Healthstream Inc Q4 FY2025 Earnings Call

Good morning, and welcome to HealthStream's Fourth Quarter and Full Year 2025 Earnings Conference Call. This conference is being recorded. I would now like to turn the conference over to Mollie Condra, Head of Investor Relations and Communications. Please go ahead, Ms. Condra.

Thank you. Good morning, and thank you for joining us today to discuss our fourth quarter and full year 2025 results. Also on the conference call with me is Robert A. Frist, Jr., CEO and Chairman of HealthStream; and Scotty Roberts, CFO and Senior Vice President of Finance and Accounting. I would also like to remind you that this conference call may contain forward-looking statements regarding future events and the future performance of HealthStream that 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 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, Mollie. Good morning, everyone, and welcome to our fourth quarter and full year 2025 earnings call. We have a lot to discuss this morning, covering multiple topics. We will address the emerging landscape of AI, review our financial performance for the quarter and the full year, and share some business and product updates at the end. Then we will open the floor for questions. So let's get right into the numbers. We concluded the full year 2025 with revenues increasing by 4.3% and adjusted EBITDA rising by 7.5% year-over-year. For the fourth quarter, revenues grew by 7.4%, and adjusted EBITDA was up by 16.4% year-over-year. Looking ahead to 2026, which is likely the main reason for our call today, we expect HealthStream to continue growing in all the areas where we provide financial guidance. We anticipate revenues between $323 million and $330 million, net income between $20.4 million and $22.8 million, and adjusted EBITDA between $73 million and $77 million. These projections do not account for any acquisitions we might complete during the year; however, our strong cash position of $57 million, combined with our untapped line of credit and no long-term debt, positions us well for potential M&A opportunities. Later in the call, I'll provide details on some exciting developments regarding our application suites and our newer career networks, which we will discuss in more depth towards the end. First, I want to share how HealthStream is positioned in the context of AI and which trends favorably position us in this evolving landscape. There are four broad categories I will discuss regarding our relative strength as we navigate this significant period of change. The first category relates to the concept of a potential SaaS apocalypse and how AI may impact our end users. While some companies worry about seat compression due to AI potentially reducing their human subscribers, we see our user base of healthcare providers expanding. In fact, the number of healthcare providers is expected to grow significantly over the coming years, especially in the nursing workforce, which is our core strength. In January 2026 alone, healthcare contributed roughly 82,000 of the 130,000 new jobs added in the U.S., based on Bureau of Labor Statistics data. This trend will likely continue, with nearly a quarter of all new jobs in the U.S. economy over the next decade projected to be in healthcare. On average, hospitals added 13,600 new personnel each month in 2025, and nurses are a key factor in this growth. From 2020 to 2024, registered nurses grew by 9.4%, while nurse practitioners increased by 38.5%, according to the BLS. This trend creates expanded opportunities for growth in our user base. While some sectors may face job eliminations, our market is seeing projections of shortages and increasing demand. The healthcare workforce, especially nursing, is at the forefront. Therefore, with our focused approach to this workforce pool, we believe we are well-positioned amid the changes brought by AI. In fact, I believe AI will enhance the roles of nurses, allowing them to spend more time with patients by automating some of their paperwork and functions. The second category is our data profile. Understanding the data profile of companies and organizations is crucial. This can be divided into two categories: the role of the software for the organizations it serves and whether the organization is an aggregator of publicly available data or a creator of unique data about its customers. Many of our solutions serve as the system of record or a foundational source of truth for our clients. For instance, in the learning space, we maintain authoritative records of millions of healthcare workers over the years. This position as a system of record is advantageous for our future with AI. AI relies on these systems of record to drive efficiency and develop insights, making them increasingly important. In terms of physician credentialing, our customers regard us as a single source of truth, as we maintain the system from which key functions like physician enrollment and privilege granting originate. HealthStream’s customers trust us to maintain secure and organized systems of record. If AI is to genuinely impact healthcare, it will rely on these foundational systems going forward. The third category is our platform and platform strategy, which we term the hStream Platform. For over five years, we have invested in creating this platform, which offers interoperability and allows our SaaS applications to function more cohesively. The platform strategy enhances our relationships with customers as they utilize the APIs and data services we provide, creating an ecological effect rather than standalone workflows. A fundamental component of this platform is the hStream ID, which is essential for driving interoperability and innovation in healthcare workforce technology. We are observing an increase in the API utilization from the platform by both customers and industry partners.

Okay. This is Mollie Condra. 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 with that, you can have a great business vertical, a great data profile or a great platform. You can even have all 3. 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 HealthStream's business, all of which work together to form a whole that is greater than its individual parts. Something that AI cannot create is an ecosystem of millions of individual caregivers, like those choosing NurseGrid or myCNAjobs, the thousands of health care organizations, like those using our SaaS application suites and dozens of industry partners like the American Red Cross and world-class health care organizations. Combining those elements with our 30-plus years of experience and our hStream 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 on 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 health care technology company dedicated to developing, credentialing and scheduling the health care workforce through SaaS-based applications, each of which are becoming more valuable because of the interoperability they are achieving through our hStream technology platform. We've also started to open our sales channels directly to health care professionals and nursing students through our 3 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 3 to 5 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-bearing debt, and we reported 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 health care and more specifically, the health care workforce of those preparing to enter it. The 12.6 million health care 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, will 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.

Thank you, Mollie and Bobby, and good morning, everyone. Before discussing the financial results, I want to highlight some significant events that occurred during the fourth quarter. We completed two acquisitions: Virsys12 in October and MissionCare Collective in December. In November, our Board of Directors approved a $10 million share repurchase program, with $5 million of the repurchases occurring in the fourth quarter and the rest in January. In December, our CEO donated $3.8 million of his personally owned stock to the company to facilitate equity grants to employees, acknowledging their efforts and aligning their interests with shareholders. The accounting for this stock grant led to a $3.5 million non-cash compensation expense and $0.3 million in employer taxes and administrative costs, which had a negative effect on our quarterly financial results. It's important to note that this stock grant did not dilute existing shareholders' shares, aside from our CEO. Turning to the financial results for the fourth quarter, unless stated otherwise, comparisons are with the same period last year. I will also reference non-GAAP measures to account for the effects of the CEO stock grant. Revenues reached a record $79.7 million, an increase of 7.4%. Operating income was $2.4 million, down 48.8%, while net income fell to $2.5 million, down 48.1%. Earnings per share were $0.09, a decline from $0.16, and adjusted EBITDA was $18.8 million, up 16.4%. On a non-GAAP basis, our operating income was $6.2 million, reflecting a 31.7% increase. Non-GAAP net income was $5.4 million, up 9.5%, and non-GAAP EPS was $0.18, an increase of $0.02. Our revenues grew by $5.5 million, or 7.4%, from $74.2 million in last year's fourth quarter to $79.7 million this year. Subscription product revenues rose by $5.8 million, or 8.2%, while professional services revenues decreased by $0.3 million, or 11.6%. The growth in subscription revenue was driven by strong performance in our core solutions, with CredentialStream increasing by 21%, ShiftWizard by 31%, and Competency Suite by 27%. Although part of the growth in CredentialStream and ShiftWizard stemmed from conversions of our legacy credentialing and scheduling applications, revenues from those legacy applications declined by 27% compared to last year. The two newly acquired companies contributed $1.6 million in revenue during the quarter. Additionally, revenue increases from annual pricing adjustments for new contracts introduced last year also contributed to our year-over-year growth. Our sales team achieved strong contract bookings, resulting in an 11.2% increase in remaining performance obligations, totaling $691 million at the end of the fourth quarter, compared to $621 million at the same period last year. We anticipate that roughly 39% of these obligations will convert to revenue within the next 12 months, and 67% will convert within the next 24 months. Gross margin was 63.8%, down from 66.2% in the previous year’s quarter, primarily due to increased cloud hosting and software licensing costs related to the CredentialStream application and the hStream Platform. The gross margin was further affected by the non-cash compensation expense tied to the CEO stock grant, which reduced it by $1.3 million or around 170 basis points. Operating expenses, excluding the cost of revenues, rose by 9% or $4 million, with about $2.5 million attributed to the CEO stock grant. We incurred over $600,000 in transaction costs related to the two acquisitions completed in the fourth quarter. Net income was $2.5 million, down 48.1% from $4.9 million last year, mainly due to the impact of the CEO stock grant. On a non-GAAP basis, net income rose to $5.4 million, an increase of 9.5% from $4.9 million last year. Adjusted EBITDA was $18.8 million, up 16.4%, with an adjusted EBITDA margin of 23.6%, compared to 21.8% last year. Regarding our balance sheet, we concluded the quarter with cash and investment balances of $57 million, down from $92.6 million the previous quarter. During the quarter, we allocated $35.1 million for acquisitions, and $6.8 million on capital expenditures. We returned $0.9 million to shareholders through dividends and repurchased $5 million of our common stock under the share repurchase program authorized in November. Our Days Sales Outstanding remained stable at 35 days for the quarter, marking the sixth consecutive quarter at or below 40 days. For the year, cash flows from operations increased to $63.3 million from $57.7 million last year, up 9.8%. Free cash flows amounted to $31.1 million compared to $29.5 million last year, reflecting a 5.5% increase, while capital expenditures rose to $32.2 million from $28.1 million, an increase of 14.3%. With $57 million in cash and investments, positive free cash flow, and no debt, we are in a strong position to invest in improving shareholder value. We have a disciplined approach to capital allocation, prioritizing organic investments, strategic acquisitions, returning profits to shareholders, and possibly authorizing share repurchase programs. On October 8, we announced our acquisition of Virsys12, a health care technology company specializing in payer credentialing, at a cost of $11.4 million in cash, subject to customary price adjustments and potential additional payments of up to $4 million over three years, based on achieving specified financial targets. On December 15, we announced our acquisition of MissionCare Collective, a health care workforce company focused on connecting non-medical caregivers and CNAs with job placement and job-related programs. The purchase price was $24.6 million in cash and $4 million in stock, again subject to adjustments and potential additional payments of up to $10 million over three years based on specific targets. Regarding our dividend program, yesterday, our Board declared a quarterly cash dividend of $0.035 per share, payable on March 20 to shareholders on record as of March 9, representing a 12.9% increase over the previous dividend. In November 2025, our Board authorized a $10 million share repurchase program, of which $5 million was executed in the fourth quarter of 2025 and the remaining amount in January 2026. Also, in May 2025, a $25 million share repurchase program was completed in the third quarter. To summarize the full year, we achieved $304.1 million in revenue, $18.3 million in net income, $21.2 million in non-GAAP net income, and adjusted EBITDA of $71.8 million. We repurchased $30 million in shares, paid $3.7 million in dividends to shareholders, and allocated $39.1 million for M&A and $32.2 million for capital expenditures. We remain committed to consistently growing the business both organically and inorganically while adhering to our disciplined capital allocation strategy. To conclude, I am enthusiastic about the opportunities ahead and confident in our ability to deliver another strong year of financial performance while creating value for our stakeholders. Thank you for your time, and I will now turn the call back to you, Bobby.

Thanks, Scotty. Let's start with the business updates for the last third of the year. I will begin with some core updates on our learning, credentialing, and scheduling application suites, then we will discuss our newest career network, myCNAjobs. Starting with the learning product family, which includes our competency suite, many customers are taking advantage of the opportunity to purchase a bundle of our most popular workforce applications and content libraries, referred to as the Competency Suite. Customers have purchased subscriptions for all of their employees in an unlimited use format. Key sales during the fourth quarter include major health care organizations such as Intermountain Health, Northside Hospital, and Dartmouth Health. In our credentialing area, our flagship product, CredentialStream, ended the year strongly in terms of new sales and expansions, as well as conversions from legacy products. Revenues from CredentialStream in the fourth quarter rose about 21% compared to the same quarter last year, with an overall year-over-year growth of approximately 23%. Our largest sale in the quarter resulted from winning a highly competitive RFP, with the next largest sale stemming from a referral from our partner, Virsys12, representing a competitive shift due to the comprehensive solution and API integration capabilities offered by our platform. Additionally, an existing health system customer decided to expand their access to CredentialStream, standardizing it across all their facilities while also investing in our case review and performance metrics products. The fourth quarter for CredentialStream was not only about sales success; improvements made earlier in the year led to excellent system performance and reliability, which were acknowledged by our customers. We were also pleased to see some of our large legacy credentialing clients transition from EchoCredentialing and MSOW, including UPMC Health System and Sutter Health. Through CredentialStream, we aim to help our customers expedite revenue generation for the physicians they onboard, ultimately enhancing their financial performance and quality of care. In 2025, revenue from CredentialStream surpassed the combined total from all our legacy credentialing products, a trend we anticipate will continue into 2026. Moving on to scheduling, our core product, ShiftWizard, has shown strong revenue growth, with fourth quarter revenues rising about 31% compared to the last year and 24% year-over-year. It remains our top-performing product in the scheduling suite, and in 2025, its revenue contribution also eclipsed that of all legacy scheduling products combined. We expect this trend to persist in 2026. ShiftWizard exemplifies how health care-specific applications provide distinct advantages over generic solutions. Our two largest sales last quarter were takeouts from a major provider, with both customers opting for ShiftWizard because of the unique benefits it offers in managing their clinical workforce. On our previous call, I introduced our emerging career networks like NurseGrid for nurses and myClinicalExchange for students, which deliver value to individuals providing care, in contrast to our enterprise solutions that benefit health care organizations. It's crucial to tackle the complex challenges facing today's health care workforce by offering solutions for both individuals and organizations, and to make a real difference, these two must be connected through a common platform. On December 15 of last year, we acquired MissionCare Collective, bringing myCNAjobs.com into our portfolio as our newest career network. MyCNAjobs assists in recruiting and retaining a diverse set of providers, including home health aides and CNAs, whose demand is set to rise, particularly in the post and pre-acute markets. MyCNAjobs gathers data from individual caregivers, enhances that data through proprietary technology, and matches caregivers with healthcare organizations that require their services, benefiting both parties. As individuals begin using myCNAjobs and receive an hStream ID, they will better manage their data and records across various applications and employers. I want to highlight how our customers increasingly view HealthStream as a partner in managing a clinician's journey from nursing school to retirement. Many leading health systems, including HCA and Intermountain Health, are placing nurses at the core of their workforce strategies. Some are even starting their own nursing schools, recognizing the high demand for nurses and the need to develop their skills. These health systems are purchasing our competency suite at scale and engaging with our career networks to streamline recruitment, development, and onboarding processes. They leverage our software to efficiently recruit, retain, develop, and onboard professional staff. I believe that other hospitals and health systems will take note of these market leaders and their focus on the nursing workforce. They will see how these investments generate a competitive advantage and recognize that HealthStream's solutions are pivotal to achieving that strategy. If you are interested in a profitable recurring revenue health care technology company with growth potential, HealthStream could be the right investment for you. If you value a company whose core user base, the clinical health care workforce, is growing faster than any other job sector, then HealthStream might be the right choice. If you appreciate a company whose software functions as a system of record for health care customers, then HealthStream could be the right investment. If you favor ecosystems over point solutions, then HealthStream may be the ideal investment option for you. I believe HealthStream is well-positioned for another exciting year, assisting leading health systems in efficiently finding, developing, credentialing, scheduling, onboarding, and retaining a growing health care workforce. Now, I will turn the call back over to the operator for a question and answer session.

Our first question comes from Matt Hewitt from Craig-Hallum Capital Group.

Maybe first up, MissionCare, I think you noted that the inorganic contribution to revenues this year is roughly $13 million. I'm just curious what the MissionCare 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 into next year?

It's a fair question, but we don't report margins on a per product line basis. We've discussed our blended gross margins, and you might notice a slight compression there. However, I don't believe that's related to the acquisitions; it's primarily due to our investment strategies. Some of our cost of goods are increasing in certain application suites, which we are currently addressing. We are actually in the process of evaluating proposals to streamline some of the growing expenses associated with our hosting services, where we manage our content and applications that have high engagement. Generally, we comment on margins without breaking them down by product. That said, I believe all our products are aiming to achieve better margins compared to our older business, which includes high costs from royalties. Overall, these software businesses have the potential to improve our blended gross margin over time. Currently, we are facing a rise in costs, particularly in hosting as we expand the usage of our applications, which is encouraging. However, we will likely need to negotiate better on the expenses related to these core services.

And then maybe a second question. Press release and in 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 HealthStream, meaning that AI isn't going to displace HealthStream 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.

Sure. What I tried to do is give these categories where the world is changing, jobs are changing, and business models need to adapt. There’s definitely something significant about how AI is transforming everything. I wouldn't say there’s no threat; everything is at risk of change and impact. That said, you need to consider how well a company is positioned in each of those areas. The concept of being a system of record is crucial for differentiating long-term winners from losers. It’s encouraging to see our API libraries within our hStream platform being utilized by our customers to integrate data from other third-party providers into our core datasets. This emphasizes the distinction between being a system of record and being a point solution, whose data gets absorbed into other systems of record. For example, in our learning network, we’ve observed an increasing use of those import APIs, which indicates that organizations prefer to consolidate their workforce data on the HealthStream platform rather than distribute it across various systems or point solutions. This is just one indicator of our company’s strength as we navigate this rapidly changing landscape. While we can’t claim to dominate everything, AI is a fundamental aspect of our hStream platform's development. We are also significant users of emerging AI tools to enhance our product efficiency. On the dimension of whether software functions as a system of record or a point solution, we favor being a system of record, which also applies to our credentialing system. Even though I’m not sure where I got cut off in the script, I appreciate your question. On this dimension, companies should evaluate a company’s viability and strength, as being a system of record is a characteristic of long-term survivors and growers rather than those under threat.

Our next question comes from Constantine Davides from Citizens.

Maybe, Bobby, just a question on career network, that strategy. With something like myClinicalExchange that you've owned now for 5 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?

Yes, of course. First of all, it's important to note that this is not a legacy application. The business has seen substantial growth, tripling in revenue since we acquired it. We initially bought it for around $2 million, and it's now generating over $6 million or $7 million. MyClinicalExchange has noticeably increased its revenue contribution and profit margins for the company, making it an exciting growth area. Additionally, as you mentioned, there's a key link between this career network for students and the HR departments at health systems utilizing our learning record. An example of interoperability occurring today is that our surveys revealed that only a small percentage of students—less than 25% or 30%—believe that the hospitals where they are doing their rotations are properly engaging with them regarding career opportunities. Many hospitals are missing the chance to express interest in hiring these students after graduation. To address this, we developed a small tool that integrates with MyTeam, which is used by managers across our network. This tool allows us to inform hospital managers when students are on site for rotations, providing their names and backgrounds, prompting them to connect with these students. This initiative has transformed a previously overlooked aspect of hospital operations into a recruitment opportunity. For example, we can notify health system managers that three students are currently rotating in their hospital, encouraging them to reach out. We've discovered that major health systems value this simple flow of information, which connects the students enrolled in rotations using myClinicalExchange software with the hospital staff. This seamless integration has led to a competitive edge in recruiting these students as they graduate and enter the workforce. This is just one instance of how we're utilizing data across platforms to create adaptive workflows that enhance our ecosystem, bridging the SaaS and student enrollment aspects of myClinicalExchange. I hope this example provides a clearer insight into our strategy and how we're leveraging data for competitive advantage in student recruitment.

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 is something that's viable? Like how low does revenue have to get for that to be in focus for you?

Yes. When we consider legacy revenues, they refer to true legacy revenues, which come from applications that we no longer sell but still support and allow our customers to renew. However, we don't actively sell these applications anymore, which means they retain their legacy status. These are well-regarded applications, and we strive to keep our customers satisfied until they choose to transition or, in the worst-case scenario, switch to another solution. Notably, the total legacy portfolio in credentialing has now been overshadowed by the new CredentialStream application. To put it into perspective, when we look at the total of our software tools, the combined legacy revenues from a few legacy applications have dropped below those from CredentialStream. The same is true for our scheduling business, where the total legacy revenues are less than the growing ShiftWizard revenue stream. Currently, the majority of our efforts and growth focus on these new applications. Overall, it’s somewhat challenging to convey this, but our legacy revenues across the company, which are good revenues despite being labeled as legacy, account for roughly 10% of our total revenues. It's worth noting that just because these are categorized as legacy doesn’t mean they are undesired; on the contrary, they often have margin and EBITDA contributions but are no longer growing. We aim to encourage our customers to migrate to newer applications. Excitingly, this quarter, we discussed two large credentialing customers who transitioned successfully to CredentialStream—specifically, Sutter and UPMC. Quantifying this revenue stream can be complex, as it doesn't imply that this revenue will vanish; instead, it indicates that we are no longer selling those products. Regarding the question of when we start enforcing decisions about moving to a sunset product, we currently have not set any official end dates for those legacy products; we have around $30 million in revenues within this category. We’ll assess over the next few years which products will reach sunset status, at which point customers will be informed that support will end, prompting them to decide to move away from these legacy applications. We have not yet implemented this for most cases, but it is something we will consider as the legacy revenue diminishes. The value of transitioning to newer applications becomes increasingly appealing due to advancements in our ecosystem, which legacy products lack. Therefore, our goal is to maintain good relationships with our legacy customers, conduct product releases, and encourage them to migrate to the newer applications integrated into our platform.

Our next question comes from Ryan Daniels from William Blair.

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.

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, 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.

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?

Well, let's see. I would characterize our fourth quarter as exceptionally strong. In some areas, it was just fantastic. And just remember, there are product sets in there that are just incredibly unique as 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 manikins 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 Competency Suite at scale. Some of our largest deals, I guess, I'd say, in our history were closed in the fourth quarter. So I think there's hesitancy in thinking through all this, 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 4 or 5 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.

Our next question comes from John Pinney from Canaccord Genuity.

Yes. This is Richard Close. Just a quick question, maybe a housekeeping, Scotty, to begin with. We jumped on late. And just curious whether you gave the acquisition contribution Virsys12 and MissionCare for the fourth quarter. And then just to clarify, you said $13 million from the acquisitions in the '26 guidance?

The impact for both acquisitions combined in the fourth quarter was $1.6 million. Additionally, the full year guidance was $13 million.

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 how you guys are integrating Gen AI, agentic AI and into various offerings that you have. Again, I apologize, we got on late, if we missed that.

Yes, I believe that our road map will become clearer as the year progresses. Each of our products has its own AI road map with intriguing projects currently in development to leverage the advantages of AI. We are automating workflows and implementing an agentic framework around some of our learning capabilities. We have introduced the concept of quantifying one's self through vector analysis to represent individual profiles in our system as tokenizable units. There are numerous exciting developments taking place, and we will continue to unveil our road map throughout the year. Every product manager must have an AI framework and road map, and all our developers are now utilizing AI. In the past month, there have been significant improvements in the tools available for building applications, which energizes us because it enables us to progress toward our vision more quickly if we utilize these tools effectively. Like everyone else, we are learning to maximize these tools, both internally and externally. AI is one of the ten components we use to define the hStream platform and has been part of our strategy for some time. We are not new to the influence of AI on workflows and applications. I hope that clarifies that it's embedded in our road maps and integral to our approach. We are committed to learning and staying engaged with industry developments, and we have discussed our positioning in relation to the upcoming changes.

And then maybe just to expand on the AI front. I'm sure you're out in the market talking with various health system executives. I'm curious about what their conversations with you reveal regarding separate AI budgets versus integrating AI into existing systems. Do you have any experiences to share about your discussions with clients and potential clients?

Yes. 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. And this is true. If you ask a CIO of a health system, their software profile, I think they'll tell you they have 2 or 3 platform choices, EHR would be one choice where they pick between 1 of the 3 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 hStream platform is take 3 or 4 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 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. This is a 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 the 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. 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.

Our next question comes from Vincent Colicchio from Barrington Research.

Yes. Most of mine have been asked, Bobby, just 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?

Vince, it's so good that it took us about 3 years to put escalators in place. And we know it was kind of an industry norm. We had always focused on our negotiations 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 the norm across software to include inflationary level price escalators in contracts. And it helps everybody strangely. It helps the customers because if you're on a contract for 4 or 5 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 3 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 if we do 3- to 5-year contracts, that means, let's say, on average, every 4 years, a contract. Every 3.5 years of contract comes up for renewal. And then the escalator takes effect on the second year of the renewal, right? Because it comes in year 1 and then year 2. 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.

This concludes the question-and-answer session. I will now turn it back over to Robert Frist for closing remarks.

Thank you, everyone. I apologize for being a bit distracted as I was thinking about what I wanted to convey and sharing a broad story about AI. I noticed that my iPad had timed out while I was speaking. Mollie Condra stepped in, and I appreciate her great work. I hope we addressed all the questions during the Q&A. Thank you for your attention. I am excited to present our next report and I'm proud of the contributions from our 1,100 HealthStreamers that helped achieve these results. We have a challenging year ahead filled with both opportunities and challenges, and we are prepared to face them. Thank you all, and I look forward to seeing you at the next earnings call.

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