HealthStream, Inc.

Good morning and welcome to Healthstream's first quarter 2022 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 Molly Kondra, Vice President, Investor Relations and Communications. Please go ahead, Ms. Condra.

Thank you, and good morning. Thank you for joining us today to discuss our first quarter 2022 results. Also in the conference call with me are Robert A. Frist, Jr., CEO and Chairman of HealthStream, and Scotty Roberts, CFO and Senior Vice President. 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 can involve risk 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 5K, 10Q, and our earnings release. Additionally, we may reference measures such as adjusted EBITDA, which is a non-GAAP financial measure. A table providing supplemental information 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 with that start, I'll now turn the call over to CEO Bobby Frist.

Thank you, Molly. Good morning, everyone, and welcome to our first quarter 2022 earnings call. As a reflect on the first quarter, in the first quarter, management delivered several key results I'd like to review. we did deliver record top-line revenue in the first quarter, lapping previous high-water marks set in Q1 of 2019 when legacy resuscitation revenue reached a peak of $17.3 million in Q1 of 2019. We have now replaced and grown through that amount with a nearly even mix of organic and inorganic growth strategies. Second, I told you that one of our multi-year goals was to become a higher gross margin company. Our gross margins for Q1 of 2022 were were 66.3%, a 750 basis point improvement over Q1 of 2019. Third, our ecosystem and ecosystem strategy, as reflected in the H-Stream platform strategy, continues to expand. With H-Stream subscriptions now at 5.13 million, we believe that our platform strategy is well-positioned for the future. I believe we're delivering on some of the key promises that we've made and our key operational commitments over the last several years. Regarding the macro context for healthcare in the United States, it appears that COVID is significantly tapering off. Last week, the White House COVID czar said the data doesn't point toward another full-on COVID surge because hospitalizations are currently the lowest they've been in the entire pandemic. According to the CDC, the U.S. is currently averaging just over 1,300 hospitalizations per day, which is a pandemic-era low point. This means that our customers are no longer facing the threat of being overrun by COVID patients. This is good news for everyone. In fact, some of our customers are starting to invite sales representatives back on site as a return to more normalized operations. That said, the longer-term impact of COVID on our customers and, in turn, our businesses are being experienced in ways still being determined, which I'd like to elaborate on. In several areas of our business, we see improving sales environments. In our learning and development application suite, for example, the need for our regulatory compliance solutions appears to have rebounded from pre-pandemic and pandemic era levels and be steadily increasing. We have a strong sales pipeline in this area and a fully staffed sales team to meet the solid market demand. At the same time, We're seeing some purchasing hesitancy among chief nursing officers to contract for our elective clinical education products right now, as the stresses on the healthcare professionals persists. Everyone's heard about the unprecedented turnover and burnout among staff. According to a recent Fitch Ratings report, resignations in the healthcare and social services sector reached unprecedented levels in 2021, with overall resignations up more than 50% since the start of the pandemic in the U.S., As many hospital CEOs and CNOs are realizing, onboarding, retaining, and engaging the healthcare workforce has never been more important. We believe that Healthstream's products are well-positioned to help solve these problems and that delays based on the need to alleviate burnout and increase retention will ultimately drive sales for the company. As you think about our results, it's important to remember that our revenue is not expected to be linear over the course of the year. I'd like to point out that overall bookings in the first quarter exceeded our internal expectations. even though our revenue growth for the quarter was just below our annual guidance range. In a subscription SaaS model like ours, the slower bookings we experienced during the height of the pandemic are now showing up in revenue after the fact, and we expect that to persist into the second quarter. That said, we expect our first quarter bookings to begin helping revenues in the last half of the year, which is a key reason that we believe our full-year revenue growth rate will be within our guidance range. The longer-term impact of COVID is also being experienced in our provider solutions business with our credential stream application. While sales have been strong, the revenue stream for these sales has lagged due to implementation backlog, which has occurred in part due to customers' recent preferences to minimize more change for their staff. Keep in mind that revenue recognition occurs after the credential stream application has been fully implemented. Now that our customers are beginning to pick up of some of their delayed initiatives, we are hiring more employees to respond to this backlog. For these reasons, we're optimistic that revenue from provider solutions will be backloaded in the second half of the year. Our CFO, Scotty Roberts, will talk more about our financial results soon, but I would first like to talk about how management has been able to implement initiatives to reduce expenses while driving employee satisfaction. Given the encouraging developments regarding the society of COVID in the United States, we announced to our employees on March 14th that everyone is welcome to voluntarily work from one of our offices, which we now call our resource centers, should they want to do that, whether they've been vaccinated or not. Healthstream's transition to a hybrid workplace was initially announced last July and has since that time proven to work very effectively and appears to be highly appreciated by our employees. We determined that our smaller office leases that we inherited through acquisitions were underutilized, and we decided to sunset these offices in favor of the hybrid work practice. This has allowed us to reduce our number of leases from 14 to 5, thus reducing our annual G&A expense by approximately $900,000 on an annual basis. Hellstream, like most other companies, experienced high turnover in the last several quarters, but we've been able to out-hire the losses. which has resulted in a net gain of our employee base of over 1,100 employees at the end of the first quarter. We had a net gain of 20 employees in the first quarter of 2022 and a net gain of 15 employees in the fourth quarter of 2021. The strong corporate culture our employees have built is helping us attract and hire fantastic talent. We've also invested in our current employee base to develop qualified and promising employees for higher levels of responsibility and new career trajectories. In fact, I believe in the last 14 or 15 months, we've had over 150 internal promotions. I think this is really exciting for our workforce and has resulted in generally very high stability amongst our leadership team. Before turning over to Scott, I'd like to comment on our ongoing share repurchase program. We continue to believe that this program is an excellent way to return capital to shareholders. On November 30, 2021, we announced a $20 million share repurchase program that And in March 2022, we completed the full $20 million of repurchases authorized under that program. We then determined to expand our repurchase program, and our Board of Directors approved an additional $10 million of share buybacks on March 14, 2022. Beginning on March 14, through the end of the quarter, we purchased $5 million worth of shares during the second authorization. That means we entered the second quarter with $5 million still authorized repurchase under the second plan. Based on our confidence in the company and the value of the buybacks we're bringing to shareholders, I'm pleased that our share repurchase program continues to remain in place and active as we progress through the year. In the last segment of the call, I'll elaborate on several exciting business developments. But before I do that, let's turn it over to Scotty Roberts for a more detailed look at the financials.