HealthStream Q2 2026 Earnings Report

HealthStream EPS Results

• Actual EPS: $0.23
• Consensus EPS: $0.17
• Beat/Miss: Beat by +$0.06
• One Year Ago EPS: N/A

HealthStream Revenue Results

• Actual Revenue: $83.73 million
• Expected Revenue: $80.82 million
• Beat/Miss: Beat by +$2.91 million
• YoY Revenue Growth: N/A

HealthStream Announcement Details

• Quarter: Q2 2026
• Date: 8/3/2026
• Time: After Market Closes
• Conference Call Date: Tuesday, August 4, 2026
• Conference Call Time: 9:00AM ET

HealthStream (NASDAQ:HSTM) is a Nashville, Tennessee–based provider of workforce development and learning management solutions for healthcare organizations. Since its founding in 1990, the company has focused on helping hospitals, clinics and other care providers streamline staff training, ensure regulatory compliance and monitor employee performance. HealthStream’s platform integrates online courses, skill competency assessments and credential management tools to support workforce readiness across the healthcare continuum.

The company’s core offerings include a learning management system (LMS) designed specifically for clinical and nonclinical personnel, a competency management suite that tracks skill acquisition and validation, and a content library featuring evidence-based clinical and compliance training modules. HealthStream also provides talent management services, such as succession planning and leadership development programs, to help organizations retain and advance qualified staff in an increasingly complex care environment.

Operating primarily in the United States, HealthStream serves a broad customer base that ranges from large health systems and academic medical centers to community hospitals and ambulatory care networks. Over time, the company has expanded its platform through strategic partnerships and acquisition of complementary technologies, further enhancing its ability to address evolving workforce challenges in the healthcare sector.

HealthStream Q2 2026 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Record quarterly results included revenue of $83.7 million, up 12.5% year over year, and adjusted EBITDA of $20.6 million, up 16.9%. HealthStream raised its full-year 2026 revenue outlook to $327 million–$332 million and adjusted EBITDA outlook to $74 million–$78 million.
• Positive Sentiment: Core products continued to grow strongly, led by ShiftWizard revenue up 30%, CredentialStream up 14%, Competency Suite up 12%, and myClinicalExchange up 29%. Management cited increasing adoption of bundled, multi-application contracts, including deals with total order values above $10 million and $5 million.
• Positive Sentiment: HealthStream plans to add 15 positions and increase spending on career networks, sales coverage, and its hStream platform. Insights active users grew from 100 to more than 2,600 in its first full year, with CredentialStream and other applications scheduled to join the shared data infrastructure.
• Negative Sentiment: Management slightly reduced its 2026 net income expectations because of accelerated growth investments and expects higher operating expenses, trade-show costs, and professional fees in the second half. The quarter also benefited from a nonrecurring $2 million revenue catch-up, while legacy credentialing and scheduling revenue declined 15% year over year.
• Negative Sentiment: The company disclosed a cybersecurity incident whose investigation remains ongoing. Management said customer-facing systems and operations were not disrupted and does not currently expect a material financial impact, but the incident remains a potential risk.

Presentation

[Operator]

Good morning, and welcome to HealthStream's second quarter 2026 earnings conference call. At this time, I'd 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 Ms. Mollie Condra, Head of Investor Relations and Corporate Communications. Please go ahead, Ms. Condra.

[Mollie Condra, Head of Investor Relations and Corporate Communications at HealthStream]

Thank you. Good morning, and thank you for joining us today to discuss our second quarter 2026 results. On the conference call with me today is Robert A. Frist Jr., CEO and Chairman of HealthStream, and Scotty Roberts, CFO and Senior Vice President of Finance and Accounting. I would also like to remind you that this conference call may contain forward-looking statements regarding future events and the future performance of HealthStream that involve risks and uncertainties that could cause the actual results to differ materially from those projected in the forward-looking statements. Information concerning these risks and other factors that could cause the results to differ materially from those forward-looking statements are contained in the company's filings with the SEC, including Forms 10-K, Forms 10-Q, and our earnings release. We may reference certain non-GAAP financial measures related to the company's past and future expected performance on this call.

[Mollie Condra, Head of Investor Relations and Corporate Communications at HealthStream]

The most directly comparable GAAP financial metrics and reconciliations are included in the earnings release that we issued yesterday. With that start, I'll now turn the call over to CEO Bobby Frist.

[Robert Frist Jr., CEO and Chairman at HealthStream]

Good morning, everyone. Welcome to our second quarter 2026 earnings call. We do have a lot to discuss as always, and it's fun when we can start with strong financial growth that we delivered during the quarter. I'll dive into some of the numbers. The quarter included record-setting revenues of $83.7 million, up 12.5% year-over-year, and record-setting adjusted EBITDA, which was $20.6 million, up 16.9% year-over-year. Operating income also grew 41.4% year-over-year. Based on our performance for the first half of the year, we increased our expectations for revenue and adjusted EBITDA for the full-year 2026 in our financial guidance. Remind you of the strong cash balance of $66.7 million and untapped line of credit and no long-term debt. We do remain well-positioned to pursue M&A opportunities as they arise and other capital deployment strategies that we believe will benefit shareholders.

[Robert Frist Jr., CEO and Chairman at HealthStream]

Our successful execution and financial performance in the first half of the year is allowing us to invest more aggressively in key areas than we had planned at the outset of the year. We believe these investments, which I'll speak to throughout today's call, will help broaden our reach into healthcare and help us deliver long-term growth in the future. This investment strategy is a primary reason we are slightly trimming net income guidance for 2026. The first area of investment I want to highlight is our career networks. Our career networks help healthcare organizations find the most qualified and competent employees while helping individual healthcare professionals develop and navigate their careers. Remember, HealthStream is already helping healthcare organizations develop, retain, engage, credential, and schedule the healthcare workforce. Our career networks provide another dimension to our capabilities, that of finding the best employees.

[Robert Frist Jr., CEO and Chairman at HealthStream]

We are now investing in personnel, approving 15 new positions beyond our original budget to develop our career networks. They include a nice mix of sales, operations, and support for this growing part of our business. Career network applications such as myClinicalExchange help us do this by interfacing directly with students as they prepare for their first job in healthcare. Already, we are seeing some of our largest and most progressive customers utilize myClinicalExchange to help them find the best students for clinical internships and rotations, to develop those individuals in ways that make their transition to practice more efficient and effective, and to help ensure that they are able to successfully hire those students upon graduation.

[Robert Frist Jr., CEO and Chairman at HealthStream]

By moving upstream into the nursing and medical student market, HealthStream is beginning to help our customers solve their staffing problems and improve the quality and readiness of these new hires. myClinicalExchange, one of our three career networks, grew 29% in the quarter versus the same period last year, which gives us confidence that we're on the right track with this investment strategy, again, incremental to our original budget plans at the beginning of the year. To summarize, due to the strength of the first half performance, we have decided electively to increase our investment in our career networks and added 15 new positions that we're rapidly hiring and onboarding. We expect them to begin contributing during the second half of the year, but also we'll have the new payroll, new expenses.

[Robert Frist Jr., CEO and Chairman at HealthStream]

As we look ahead, we continue to monitor a number of external factors that may influence the operating environment for both HealthStream and our customers. Several of our larger hospital system customers have described headwinds associated with the expiration of the enhanced ACA premium tax credits at the end of last year. A few have also noted future Medicaid reimbursement pressure related to the One Big Beautiful Bill Act. We'll continue to track these developments, including any spending impact they may have on our customers. To date, because of how we're positioned, we have not seen a negative impact on our business, and that's partially because our solutions are specifically designed to help health systems save money associated with their operations. We'll continue to focus on enabling our customers to operate more efficiently, regardless of the macroeconomic conditions.

[Robert Frist Jr., CEO and Chairman at HealthStream]

I think that's why our solutions are well-positioned, even in this tighter money environment for our customers. As a reminder, in the last couple of calls, I outlined four reasons why HealthStream sees significant opportunities in the rapidly evolving AI landscape. As AI continues to advance, we're even more confident in each of these reasons that we've articulated in the past. Let me reiterate them. First, our healthcare user base continues to grow. Unlike industries that may experience seat compression from AI, healthcare employment is largely projected and expected to remain a major source of job growth in our country, with nurses, our largest user base for HealthStream, at the center of that trend. We believe AI will help caregivers spend more time with patients and less time on administrative work.

[Robert Frist Jr., CEO and Chairman at HealthStream]

Just a general characterization is that we see a lot of job growth in healthcare, and particularly in the nursing base. Second, our data remains a key differentiator. As we enter the AI era, our enterprise applications serve as systems of record for learning, credentialing, and scheduling. While our career networks generate proprietary workforce data. Nursegrid alone now reaches approximately one in five U.S. nurses, providing valuable insight into nurses' preferences and work life. Third, our HealthStream platform is designed to incorporate AI as a core capability, and assets such as our hStream ID and our expanding API footprint provide foundational infrastructure to support AI-driven innovation across healthcare workforce technology. We already, for example, have over 780 registered users of our developer portal building dozens of customer-built applications and integrations using our API. I think this is solid footing for the AI-driven future.

[Robert Frist Jr., CEO and Chairman at HealthStream]

Fourth, our ecosystem brings these advantages together. Thousands of healthcare organizations, millions of caregivers, dozens of industry partners, and more than 30 years of expertise create a differentiated platform that is difficult to replicate. While AI cannot create an ecosystem like ours, we believe it can make that ecosystem even more valuable. Before we go further in the call, and I turn it over to Scotty, I want to summarize, for those of you new to the HealthStream story, kind of a business overview, the business description. For anyone new to the story, first and foremost, HealthStream is a healthcare technology company dedicated to finding, developing, retaining, engaging, credentialing, and scheduling the healthcare workforce through technology solutions. Each of which we believe are becoming more valuable because of the interoperability they are achieving through our hStream technology platform.

[Robert Frist Jr., CEO and Chairman at HealthStream]

The company holds 21 patents on its innovative products, which have been awarded over 40 Brandon Hall Awards. Historically, we sell our solutions on a subscription basis under contracts that average three to five years in length, which makes our revenues recurring and predictable. In fact, 97% of our revenues are subscription-based. We are profitable, have no interest-bearing debt, and report a strong cash balance of $66.7 million at the end of the second quarter of 2026. The strong cash balance allows us to allocate capital to product development, M&A, share repurchases, and dividends. We are solely focused on healthcare, and more specifically, the healthcare workforce and those preparing to enter it. The 12.6 million healthcare professionals and nursing students in the United States comprise the core total addressable market for our solutions.

[Robert Frist Jr., CEO and Chairman at HealthStream]

Later in the call today, I'll describe some of the exciting developments in each of our areas of learning, credentialing, and scheduling primarily. First, let's turn the mic over to Scotty Roberts, our CFO, who'll provide a more detailed discussion of the financial metrics for the second quarter of 2026, along with further comments about how we view our financial outlook for the remainder of 2026. Scotty, I'll turn it over to you.

[Scotty Roberts, CFO and Senior VP of Finance and Accounting at HealthStream]

All right. Thank you, Bobby, and good morning, everyone. I'll go ahead and dive into the numbers for the quarter. Our revenues were a record of $83.7 million and were up 12.5%. Operating income was $8.3 million, which was up 41.4%. Net income was $6.7 million, up 23.8%. Earnings per share was $0.23 per share, up from $0.18 per share. Adjusted EBITDA was also a record, coming in at $20.6 million and was up 16.9%. Our revenues increased by $9.3 million or 12.5% and were $83.7 million, compared to $74.4 million in the prior year. Revenues from subscription products were up $8 million or 11.2%, and professional service revenues were up $1.3 million or 52.6%. Let me touch on the revenue growth drivers for the quarter.

[Scotty Roberts, CFO and Senior VP of Finance and Accounting at HealthStream]

First, our core subscription solutions continue to provide solid growth with an organic revenue growth rate of 8.3%, led by products like CredentialStream, which grew by 14%. ShiftWizard, which grew by 30%. Our Competency Suite product grew by 12%, and myClinicalExchange grew by 29%. In addition to the growth in our core subscription products, I want to point out that approximately $2 million of our revenue came from a contract that contains contingent fees. It's a contract that we acquired back in 2020 as part of our acquisition of ANSOS. From an accounting perspective, the $2 million of revenue was recognized as a cumulative catch-up in accordance with ASC 606 and resulted from the resolution of previously constrained estimates of variable consideration under the customer's contract. Approximately $1.2 million of the $2 million catch-up was recorded as subscription revenue, and $0.8 million was recorded as professional services revenue.

[Scotty Roberts, CFO and Senior VP of Finance and Accounting at HealthStream]

To provide a little more plain English explanation around this, the $2 million of revenue that I just mentioned was associated with shared cost savings that we helped one of our customers achieve in the first half of the year. We do not have any other contracts containing this type of contingent payments and do not consider this revenue to be recurring in nature. The third component of our growth was the Virsys12 and MissionCare Collective acquisitions that we completed in the fourth quarter of 2025. Our inorganic revenue growth rate was 4.2% in the second quarter. Together, these two acquisitions contributed $3.1 million in revenue in the second quarter.

[Scotty Roberts, CFO and Senior VP of Finance and Accounting at HealthStream]

Lastly, revenues from our legacy credentialing and scheduling products, excluding the impact of the $2 million catch-up, approximated $7.4 million of our second quarter revenues and declined by $1.3 million or 15% compared to the second quarter of last year, as we continue our efforts to migrate customers from those solutions. Our remaining performance obligations were $685 million as of the end of the second quarter, which compares to $618 million for the same period of last year. We expect approximately 40% of the remaining performance obligations will be converted to revenue over the next 12 months, and that 68% will be converted to revenue over the next 24 months. Gross margin was 65.3%, compared to 64.6% in the prior year quarter.

[Scotty Roberts, CFO and Senior VP of Finance and Accounting at HealthStream]

This improvement was primarily related to the growth in revenues, including contributions from the recent acquisitions and the revenue catch-up I just described, and was partially offset by higher labor, software, royalties, and hosting costs. Operating expenses, excluding cost to revenues, increased by 10.1% or $4.2 million. Product development increased by $1.5 million or 12.5%. Sales and marketing increased by $1.7 million or 14.3%, and depreciation and amortization increased by $0.4 million or 3.8%. Lastly, our G&A costs increased by $0.6 million or 8.6%. Net income for the second quarter was $6.7 million and was up 23.8% over the prior year. Finally, our adjusted EBITDA improved to a record of $20.6 million and was up 16.9%, and adjusted EBITDA margin was 24.6%, compared to 23.7% last year. Now let's review the balance sheet and cash flows.

[Scotty Roberts, CFO and Senior VP of Finance and Accounting at HealthStream]

Our cash and investment balances were $66.7 million, compared to $66.5 million last quarter. During the second quarter, we paid $8.4 million for capital expenditures, returned $1 million to shareholders through our dividend program, and repurchased $2.6 million of our common stock under the share repurchase program that we announced in March of 2026. In addition, we made $0.8 million of minority investments in companies that we expect to leverage our ecosystem and platform and paid $0.4 million in earn-outs associated with a prior acquisition. Some of the growth investments that Bobby mentioned in the first half of the call are geared towards making our hStream technology platform more extensible, so companies, including those that we invest in, can begin to build on our platform in ways that benefit everyone involved.

[Scotty Roberts, CFO and Senior VP of Finance and Accounting at HealthStream]

It was another good quarter of collections efficiency for us as day sales outstanding were 38 days for the quarter, compared to 35 days in the prior year second quarter. From a cash flows perspective, on a year-to-date basis, our cash flows from operations were $40.6 million, which is up from $32.1 million last year or a 26% increase. Free cash flow was $24.7 million compared to $14.2 million last year, which is up 73%. Our capital expenditures were $8.4 million this quarter compared to $9 million last year's second quarter. Ending the quarter with $66.7 million of cash and investments, free cash flows, and no debt, we are well positioned to deploy capital to improve shareholder value. As a reminder, we maintain a disciplined approach to capital allocation and how we prioritize our use of capital.

[Scotty Roberts, CFO and Senior VP of Finance and Accounting at HealthStream]

Our utmost priority is making organic investments back into the business, which is evident by our annual capital expenditure and R&D plans. The second is pursuing acquisition opportunities, which we have a long track record of executing. The third is returning a portion of profits back to shareholders in the form of cash dividends. The fourth priority is that our board may authorize share repurchase programs. Yesterday, as announced in our earnings release, our board of directors declared a quarterly cash dividend of $0.035 per share to be paid on August 28th to holders of record on August 17th. Also, in March 2026, our board of directors authorized a $10 million share repurchase program. During the second quarter, we repurchased $2.6 million of our common stock under this share repurchase program, and we currently have $5.7 million remaining.

[Scotty Roberts, CFO and Senior VP of Finance and Accounting at HealthStream]

This program will terminate on the earlier of September 12, 2026, or when the maximum dollar amount under the program has been expended. We may suspend or discontinue making purchases under the program at any time. Let me turn over to our financial expectations for 2026, which we updated yesterday. We expect consolidated revenues to range between $327 million and $332 million. The bottom of the new range is now above the midpoint of our previous guidance range, and the new range equates to a growth rate between 7.5% and 9.2% over 2025. We expect our net income range to be between $19.5 million and $22.2 million. Adjusted EBITDA to range between $74 million and $78 million, and capital expenditures to range between $31 million and $34 million.

[Scotty Roberts, CFO and Senior VP of Finance and Accounting at HealthStream]

Consistent with our previous guidance, we expect lower revenue growth rates in the second half of the year versus the first half, due in part to the acquisitions that we completed in 2025. We expect our revenue growth rate for the third quarter will be approximately 8%. We expect adjusted EBITDA margin will approximate 22% for the third quarter. Our adjusted EBITDA for the first half of the year was very strong, which was partially due to the $2 million of revenue catch-up in the second quarter. For the second half of the year, our forecast assumes higher operating expenses compared to the first half of the year, higher trade show costs, and higher professional service fees. As Bobby discussed earlier, we're also planning to expand our product development and sales and marketing efforts in our career network solutions. Those solutions include myCNAjobs, myClinicalExchange, and Nursegrid.

[Scotty Roberts, CFO and Senior VP of Finance and Accounting at HealthStream]

We're also investing more aggressively with regard to our hStream technology platform. These guidance expectations do not include the impact of any acquisitions or dispositions that we may complete during the year, gains or losses from changes in the fair value of non-marketable equity investments or contingent consideration, or impairment of long-life assets that we may complete during the year. That wraps up my portion of the call this morning. Thanks for your time, and I'll now turn it back over to Bobby for some more updates.

[Robert Frist Jr., CEO and Chairman at HealthStream]

Thanks, Scotty. Increasingly, our customers view HealthStream as a partner for solutions across their entire enterprise rather than a single application or a single point solution, as we say. That broader view is showing up in what customers buy and how they buy it. This is where our bundling strategies are beginning to take hold. Stronger go-to-market curation among our solutions allows customers to purchase product bundles designed to manage end-to-end clinical workflows. Our Competency Suite is a good example of this. We are also beginning to sell market-specific bundles that are tailored to meet unique needs of different types of healthcare organizations. We call these our market bundles. They're designed for areas such as post-acute care, physician offices, and ambulatory surgery centers. I'll say a bit more about how each of these two bundling strategies work.

[Robert Frist Jr., CEO and Chairman at HealthStream]

When customers purchase a subscription to our Competency Suite, all of their applicable employees gain unlimited access to the content and applications in that bundle. This gives customers a more complete, more economical solution while simplifying what would otherwise be a series of separate piecemeal purchasing decisions. We saw continued momentum in the quarter with Competency Suite. Revenue's up approximately 12% over the same period last year, and it remains one of our largest revenue drivers within our workforce development business. That brings us to market bundles. At HealthStream, we want to be positioned to serve all types of healthcare organizations, and we believe that our market bundles can help us do just that. We recognize that the mix of solutions a large health system requires may be different than what a smaller long-term care facility needs.

[Robert Frist Jr., CEO and Chairman at HealthStream]

That is why we are beginning to build out our market bundles for the skilled nursing space, the long-term care space, and small hospitals, often called critical access hospitals. For example, our critical access bundle combines software and content into a single decision rather than several incremental ones, giving smaller facilities a more complete set of applications at a better price per unit. In the second quarter, we saw uptake in these market bundles with new critical access, skilled nursing, and long-term care customers signing on for these market bundles. Early in the call, I mentioned more aggressive investment in growth initiatives. Part of that investment is to bolster and expand our sales team in order to get these product and market bundles more widely adopted.

[Robert Frist Jr., CEO and Chairman at HealthStream]

To do this, we've already started hiring more sales representatives because we believe that increase in sales coverage is likely to result in future revenues over time. Switching gears, on Wednesday of last week, we electively filed an 8-K disclosing a cybersecurity incident, the investigation of which is ongoing. Rather than reading that disclosure to you, I'll simply direct you to that filing. I'll reiterate our statement that we do not believe any customer-facing systems, such as our platforms or applications, were accessed or compromised. Additionally, we have not experienced any interruption in our product service or service delivery to customers or to our business operations. Based on what we know, I also want to reiterate that we do not anticipate this incident to have a material impact on our financial results.

[Robert Frist Jr., CEO and Chairman at HealthStream]

All right, let's get back to our business updates, beginning with an update about how we are becoming a platform company through our emerging hStream technology platform. The reporting and analytics layer of our hStream platform is known as Insights. Insights made real, tangible progress in the quarter. I'm really proud of the teams that have been building this part of our platform. It's really starting to show its capabilities. Insights made real, tangible progress in the quarter, largely because of the work we've done to ensure that our individual applications are now feeding their data into a common Snowflake-powered data lake.

[Robert Frist Jr., CEO and Chairman at HealthStream]

Once the data is in one place, our developers can then create standard datasets, standard reports, often using new AI tools, and then customers can use the Insights infrastructure to do everyday standard reporting, build their own custom reports, and turn that data into action through live analytics dashboards. What makes this strategically important is that it only becomes more valuable as more of our applications participate, and that is exactly what we're seeing. Insights, our reporting application or pillar of our platform, now spans seven of our applications, including Learning Center, Learning Experience, ShiftWizard, several quality and compliance and clinical development solutions. In its first full-year, active users of Insights grew from 100 to more than 2,600, and we expect the catalog to continue expanding meaningfully as additional products, including CredentialStream in the upcoming quarter, Policy Manager, Workforce Validate, to come online in the next two quarters.

[Robert Frist Jr., CEO and Chairman at HealthStream]

It's really exciting to watch all of our data get pushed into one unified data lake tied to one unified reporting architecture. It's allowing large system customers and small ones to create really unique insights into the data coming off multiple of our applications through one data lake and one set of access tools that are a part of the platform. Really excited about our progress there. Let's move on to our learning solutions, which are demonstrating the power of our ecosystem. We continue to see customers consolidate learning purchases instead of just running isolated point solutions. This is helping drive larger contract values for our solutions like our Resuscitation Suite, where we closed a deal worth over $10 million of total order value in the quarter.

[Robert Frist Jr., CEO and Chairman at HealthStream]

Competency Suite, where we closed a $5 million total order value deal, and Quality OB, where we closed a $1.5 million+ total order value deal. It feels like some of the deals are getting bigger, and they're more inclusive, and they leverage our platform and technologies in new and exciting ways. More importantly, it is helping our customers understand the strategic value of consolidating their purchases with HealthStream as we transition into a platform to handle all of their clinical workforce needs. These types of transformations do not happen overnight, which is why we have been investing in our solutions and our platform strategy for the last many years. Why we are accelerating investment as results begin to manifest in terms of customer benefit and company growth. Let's move on to credentialing.

[Robert Frist Jr., CEO and Chairman at HealthStream]

Revenues from sales of our flagship credentialing product we call CredentialStream, were up approximately 14% in the second quarter compared to the same quarter last year. We also saw growth from meaningful competitive takeouts. Systems that are standardizing all of their facilities onto CredentialStream, and the additional purchase of modules like Enroll, which allows customers to manage their enrollment processing directly through CredentialStream instead of through a separate, non-integrated system. I'm also pleased that we saw some conversions from our legacy credentialing solutions into CredentialStream. Conversion from legacy solutions, particularly older versions of legacy solutions, is something we plan to focus on more as we move into next year. Let's move on to scheduling, where our core product, ShiftWizard revenues, were up approximately 30% in the second quarter versus second quarter of the previous year.

[Robert Frist Jr., CEO and Chairman at HealthStream]

Two large health system go lives during the quarter, together representing approximately $1.7 million in combined new order value or contract value, reflect our expanding ability to implement ShiftWizard at scale within complex multi-facility healthcare organizations. As in prior quarters, our largest ShiftWizard wins were once again competitive takeouts of a horizontally focused competitor that serves multiple industries rather than healthcare specifically. Our sales leaders continue to attribute these wins to customers recognizing that scheduling and staffing clinicians is simply different from scheduling a labor pool for retail or factory shifts. Stepping back from the quarterly results for a moment, I'd like to recognize something that reflects the day-to-day work of our teams rather than a single quarter's numbers.

[Robert Frist Jr., CEO and Chairman at HealthStream]

This past quarter, G2 named ShiftWizard a leader in medical staff scheduling and our learning management system, ComplyQ and SafetyQ and Jane, were all recognized among the top performers in healthcare learning management on G2's latest report. Across our full portfolio, HealthStream now ranks number one in five separate G2 categories and holds an overall grid leader designation as based entirely on the feedback from people who use our solutions every day. It's a good reminder that the work of our teams that they do to serve these organizations and the clinical workforce is resonating in a very tangible way, and we're grateful to our customers for continuing to tell us so. Now I want to close with the same reminder I share with you every quarter.

[Robert Frist Jr., CEO and Chairman at HealthStream]

If you are interested in a profitable, highly recurring revenue healthcare technology company that expects to deliver growth, then HealthStream may be the right investment for you. If you are interested in a company whose core user base, the clinical healthcare workforce, is expanding faster than any other sector of the job market, then maybe HealthStream is the right investment for you. If you like a company whose software serves as a system of record on behalf of healthcare customers, then HealthStream may be a company for you. If you favor ecosystems over point solutions, then maybe HealthStream is the right investment for you. For all these reasons, HealthStream is positioned for another exciting year helping the nation's top health systems find, develop, schedule, credential, onboard, and retain this growing healthcare workforce. Maybe HealthStream is the right investment for you.

[Robert Frist Jr., CEO and Chairman at HealthStream]

I'll now turn it over to the operator to begin the Q&A session.

[Operator]

Thank you. At this time, we will conduct a question and answer session. As a reminder, to ask a question, you'll need to press star one one on your telephone and wait for your name to be announced. To withdraw your question, press star one one again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Matt Hewitt with Craig-Hallum.

[Matt Hewitt, Analyst at Craig-Hallum]

Congratulations on the strong quarter. A couple questions. First, obviously, you announced several competitive wins across the portfolio of applications. I'm just curious, what's driving that? Is this maybe a heightened focus by the customers to kind of get to that one throat to choke? Is it because you have the better platform versus maybe a legacy platform that you've displaced? Just any color that you can provide on the competition side.

[Robert Frist Jr., CEO and Chairman at HealthStream]

Well, it's a little bit of all those things, of course. I think a little bit of our bundling strategy, I feel like, is starting to take hold. We're able to put more products together. They're more interoperable. We're able to give better unit pricing, but for more complete solutions under larger contracts. I do think our products are advancing in their capabilities. The platform itself essentially powers up the applications and gives them new capabilities. I talked today about the Insights reporting. It's really just a different experience if a large enterprise has access to all of the core data sets from all of the myriad of our applications that they've licensed access to in one data lake.

[Robert Frist Jr., CEO and Chairman at HealthStream]

I think our customers are starting to hopefully view the shift from buying several independent, non-disconnected or standalone point solutions, distinguishing that from investing in a platform technology that they're starting to wake up and see, like, oh, wow, if I use the myClinicalExchange network and we also do use the learning system from HealthStream, all that data now goes into kind of a mix-and-match reporting engine that gives incredible flexibility to gain insights about your workforce. That's an example. As that platform pillar of reporting and analytics matures and customers wake up, instead of getting a set of canned reports that are separate and distinct, they can now relate data across applications through our Insights reporting and analytics platform.

[Robert Frist Jr., CEO and Chairman at HealthStream]

Bringing information about students that applied and are now being onboarded into learning system, for example, so you can now track people better across time and look at onboarding efficiency is maybe a good example of the blend of data across the students as they become professionals and take jobs in organizations. Again, the data from both those applications pushed to the same data lake allows you to create more insightful use of that data. The maturity of the platform, the bundling strategy, I think are two contributors to the access we're getting to the buy-in. We're also doing a better job of assembling our products for specific market verticals, and that's part of the market bundles we talked about. It's not just bundling together more products.

[Robert Frist Jr., CEO and Chairman at HealthStream]

It's more products that are kind of filtered for each clinical setting environment, which I think we're just getting a little better at curating our product sets into these bundles for specific markets. I think that may be helping as well. Thanks for the question. Hope that helped answer it.

[Matt Hewitt, Analyst at Craig-Hallum]

It did. Maybe as a follow-up, and that was kind of a little bit of a lead in, but you noted the long-term care market this morning. I feel like a lot of times we get focused on the hospital environment, given the size and the opportunity there. In the long-term care market, it's a little bit different. It's a little more fragmented, smaller facilities, those types of things. Where do you sit from a penetration standpoint? Where do you see that as maybe a driver or an opportunity as we look out over the coming years? Thank you.

[Robert Frist Jr., CEO and Chairman at HealthStream]

Matt, it's a great question. I think in our slide deck for investors, we've kind of aggregated the number of people working across these clinical settings. We haven't broken out market share per setting yet. Actually, our board asked us to do a lot more work on that at our next board meeting. Maybe that's something we can follow up on. We've aggregated into this kind of, this demand circle about 12.5 million or 12.6 million healthcare workers. A little more than half of those are in the acute care settings, as you know, and then spread across the other settings. Where we're seeing traction now, the skilled nursing market, which, if you think about it, kind of structurally the most similar to the acute care market. We're also seeing some traction, ironically, in the smaller critical access hospitals.

[Robert Frist Jr., CEO and Chairman at HealthStream]

Again, I think the bundles are helping there. I don't have any specific numbers for you. I would say we have a footprint in each of those markets, long-term care, skilled nursing, home health. We see some expanding footprint in home health. The critical access hospitals, I view those as kind of four. We now have market bundles for each of those and beginning to get better at messaging those into the market. They are more fragmented. They come in smaller pieces, so it's a slightly different structure to the sales organization to achieve market share in there. A little bit more of the inside/outside tag-team sales force. Less traveling, of course, more phone and Webex work to communicate with those smaller customers.

[Robert Frist Jr., CEO and Chairman at HealthStream]

The contracts are smaller, what's important, I think, as we think about the total market as those 12 million people, they have a lifetime value of each person. One may be working in a skilled nursing facility, but find themselves a few years later moving into a bigger city and working in an acute care hospital. In our new model, this platform approach allows us to track them kind of horizontally across their career as they move between jobs and they land in different places that have the HealthStream platform. I'm talking about some of our kind of platform benefits as we try to get more specific in how we penetrate those verticals. Of the verticals we mentioned, or the market segments, we're seeing good uptake right now, skilled nursing is probably the one that has the most uptake as opposed to long-term care.

[Robert Frist Jr., CEO and Chairman at HealthStream]

We have a good, strong footprint in long-term care as well.

[Matt Hewitt, Analyst at Craig-Hallum]

Got it. Thank you.

[Operator]

Thank you. Our next question comes from the line of Ryan Daniels with Blair. Your line's open.

[Dustin Scaringe, Analyst at William Blair]

Hi, good morning, everyone. Hi, good morning, everyone. This is Dustin on the line for Ryan. Regarding your guidance update, just wondering if that now includes the $2 million catch-up, or was that Kind of previously in the guide. Also, did that flow through directly to the bottom line, or were there some expenses associated with that? Thank you.

[Scotty Roberts, CFO and Senior VP of Finance and Accounting at HealthStream]

Yeah.

[Robert Frist Jr., CEO and Chairman at HealthStream]

Scott, I'll let you address that first. Yeah.

[Scotty Roberts, CFO and Senior VP of Finance and Accounting at HealthStream]

The $2 million that we saw come through in the second quarter was incremental to our previous expectations. It's now flowed through to our updated revenue guidance for the full-year. From its impact on kind of profitability for the second quarter, it was meaningfully impactful. Just a small cost to kind of realize that revenue. You could probably flow most of it to the profitability line items from an EBITDA perspective, for sure.

[Dustin Scaringe, Analyst at William Blair]

Got it. Thank you for that.

[Scotty Roberts, CFO and Senior VP of Finance and Accounting at HealthStream]

Thanks for your question.

[Dustin Scaringe, Analyst at William Blair]

Yep, it did. Thank you.

[Operator]

The next speaker is Richard Close from Canaccord Genuity. Your line's now open.

[Richard Close, Analyst at Canaccord Genuity]

Yes, good morning. Thanks. Congratulations on the results. I jumped on late, so I apologize. Did you guys talk about the legacy revenue impact in the quarter? I just want to do that from a housekeeping to begin with.

[Scotty Roberts, CFO and Senior VP of Finance and Accounting at HealthStream]

Yeah, Richard. It was $7.4 million of revenue in the second quarter, which is down $1.3 million or 15% versus the same period last year.

[Richard Close, Analyst at Canaccord Genuity]

Okay. That's good. Just wanted to cover that in a public forum, to get that number. Okay. Questions. Bobby, you talked about some larger contract values, and I just want to put them in a little bit of perspective. You mentioned a $10 million one, I think a $5 million contract value. Are those different terms of contracts?

[Robert Frist Jr., CEO and Chairman at HealthStream]

Yes

[Richard Close, Analyst at Canaccord Genuity]

in terms of lengths?

[Robert Frist Jr., CEO and Chairman at HealthStream]

Yeah.

[Richard Close, Analyst at Canaccord Genuity]

maybe you could talk about, is the annualized revenue coming through with respect to these larger contracts, or is it more extended timelines?

[Robert Frist Jr., CEO and Chairman at HealthStream]

Generally, they're kind of bigger bundles over longer periods of time, so they're bigger strategic commitments to our company, which we're excited about. You're right to point out that the terms on those are sometimes four years or more. That's the total contract value, which is kind of a bigger number because there's usually more in the bundle. It's also, typically, they tend to be a little bit longer-term agreement. As far as coming into revenue, it just depends on the mix of what's in that bundle. The first one we called out, which was the biggest number, was for Resuscitation competitive win. That revenue tends to come in a little faster, but has a little lower gross margin because of the partnership and the royalties associated with our Resuscitation Suites that we take to market. It's exciting. They're bigger.

[Robert Frist Jr., CEO and Chairman at HealthStream]

It's kind of a system-level commitment in that case. We can usually get to the revenue a little faster in that particular case. In those ways, it's good. On the negative side, it has a little lower gross margin because it involves content products, which have royalties. The second bundle we mentioned, I think, was a Competency Suite, which is another great example of, historically that would have been five separate sales of kind of products that are in this Competency Suite now. The value of the contract gets bigger, and I think in that case, $5 million, because it includes several of our products in that bundle, which I think is going to help. It's a little longer sales process because it's a bigger financial commitment and it is a multi-year agreement.

[Robert Frist Jr., CEO and Chairman at HealthStream]

It takes the decision down to one decision instead of six separate decisions over many years. They just say, "Is HealthStream have the right tool set to develop the competency of our clinical workforce?" If the answer to that is yes, then it's a bigger commitment, but it's the mix of the products. Instead of picking one tool, then adding another tool a year later and then another tool, it's all bundled together into the Competency Suite. Again, bigger contract value over more time. I think it's going to help with renewal rates over time too because what would happen is you'd sell four or five-point solutions over four or five years, and it would get to the bigger contract value.

[Robert Frist Jr., CEO and Chairman at HealthStream]

As each of those separate contracts for one of the components of the suite came up for renewal, they would adjust it based on actual utilization. Sometimes they'd adjust up or down if they subscribe for too many or they used it less than they expected. Now I think in these bundles, it's kind of all or none. You get your phone and you don't use all the features of the phone, but you don't give any of them back. You keep the phone. I think the bundles ultimately will also help with renewal rates. I hope that answers, but yes, bigger deals, typically bundles and over longer-term periods. So the NOV, we call the contract order value, the new order value is the total five-year value or four-year value of those contracts.

[Richard Close, Analyst at Canaccord Genuity]

Okay, that's great. Then just clarification, when you were talking about CredentialStream, you said sales up 14% in the second quarter, I believe the number was. Is that new bookings? Because when you talked about ShiftWizard.

[Robert Frist Jr., CEO and Chairman at HealthStream]

Yeah. That's the revenue that's coming in from implementations of contracts. That's not necessarily sales. That's the revenue as it's materializing. It was up 14%, the revenue was up, which means kind of contract go lives. We're taking customers live and that's adding to the total revenue of that product.

[Richard Close, Analyst at Canaccord Genuity]

Okay. That's perfect. Just wanted to clarify because ShiftWizard, you said 30% revenue. Is the 14% year-over-year growth?

[Robert Frist Jr., CEO and Chairman at HealthStream]

Scotty, I believe that is year-over-year growth, I think that's also true of the ShiftWizard number, which is year-over-year growth. There's a couple of bigger, as we mentioned in the script, the bigger ShiftWizard accounts went live, that starts to turn into revenue rec. The result of that was this 30% year-over-year revenue growth, quarter to prior year quarter. I think that's the same format for the credentialing. Scotty, can you verify?

[Scotty Roberts, CFO and Senior VP of Finance and Accounting at HealthStream]

Yeah, that's exactly right, Bobby. Those are the growth rates for the second quarter of the prior year, second quarter.

[Richard Close, Analyst at Canaccord Genuity]

Perfect. I just wanted to make sure apples or apples and oranges there.

[Robert Frist Jr., CEO and Chairman at HealthStream]

Right.

[Richard Close, Analyst at Canaccord Genuity]

Good to be on the right page there. My last question, I guess is, with respect to ShiftWizard and those larger system go lives, is that relatively new in terms of seeing the success with larger systems that, like ShiftWizard is ready for prime time, in these larger accounts now? That's something that I know you've gotten questions on over the last couple of years.

[Robert Frist Jr., CEO and Chairman at HealthStream]

Yeah, we're definitely feeling better about it. I made that statement. I said that I thought that They're not huge systems, but they're definitely larger, more complex, multi-facility systems. We did comment that I think that it does reflect our expanding ability to service at scale, more complex multi-facility health systems. I think that's good news. I don't know if it's when you say prime time, there are a few giant systems. We have some larger implementations now, and I think the product's maturing and we're getting more capabilities on the board, which I think makes a broader audience possible for that set of applications.

[Richard Close, Analyst at Canaccord Genuity]

Okay. Can I slip one more in or?

[Robert Frist Jr., CEO and Chairman at HealthStream]

Yeah, sure.

[Richard Close, Analyst at Canaccord Genuity]

Okay. With respect to the Insights and that you talked about and making tangible progress there, the data lake and Snowflake. Is that a revenue contributor? Do you charge for all that? What's the revenue model there?

[Robert Frist Jr., CEO and Chairman at HealthStream]

Yeah.

[Richard Close, Analyst at Canaccord Genuity]

Is it more like a ROI, making the client understand they're getting an ROI out of all your products?

[Robert Frist Jr., CEO and Chairman at HealthStream]

Yeah. It's a little of all those. There is an Insights+ buy-up, there are things to buy there. There's an analytics tool set that's more advanced that you purchase. If you want to take full advantage of this, there are things you purchase. It does grow revenue. There's Insights and then there's Insights+ and there's kind of an analytics framework. There are some buy-ups there, and we're selling them very well. What's really cool is when you, if you license two or three of our applications, and we've mentioned about five of them now that are participating in the Insights infrastructure. You literally can go in and you see the datasets presented as checkboxes from each of our applications on one screen.

[Robert Frist Jr., CEO and Chairman at HealthStream]

You go in and say, "Okay, I want to see the tenure of students on myClinicalExchange that we happen to also then onboard." They were students doing rotations. A year later, we onboard them as employees and we did some learning and training and transition to practice training, and now we want to pull together that as a longitudinal review of how students were selected, onboarded, and trained, and ready to work. That was really, really difficult a year ago. You can literally just go in and you because we've talked myClinicalExchange for the students is on the hStream ID. A lot of our large health systems have used the hStream ID as a sign-on model. When that's the case, those datasets are not just available in one environment, they're also relatable.

[Robert Frist Jr., CEO and Chairman at HealthStream]

Now you can ask questions of the data, these growing datasets. I think that's very much more indicative of being a platform company where, hey, yes, the IT staffs at these larger health systems are realizing that we're a data partner now. If you think about a learning systems bought in HR and they generate these little reports for HR about compliance training, for example, but now you go in and you can literally configure data across five of our applications, the one set of reports. It opens up the ability to view us as a platform level data partner, in the journey of managing your workforce. We have several more applications will go online with Insights reporting. The other thing it does, is it allows us to refactor older applications.

[Robert Frist Jr., CEO and Chairman at HealthStream]

The reporting engines of the older applications can start to retire as the data lake and the Insights reporting framework manifest. If you think about it, one of the complexities of all of our dozens of applications is managing the data, reporting on it, and getting people custom reports on each point solution. Well, now you just subscribe to the Insights platform and you start to build your own reports. We can help you with that. Custom, you can schedule them. There's just so much more you can do with the data now that we're in Snowflake and that manifests in the tool sets customers can use to extract, maneuver, and analyze the data coming across dozens of our applications in one unified environment. It's one of our 10 pillars of our platform was this data aggregation, data analytics. Yes, it should enhance revenue.

[Robert Frist Jr., CEO and Chairman at HealthStream]

It will have our customers view us more as a platform. It will lower our refactoring costs as we modernize each application, as we move them to the reporting Insights platform. We're not kind of managing all these separate reporting environments. I think it has benefits for everyone, and we're super excited to report our progress there.

[Richard Close, Analyst at Canaccord Genuity]

Okay. Thank you very much.

[Operator]

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

[Vincent Colicchio, Analyst at Barrington Research]

Yeah. Most of my questions were asked. Bobby, I'm curious, the payer side in the credentialing business, how is that performing and what's the pipeline look like there?

[Robert Frist Jr., CEO and Chairman at HealthStream]

Yeah. The payer side are fewer and bigger wins. The good news is we've had one of those. We're targeting another one in the second half of the year. They take longer, but they're bigger contracts. Some of these payers are bigger than health systems. They're coming. Our acquisition of Virsys12 has given us a more complete tool set to offer to the payers around credentialing. We're excited. It's early. We're just a half a year into it, but strengthening our positioning there, and I feel like there's a good pipeline. They are more like, I guess you'd say in the old parlance of whale hunting. You're developing relationships that take time to develop, but when you win them, they're bigger, and we did have a nice win in the first half of the year.

[Vincent Colicchio, Analyst at Barrington Research]

Lastly, how are price accelerators taking hold? Any pushback there or are things going smoothly?

[Robert Frist Jr., CEO and Chairman at HealthStream]

Steady she goes. All the core products now, as a standard part of the renewals, include pricing escalators. That took a while to roll out, change our legal templates, educate our sales team to roll it out, and we did it in steps over two years. Now, essentially every contract renewal that's related to the core three application suites includes accelerators. They're kind of inflationary level. They're not big, but they're nice, consistent drivers, and we find the market accepting of them as a component. In many ways, it helps them plan better so they don't get to the end of a four-year renewal and have a big price jump. They've moved along within inflation. It helps them budget better their renewals, I think.

[Robert Frist Jr., CEO and Chairman at HealthStream]

Ironically, I think it's going to help smooth over renewals when people get to end of contracts because there won't be these big pricing adjustments that we're trying to get. We will have steadily grown to a higher price.

[Vincent Colicchio, Analyst at Barrington Research]

Congrats on a good quarter.

[Robert Frist Jr., CEO and Chairman at HealthStream]

Thank you.

[Operator]

This concludes the question and answer session. I would now like to turn it back to CEO Robert Frist for closing remarks.

[Robert Frist Jr., CEO and Chairman at HealthStream]

Thank you everyone for participating in the call, especially our nearly 1,150 employees who are making all this happen. It's my privilege to report on their progress. We look forward to reporting the next quarter. Remember, if you're an analyst, we were very careful to talk about we'd only get overexcited. We had a great, solid quarter. We're celebrating it, but we also had a few things like the $2 million one-time revenue rec. We are increasing our investments. We were very careful to emphasize that. As you look at our second half guidance, take it seriously. As you rebuild your models, we think we've done our best to be accurate in how we plan to increase investments, which will result in a little lower net income. Again, we're upping our revenue forecast and upping our several components as provided in guidance. Be careful.

[Robert Frist Jr., CEO and Chairman at HealthStream]

Listen to our guidance as always. We try to make it as strong and as accurate as we can. Thanks to our employees. We'll see you guys on the next call.

[Operator]

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

Participants

Executives

• Mollie Condra, Head of Investor Relations and Corporate Communications
• Robert Frist Jr., CEO and Chairman
• Scotty Roberts, CFO and Senior VP of Finance and Accounting

Analysts

• Matt Hewitt, Analyst at Craig-Hallum
• Dustin Scaringe, Analyst at William Blair
• Richard Close, Analyst at Canaccord Genuity
• Vincent Colicchio, Analyst at Barrington Research