Good morning, and welcome to HealthStreams, fourth quarter and full year 2025 earnings conference call. At this time, I would like to inform you that the conference is being recorded and that all participants are in 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 like to turn the conference over to Molly Kondra, Head of Investor Relations and Communications. Please go ahead, Ms. Kondra.

Thank you. Good morning. and thank you for joining us today to discuss our fourth quarter and full year 2025 results. Also in the conference call with me is Robert A. Frisk, 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 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 Bobby Frist.

Thank you, Molly. Good morning, everyone, and welcome to our fourth quarter and full year 2025 earnings call. We do have a lot to talk about this morning, and there's several topics. We'll definitely cover the topic of the emerging landscape with AI. We're going to talk about our financial performance for the quarter and the full year. We'll go through some business and product updates at the end and turn it back over to you guys for questions. So, you know, nothing like the numbers first. Let's just kind of jump in. We finished the full year 2025 with revenues up 4.3% and adjusted EBITDA up 7.5% year over year. For the fourth quarter, revenues were up 7.4%, and adjusted EBITDA was up 16.4% year over year. And then, you know, looking forward to 2026, probably the reason we're all on the call today, we expect Healthstream to show continued growth in each of the areas where we provide financial guidance, as we anticipate revenue between $323 million and $330 million, net income between $20.4 million and $22.8 million, and adjusted EBITDA between $73 and $77 million. These guidance ranges do not include any acquisitions we may complete during the year, though our strong cash balance of $57 million, untapped line of credit, and no long-term debt position us well to take advantage of M&A opportunities as they arise. Later in the call today, I'm going to describe some of the exciting developments on our application suites, which we've talked about for years, and our rather newer career networks, which we'll cover in a little bit of detail the newest at the end of the call. But first, I want to talk a little bit about how HealthStream is positioned relative to the emerging context of AI and which trends we think are categories of trends we think help favorably position us in that landscape. There's four categories I'm going to kind of discuss that are really more broadly positioning categories. So we talk about relative strength to others as we enter this massive period of change. First category, because there's this concept of this SaaS Armageddon or SaaS apocalypse, is to think about how AI might affect our end users. And so this first category is talking about the expansion of the healthcare user base. I think unlike companies that fear seat compression due to AI agents minimizing the number of their human subscribers, our user base of healthcare providers is expanding. In fact, the number of healthcare providers is projected to increase significantly in the coming years, particularly in the nursing workforce, which is our greatest strength as a company. In January of 2026 alone, healthcare accounted for approximately 82,000 of the 130,000 new jobs added in the U.S. According to the Bureau of Labor Statistics, that trend will continue was roughly one quarter of all new jobs in the U.S. economy over the next decade being in health care. On average, hospitals hired 13,600 net new personnel each month in 2025, and nurses continue to be a strong component of this growth. From 2020 to 2024, registered nurses increased 9.4% overall, while nurse practitioners increased 38.5% according to BLS. So, this first trend translates into expanded opportunities for growth in our user base. And I just think fundamentally, you know, there's lots of areas of the market where there's lots of white papers, projections, futurists are saying those jobs may be eliminated. And I think in our market, we're just not seeing those kind of projections. What we're seeing are projections of shortages and projections of increasing demand. And so at our core is the healthcare workforce, and at its core is the nursing workforce. And so we think that with our acute focus on that workforce pool, we have a relatively strong position as we enter the projections of how change, how dynamic of change AI will impose on our marketplace. In fact, you know, when we think about it, the positive dimension of AI in our workspace is I believe that AI will enhance the roles of nurses. It will make them more human and have more contact with patients as some of their paperwork and other functions get automated. And so kind of in a great irony, you know, this is one of the skills jobs that I think survives the apocalypse and, in fact, is enhanced by it, allowing the millions of nurses in our country to spend more time by the bedside with patients instead of less. So that's the first trend I want to talk about. The second is our data profile. And I think everybody has to get a grip around companies and organizations' data profile. And, you know, I think that that can be broken into two categories. The first is thinking about the role of the software plays for the organizations it serves. And I think for several of our solutions, our systems serve as a system of record, kind of a foundational source of truth. For example, in the learning space, we have an authoritative position maintaining the horizontal and longitudinal learning records of millions of healthcare workers over decades. And that strength of position as a system of record positions us well for the future of AI. AI is increasingly used to drive efficiencies and develop insights, the systems of record on which AI relies are becoming increasingly important. In terms of learning and compliance, I feel confident that we serve as a system of record for more healthcare organizations than any other company. Customers value having a single system of record for the whole of their learning program because it allows them to easily store, report, and gain actual insights into the development and assessment of their workforce, whether that is in the form of the use of AI or other tools. Traditionally, the data feeding into the learning system of record was generated solely from the use of one of our SaaS applications, such as the HLC, the Lstream Learning Center. That continues to be the case, but encouragingly, we're also seeing customers push other learning records they have into their Lstream system of record. They're accomplishing this through our learning API, which of course is included in their Hstream subscription. So all that to say is just to reinforce that some of our core systems do serve as a system of record on behalf of our customers. And I think in a relative positioning world, I'd rather be there than just be a point solution. In terms of physician credentialing, our customers often refer to us as the single source of truth. And this means that we maintain the system of record status of which key functions, such as physician enrollment and privilege granting, those functions originate and are maintained and spin off of our system of record. So whether it is for learning or credentialing, Healthstream's customers trust us to maintain secure, reliable, and organized systems of record on their behalf. If AI is to make a true impact in healthcare, you know, we believe and our company believes and I believe it will need to rely on these systems of record going forward. The second component of data, if you think about a data profile, when you enter this world of change is trying to determine whether an organization is an aggregator of kind of publicly available data or their originator of unique data about their customers and customer organizations. What is their relative data position? And I would say, you know, through our career networks, which we'll talk more about at the end, students, professionals like nurses, CNAs that interface directly with HealthStream for a variety of reasons. Whether it's to find their first clinical rotation in a hospital as they're graduating or find their next shift or they're socializing with colleagues, these interactions create that access to this proprietary data that I would call original data. You take our virally growing nurse grid career network, for example. It's adding about 2,000 new nurses a week and now over 670,000 monthly active users. That's a staggering one out of five nurses in the U.S. using NurseGrid. And they tell us who they like to work with, who they like to work for, when they want to work, how much monetary incentive will persuade them to pick up an extra shift. You know, Healthstream is originating this proprietary data, and more importantly, we're using it to the mutual benefit of the individuals who provide it and the organizations that want to employ them. By connecting individuals with employers to help both realize their goals, healthcare itself improves. Everyone knows that AI requires data to be effective, and we believe that the data we are originating can be among the most valuable and beneficial for managing the healthcare workforce. That brings me to the third category, which is our platform and our platform strategy. We call it our H-Stream platform. Essentially, for over five years, we've been working diligently underneath the scenes and behind the scenes, investing in the creation of our platform. This is distinguished from our group of SaaS applications. The platform is a series of capabilities, of which, by the way, AI is one of the 10 core elements of the H-Stream platform that allows interoperability and allows our SaaS applications to behave more like an ecosystem than separate, distinct SaaS applications. And we're also, through this platform able to connect to the backbone of these career networks. And so it's really an interesting kind of ecology that's evolving around the platform that we've built. So I just want to remind you that the platform strategy we have is an advancing strategy. It puts us in a more primary situation with our customers as they use the APIs of the platform, the data of the platform, the data services of the platform. The interoperability they can enjoy between the different applications creates more of an ecology effect instead of just standalone kind of workflows that we're excited about. And so, you know, for example, one of the core elements of the platform is the H-Stream ID, which, you know, is a fundamental building block needed to drive interoperability and innovation in the healthcare workforce technology we're building. So what we observe is the number of APIs from the platform, their utilization by customers and industry I'm sorry, participants.

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Okay, this is Molly Kondra. I'm going to pick up and finish off this section for Bobby while we figure out what's going on. I apologize for that. We were leading up to the fourth category, which is our ecosystem. And for that, you know, you can have a great business vertical, a great data profile, or a great platform. You can even have all three, but if you don't bring them together at scale to form an ecosystem, then it really doesn't create durable value. There are many dimensions to health change business, all of which work together to form a whole that is greater than its individual parts. You know, something that AI cannot create is an ecosystem of millions of individual caregivers, like those choosing Nurse Grid or MyCNA Jobs, the thousands of healthcare organizations, like those using our SaaS application suites, and dozens of industry partners, like the American Red Cross and world-class healthcare organizations. Combining those elements with our 30-plus years of experience at our 8-stream platform architecture, and you have something that's difficult to replicate. The organic life of such a thriving ecosystem is not something that AI can simply code, but it's something that AI can enhance and something that can turn and enhance AI. At least that's our strong belief. Now, before we go further in the call, I want to briefly summarize our business for the benefit of anyone who's new to the HealthStream story. And this is something we do every quarter. First and foremost, keep in mind that HealthStream is a healthcare technology company dedicated to developing, credentialing, and scheduling the healthcare workforce through SaaS-based applications, each of which are becoming more valuable because of the interoperability they're achieving through our H-Stream technology platform. We've also started to open our sales channels directly to healthcare professionals and nursing students through our three career networks for helping 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, 96% of our revenues are subscription-based. So we are profitable, we have no interest-faring debt, and we report a strong cash balance of $57 million at the end of the fourth quarter of 2025. This strong cash balance allows us to allocate capital to product development, to M&A, share repurchases, and dividends, all of which we've done in the fourth quarter. We are solely focused on healthcare, and more specifically, the healthcare workforce of 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. So at this time, right now, we're going to turn our attention back to our results in this call, and Scotty Roberts, our CFO, We'll provide a more detailed discussion of the financial metrics in the fourth quarter and full year 2025, along with further comments about how we view our financial outlook for 2026. So I'll turn it over to you, Scotty.

Hey, Scotty. By the way, sorry, I didn't realize that dropped, so I was beautifully ad-libbing on the script. But thank goodness we had such a solid script. And Molly, you jumped right in as needed. So fantastic. I just caught the last minute of your presentation. Nice job. We're fine. But I did do a lot of great ad-libbing, which maybe people were grateful I didn't go off-script, at least those that helped develop it. So thank you, Molly, and Scotty, we'll turn it over to you. I'll try to keep my iPad live so I don't get cut off again. I'm not really sure where I dropped off. Sorry for that. I'll be available in the QA, and I'll pick it up in the last third as well. So, Scotty, you're on.

Thanks, Molly, and thanks, Bobby. Good morning, everyone. Before going over the financial results, I want to first point out several exciting events that took place during the fourth quarter. We completed two acquisitions, Versus 12 in October and Mission Care Collective in December. Our board of directors authorized a $10 million share repurchase program in November, with $5 million of the repurchases made in the fourth quarter, and the remainder was purchased in January. In December, our CEO contributed $3.8 million of his personally owned stock to the company in order to facilitate the grant of equity to company employees in recognition of their contributions to the company and to further align the interests of those employees with our shareholders. The accounting treatment of this stock grant resulted in $3.5 million of non-cash compensation expense and $0.3 million of employer taxes and administrative costs, which negatively impacted our financial results for the quarter. It's also worth noting that this stock grant resulted in no dilution of shares to any existing shareholders of the company other than our CEO. Now, with that backdrop, let me go over the financial results for the fourth quarter. Unless otherwise noted, the comparisons will be against the same period of last year. Additionally, I'll reference certain non-GAAP comparisons to adjust for the impact of the CEO stock grant. Revenues were a record of $79.7 million and were up 7.4 percent. Operating income was $2.4 million and was down 48.8 percent. Net income was $2.5 million, down 48.1 percent. Earnings per share was $0.09 per share down from 16 cents per share and adjusted EBITDA was 18.8 million and was up 16.4 percent. On a non-GAAP basis our non-GAAP operating income was 6.2 million and was up 31.7 percent. Non-GAAP net income was 5.4 million and was up 9.5 percent and non-GAAP EPS was 18 cents per share and it was up two cents per share. Our revenues increased by 5.5 million or 7.4 percent and were 79.7 million compared to 74.2 million in last year's fourth quarter. Revenues from subscription products were up 5.8 million or 8.2 percent, while professional service revenues were down 0.3 million or 11.6 percent. Our subscription revenue growth was supported by continued strong performance from our core solutions with credential stream growing by 21 percent shift wizard growing by 31 percent and competency suite growing by 27 percent now while a portion of the strong revenue growth and credential stream and shift wizard are from conversions from our legacy credentialing and scheduling applications revenues from those legacy applications declined by 27 compared to last year. Revenues from the two acquisitions that we recently completed were $1.6 million in the quarter. In addition, revenue increases from the annual pricing escalators that we began introducing into new contracts last year also benefited the year-over-year growth. Moving on, our sales team finished the year with strong contract bookings, which led to an 11.2% increase in our remaining performance obligations, which were $691 million as of the end of the fourth quarter, and that compares to $621 million for the same period of last year. We expect that 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 63.8% compared to 66.2% in the prior quarter, and gross margin was impacted by an increase in our cloud hosting costs and software licensing costs, which primarily come from the Credential Stream application and the HStream platform. The gross margin was also impacted by the non-cash compensation expense associated with the CEO's stock grant. This grant reduced gross margin by $1.3 million, or approximately 170 basis points. Our operating expenses, excluding cost to revenue, increased by 9% or $4 million, of which approximately $2.5 million of the increase was associated with the CEO stock grant. We also incurred over $600,000 in transaction costs associated with the two acquisitions that we completed in the fourth quarter. Net income was $2.5 million and was down from $4.9 million last year. Again, this decline was significantly influenced by the non-cash compensation expense from the CEO stock grant. On a non-GAAP basis, that income was $5.4 million and was up 9.5% from the $4.9 million last year. And finally, adjusted EBITDA came in at $18.8 million, which was up 16.4%, and our adjusted EBITDA margin was 23.6% compared to 21.8% last year. Switching to the balance sheet, we ended the quarter with cash and investment balances at $57 million, which compares to $92.6 million last quarter. And during the quarter, we deployed $35.1 million for acquisitions. We paid $6.8 million for capital expenditures. We returned $0.9 million to shareholders through our dividend program, and we repurchased $5 million of our common stock under the share repurchase program that we announced in November. Our day sales outstanding remained steady at 35 days for the quarter, which marks the sixth consecutive quarter that DSO is at or below 40 days. For the year, our cash flows from operations were $63.3 million compared to $57.7 million in the prior year, which is an increase of 9.8 percent. Free cash flows were $31.1 million compared to $29.5 million last year, an increase of 5.5 percent, and our capital expenditures were $32.2 million compared to $28.1 million last year, an increase of 14.3%. Ending the quarter with $57 million of cash and investments, free cash flows, and no debt, we are well positioned to deploy capital to improve shareholder value. 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&D plans. 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. In regard to M&A investments, on October 8th, we announced the acquisition of Versus 12, a health care technology company focused on payer credentialing. The consideration paid for Versus 12 consisted of $11.4 million in cash, taking into effect customary purchase price adjustments and a post-closing working capital adjustment. And up to an additional $4 million of cash consideration may be paid over a three-year period following closing, contingent upon achievement of certain financial targets. And then on December 15th, we announced the acquisition of Mission Care Collective, a healthcare workforce company primarily focused on connecting non-medical caregivers and CNAs with job placement and numerous job-related programs. The consideration paid for Mission Care consisted of $24.6 million in cash and $4 million in our common stock, which also takes into effect customary purchase price adjustments and is subject to a post-closing working capital adjustment. And up to an additional $10 million of cash consideration may be paid over a three-year period following closing, which is also contingent upon achievement of certain financial targets. In respect to our dividend program, yesterday our board of directors declared a quarterly cash dividend of three and a half cents per share to be paid on March 20th to holders of record on March the 9th. This represents a 12.9% increase over the previous quarterly cash dividend. In November of 2025, our Board of Directors authorized a $10 million share repurchase program, of which $5 million of share repurchases were made in the fourth quarter of 2025, and the remaining $5 million were made in January of 2026. Also, in May of 2025, the Board authorized a $25 million share repurchase program that was completed in the third quarter of 2025. To recap the full year, we achieved $304.1 million of revenue, $18.3 million of net income, $21.2 million of non-GAAP net income, and adjusted EBITDA of $71.8 million. We made $30 million in share repurchases. We paid $3.7 million in dividends to shareholders, deployed $39.1 million of capital on M&A, and $32.2 million of capital expenditures. We remain focused on consistently growing the business both organically and inorganically while remaining disciplined with our capital allocation strategy. I'll go ahead and wrap up my portion of the call this morning by going over our financial outlook for 2026. We expect that consolidated revenues will range between 323 and 330 million, which equates to a growth rate range of 6.2% to 8.5%. And to begin the year, we estimate that the fourth or the first quarter revenue growth rate will be approximately 8%. We expect quarterly revenues to improve sequentially across the year with higher growth rates in the first half of the year than in the second half, which is primarily due to the timing of the 2025 acquisition. We expect that inorganic revenues will be approximately $13 million for the year. We expect that net income will range between $20.4 and $22.8 million. That adjusted EBITDA will range between $73 and $77 million. That capital expenditures will range between $31 and $34 million. and we expect that our effective tax rate will be approximately 22%. This guidance does not include the impact of any acquisitions or dispositions that we may complete during the year, any gains or losses from changes in the fair value of non-marketable equity investments or contingent consideration or impairment of long-lived assets. In closing, I'm excited about the opportunities we have in front of us and have confidence in our ability to deliver on another solid year of financial performance while continuing to create value for our stakeholders. Thanks for your time again this morning, and I'll now turn the call back over to you, Bobby.

Thanks, Scotty. Well, let's see. Let's pick up here with the business updates at the last third here. So I'll start off, as I usually do, with some core business updates that cover our learning, credentialing, and scheduling application suites. And then we'll talk about the newest career network, MyCNAJobs. So, let's start with the learning product family, which includes kind of a subset of what we call our 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. Customer purchases, the customers purchase a subscription to the competency suite for all of their employees, which comes in an unlimited use format. Key sales of the competency suite during the fourth quarter included some of the nation's top health organizations like Intermountain Health, Northside Hospital, and Dartmouth Health. We think about our credentialing area where our flagship product, Credential Stream, also finished the year strong in terms of new sales, expansion sales, and importantly, conversions from legacy products. Revenues from sales of Credential Stream in the fourth quarter were up approximately 21% over the same quarter last year, and we saw growth of approximately 23 percent year over year our largest sale in the quarter was the result of our winning a highly competitive rfp our next largest sale came from a referral from our partner verisys and represented a competitive takeout because the customer loves our comprehensive solution api integration capabilities from our platform and the use of cutting-edge data infrastructure that allows them to get greater insights faster things their previous system could not deliver. Additionally, we were pleased that an existing health system customer decided to expand their credential stream access as they standardized on the credential stream across all their facilities and also invested in our case review and performance metrics products. The quarter for credential stream was not only about sales success. As a result of infrastructure enhancements we made earlier in the year, credential stream delivered excellent system performance and high reliability both of which were recognized and lauded by our customers we were also pleased that some of our large legacy credentialing customers completed their conversion from echo credentialing and msow for example upmc health system a major health system and sutter health being notable among those that successfully transitioned to our credential stream application through credential stream we're committed to helping those customers speed time to revenue for the physicians they onboard, which will improve their financial performance and ability to provide quality care. To conclude my update on our credentialing business, I will say that 2025 saw total revenue contribution from Credential Stream edge out total revenue contribution from all of our legacy credentialing products combined. As customers continue to see the value of Credential Stream, we expect this trend to continue and accelerate in 2026. Now let's move to scheduling, where our core product, Shift Wizard, continues to deliver strong revenue growth. With fourth quarter revenues from sales up approximately 31% versus the fourth quarter of the previous year and up 24% year over year, it continues to be our top performing product in our scheduling application suite. And in 2025, revenue contribution from Shift Wizard was greater than revenue contribution from all legacy scheduling products combined. This, too, is a trend we expect to continue in 2026. ShiftWizard is a good example of how vertically-focused, healthcare-specific applications benefit customers in ways that generic, horizontally-focused solutions simply cannot. In fact, our two largest sales last quarter were takeouts of a major provider, the horizontal provider, and both customers selected ShiftWizard because of the healthcare-specific advantages that it offers. For example, both customers identify the ability to gain greater visibility into and control over managing and engaging their clinical workforce is something that differentiated Shift Wizard over and above even the best horizontal solutions. Scheduling and staffing clinicians is simply different than scheduling a labor pool for retail or factory shifts. Increasingly, the market is realizing this fact and choosing Shift Wizard as a result. On our last call, I introduced an exciting new area of focus for the company, our emerging career networks, like NurseGrid for nurses and My Clinical Exchange for students. Remember, career networks provide value directly to the individuals who deliver care. You can contrast that with our enterprise application suites, which provide value to healthcare organizations. I also made an important point on the last call that bears reiterating. To really address the complex issues of today's healthcare workforce, we think that you have to have solutions for both individuals and for organizations and here's the more important part to really change the game you have to connect both of them together through a common platform and that's exactly what we're beginning to do at health string on December 15th of last year we acquired mission care collective whose primary offering is my cnajobs.com which we're introducing as our newest career network my CNA jobs helps recruit and retain a large set of providers that includes home health aides, home care providers, and CNAs, which are also incredibly in high demand. And we also expect, for example, in the CNAs, the demand for them to increase, particularly in the post and pre-acute markets. MyCNA Jobs originates data directly from individual caregivers, enriches that data through proprietary technology, and then utilizes that data to help pair those caregivers with healthcare organizations that want and need to hire them. Both the individual and the organization benefit as a result. As we get the individuals using MyCNA Jobs issued an H-Stream ID, they're better able to help manage their data and longitudinal record across both applications and employers. I want to close by giving you an example of how our customers are increasingly turning to HealthStream as they manage the entirety of a clinician's journey, from nursing school to retirement and everything in between. It's my view that many of the smartest health systems, and I'll name a few, like HCA and Intermountain Health, are putting nurses at a center of their workforce strategy. In some cases, these health systems are doing things like launching their own nursing schools. That's how much demand there is for these nurses and how much they realize the need to develop their competence and upskill them. They're actually getting into the nursing schools themselves. themselves. They're also purchasing our competency suite at scale, and they're engaging with our career network so they can officially recruit, be efficient in the recruitment, the development, and that transitional onboarding that they do between the career network and to full-time employment. And they use our software then to recruit, retain, develop, and onboard that professional staff. It's my belief that other hospitals and health systems will look at these market leaders and see their extreme focus on this nursing workforce and their investment in it and they'll see that it's generating a competitive advantage for these thought-leading and market-leading health systems like HCA and Intermountain Health and that that HealthStream solutions are a central part of helping them achieve that strategic focus. I want to remind everyone that if you're interested in a profitable recurring revenue healthcare technology company that expects to deliver growth, then maybe HealthStream is the right investment for you. If you're interested in a company whose core user base, the clinical healthcare workforce, is 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 maybe HealthStream is the right company for you to invest in. If you favor ecosystems over point solutions, then maybe HealthStream is the right investment for you. For all of these reasons, I believe HealthStream is positioned for another exciting year helping the nation's top health systems find, develop, credential, schedule, onboard efficiently, and then retain this growing healthcare workforce. And I think that maybe if those are traits that you value in an emerging healthcare technology company, then HealthStream is the right investment for you. I'll now put it back over to the operator so we can begin our question and answer.

Thank you. At this time, we will conduct the question and answer session. To ask a question, you will need to press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Please stand by while I compile the Q&A roster. Our first question comes from Matt Hewitt from Craig Hollum Capital Group. Please go ahead.

Thanks for taking the questions. Maybe first up, mission care. I think you noted that the inorganic contribution to revenues this year is roughly $13 million. I'm just curious what the mission care margins look like. Were those similar, or is there an opportunity there to maybe get those in line with the corporate average, and so we could see some incremental margin lift over the course of the year and in the next year?

That's a fair question, Matt, but we don't report margins on a per-product line basis. We talk about our blended gross margins, and you could see a little bit of compression of that. I don't think that was due to the acquisitions, though. It's just due to how we're investing. Some of our cost of goods are going up on some of our application suites, which we're working on right now. In fact, we're conducting an RFP to consolidate some of our growing expense of our hosting services where we keep our content and our highly engaged applications. So we generally only comment on margins, not at a product level. But look, I think all of our products are trying to push for higher margins in our legacy applications or our legacy business, I'll say, which includes the high cost of goods of royalties. And so in general, all these software businesses, I think, have the potential to pull our blended gross margin up over time. Even though right now we're experiencing a bit of a surge in costs and things like our hosting costs as we expand the utilization of our applications, which is great news, but we probably need to negotiate a little better on some of these core services that cost the goods underneath them as well.

Got it. And then maybe a second question. Thank you. Press release and on your prepared remarks talking quite a bit about AI and the impact that that can have on the market, how you're more sticky. And I think during your prepared remarks in particular, you talked about how some of your customers are actually pushing other records into the HealthStream platform. And I'm just curious, one, is that there's some M&A opportunities there with those other platforms that are now being pulled into your platform? And two, does that further highlight the stickiness of Hellstream, meaning that AI isn't going to displace Hellstream or your platforms, but rather it's a contributing factor and you should be able to not only weather any potential storm in the future, but quite frankly, survive better because of it. Thank you.

Sure. What I try to do is just give these categories where, you know, I mean, the world is changing, jobs are changing, business models are going to have to adapt, and there's definitely something real here to how AI changes everything. And so, first, we wouldn't say there's no threat to anything. Everything is, in my view, at risk of change and impact. That said, on many key dimensions, you kind of have to think about how well a company is positioned in each of those types of positions. And I think this idea of being a system of record is an important concept to differentiate kind of long-term winners from losers. And so it's really encouraging for us to see our API libraries that are part of our H-Tream platform that our customers get access to. They're starting to use those APIs to push data from other third-party providers that's relevant to this system of record into our core data sets, which shows, again, it kind of emphasizes the difference between being a system of record and not being a system of record, being a point solution whose data is sucked into other systems of record. And so in several cases, like in our learning network, we see growing use of those import APIs, which means that they're saying, look, we would rather have our data on the learning journey about our workforce consolidated at the health stream platform level than spread across multiple systems or multiple point solutions. And so it's just one indicator of a relative strength of our company as we enter this ever-changing world. It's changing at a really rapid pace. And so we can't say that we're going to conquer everything, but AI is a fundamental component of our 10 components of our H-Stream platform, so it's well in development. We are huge utilizers of the emerging AI tools ourselves in how we build our products more efficiently. And then on this one dimension, and we covered others, but on this one dimension of whether your software is a system of record or a point solution, we tend to lean towards being the system of record, which, by the way, is also true, for example, in our credentialing system. I think we made that point in the script as well, although I'm not exactly sure where I got cut off on the script, so apologize for that. It looks like my device timed out and cut me out of the conference, and I was waxing poetic about these ideas and didn't catch that until the end. But But anyway, I think thanks for the question on that one dimension, I just would say companies should, when you evaluate companies for their viability and strength as they enter this change, that being a system of record is one characteristic of a long-term survivor and grower instead of one under assault.

That's great. Thank you. Thank you. Our next question comes from Constantine Davies from Citizens. Please go ahead.

Thanks. Maybe, Bobby, just a question on Career Network, that strategy. With something like My Clinical Exchange that you've owned now for five years or so, just give me a sense for what interoperability features are resonating most with customers and prospects in terms of integration between that legacy type of solution and the rest of the platform?

Yeah, sure. So first of all, it's not a legacy application. It's a growing, the business has tripled since we bought it in terms of just absolute revenue. I think it's around $2 million we bought. It's pushing over $6 or $7 million now. And so the My Clinical Exchange has grown its revenue contribution and margins to the company. So it's an exciting growth area for the company. The second is exactly what you pointed out is, you know, what is the idea of the link between this career network for students in this case and, say, HR at a health system using our learning record? And so one little example of interoperability, which is happening today, we found when we surveyed those students that very few of them, less than 25 or 30 percent, felt that the hospitals where they were doing their rotations were properly addressing their career opportunities and saying, hey, you know, we see you're doing your rotation at our hospital. We'd love for you to take a full-time job with us when you graduate. And so, in other words, there's this huge disconnect between the hospital operations and the clinical student doing a rotation at that hospital. And so what we did was we built a little widget that goes on a product called MyTeam where all the managers are in our network. And so we have this application that's broadly used by managers.

And we were able to tell them that today three students were doing rotations on the second floor of their hospital.

And they'll be there the next five hours. And here's their names and their backgrounds. go say hi to them. And so we're able to directly connect these clinical rotating students. It was kind of there as a previously almost a side thought. Hospitals kind of put that under their operations. But now we've turned it into recruiting opportunity. We're giving the information that Bobby Frist is on the floor as doing their clinical rotation today. Maybe go say hi to them. And we found that large health systems are attributing that simple flow of information across the transom from the student who enrolled in that rotation using the My Clinical Exchange software to their arrival on the hospital, where then kind of the resume pops up in the application My Team on a little widget and says, hey, there are three students a day at the hospital. Go say hi to them. It'll prove our odds of hiring them when they actually graduate and become a professional. And so that's an example of using the data as a tool. And it's just a simple data flow, But that reminder, we see health systems taking advantage of that function, feeling they have a competitive advantage on recruiting those students when they graduate. So that's one example of the workflows that expand and become more ecology-like. Like there you're crossing from the SAS world through the platform to the student enrollment world on My Clinical Exchange. So I hope that one little example gives you an insight to how we're thinking. but it's just a manifestation of the data across this platform, Transom, which gives a competitive advantage to recruiting that student in the future.

That's great, Collar. Just shifting gears a little bit to legacy product headwinds, I think you said legacy revenue was down 27% from the prior year in the quarter. How much legacy revenue is still left on the platform? And I guess at what point do you start considering a sunsetting strategy as something that's viable? Like how low does revenue have to get for that to be in focus for you?

Yeah, when we look at classifying legacy revenues that are true legacy revenues, meaning they're on applications that we're no longer selling. and they're maintained and we allow customers to renew on them and uh they they um you know but we don't we don't carry a quote on them we don't sell them and so they're they're effectively uh they stay they maintain that legacy status but they're supported their beloved applications we do our best to to keep customers happy on them until they decide to transition or you know our worst case scenario, they leave for another solution in the market. And so that business, we were able to report the totality of the legacy portfolio in credentialing has been surpassed by the go forward credential stream application. So at least in the credentialing space, if you take the total of all of our software tools and the legacy revenues are combined across all the legacy applications, which there are two or three, they're now less than the revenue from credential stream. And that is also true in our scheduling business, where all the legacy businesses combined are less than the go-forward growing shift wizard revenue stream. And so we now have the majority of our work and growth is now on the go-forward application in both of those circumstances. Overall, and this is a little tricky to provide this, but I'm going to go ahead and do it. Overall, our legacy revenues across the company, and remember, these are good revenues. Legacy doesn't mean we don't want them. It just means that we're not selling any more of those products. And there's a good probability that those renew year to year and year. So this revenue stream could continue for a long time until it's either transitioned or lost. But approximately, a little less, around about 10% of our total revenues are in that bucket across the company. So we've now kind of scoped the size of that. And remember, it's important to remember that that, you know, approximately, we'll just say a little bit over $30 million is desired revenue. Because we're calling it legacy doesn't mean it's not desired. It has a margin and in most cases has an EBITDA contribution. It's just not growing anymore, and we're waiting to encourage those customers to transition. And excitingly, in this quarter, we were able to talk about two very large credentialing customers that made that move. And we believe they're happy customers on Credential Stream, for example. We identified Sutter and I believe UPMC were successful migrations from that legacy category to, in that case, Credential Stream. So now we've kind of quantified it, but it's a tricky thing to quantify because, again, it doesn't mean that revenue is going away. It just means those products were not selling anymore. And then you brought up the final question is, well, when do you start to force the decision? And we call that a sunset product. And in that bucket of revenue, a little over $30 million, we have not told those customers and we have not picked a date to officially change it from legacy to a sunset product. And I would say over the next few years, we'll evaluate that. And certain of those products will achieve what I'll call sunset status. And at that point, customers have been notified of an end date when that technology will not be supported. So they need to start to plan and make a decision to move off of that legacy application. Again, we haven't done that yet, except in a few cases, and that's something we'll consider as the overall bucket of legacy becomes smaller and smaller. And by the way, it's getting much more compelling to move to the newer applications every day for reasons like we talked about, that little widget, for example, that makes one application even more powerful. If you're on a legacy product, you're not getting the advances of the ecosystem that we're building that we mentioned in the earlier case. So I hope that helps kind of quantify it overall, scale it and scope it and tell our ambition with it. And again, that bucket of revenue is a generally a happy set of customers that we're trying to maintain.

We do product releases.

The customers there are in a good spot, but we want them to be in a better spot. We want them to migrate or transition or convert to the go forward applications that are all plugged into the platform.

Thanks, Bobby. Appreciate it.

Thank you. our next question comes from Ryan Daniels from William Blair please go ahead yeah good morning thanks for taking the question and Bobby thanks for all the conversation on AI I really appreciate that a question for you in regards to that and a bit of a follow up from an earlier one you mentioned data origination is kind of a key competitive advantage because you can create that proprietary data and I'm curious if that changes your capital deployment mentality at all whether it's either via internal product development or how you look at the M&A markets to kind of go forward and create more of that proprietary data such that you can withstand any future AI headwinds?

Oh, it certainly does. Super exciting. As I mentioned, AI is one of the 10 core elements of our platform that we're developing. And so there's capital already going into that to make it a fundamental kind of capability set, a framework for deploying AI into our product sets. And several exciting products, enhancements, extensions, where we're deploying capital are underway now. And we'll have to wait to reveal some of those directly, but I couldn't be more excited about some of the advances we're seeing. And specifically as it relates to data, we really are focused on trying to identify, catalog, manage. And so investments are increasing in the area of kind of data management, data classification, data rights management across all of our network. And so, yes, capital is flowing into that area. Yes, organizing our data. For example, one of our core tenets of our platform is to get all of our data from all of our 27 applications updated nightly into Snowflake. And, you know, getting that organized and then, of course, getting all that data relevant to each other through the HStream ID, another core tenant of the platform is critical. So, yes, capital is flowing to this area. Yes, we're trying to distinguish which data is kind of aggregated data, which data is proprietary data, which data can lend competitive advantage in the long run, which data might train AI, for example. And I think in all cases, there's an increased emphasis and awareness of that from our board to our operators.

Great. Thank you for that color. And then maybe another one just on the AI marketplace, again, very rational conversation of why you're relatively well positioned. But I'm curious, if you talk to your sales team, are they seeing any hesitation in the market, either with longer term contracts, with the elevated pricing each year, the inflationary pricing, or any pause in buying decisions as the market CTOs kind of look at all the potential AI solutions out there? Or is it generally still business as usual on your sales cadence? Thanks.

Well, let's see. I would characterize our fourth quarter as exceptionally strong. In some areas, it was just fantastic. Just remember, there are product sets in there that are just incredibly unique. They blend technology, content, data analysis together to solve a real problem. for example, our partnership with the American Red Cross is thriving. We think we have a really great partner there and a great product set. It's an interesting solution set that meets essentially a compliance-oriented need. And there are several of our products that are doing really well that are a complicated blend of SaaS technology, data and benchmarking, reporting capabilities, physical. In this case, the internet connects to these physical mannequins that evaluate the skill, and then branded, high quality, scientifically valid content. And so in that case, we're seeing that product growing very nicely and well positioned for continued growth. So in the fourth quarter, we saw wins in each of these areas, including things like our American Red Cross resuscitation suite. But we also saw some system wins on our topsy suite at scale. Some of our largest deals, I guess, I'd say in our history were closed in the fourth quarter. So, you know, I think there's hesitancy in thinking through all this. CIOs and CTOs, we're doing our best to educate the market about the emergence of our platform this year and make us more relevant as a consolidator of services, not just a point solution here and a point solution there. I think there's more and more potential every quarter for us to position as a core consolidation platform. And yes, it has SaaS capabilities. And yes, those can be more rapidly built by competitors. But I think it is this interesting dynamic that we talked about of more ecology-like behavior than point solution or SaaS workflow behavior that we're seeing. So I hope that gives a little bit more color on it. Overall, I believe there's a tremendous amount of change coming to all businesses, to almost all workforces. But on these four or five dimensions we talked about today. I think we're relatively well positioned to learn, iterate, provide value, and capitalize on the value people expect to get from AI as it advances.

Yeah, absolutely. Thank you so much.

Thank you. Our next question comes from John Penny from ConocoAgenuity. Please go ahead.

Yes, this is Richard Close. Just a quick question, maybe housekeeping, Scotty, to begin with. We jumped on late, and just curious whether you gave the acquisition contribution versus 12 emission care for the fourth quarter. And then just to clarify, you said $13 million from the acquisitions in the 26 guidance?

Yeah, so I guess the fourth quarter impact for both acquisitions combined was $1.6 million. And then you're correct on the full year guide was $13 million.

Okay, thanks for that. And then, Bobby, maybe just on the AI front to continue to go down that rabbit hole, I'm just curious if you can provide some examples in terms of, you know, how you guys are, you know, integrating Gen AI, agentic AI and into various offerings that you have. Again, apologize. We got on late if we missed that.

Yeah, I think that roadmap will unfold in more detail over the course of the year. But needless to say, every one of our products has an AI roadmap. And really interesting and fascinating projects underway to take advantage of the benefits that we would expect from AI. And so the workflows are being automated. We have an agentic framework around some of our learning capabilities that we're working on. And we have this concept of the quantification of self, you know, using a vector analysis for some of the individual profiles in our system, making it kind of a tokenizable unit. There's just so many interesting things happening. And I think we'll let that roadmap unfold over the course of the year. But, you know, every product manager is required to have an AI framework and an AI roadmap. And all of our developers are now using AI. And any of you probably followed this in the last 30 days, there have been significant enhancements in the tool sets people are using to build applications, which just gets us more excited because we can get to more of our vision faster if we use these tools properly. But like everybody, we're learning to use the tools. So there's the internal application of them. There's the external extension of them. And I think what I can say today is that of the 10 elements that we use to define the H-Stream platform, AI is one of the 10. And it has been for some time now. So we're also not new to the idea of AI and how it's going to impact workflows and applications. And so I hope, I don't know, I just have to give a generic answer now that it's in our roadmaps. It's part of our kind of our DNA. It's part of how we're thinking. And we're doing our best to learn and stay on the curve with everyone else. And then we've talked about, of course, these categories of impacts, kind of, are we better positioned or are less better positioned to take advantage of the changes coming? Okay.

And then, you know, maybe just to expand on the AI front, just, you know, I'm sure you're out in the market talking with various, you know, health system executives. And I'm just curious what their, you know, their conversations with you is gleaning with respect to, you know, separate AI budgets versus looking for AI in, you know, you said the systems of record and whatnot. I'm just curious if you have any, you know, experiences that you can share on the conversations you're having with clients and potential clients.

Yeah, there's a lot of dimension to that. One is the CIOs of the country at these health systems are tired of having 400-point solutions. And so in that regard, if you're just a point solution and you're not a platform, I think there is a definite high degree of interest in moving to fewer platforms that work together than, say, as many as 400 point solutions. This is true. If you ask a CIO of a health system, you know, their software profile, I think they'll tell you they have two or three platform choices. You know, EHR would be one choice where they pick between one of the three big ones. ERP would be another. And then they have 500 point solutions. So the first point of dialogue with, say, the executive suite, particularly the CIOs, is, look, we need to make sense of these 500 point solutions. And I think that's exactly what HealthStream is trying to do with our 8Stream platform is take three or four of them that are core, that are point solutions like scheduling, credentialing, and learning and make them interoperable. And then we're bringing this other dimension, which is the second point is, you know, which problems are you solving for me? And if I have a nursing shortage, how are you helping me more efficiently onboard these nurses? How are you helping me move costs from those nurses from when they're employed to when they're pre-employed? And I think it's our theory of connecting this through the platform to these career networks that lets us have a business dialogue, not an AI dialogue, but a business dialogue about shortening the onboarding cycles and improving the value proposition of moving the cost from the health system, say, to the student period or getting the ready to work, ready to work concept. So we're able to talk about business value propositions that are kind of universally the problems they're trying to solve, like with their labor pool size and their recruiting of nurses. And so our dialogue isn't so much about just whether your budget of AI is going to shift. It's about how you're going to consolidate point solutions and about whether the vendor standing in front of you, in this case, HealthStream, can help solve a value proposition and do something more effectively. So I tend to lean into those. You know, we can help onboard physicians more efficiently. We can help recruit nurses and find the future high quality employees, the students that are going to be the best in your environment and help you match them. And so, again, we just stick to the fundamentals of providing value to our customers on that journey. And then we can show how AI will facilitate those workflows.

So would you characterize the environment as not necessarily clients or potential clients being distracted by AI, that they're still focused on these, you know, key areas of business improvement?

I think the smart ones are. I don't know how to say it the other way. I mean, yeah, I mean, obviously, even just through this call, everyone is trying to understand the implications and impact of AI. And Healthstream is in that group. All the CIOs we talked to are in that group. So, yeah, it's a lot of discussion on it. At the end of the day, I think the leading health systems are focused on the fundamentals of providing better patient care. And then they come back to the fundamental questions like, well, what is our cost of finding and developing a talented workforce and retaining them at the expense of our competitors? How do we have a better, higher quality workforce? And so we keep trying to steer the conversation there and then show how all the tools of HealthStream, including the unique dimensions like our career networks, bring value to that equation. So, you know, just doubling down on the fundamental values that we provide is what we need to do. It doesn't mean that the dialogue isn't all-consuming about the future, the impact of AI. But, you know, like I said, healthcare is a local business. It's a service provision business. It's a hands-on nurses and doctors on patients business as is surgery. And here, I think AI is kind of an augmentation process instead of an automation or replacement. Now, there are plenty of back office functions and efficiencies that can be gained with AI. And there are certain roles that we expect fewer of them. But at its core, as I mentioned earlier, the nursing workforce is expected to grow. And I think they're going to grow and be more human through the use of AI. And those are the things that we talk to our customers about.

All right. Thank you.

Thank you. Our next question comes from Vincent Colicchio from Barrington Research. Please go ahead.

Yeah, most of mine have been asked, Bobby, perhaps if you could just talk about the price accelerators. It was nice to see the contribution for the year. Has this mechanism played out as expected? What are your thoughts there? Sure.

Vince, it's so good that it took us about three years to put escalators in place. And we know it was kind of an industry norm. We had always focused on our negotiation around volume, commitment and term. And we didn't have these built in escalators. So it took us a while to design the contractual infrastructure, the deployment, train the sales organizations. But now it is the norm and it is a norm across software to include, you know, inflationary level price escalators in contracts. And it helps everybody, strangely. It helps the customers, because if you're on a contract for four or five years with those small escalators, you don't get hit with a big price increase necessarily when you renew. And so the escalators are kind of a smoothing function for budget planning. They're negotiated, but generally accepted. And I would say that every renewal and every contract now in all three of our major application suites include escalators in the contract. And so, yes, we were excited to see that it started to impact us financially. And it is a slow roll because, you know, if we do three to five year contracts, that means, let's say, on average, every four years, a contract, every three and a half years, a contract comes up for renewal. And then the escalator takes effect on the second year of the renewal, right, because it comes in year one and then year two. So as we go through renewals and as we include escalators, it's having kind of an impact, but it's a slow movement through these thousands of customers. But it's underway, and every renewal includes an escalator. Thanks, Bobby.

Thank you. This concludes the question and answer session. I will now turn it back over to Robert Fisk for a closing remark.

Thank you, everyone. I apologize for – I was kind of head down and thinking about what I wanted to say, and I was telling this big story about AI, and I realized I looked up and my iPad had timed out, and I think Molly Condor stepped in. Molly, I know you did a great job. I hope we got all the questions done in Q&A. Thanks for listening. I look forward to reporting the next report. I'm proud of the contributions of 1,100 health streamers in achieving these results, and we've got another tough year in front of us full of opportunity and challenges, and we're ready to take it on. Thanks, all. We'll see you on the next earnings call.

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