Healthstream Inc Q1 FY2021 Earnings Call

Good morning! And welcome to HealthStream’s First Quarter 2021 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 would now turn the conference over to Mollie Condra, Vice President of 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 2021 results. Also in the conference call with me today 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 could 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, 10-Q 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, at this time I'll turn the call over to Bobby Frist.

Thank you, Mollie. Good morning and welcome to our first quarter 2021 earnings conference call. There is so much news to cover this morning, I can't wait to get started. But I think context is very important. So to provide some personal context, the nation continues to move through the pandemic and there are reasons for cautious optimism, especially here in the U.S., given that over half of the adults have now had at least one vaccine dose and a third are fully vaccinated. As we celebrate this remarkable progress, there are plenty of challenges still remaining regarding the pandemic that affect us as individuals and, of course, our company as well. For example, figuring out our new work-from-home models and our approach to operating as a business and making them fit within whatever the new permanent norm is going to be, we are working on that diligently now. What I can tell you with absolute certainty is that HealthStream’s mission, which is focused on the people of healthcare and improving the quality of healthcare by helping to develop, retain, engage, and credential those that are in healthcare, remains constant. As you listen to our call today, I hope you recognize our commitment to that mission, how we are striving to achieve it, and how we are executing on it through some of our exciting new products, many of which have been in development for years and are emerging in the marketplace as we speak. So I'm going to give a little more detail today about some of these exciting new products or progress with them. To start out though, I do want to touch on our financial guidance, which we updated after a strong first quarter. The quarter included a record high adjusted EBITDA that's in our company's history and record quarterly sales for Verity hStream, which, as you know, has been a significant focus for us. We have been working diligently on Verity hStream for several years through a combination of core acquisitions to build a new application set for credentialing and privileging. We are now seeing it emerge, delivering record quarterly sales, and I can't wait to share more details on that. Additionally, we have two multi-million dollar contracts for our emerging products. These are products that we are excited about, and we’re glad to see the market get excited about them as well. With all of that context, we expect revenue for the full year 2021 to be in the range of $245 million to $255 million and adjusted EBITDA to be in the range of $40 million to $44 million. I'm excited to provide that updated guidance to all of our financial community and current investors. As I stated in our call in February, I believe one of the most remarkable things about this guidance is that we are projecting potential revenue growth despite a $38.4 million revenue decline in legacy resuscitation products from 2020 to 2021, and the $4 million to $4.3 million negative impact of acquisition-related deferred revenue write-downs. So, despite these headwinds, our first quarter performance gives us confidence in our improved financial expectations for 2021, where we believe we have a good shot at showing top-line revenue growth on a year-over-year basis. This is a great accomplishment by our team to figure out the balance of both organic and inorganic growth to deliver what looks like the potential amount to actually show growth in the year with such material financial headwinds from a declining product set. I just want to take a moment to reiterate some of the directional information I provided in our last call on what we could expect beyond the current year—this is a bit longer view than we normally provide—and it's building on our anticipated results for 2021. In 2022, we expect to deliver organic, high single-digit revenue growth rates. We've been focusing on our gross margin profile, expecting it to be approximately 65% in that timeframe as well. Finally, we look for a return to adjusted EBITDA margins of 15% to 20%. We saw some depression in those margins as we made product changes and investments in the last few years, but we see a return to those margins for adjusted EBITDA in 2021. It’s not only about the continued success of our long-standing product portfolios, but also the market's enthusiastic response to our innovative new solutions that contributes to our confidence in the company's future growth, and I'm going to highlight a couple of those now. One of those innovative products that we call Jane is the first of its kind in the market, to the best of our knowledge. Jane is AI-driven, with components of truly exciting technology, but it’s not the technology itself that’s exciting; it’s what it does for clinicians. It’s one of the first intelligent competency development systems in the market. It has components like Natural Language Processing by IBM Watson, and the state-of-the-art technology is changing the way nurses assess, develop, and maintain their clinical competencies. Let me explain how it works a little bit. Through two acquisitions and our M&A program, we acquired testing services and data sets, some of which had 30 years of history on evaluating the clinical competence of nurses specifically. We painstakingly converted that data into dynamic algorithms that involve components of AI capable of having real-time conversations with nurses. Next, we developed high-quality videos and simulations that present clinical events that nurses can respond to in real-time, informing Jane about what they believe is happening and what should be done for the patient. This produces an assessment that identifies the nurses’ strengths and areas for improvement. But we didn't stop there. In order to make Jane a true virtual coach—a mentor to nurses—we connected our proprietary taxonomy engine from the assessments to a library of 1,800 content titles. This allows Jane to provide a personalized learning plan to each nurse by identifying particular areas of need and recommending the actual education and training to address those unique individual needs. You can probably tell that we're excited about Jane, and I'm excited about it because it has been well over five years in development. We started selling it about 18 months ago, and we're not the only ones excited about Jane. Jane recently won six of the industry's most prestigious awards, including two first-place awards from the Brandon Hall group: one was a gold medal for best advance in AI and machine learning, and another was a gold medal for best advance in emerging learning technology. We’re excited that others recognize what we see in our new Jane capabilities. These awards recognize that Jane has moved assessments from the pen-and-paper world, through online tests, to an immersive multimedia journey that is specifically tailored to each nurse. We're also pleased that Jane was awarded a patent to further recognize its one-of-a-kind technology and approach. Awards aside, we believe the greatest accolade Jane can achieve is adoption by our customers because we think it can profoundly impact the skills, capabilities, and competencies of their staff. In 2020, when we first began offering Jane at scale, our goal was to sell Jane to one account per week every week of the year. We actually accomplished that goal and have been on a similar pace so far in 2021. As I mentioned earlier, we had a leading health system make a multi-million enterprise-wide purchase of Jane—kind of the first of its type and kind of scale—in this first quarter of 2021. As customer utilization grows and Jane’s capabilities expand, we look forward to updating you on how Jane is helping healthcare providers improve the quality of care that patients receive. I think it's one of the most exciting developments we've had in the industry in a long time, and it's definitely not an overnight process; it's taken many years to build, tune, refine, and test the Jane technology. Our focus remains on innovation, and I know that can be hard to see given all the transitions we've been discussing over the last several years. However, we believe these innovations can deliver improved outcomes and higher-skilled workers in healthcare. I do want to discuss the transition aspect. An important part of our focus is several key transitions we've discussed for over two years. I believe we've crossed an inflection point where the major business risks associated with the transitions, such as market acceptance, are behind us. We are now focused on normal market competitive risks and operational risks. We've entered the operational risk phase with these three transitions, and I believe we are doing well. For example, the Red Cross Resuscitation Suite program, which comprises BLS, ALS, and PALS competency development curriculum, was launched in January of 2019. It provides an updated, highly adaptive competency-based development solution to healthcare professionals. It offers certification to healthcare professionals successfully demonstrating proficiency in lifesaving resuscitation knowledge and skills. It’s a clearly defined product, and when we embarked on this journey in early 2019, we were uncertain of its adoption. Just by way of an update, the program has been adopted across all 50 states, and since its launch, we’ve amassed over 289 new contracts signed by customers—including healthcare facilities of all types and sizes from across the continuum of care. It includes some of the industry’s largest acute care health systems, such as HCA, Committee Health Systems, Quorum, and Trinity, along with many of the most award-winning, thought-leading acute care organizations like Cedars-Sinai and Kettering Health Network. In the non-acute space as well, we have secured substantial wins, such as with Fresenius Medical Care, one of the largest renal care providers in the U.S., and the LHC Group, a leading home healthcare service provider operating in 35 states. All of them have witnessed the innovation of the Red Cross Resuscitation Suite, particularly through the exceptional delivery via the HealthStream network and platform. With 289 new contracts and many of those representing hundreds of locations and facilities, over half a million workers have now moved through and engaged with the program. We can now confidently declare that the question of whether it is a viable solution in the market has been affirmatively answered. Now we face standard execution against our competition. How much market share can we gain? How will it continue its growth trajectory? To provide some context, it took us 12 years to build our highest level of adjusted EBITDA contribution from our legacy resuscitation offerings—12 years of selling and marketing those legacy products. We expect to eclipse that adjusted EBITDA contribution from sales of our Red Cross Suite in just 3.5 years. By the middle of 2022, we expect to surpass the previous highest level of adjusted EBITDA from the legacy platform. We do have time ahead of us, but we're on an incredible trajectory with the Red Cross Resuscitation Suite. Additionally, regarding our resuscitation offering, we are building a more comprehensive portfolio simulation offering. In February of 2020, we announced the addition of the S.T.A.B.L.E. program, a leading neonatal education solution. It’s highly respected, and now available online exclusively through HealthStream. We saw strong sales in the first quarter, adding to our thousands of subscriptions for the S.T.A.B.L.E. program. Our portfolio is no longer dependent on a single application point; our Simulation Suite and Resuscitation Training Offerings are being broadened. We are committed to continued diversification of that product portfolio and have exciting new advances coming in areas that will address specific dimensions of resuscitation and specific care settings. The second transition we talked about is Verity hStream. We've created, through four acquisitions, a common vision and team focused on credentialing and privileging enrollment needs in healthcare. During the first quarter of 2021, 45 customer accounts contracted for the Verity hStream Application Suite, which we call the CredentialStream Suite, bringing our cumulative total to approximately 390 customers. This included one new customer that signed a multi-year, multi-million contract with Verity hStream’s next-generation SaaS application—this represents the single largest sale in Verity hStream history. We are thrilled that this product, and this transition, if you will, through these acquisitions to one common approach and one SaaS Application Suite called CredentialStream, has proven to be successful. We think we are beyond just proving its technical viability, and the existential risk of the four acquisitions being integrated into one company are behind us. We are now in the normal business risks of gaining market share against the competition and positioning the product for future growth. The caliber of customers adopting the platform is a testament to its value. In the first quarter, Providence Health System, Mount Sinai Health System, Atlantic Health System, and Seattle Children's Hospital all came on board the enterprise CredentialStream platform through contract, and we are in the midst of implementing strategies for all of them. We are excited about gaining adoption of what we believe is a best-in-class solution with distinguished customers. While we face challenges in terms of learning new selling models and managing implementation backlogs from new signed customers, we believe we have proven the market acceptance of the CredentialStream platform built by the Verity hStream team. I will further touch on the upgrade of our move to a PaaS strategy through the hStream platform. There is still much work left here. Not all our application sets, particularly from recent acquisitions, are connected to or benefiting from this new PaaS architecture we’ve been building for over three and a half years. However, we are increasingly connecting them to the PaaS architecture, allowing us to develop things more rapidly and interconnect applications within the hStream platform. This also enables us to integrate added value services in the new platform that can manifest back out in the application sets, such as the learning and development set, credentialing and privileging set, and the scheduling and capacity management set of applications. We’ve been finding ways to connect the PaaS application infrastructure we are building with these application sets. A quick update: in the first quarter, we added approximately 21,000 net new hStream subscriptions, bringing our cumulative total to about 4.34 million subscriptions. These are subscriptions, not individual subscribers. It’s important to note that if you’re using an application that connects to hStream, you get a subscription to hStream. An individual could potentially have multiple subscriptions if they are using multiple applications that connect to the hStream platform. hStream brings value to customers and partners, and it's important to know that since inception, for example, the American Red Cross Suite has been powered by the hStream PaaS architecture. Our updates regarding these business transitions began at the start of 2019, and we continue to work on each of these transitions. As I mentioned, we've moved to what can be described as an operational execution phase. Moving forward, we will focus less on discussing transitions and transitional risks and more on the exciting emerging products like Jane and other innovations coming to market. At this time, I think it’s important to take a look at the financials. We had a really good first quarter, and while we're excited about it, we need to be cautious going forward. Increased investment needs and one-time expenses not recorded in Q1 will arise as we return to normal operations, including reinstating pay raises for employees. Even though we had a strong first quarter, we need to model the future carefully because we remain in an investment phase. With that, I’ll turn it over to Scotty Roberts.

Good morning everyone. I want to start with a summary of our results for the quarter. Our revenues were $63.5 million, which is up 3% over last year and included modest growth within both reporting segments. Revenues for 2021 were impacted by a $1.6 million revenue reduction associated with deferred revenue write-downs, primarily related to an acquisition we completed during the fourth quarter of last year. Operating income was $3.3 million, down 54%. Net income was $2.3 million, a decrease of 68%, and EPS was $0.07 per diluted share, down from $0.22 per diluted share in the prior year. While these GAAP-based financial measures experienced declines, our non-GAAP performance measure, adjusted EBITDA improved to $13.6 million, up 14%, which is a record quarterly high for the company. Both business segments achieved revenue growth over the prior year. Workforce Solutions revenues were $51.3 million, up 3%, and revenues from Provider Solutions were $12.2 million, up 4%. As we previously discussed, we've stopped selling legacy resuscitation products, and revenues from these products have been declining over the past two years as subscriptions expired. We indicated that revenues would cease at the end of 2020, which effectively occurred as expected. However, with our partner’s support, we extended utilization of these products for a small group of customers, leading to $1.8 million in revenue from legacy products during the first quarter. Similarly, we expect legacy product revenues in the second quarter to be approximately $700,000, essentially de minimis for the remainder of the year. Revenues from the legacy products were $11.2 million last year, and despite this over $9 million year-over-year decline, revenues from recent acquisitions, coupled with growth in other solutions from both segments, more than offset this decline. Excluding revenues from the legacy resuscitation business, consolidated revenues grew by 22%, which was comprised of 8% organic growth and 14% from acquisitions. Our gross margin was 66.5% compared to 66.9% last year. The previous year's gross margin was positively impacted by a one-time $3.4 million non-cash reduction to the cost of revenues. If we exclude the impact of this favorable adjustment, gross margins would have been 61.3% last year. This margin improvement aligns with our goal of achieving a mid-60% gross margin range for 2021. Operating expenses, excluding costs to revenues, were up 15% or $5 million. This increase reflects investments in our core business as well as incremental expenses associated with acquired businesses, including integration and transition service costs. Operating expenses from the acquired companies comprise the majority of the $5 million year-over-year increase. Offsetting these cost increases were lower expenses, such as commissions associated with the decline in legacy resuscitation revenues, reduced travel due to COVID-19, and a non-recurring, non-cash expense reduction based on changes to our paid time off policy. These factors contributed to our operating income declining by $3.9 million or 54% to $3.3 million, while adjusted EBITDA improved by $1.7 million or 14% to $13.6 million. Our cash flows from operations improved to $19.1 million this year compared to $6.1 million last year, mainly due to higher collections. Our DSO was 52 days compared to 44 days last year, which was primarily impacted by additional receivables from acquisitions completed at the end of last year. Free cash flows were $11.9 million compared to $1 million last year, and we ended the quarter with cash and investment balances of $56 million. Coming off the closing of three acquisitions in the fourth quarter of last year, we completed one more during the first quarter, which is included in our workforce segment. We paid $2 million in cash to fund this acquisition. We also increased our position in an existing minority investment by $1 million during the quarter. Our capital expenditures incurred include capitalized software development of $4.3 million. Now let's review our financial expectations for 2021, which we've updated after our strong first quarter performance. As a reminder, COVID-19's continued impact on our operating results and financial condition could influence our actual performance compared to our guidance assumptions. We are raising our revenue ranges and now forecast that consolidated revenues will range between $245 million and $255 million, with workforce revenues forecasted to range between $197 million and $205 million, and Providers revenues forecasted to range between $48 million and $50 million. Also, after the first quarter's performance, we are raising our EBITDA forecast to now range between $40 million and $44 million, equating to a 17% EBITDA margin at the mid-point of our guidance ranges. We anticipate capital expenditures—which include both capitalized software development and content—to range between $25 million and $27 million. For purposes of modeling the full year and better understanding our guidance, we want to highlight some key variances between the first quarter's results and the rest of the year. In short, we believe it would be a mistake to annualize the first quarter performance when trying to extrapolate cumulative performance for the year. This is because our first quarter revenue performance benefited from a couple of factors that will not recur at the same level, including the $1.8 million in legacy resuscitation revenues that I've described earlier and some non-recurring professional services and one-time software license revenues from our scheduling and capacity management solutions during the quarter. Our adjusted EBITDA guidance reflects increased investments in sales, marketing, and product development, which will accelerate across the remainder of the year, with a greater focus on new companies we've recently acquired. Our forecast also assumes that business travel gradually resumes and includes annual compensation increases that were frozen last year, which will take effect beginning in Q2. We also anticipate that costs associated with acquisitions integrations will continue over the next three quarters at levels higher than the first quarter, but we expect those to decline once these integrations are completed. Our forecast does not include the impact of any other potential acquisitions that we might complete over the remainder of 2021. It would only take a moment to provide a few comments about the COVID-19 impact on our business. While we are assuming a gradual improvement in sales and renewals, the pandemic may continue to negatively impact our customers, leading to uncertainty in their purchasing decisions for our products. Since the onset of the pandemic, our business operations shifted to remote selling and remote implementation, and over the past year we've conducted very little travel to our clients. Our customers have generally limited or prohibited vendors from their facilities during the pandemic. Our sales and operations teams have adapted well to working virtually, and we're pleased with their ability to maintain sales pipelines, bring in new business, and implement our solutions—all without traveling. While we have adapted to this new environment, we continue to experience some ongoing uncertainty in our customers' purchasing decisions. With a diverse product portfolio, bookings of certain products have performed better than others, and overall, our bookings for the first quarter exceeded those from the same period last year. Product categories that regained momentum include a multi-year, multi-million dollar contract for our Jane solutions and our credentialing and privileging solutions achieving record sales results this quarter. Our offices remain closed, and all employees continue to work remotely, but we are optimistic that we can reopen later this year, providing our employees the opportunity to connect and collaborate in person again. We are also closely monitoring our liquidity, including weekly cash flows, customer payment patterns, and bankruptcy notices. Fortunately, we have not experienced significant bad debts, and our customer payment patterns have stabilized over the past few months. However, if economic conditions worsen and our customers' financial situations deteriorate, it could negatively impact our future cash flows. We ended the quarter with approximately $56 million in cash and investments, no debt, and full availability under our $65 million line of credit facility. Our share repurchase program expired last month, and we remain open to establishing a new program in the future depending on market conditions and capital allocation needs. We are also consistently evaluating potential M&A opportunities. We believe that our multi-year objective to grow revenues, improve and maintain gross margins, and deliver incremental EBITDA serve the long-term best interests of shareholders and the company. Thank you. That concludes my comments for this morning. Bobby, back over to you.

Thank you, Scotty. Speaking of working from home, I was in my office. In my office, there is a fireplace, and on top of the fireplace, I had songbirds, so I guess I was competing with the songbird to share the news, and I've moved locations, so hopefully you can hear me better. It’s all about adjusting to the new working conditions. As Scotty mentioned, our President and COO is devising our return to office strategies now for our 1,000 employees, and we look forward to being together again in the near future. As we wrap up and before we go to Q&A, I want to revisit the metaphor of a three-legged stool that we introduced in our last earnings call, describing the totality of our business. Each of our solution groups represents a leg of the stool, and I’ll refresh you on that before we probably drop the analogy. The first leg represents Learning and Development solutions, which have long been a core of our business, and we’ve continued to expand and develop next-generation technologies alongside our Jane platform, which works harmoniously with some of the most widely adopted learning platforms in healthcare. The second leg is Credentialing and Privileging Solutions, which is the Verity hStream organization. It is now a 250-employee strong unit that has been gaining momentum and is setting new records in the quarter. Credentialing and privileging is an area we believe we have a good market position and are beginning to show our offerings to the world with positive reception. The third leg, which we are assembling through acquisitions, includes Scheduling and Capacity Management Solutions. This area is currently in a storming phase as we assemble our management team and determine the best approach to leverage each of the platforms we acquired, such as NurseGrid, ANSOS, and ShiftWizard—all recognized for their unique capabilities. We plan to replicate the success of our Credentialing and Privileging segment as we seek to combine the best of the abilities of these new assets, using the roadmap we created there. While we are optimistic, we acknowledge there will be hurdles in integrating these various applications, cultures, and teams. We see that as a path forward, and as we gather insights from our acquisition experiences, we hope to execute a better strategy for Scheduling and Capacity Management than we did with Credentialing and Privileging. Each of these solution groups is connected to the PaaS technology, the hStream platform, which is maturing over time. I'm truly excited about the viability, the interoperability between the application sets, and the growing potential for the new services we’re developing with the hStream platform. We believe more seamless workflows can enhance the effectiveness of these tools. I want to take a moment to celebrate the people of HealthStream, who have navigated the pandemic's challenging conditions. I’m thrilled to announce that HealthStream recently received an award from Comparably for the Best Operations Team. Our operations personnel rated our environment positively compared to other companies in the same field. This recognition speaks volumes about the culture we’re fostering, and we’re committed to using employee feedback—not just the 11,000 publicly posted comments on Comparably—to make HealthStream a better and stronger place to work. To wrap up, I want to remind everyone that on Thursday, May 20, at 02:00 PM Central, we will hold our virtual annual shareholder meeting, similar to last year, and it should simplify participation for our shareholders. We look forward to providing that report. With that, I’d like to turn it over to questions for the operator to take.

Thank you. And our first question comes from Ryan Daniels from William Blair. Your line is now open.

Joe in for Ryan. Thanks for taking the questions and congratulations on a solid quarter. I wanted to ask two questions regarding the demand environment generally. First, regarding the Verity hStream product line, Bobby mentioned having record quarterly sales and the largest sale in the history of that product line, which is great to see. I’m curious if you could elaborate on what's driving that success in the marketplace. Are there any specific tailwinds or competitive advantages you can highlight?

Yeah, I can comment on that. I believe we acquired four companies that are all in this space. We carefully reviewed the capabilities of those companies. For example, some had the best privileging libraries, which serve as data assets; others excelled in workflow management. When we built the CredentialStream platform, we not only incorporated the best of those features, but we also created a more comprehensive view of all the services and functions tied to the core credentialing process. My belief is that our application suite in credentialing and privileging enrollment is simply more complete, thoughtful, and effective than the competition. We're starting to see an improved win rate in head-to-head competitions due to the completeness of the vision of the VerityStream team and the execution of the platform. Also, we're noticing an uptick in customer engagement. Many organizations are beginning to evaluate vendors more closely, seeking better solutions than what they've currently been using, with greater interest in adopting newer platforms. However, there's still implementation lag due to the ongoing pandemic and operational challenges in various health systems, but overall, we perceive a general improvement in the buying environment, largely aided by our superior application suite.

Got it. Yeah, that's super helpful. I wanted to circle back on some of the comments regarding the Jane product, being one of the first AI-driven workforce competency management products in the marketplace. How would you characterize the demand for your workforce management solutions in the context of broader AI priorities among health systems? We often hear about large chatbots for patient engagement, or other AI solutions related to patient operations. Just curious about your perspective on workforce development and competency management tools among those priorities.

It's a great question. I believe that high-quality education and training have long been undervalued, especially in the context of significant investments in technology and equipment. Even though we understand growth and competencies among staff impact health outcomes, proving this can be challenging. This often leads education and training to be cut when budgets tighten—even if investing in competence leads to enhanced patient care and outcomes. Consequently, I’d say that investment in competency development usually receives lower priority. Early adopters of Jane quality products are often higher-quality organizations and see the link between competencies and improved clinical outcomes. Jane importantly quantifies not just knowledge deficits, but decision-making competencies, which is where errors occur. Many organizations don’t yet recognize the full potential of these investments, viewing competency development training as a mere regulatory requirement rather than a strategic investment in quality outcomes.

Hi, good morning, and congratulations on a great quarter. This might be a good follow-up to that question. When you think back to Q2 and Q3 last year, hospitals were focused on addressing the pandemic and diverting employees. Now, as vaccinations increase and the pandemic eases, how are hospitals shifting their priorities, and how does that impact your products? Are you witnessing these shifts in your discussions?

I think broader healthcare trends illustrate a shift towards EHR digitization, with many hospitals trying to balance quality outcomes with their budgets. Larger organizations are investing towards improving quality outcomes, and we believe they’re beginning to recognize the importance of tools that contribute to these aims. For example, our Credentialing and Privileging Solutions enable organizations to ensure the quality of their staff, which is increasingly vital in today's healthcare environment. The tools need to be accurate to keep non-qualified practitioners off the field. Products like our Workforce Validate system, which checks for any sanctions against employees aiming to enter the workforce, are becoming essential. These factors suggest that Quality Assurance tools are garnering more attention, which we perceive as a positive indicator of ongoing investment in staffing competencies and educational development.

Great. Thank you. Congrats on a solid start to 2021. Scotty, I was wondering just for a housekeeping matter, can you recap organic and acquired growth once again? Didn't quite catch it.

Sure, Richard. I believe we characterized organic growth, excluding the legacy resuscitation business, at 8% and acquisitions contributing about 14%. So, the combination of both resulted in a 22% growth rate if you factor out the legacy business compared to last year and this year. All of our acquisitions focus on the Workforce business unit.

I'm curious if you can provide specific color on what investments you will be making this year.

We have planned numerous investments in areas like Jane and the VerityStream team’s R&D efforts. These investments target enhancing our Application Set, particularly in Scheduling and Capacity Management Solutions. We have a solid roadmap, and we plan to expand our sales team from 10 to roughly 22 members within the next three months. I want to ensure we maintain the best expertise and build strong interconnectivity to foster a cohesive approach leveraging the combined knowledge we’ve gained from our acquisitions.

Understood, thank you. Lastly, regarding implementations, where do those stand currently versus pre-pandemic levels, and how do you expect that to play out through FY22?

As you can imagine, there was a period from February to June last year where there was minimal adoption; vendors couldn't even make contact, and implementations were stalled. Since then, customers are more open to scheduling implementations, albeit not at the pace we would typically see due to pandemic-related disruptions and the transition to remote deployments. We have a natural lag now as things are put back on schedule. Different products will have varying timelines; for credentialing solutions and multi-year contracts, full implementation might take over two years. But overall, we are beginning to see progress; we've worked hard to put things back on track, and I feel quite optimistic about our path forward.

Thank you. And showing no further questions, I would now like to turn the call back over to Robert Frist for closing remarks.

Thank you to all the analysts who are following us. We appreciate you sharing our story and want you to be careful as you model out. We attempted to clarify the second half of this year, including increased investments. Although we had a strong first quarter, please adjust your models considering our guidance ranges, as renewed investments will surface in Q2, Q3, and Q4. I'm excited to raise our guidance and share continued progress about the company. We look forward to seeing you at our shareholder meeting and we extend our gratitude to our team members for their unwavering commitment. You're making a difference here at HealthStream, and I can't wait to see how these investments yield a positive impact. Thank you, and see you next quarter!

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