HealthStream, Inc.

Good morning and welcome to HealthStream's second quarter 2025 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 Condra, head of investor relations and communications. Please go ahead, Ms. Condra.

Thank you and good morning. Thank you for joining us today to discuss our second quarter 2025 results. Also in 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 could 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, and these include forms 10K, 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 that we may refer to in this call. So with that start and that opening, I'll now turn the call over to CEO Bobby Frist.

Good morning, thank you, Molly. Good morning, everyone. It does seem like a quarter of follow-up, so we've got some news to share, followed from our last earnings call related to our sales pipeline, macroeconomic conditions, and of course, financial results. So I'm gonna hit highlights first of the financial results, which we feel good about the quarter and the results we'll be reporting. In the second quarter, we achieved record quarterly revenue, which is always an exciting milestone, shows we're moving up and to the right, I like that, which is up 4% from the second quarter of last year. Operating income was up .4% and net income was up 29.3%, while adjusted EBITDA was up 11.3%, all those are over the same quarter last year. We increased our expectations for net income for full year 2025 in our financial guidance and reiterated our expectations for revenue, adjusted EBITDA and capital expenditures. And so later in the call, Scottie, of course, will expand on each of those. And there's some exciting developments in all of our core application suites, learning, credentialing and scheduling, which we'll provide in the back half of this presentation. And those are the things we're most excited about to help driving our business results. First, let's look back to our prior quarterly call. In our last call, we mentioned we were tracking a handful of, well, we characterize them as medium or large size deals that were originally expected to close in the first quarter. And I'm pleased to report that four of the five deals that we were tracking were signed during the second quarter. And the average new order contract value of those was 2.2 million across each of the four deals that's closed. And also in good news, the fifth deal is expected to be signed here early in the third quarter. So I feel like that's a positive update on the five deals that we, while the timing wasn't as we expected, the business outcome was solid in that it looks like we've landed four of the five and the fifth it seems imminently will be executed. So the market conditions, we'll talk more about that here in a bit, but we're excited to have that be our follow-up on the four deals that we talked specifically referenced last quarter. Also, I think it's positive that those five deals were really nice balance across our broad portfolio of application and suites. One of the deals closed, for example, was a multimillion dollar multi-year contract from a very prestigious health system for our American Red Cross resuscitation program. That's one of our leading partnerships and content offerings in our whole ecosystem. So we're very pleased to see a big win up in the Northeast for that product. Again, multi-year, multimillion dollar contract. And now that they're a customer health team, we're pleased to have them in the network and we hope to continuously grow that account over time as they drive more and more value from a growing library of our solutions. Another deal included a wide range of our products, including our competency suite, which is demonstrating the success of our new bundling strategy and how our customers value our ability to handle the -to-end needs of their competency program. So, I really like that this new bundling strategy around staff development here, competency assessment and development, which includes a broad swatch of our competency-oriented products, one, a multimillion dollar deal during the second quarter. The third deal, kind of rounding them out, was a credential stream deal. So again, exciting to see progress from credential stream as well. Another large health system and they selected credential stream to go enterprise-wide and our scheduling application was the fourth that's already been signed for ShiftWizard, contracted by another top health organization as well. So these are four enterprise deals balanced across learning and development and our content offerings, our scheduling application and our credential stream application. So again, I think the diversity of the WINS was as important as the size of the WINS and it was nice to see them all come through here, four of the five come through again with the fifth still expected. Now, I think another topic that's probably on the top of mind for everybody is AI and it seems like no earnings call is complete without talking about AI and AI strategies and I think this call should be no exception. At HealthStream, there are multiple dimensions of AI, its impact and we're focused on utilizing that to manage our business more efficiently, of course. And so there we're looking at role augmentation, efficiency and development of the applications we build and so we have lots of prototypes and pilots going on in the efficiency category. And then of course, we're working hard to use AI to create competitive differentiation throughout all our product suites and product offerings. And so a series of pilots spooling up using AI to reshape our future roadmaps. So both those dimensions are well underway and it's not like this is new for us. HealthStream has an established history of utilizing AI to improve healthcare and in fact, beginning with the launch of our Jane AI program over five years ago, our Jane AI was one of the first solutions to use AI to assess the clinical competency and we'd say the clinical reasoning ability of nurses. And so it's a little different than a knowledge test, it was using AI, natural language processing and machine learning to suss out the clinical reasoning ability, that kind of the quality of the clinical decisions being made from nurses. And so we think there's a pioneering product and it's just getting smarter and more effective over the years. In fact, we were just awarded another patent in connection with our Jane AI and its use of natural language processing and deep learning to facilitate competency assessment of clinical staff, particularly nurses. So we're excited to have earned yet another patent related to our Jane AI technology as it continues to be kind of foundational for our moves in and towards AI. AI is playing an important role in our new learning application. That application is called the HealthStream Learning Experience and actually in the back half of this presentation, we're gonna give an update on the business associated with this new advance. But the HealthStream Learning Experience Application or the HLX as we call it, was announced last quarter. The HLX is a modern healthcare specific application that offers the workforce personalized and this is key self-directed intelligent learning and development pathways. And those incorporate a wide range of learning modalities. So we've kind of expanded the dimensions of content available while we build these self-directed intelligent learning pathways for healthcare professionals using the HLX. And of course it's engaging the individuals in a new way, thoroughly modern user experience. Also incorporated into the HLX is OpenAI's chat or -4-0, LLM. And that's powering faster and more precise search capability for HLX users and helping establish the foundation for powering smarter, more relevant recommendations based on the learner's profile experience. The more the HLX knows about you, the better recommendations it can make for your career development, skill development, competency development and testing and evaluations. And so super excited about the HLX and its advanced incorporation of OpenAI's -4-0, LLM. And so just wanted to give another example of our advances with AI. We think that beat together, JaneAI and HLX are just a few of the examples of Healthstream's movement towards AI and getting our customers equipped to the latest tools, in this case in employee development and competency assessment. I think central to successful implementation of AI is building a culture focused on AI. And we're working really hard to get all of our officers on board with everything from collecting the data they'll ultimately need to potentially train agentic AI to envisioning pilot programs and equipping our teams with tools. For example, during this quarter, all of our developers will have a choice of being equipped with either cursor AI or co-pilot. And so we're excited to get that out of the pilot mode and into kind of full production mode. And we're excited to make those tools available to our developer, our in-house developer capabilities. Let's see, I think every company is gonna have to go on a journey of working to define how all the roles in the company will be augmented with the power of AI. And Healthstream is deep into that journey, setting up a really nice governance structure over our AI projects and beginning to fund the use of these technologies and pilots and product development. So really excited about my team's advances there and the leadership of our tech leaders in the company helping us lead us forward and building a culture of incorporating AI into our business strategies and operations. Before we go further in the call and before I turn it over to Scottie, I think it's useful in case we have new potential investors in Healthstream is just to kind of summarize to everyone the Healthstream story and reiterate what we are and what we stand for. So first and foremost, Healthstream is a healthcare technology company dedicated to developing, credentialing, and scheduling the healthcare workforce through SaaS-based solutions. And each of those are becoming, we believe, more valuable because of the interoperability that we're achieving through our H-Stream technology platform. We're kind of in this transition of trying to move from SaaS applications to a pass, the platforms of service architecture to power up and make those SaaS applications interoperable. The company holds 20 patents for its innovative products and I just announced a new one in our Jane AI. We've been awarded over 40 Brandon Hall Awards in the recent years showing our excellence in our learning, instruction, and development programs. 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, about 97% 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. We are profitable, we have no interspersing debt, and a strong cash balance of 90.6 million. We're 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 SaaS solutions and now, of course, our path-based ecology of applications. At this time, I'll turn it over to Scotty Roberts, our CFO, for a more detailed look at our financial performance here in the corridor with a forward look as well.