HealthStream Q1 2026 Earnings Call: Complete Transcript

HealthStream (NASDAQ:HSTM) released first-quarter financial results and hosted an earnings call on Tuesday. Read the complete transcript below.

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Summary

HealthStream reported record revenues of $81.2 million, a 10.5% increase year-over-year, and adjusted EBITDA of $20.1 million, a 24.1% increase year-over-year.

The company reaffirmed its 2026 full-year guidance with anticipated revenues between $323 million and $330 million and adjusted EBITDA between $73 million and $77 million.

HealthStream highlighted strategic investments in AI integration, career networks, and new sales hires to drive future growth, particularly focusing on the healthcare workforce.

The company continues to maintain a strong cash position of $66.5 million with no long-term debt, enabling potential M&A opportunities and ongoing capital allocation towards growth initiatives.

Operational highlights include strong subscription growth from Credential Stream, ShiftWizard, and the Competency Suite, along with successful integration of recent acquisitions Versys 12 and Mission Care Collective.

Full Transcript

OPERATOR

Good morning and welcome to HealthStream's first quarter 2026 earnings conference call. At this time I'd like to inform you that this conference is being recorded and all participants are in a listen only mode at the request of the Company. We will open the conference up for question and answers after the presentation. I will now turn the conference over to Molly Kondra, Head of Investor Relations and Corporate Communications. Please go ahead Ms. Kondra. Thank you and good morning. Thank you for joining us today to discuss our first quarter 2026 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 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, including Forms 10K, 10Q and our earnings release. Additionally, we may reference certain non GAAP financial measures relating to the Company's past and future expected performance on this call. The most directly comparable GAAP financial metrics and reconciliations are included in the earnings release that we issued yesterday. So with that start I'll now turn the call over to CEO Robert A. Frist Jr..

Robert A. Frist Jr

Good morning everyone. We do have a lot to cover this morning and I'll ask Scotty and Molly to be on guard in case I have a coughing fit. Working off a bit of a cold. That's my issue. I'm going to get through it though, just in case. Molly, be ready. All right. Well good morning everyone to our first quarter 2026 earnings call. We have a lot to go over starting with the strong financial growth we delivered in the quarter which included record setting revenues of 81.2 million. That's up 10.5% year over year and record setting adjusted EBITDA which has just pushed through the 20 million to 20.1 million. That's up 24.1% year over year. Operating income grew 71.6% year over year. The strong performance in Q1 is allowing us to increase investment beyond our original plan as we started the year including in growth initiatives related to our current products, new products on the horizon and accelerated use of AI. And talk about some of those investments. Towards the end of my sections we're reaffirming our 2026 full year guidance and continue to anticipate revenue between 323 million and to 330 million, net income between 20.4 million and 22.8 million and adjusted EBITDA between 73 million and 77 million. Our strong cash balance of 66.5 million and untapped line of credit and no long term debt continue to position us well to take advantage of M and A opportunities as they arise as well as other capital deployment strategies that we believe will benefit our shareholders. As a reminder, last quarter I described four reasons why HealthStream sees real opportunity in today's rapidly expanding AI environment. As AI continues to develop, I am pleased to reaffirm our increasing belief in each of those four reasons today. First, our healthcare user base continues to expand. Unlike companies facing seat compression from AI agents, healthcare keeps hiring and keeps growing. We with roughly one quarter of all new US jobs over the next decade projected to come from the healthcare industry and nurses, our largest user base, are leading that growth. AI is not expected to reduce demand for nurses. If anything, it should free them to spend more time with patients and less time documenting. Second, our data profile remains a meaningful differentiator. Our customers utilize our enterprise applications as system of record for managing their learning, credentialing and scheduling programs. The data in these applications serves as the source of truth for our customers as they carry out their operations. I believe they'll use that source of truth in training their own AI. Third, in parallel well, in addition, around the data profile in parallel, our career networks, which is going to be an area of investment, generate proprietary individual level data that we believe is valuable for finding, developing, retaining and engaging the healthcare workforce. Nurse grid alone, for example, now reaches roughly 1 in 5 US nurses telling us where, when and for whom they want to work. Third, our HStream platform is built to incorporate AI as a core element rather than bolting it on platform elements like the HStream ID, which we've talked about extensively in the past, and our growing API footprint serve as essential infrastructure that help enable AI driven innovation in healthcare workforce technology. Fourth, our ecosystem ties it all together. Millions of caregivers, thousands of healthcare organizations and dozens of industry partners combined with more than 30 years of domain experience and the HSTREAM technology platform create something difficult to replicate. AI cannot manufacture an ecosystem like HealthStream's, but it can enhance it. In turn, our ecosystem can enhance AI in what we believe will be a virtuous loop of value creation for our customers and investors alike. Building on that foundation, I'm pleased to share that we have meaningfully expanded our internal rollout of AI across the company and are making great progress. Adoption is broadening across teams. Our employees are putting these tools to work in their day to day and we are encouraged by the early productivity and quality benefits we are already seeing. It's still early days in terms of realizing the benefits of AI and with driving innovation as one of our company's six constitutional values, I believe our employees are on the front foot of ensuring that HealthStream is an innovator in this promising area. Before we go further in our call, I want to briefly summarize our business for the benefit of anyone who is new to the HealthStream story and I hope there's lots of you on the call today. First and foremost, HealthStream is a healthcare technology company dedicated to developing, credentialing and scheduling the healthcare workforce through technology solutions, each of which are becoming more valuable because of the interoperability they're achieving through our HSTREAM technology platform. We have also started to open our sales channels directly to healthcare professionals and nursing students through our three career networks. These help nurses, CNAs and students throughout their career journey. The company holds 20 patents for 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 reported a strong cash balance of 66.5 million at the end of the first quarter of 2026. This strong cash balance allows us to allocate capital to product development, m and a share, repurchases and dividends. We are solely focused on healthcare and more specifically the healthcare workforce and those preparing to enter it. The 12.5 million healthcare professionals and nursing students in the United States comprise the core total addressable market for our solutions at this time. Turn it over to Scotty Roberts. We'll turn our attention to our financials and hear a report from Scotty. Scotty, take a look at 2026 first quarter and give us your financial outlook.

Scotty Roberts (CFO and Senior Vice President of Finance and Accounting)

All right, thanks Bobby and good morning everyone. I'll be happy to cover our financial results for the first quarter with you this morning. And for the first quarter our revenues were a record of 81.2 million, which was up 10.5%. Operating income was 7.5 million and it was up 71.6%. Net income was 5.9 million, up 36.4%. Earnings per share came in at $0.20 per share, which is up from $0.14 per share and adjusted. EBITDA was also a new record of 20.1 million which was up 24.1%. Our revenues increased by 7.7 million or 10.5% and were 81.2 million compared to 73.5 million in the prior year. Revenues from subscription products were up 7.6 million or 10.7%, while professional service revenues were up 0.1 million or 4.3%. Our organic revenue growth rate was 5.8% and the inorganic growth rate was 4.7% in the first quarter. Inorganic revenues are associated with the Versus 12 and Mission Care Collective acquisitions that we completed in the fourth quarter of 2025. The first quarter of 2026 is the first full quarter with both operating as part of HealthStream. I'm pleased to report that both post acquisition integrations are progressing well. Versys 12 is extending our reach into payer credentialing, a meaningful expansion of our addressable market, and MYCNA Jobs is building momentum connecting CNAs and home care providers with the organizations that need them. Together these two acquisitions contributed 3.4 million in revenue in the first quarter and we continue to see compelling opportunities to cross sell and integrate the capabilities into the broader HealthStream platform. In addition to the revenue contributions from these 2 recent acquisitions, our core business was supported by strong subscription growth performance from Credential Stream, which grew by 19%, Shift wizard, which grew by 29% and Competency Suite, which grew by 17%. Revenues from our legacy credentialing and legacy Scheduling products approximated 7.6 million of our first quarter revenues and declined by 16% compared to the first quarter of last year. As we continue our efforts to migrate customers from those solutions, our remaining performance obligations were 687 million as of the end of the first quarter compared to 613 million for the same period as of last year. We expect approximately 39% of the remaining performance obligations will be converted to revenue over the next 12 months and that 67% will be converted over the next 24 months. Gross margin was 65.8% compared to 65.3% in the prior year quarter and this improvement was primarily related to the growth in revenues and including contributions from the recent acquisitions. Operating expenses excluding cost revenues increased by 5.3% or 2.3 million. Product development increased by 1.6 million or 12.9%. Sales and marketing increased by 0.8 million or 6.7%. Depreciation and amortization increased by 0.6 million or 5.7%, while G&A expenses declined by 0.7 million or 7.7%. These operating expense increases were partially impacted by the recent acquisitions. While the GNA expense decline resulted from our office sublease to wrap up, our net income was 5.9 million and was up 36.4% over the prior year and adjusted EBITDA improved to a record high of 20.1 million and was up 24.1% and the adjusted EBITDA margin was 24.28% compared to 22% last year. So we ended the quarter with cash and investment balances of 66.5 million compared to 57 million last quarter and during the first quarter we paid 7.5 million for capital expenditures, we returned 1 million to shareholders through our dividend program and we repurchased 7 and a half million of our common stock under the share repurchase programs that we announced in November of 2025 and March of 2026. In addition, we made 1.8 million of the minority investments in companies that we expect to leverage our ecosystem and our platform. Our day Sales outstanding were 39 days for the first quarter compared to 37 days in the prior year. First quarter our objective is to maintain our DSO in the 40 to 45 day range or better and I'm pleased with our continued progress in this area. Cash flows from operations came in at 27.1 million for both the current year and the prior year. First quarter cash flows were partially impacted by the minor increase in DSO that I just mentioned as well as higher payments for sales commissions. Following the strong bookings that we achieved in the fourth quarter of last year, our free cash flow was 19.7 million which is up from 18.2 million from last year, which is an increase of 7.9%. And our capital expenditures came in at 7.5 million compared to 8.8 million last year, ending the quarter with 66.5 million of cash and investments. Free cash flows and no debt. We are well positioned to deploy capital to improve our shareholder value. As a reminder, we maintain a disciplined approach to capital allocation 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. The third is returning a portion of profits back to shareholders in the form of cash dividends and our 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 3 and a half cents per share to be paid on May 29th to holders of record on May 18th. During the first quarter we made share repurchases of 7.5 million under two board authorized share repurchase programs. We repurchased the remaining 5 million under a $10 million share repurchase program that was authorized by the Board of Directors. In November of 2025 and in March 2026, the board authorized a new $10 million repurchase program and we made 2 1/2 million of repurchases under this plan during the first quarter and we've continued to make repurchases during the second quarter. 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 and I'll finish up this morning by just recapping our financial outlook for 2026, which we are reiterating the guidance that we previously announced in February. We continue to expect our consolidated revenues to range between 323 million and 330 million, net income to range between 20.4 million and 22.8 million, adjusted EBITDA to range between 73 and 77 million, and capital expenditures to range between 31 and 34 million. For the second quarter, we expect our revenue growth rate will approximate 9.5% and adjusted EBITDA margin will approximate 23%, consistent with our operating budget for the year. We have several planned operating expenses that will begin in the second quarter, including higher labor costs, higher marketing costs from trade show sponsorship and attendance, and new technology investments to support our infrastructure, among others. In addition, our strong performance in the first quarter provides us with additional capacity to accelerate investments towards several initiatives such as our career networks. 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 lived assets that we may complete during the year. That's all I have for today. Thanks for your time this morning and Bobby, I'll go ahead and turn the call back over to you for some more updates.

Robert A. Frist Jr

Thank you, Scotty. I want to start this section off the call as I usually do, with some business updates that highlight successes we've achieved in the learning, credentialing and scheduling areas along with updates on our career networks. Let's start with the Learning Product family, which includes the Competency Suite. Many customers are increasingly taking advantage of the opportunity to purchase a bundle of several of our most popular workforce applications and content libraries, which we call the Competency Suite. Customers purchase a subscription to the Competency Suite for all of their employees that are applicable, particularly the clinical staff, which comes with unlimited use. We saw strong momentum of this product in the first quarter with a 17.3% increase in revenues achieved. Our American Red Cross Resuscitation Suite continues to be in demand by customers. In the first quarter, we provided the marketplace with 18 updated courses which included education content in our BLS, ALS and PALS programs. The updated content was deployed simultaneously across the entire customer network in a single day, all aligned to the new ILCOR Science guidelines. Among the sales successes we had in Q1 with the resuscitation Suite was a decision by Cedars Sinai Medical center to renew and expand their number of users by 50%. They also informed us that the expansion will be beneficial as they have been named the official medical provider to the 2028 LA Olympic and Paralympic Games. That's super exciting for our teams as well. Now let's move to Credentialing where our flagship product, Credential Stream, continued its strong momentum in the first quarter. Revenues from sales of credential stream in the first quarter were up approximately 19% over the same quarter last year. One thing we love to see is to see our customers growing along with us and some of our customers meaningfully expanded through M and A last year. In fact, two of our largest Credential stream sales in the quarter were significant expansions due to M and A and enterprise wide standardization on Credential Stream. We we take it as a strong vote of confidence when our customers trust and rely on Credential Stream so much as a system of record that they choose to stop using solutions from our competitors and standardize on Credential Stream when they expand their operations. We're dedicated to repaying that vote of confidence by helping these customers improve their operating results by reducing the time it takes to onboard, enroll, credential and privilege their physicians. There's just huge economic benefit when a health system or one of our customers can show demonstrable improvement in the time to revenue on these physicians. We believe our software plays an essential role in getting that outcome versus 12 which we recently acquired in order to expand our market share. That product offering and expertise in the payer credentialing space also delivered one of our top three Credentialing Wins in the Quarter we're still in the earlier phases of our expansion to the payer market and we are pleased to see versus 12 already contributing to that effort. Let's move to scheduling where our core product Shift wizard continues to deliver strong revenue growth. With first quarter revenues up approximately 29% versus the first quarter of the previous year, it continues to be our top performing product in our scheduling application suite. Our top two shiftwizard deals in the quarter were once again takeouts of a competitor that is horizontally focused instead of solely focused on healthcare. Our sales leaders attribute these wins to the fact that our growing ShiftWizard customer base is increasingly touting the value of the healthcare specific solution that ShiftWizard provides when the rubber hits the road. Scheduling and staffing clinicians are simply different than scheduling the labor pool for retail or factory shifts and the market is taking note of that. Now let's turn to our Career Networks. They include my Clinical Exchange, Nurse Grid and MYCNA Jobs. Importantly, Career networks directly benefit both individual healthcare professionals as well as the health organizations seeking to employ and engage them. For individuals, HealthStream Career Network serves as a career catalyst through every stage of their pre professional and professional journey. Last year alone, my Clinical Exchange connected over 364,000 nursing and allied health students to clinical placements. Nurse Grid, the number one app for nurses in the Apple App store, engaged over 683,000 monthly active users and MyCNA jobs, which connected approximately 70% of America's direct care workforce in the home caregiver space. In doing so, these solutions guided caregivers through every stage of their career journey, helping them discover their path, build meaningful professional relationships, access focused learning and advance to what's next in their career. For healthcare organizations, our career networks provide employers with direct access to the largest, most engaged audience of nurses and caregivers through targeted recruitment development pathways and in App promotion. My Clinical Exchange served as the first touch point for helping over 715 healthcare organizations and over 1900 schools seeking to place nurses and allied health students into clinical rotations. Nurse Grid was utilized by nurses in approximately 37,000 unique clinical sites as Nurse Grid users managed their professional calendars and engagement across those sites. Finally, MYCNA jobs helped over 8,000 healthcare organizations access our home caregiver and CNA community to promote work and learning opportunities. To date, the usage of our Career Networks has created over 450,000 HStream IDs and counting among students, nurses and allied health workers. In aggregate, Career Networks contributed approximately 3.78 million in the quarter. While this is modest compared to the company's total revenue, we believe that growth potential, differentiation and diversification of Career Networks makes them an important area for incremental investment. We are already rolling some of the profits from the quarter's outperformance into new sales hires for this area, the Career Networks, and into scaling the three solutions. I'm pleased to announce the promotion of Michael Collier as we wrap up this quarter's news. From Executive Vice President, Corporate Strategy, Development and Operations to Chief Operating Officer and Executive Vice President. In this expanded role, Michael will lead enterprise operations across HealthStream, including customer experience, corporate development and M and A implementations, legal, human resources and other critical areas he's taken on a lot. He also serves as Executive sponsor of the company's AI transformation, driving AI readiness across operational teams. Since Joining Hellstream in 2011, Michael has been instrumental in our growth, including leading more than two dozen successful acquisitions. We look forward to his continued leadership in this expanded capacity. Before we move on, I want to remind our shareholders and investors that if you're already a shareholder, then you know that our annual shareholders meeting is scheduled to take place virtually on Thursday, May 28 at 2pm Central. Notifications of the meeting and access to the proxy statement, 10k and shareholder letter were sent out on April 13th. We encourage you to vote your shares and participate in the future of our company. And now I want to close the same reminder I share with you every quarter. If you are interested in a highly recurring revenue a profitable healthcare technology company that expects to deliver growth, then HealthStream may be the right investment for you. If you're interested in a company whose core user base the clinical health workforce expanding faster than any other sector in 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 credential schedule onboard and retain this growing healthcare workforce. Maybe HealthStream is the right investment for you. I'll turn it over to our sponsor and the operator to begin the Q and A session. Thank you.

OPERATOR

Thank you. At this time, we will conduct the question and answer session. To ask a question, you'll need to press Star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q and A roster. Our first question today is from Matt Hewitt with Craig Hollam Capital Group. Your line is open.

Matt Hewitt (Equity Analyst)

Good morning team, and congratulations on the strong start to the year. Maybe first up, obviously a nice pop in gross margin. Sounds like some of the acquisitions or the acquisitions were aiding in that. Should we anticipate a little bit more lift here in Q2 and longer term, how could that play out? I mean, are you anticipating annual improvement in gross margins or is it more about driving operating leverage as you kind of go forward?

Scotty Roberts (CFO and Senior Vice President of Finance and Accounting)

Scotty, I'll let you take that one to start us. Yeah, really, Matt? No significant expectation of improvement in gross margin. I think the 65.8% what we delivered in Q1 was probably a little bit ahead of where we expected to be in the quarter. And it's just, you know, revenue mix. Got a little bit of improvement in revenue in the first quarter from a variety of things. Some of it's timing, things that we anticipated to come in and say Q2 or Q3 kind of move forward in the year. Some of that's just, you know, early activations from customers that we had sold in, say Q4, you know, some consumption based revenue, things like that. We're pulling forward. So got a little bit of improvement in margin because of that, you know, some of our ambitions for, you know, moving to the clouds could compress margins a little bit over time. Makes some of those transitions. But that's still, you know, good ways in front of us to see how that plays out. But that's just something that's on our to do list for this year to begin this year anyway.

Matt Hewitt (Equity Analyst)

Got it. And then maybe a question for you, Bobby, since you addressed it in your prepared remarks, but you spoke to how AI is expected to drive increasing efficiency with nurses. What do you think will be the downstream effect of that? Will that allow them more time to care for patients? Will that allow more time for them to work on their training and education and those types of things? From a hospital's perspective, does that mean if the nurses are becoming more efficient, maybe they don't need to hire as many? I'm just trying to think what the downstream effects of AI adoption by the nursing group would be. Thank you.

Robert A. Frist Jr

Yeah, overall we see a shortage of nurses and we see the early successes of the deployment of AI in our customer base are around ambient listening. And ambient listening definitely frees up more time for the nurses and caregivers to spend with patients, which I think is greatly appreciated by all patients and helping the Health systems put a more friendly face on their adoption of technology. So I think the early use and adoption is in areas that will directly impact the patient experience in a positive way. As far as demand for nurses go, I and every report that I read seem to think that there's far more demand than there will be supply for the next five years plus. And so I don't see fewer caregivers. I see more and a better opportunity to be more personalized in the care delivery. So we view that as an opportunity to be a close ally to all those health systems. We've kind of continued to expand the value that we provide by these career networks, helping hospitals not just develop and retain the ones they have and say, for example, through our learning capabilities, but now helping find, identify, match new talents for them to employ. So we're servicing more of the continuum of the workforce need and at a time of great need for more workforce. So we think we're well positioned with the mixture of our product sets to be a great ally to these health systems. That's great. Thank you.

OPERATOR

Thanks for your question. Our next question is from John Penny with Canaccor Genuity. Your line is open.