create new types of data monetization strategies or growth strategies. And so again, overall, super excited.

Speaker 2

We're 3 or 4 years into this development, but the fun part is this year we started seeing real tactical operational benefit. And as evidenced by our ability to quickly integrate a partner like Plannery and or launch a revolutionary new reporting and analytics framework that we charge for called Insights Plus.

Speaker 8

Thanks. And then just the first part of the question on the how many users have claimed their IDs at this point?

Speaker 2

We haven't released claimed ID numbers. Maybe that's something we could consider for our investor conference, which again, we'll target that late January, early February before our next year report probably. But certainly, early next year, we'll try to get an Investor Day. That'd be a good topic to talk about then. Because as you know, it's a complicated topic.

Speaker 2

There's a number of IDs issued and then there's those that are claimed and then there's those that have what we call multiple keys on that key chain. So having a unique ID is one thing, but having a unique ID for each of our 27 different applications is another thing. And so the whole, we call keys on key chains initiative, maybe that's something we can address in our Investor Day.

Speaker 8

Great. And then one last one for me on scheduling. Are we at the point where sequentially the growth in ShiftWizard is starting to eclipse the attrition of the legacy product?

Speaker 2

Maybe another so in our Investor Day, that'd be another great opportunity to look at these crossover opportunities when you look at because the same question maybe exists when you look at Credential Stream against the acquired companies, Morrissey and Healthline, which again have installed customer bases, it might be a good discussion to take a few of these cases and talk about that crosswalk. I mean, we're excited to be able to show net growth of 4% even during the crosswalk, but obviously, we've had more of a drag on overall growth from these legacy applications than we wanted. But nevertheless, feel that we'll have good plans in place and do our best to manage through those migrations over the coming years. I feel a bit like a politician answering that because we haven't published the crosswalks yet and the plans. And as I said even earlier, they're more classified as legacy customers.

Speaker 2

There are no active rollouts of the sunsetting plans. And so but that's something we'll tackle in the coming years.

Operator

Thank you. And one moment for our next question. And our next question is going to come from the line of Vincent Colicchio with Barrington Research. Your line is open. Please go ahead.

Speaker 2

Yes. Thanks, Bobby. Most of my questions have been answered. Just curious, could you update us on ShiftWizard as far as how far along it is in terms of being where you want it to be for the large organization market? Yes.

Speaker 2

I did just get an update on that the other day and in our recent board meeting actually yesterday. And here's what I would say about that. I think by the end of Q2 next year, we'll be better than feature parity. And that's at all levels of scalability, reporting and data because we just mentioned, for example, we launched Insights Plus for Learning, we'll turn our attention to data management on credentialing as well, so and on scheduling. And so I think what I would say is Q2 of next year, we should have the kind of feature parity and beyond.

Speaker 2

We think we'll actually be better than the legacy application set. So I think and also we're already at the place where the ShipWizard revenue run rate is higher than the ANSOS revenue run rate. I believe that's an accurate statement. So we've begun the crossover and the feature parity that we think is necessary to improve our retention rates, I would say Q2 of next year. Thank you.

Operator

Thank you. And I would like to hand the conference back over to Robert Frist, CEO for any further or closing remarks.

Speaker 2

Well, thank you. I think we've covered everything I want to cover today. So we'll look forward to reporting our next quarterly earnings call, our year end results, which will be later early next year, I think, end of February. So it's going to be a while since we talked to you guys. That's where we'll probably work to insert an Investor Day in there somewhere between, and we'll focus on wrapping up the year strong.

Speaker 2

So thank you, everyone, for participating in our earnings call and we look forward to continued dialogue with investors in the coming days. Thanks. Bye.

Operator

This concludes today's conference call. Thank you for participating. You may now disconnect.

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Key Takeaways

  • Management highlighted record Q3 revenue of $73.1 M (up 3.9% yoy) and record adjusted EBITDA of $17.7 M (up 9% yoy).
  • Core SaaS solutions saw strong growth, with CredentialStream up 34%, ShiftWizard up 17% and the new Insights Plus bookings exceeding $2 M in the first nine months.
  • Introduced Insights Plus, a modern reporting and analytics platform built on Snowflake and Sigma, which has replaced two legacy tools and fueled platform API adoption that doubled active organizations and tripled integration builds year-over-year.
  • Expanded into direct-to-professional and pre-professional markets via the NurseGrid Learn app (117% ecommerce growth) and My Clinical Exchange platform (11% YTD rotation growth), engaging over 600 K monthly active nurses and 285 K student rotations.
  • Finished the quarter with $94.9 M in cash, zero debt, declared a $0.08/share dividend, and maintained full-year guidance of ~$290 M–$292 M revenue and $66 M–$67.5 M adjusted EBITDA.
A.I. generated. May contain errors.
Earnings Conference Call
HealthStream Q3 2024
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