UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended June 30, 2023 ☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Commission File No.: 000-27701 HealthStream, Inc. (Exact name of registrant as specified in its charter) Tennessee 62-1443555 (State or other jurisdiction of incorporation or organization) 500 ...

PART I. FINANCIAL INFORMATION [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) HealthStream's unaudited condensed consolidated financial statements for Q1 2023 cover balance sheets, income statements, comprehensive income, equity, and cash flows, with notes on accounting policies and key financial events [Condensed Consolidated Balance Sheets (Unaudited)](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets%20(Unaudited)) Total assets increased to **$503.16 million** by March 31, 2023, with rises in current assets, liabilities, and shareholders' equity | Metric | March 31, 2023 (in thousands) | December 31, 2022 (in thousands) | Change (YoY) | | :-------------------------------- | :------------------------------ | :------------------------------- | :----------- | | Total Assets | $503,159 | $497,741 | +1.09% | | Total Current Assets | $125,108 | $114,377 | +9.38% | | Total Liabilities | $166,538 | $163,677 | +1.75% | | Total Shareholders' Equity | $336,039 | $334,064 | +0.59% | [Condensed Consolidated Statements of Income (Unaudited)](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income%20(Unaudited)) Net revenues increased **5% to $68.95 million**, but operating income fell **28%** and net income decreased **9%**, with diluted EPS flat | Metric | Three Months Ended March 31, 2023 (in thousands) | Three Months Ended March 31, 2022 (in thousands) | Change (YoY) | | :-------------------------------- | :--------------------------------------------- | :--------------------------------------------- | :----------- | | Revenues, net | $68,946 | $65,367 | +5.48% | | Operating income | $2,891 | $4,035 | -28.37% | | Net income | $2,623 | $2,893 | -9.26% | | Diluted EPS | $0.09 | $0.09 | 0.00% | | Dividends declared per share | $0.025 | $— | N/A | [Condensed Consolidated Statements of Comprehensive Income (Unaudited)](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income%20(Unaudited)) Comprehensive income decreased **18.24% to $2.59 million** in Q1 2023, due to lower net income and negative foreign currency adjustments | Metric | Three Months Ended March 31, 2023 (in thousands) | Three Months Ended March 31, 2022 (in thousands) | Change (YoY) | | :-------------------------------- | :--------------------------------------------- | :--------------------------------------------- | :----------- | | Net income | $2,623 | $2,893 | -9.26% | | Total other comprehensive (loss) income | $(35) | $272 | -112.87% | | Comprehensive income | $2,588 | $3,165 | -18.24% | [Condensed Consolidated Statements of Shareholders' Equity (Unaudited)](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Shareholders'%20Equity%20(Unaudited)) Shareholders' equity rose slightly to **$336.04 million**, influenced by net income and stock-based compensation, offset by cash dividends - HealthStream declared its first quarterly cash dividend of **$0.025 per share**, with a second dividend also approved[32](index=32&type=chunk)[33](index=33&type=chunk)[89](index=89&type=chunk) | Metric | March 31, 2023 (in thousands) | December 31, 2022 (in thousands) | | :-------------------------------- | :------------------------------ | :------------------------------- | | Total Shareholders' Equity | $336,039 | $334,064 | | Net income | $2,623 | N/A | | Dividends declared | $(767) | N/A | | Stock-based compensation | $945 | N/A | [Condensed Consolidated Statements of Cash Flows (Unaudited)](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows%20(Unaudited)) Operating cash flow remained stable, but investing cash outflow surged due to an acquisition, while financing cash outflow decreased | Cash Flow Activity | Three Months Ended March 31, 2023 (in thousands) | Three Months Ended March 31, 2022 (in thousands) | Change (YoY) | | :-------------------------------- | :--------------------------------------------- | :--------------------------------------------- | :----------- | | Net cash provided by operating activities | $20,541 | $20,655 | -0.55% | | Net cash used in investing activities | $(16,916) | $(3,962) | +327.00% | | Net cash used in financing activities | $(791) | $(20,223) | -96.09% | | Cash and cash equivalents at end of period | $48,836 | $43,370 | +12.59% | - Investing activities for Q1 2023 included **$6.6 million** for the eeds acquisition and **$7.6 million** for capitalized software development[84](index=84&type=chunk) [Notes to Condensed Consolidated Financial Statements (Unaudited)](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements%20(Unaudited)) These notes provide detailed explanations of HealthStream's accounting policies and significant financial events, including segment transition, revenue recognition, income taxes, equity changes, earnings per share calculations, marketable securities, the eeds acquisition, and the revolving credit facility [1. OVERVIEW AND BASIS OF PRESENTATION](index=8&type=section&id=1.%20OVERVIEW%20AND%20BASIS%20OF%20PRESENTATION) HealthStream provides SaaS applications for healthcare via its hStream platform, consolidating into a single reportable segment - HealthStream provides Software-as-a-Service (SaaS) based applications for healthcare organizations, focused on clinical development, talent management, training, education, assessment, competency management, safety and compliance, scheduling, and provider credentialing[18](index=18&type=chunk)[53](index=53&type=chunk) - The company operates under a "One HealthStream" approach, with the hStream technology platform at its core, facilitating interoperability among applications to enhance value[18](index=18&type=chunk)[21](index=21&type=chunk)[54](index=54&type=chunk) - Effective January 1, 2023, HealthStream transitioned to a single reportable segment, consolidating its Workforce Solutions and Provider Solutions segments under a "One HealthStream" enterprise approach[22](index=22&type=chunk)[23](index=23&type=chunk)[55](index=55&type=chunk)[56](index=56&type=chunk) [2. REVENUE RECOGNITION AND SALES COMMISSIONS](index=8&type=section&id=2.%20REVENUE%20RECOGNITION%20AND%20SALES%20COMMISSIONS) HealthStream recognizes revenue primarily from subscription services, which grew **6%**, and expects **$504 million** from remaining performance obligations - Revenue is recognized based on a five-step model when control of promised goods or services is transferred to the customer[24](index=24&type=chunk)[25](index=25&type=chunk) | Revenue Source | Three Months Ended March 31, 2023 (in thousands) | Three Months Ended March 31, 2022 (in thousands) | Change (YoY) | | :----------------- | :--------------------------------------------- | :--------------------------------------------- | :----------- | | Subscription services | $66,015 | $62,075 | +6.35% | | Professional services | $2,931 | $3,292 | -11.00% | | Total revenues, net | $68,946 | $65,367 | +5.48% | - Approximately **$504 million** of revenue is expected to be recognized from remaining performance obligations, with about **44%** recognized over the next 12 months[28](index=28&type=chunk) - Amortization of deferred sales commissions increased to **$2.7 million** for Q1 2023, up from **$2.5 million** in Q1 2022, and is included in sales and marketing expenses[29](index=29&type=chunk) [3. INCOME TAXES](index=10&type=section&id=3.%20INCOME%20TAXES) Income tax provision decreased to **$0.5 million** in Q1 2023, lowering the effective tax rate to **16%** due to discrete tax benefits | Metric | Three Months Ended March 31, 2023 (in thousands) | Three Months Ended March 31, 2022 (in thousands) | Change (YoY) | | :----------------- | :--------------------------------------------- | :--------------------------------------------- | :----------- | | Income tax provision | $518 | $866 | -40.20% | | Effective tax rate | 16% | 23% | -7 percentage points | - The effective tax rate for Q1 2023 was **16%**, reflecting statutory corporate income tax, state and foreign taxes, permanent tax differences, and discrete tax benefits of **$53

Financial Data and Key Metrics Changes - For Q1 2023, the company reported record quarterly revenue of $68.9 million, an increase of 5% compared to the same period in 2022 [4][23] - Operating income was $2.9 million, down 28%, while net income was $2.6 million, down 9% [9] - Adjusted EBITDA was $13.7 million, a decrease of 2%, with an adjusted EBITDA margin of 19.9% compared to 21.4% last year [25][10] - Gross margin was 65.4%, slightly down from 66.3% the previous year, impacted by severance charges and increased costs [10][9] - Days Sales Outstanding (DSO) increased to 51 days from 46 days last year, primarily due to a single customer with a large balance [26] Business Line Data and Key Metrics Changes - Subscription product revenues were $66 million, up 6%, while professional services revenues were $2.9 million, down 11% [23] - Revenues from the ShiftWizard application grew by 30% year-over-year, indicating strong customer satisfaction [33] - The company added 31 new health organizations to the Workforce Validate application set in Q1 [20] Market Data and Key Metrics Changes - The company noted that macroeconomic challenges such as inflation and recession are impacting the market, but it remains confident in its growth trajectory [21] - The integration of the hStream technology platform is expected to enhance interoperability and drive future growth [34][36] Company Strategy and Development Direction - The company has unified its operations under the hStream technology platform, moving away from the previous two-segment structure [5] - A new dividend policy was introduced, with the first cash dividend of $0.025 per share to be paid on April 28, 2023 [59][41] - The company plans to continue investing in its platform as a service technologies to enhance its SaaS application suite [50] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence that the restructuring will positively impact financial performance starting in Q2 2023 [17] - The company anticipates that the revenue impact from slower bookings during COVID will be behind it as the first half of the year closes [21] - Management acknowledged a slight dip in hStream subscriptions but expects growth in the coming quarters [61][30] Other Important Information - The company completed the acquisition of Eeds, expanding its ecosystem in the healthcare technology niche [69] - The developer portal launched in Q4 2022 is expected to enhance the capabilities of the hStream platform [19] Q&A Session Summary Question: What are you hearing from your customers regarding employment trends? - Management noted that as customers grow, the company also benefits, particularly as healthcare organizations build their nursing core and rely less on contracted labor [76][100] Question: How is your employment situation? - The company reported a stable employee count and is finding the necessary talent, following a planned restructuring [78][79] Question: Can you provide color on the learning side in terms of product traction? - Clinical education products are performing well, with notable growth in onboarding and clinical education offerings [126] Question: What does pricing look like for contract renewals? - Pricing remains stable, with adjustments based on customer growth and commitment length [128] Question: Can you provide an update on the digital network development unit? - The company is excited about monetization strategies for NurseGrid and myClinicalExchange, with plans to launch direct-to-consumer education sales [86][112]

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2022 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO Commission File Number 000-27701 HEALTHSTREAM, INC. (Exact name of registrant as specified in its charter) Tennessee 62-1443555 (State or other jurisdict ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q For the quarterly period ended September 30, 2022 ☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Commission File No.: 000-27701 HealthStream, Inc. (Exact name of registrant as specified in its charter) Tennessee 62-1443555 (State or other jurisdiction of incorporation or organization) 500 11th Avenue North, Suite 1000, Nashville, Tennessee 37203 (Address of principal executive office ...

HealthStream, Inc. (NASDAQ:HSTM) Q3 2022 Earnings Conference Call October 25, 2022 9:00 AM ET Company Participants Mollie Condra - Vice President of Investor Relations and Communications Robert Frist - CEO and Chairman Scott Roberts - CFO and Senior Vice President of Finance and Accounting Conference Call Participants Richard Close - Canaccord Genuity Vincent Colicchio - Barrington Operator Good morning, and welcome to HealthStream's Third Quarter 2022 Earnings Conference Call. At this time, I would like to ...

[PART I. FINANCIAL INFORMATION](index=3&type=section&id=Part%20I.%20Financial%20Information) Presents HealthStream, Inc.'s unaudited condensed consolidated financial statements and management's discussion and analysis [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) Presents HealthStream, Inc.'s unaudited condensed consolidated financial statements and related notes [Condensed Consolidated Balance Sheets (Unaudited)](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets%20(Unaudited)%20%E2%80%93%20June%2030%2C%202022%20and%20December%2031%2C%202021) Presents HealthStream, Inc.'s unaudited condensed consolidated balance sheets as of June 30, 2022, and December 31, 2021 | ASSETS (in thousands) | June 30, 2022 | December 31, 2021 | | :-------------------- | :------------ | :---------------- | | Cash and cash equivalents | $37,216 | $46,905 | | Total current assets | $95,333 | $106,845 | | Total assets | $477,704 | $486,753 | | LIABILITIES AND SHAREHOLDERS' EQUITY (in thousands) | | | | Total current liabilities | $104,914 | $100,350 | | Total shareholders' equity | $326,732 | $339,019 | | Total liabilities and shareholders' equity | $477,704 | $486,753 | [Condensed Consolidated Statements of Income (Unaudited)](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income%20(Unaudited)%20%E2%80%93%20Three%20and%20Six%20Months%20ended%20June%2030%2C%202022%20and%202021) Details the unaudited condensed consolidated statements of income for the three and six months ended June 30, 2022 and 2021 | (in thousands, except per share data) | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenues, net | $65,638 | $64,816 | $131,005 | $128,284 | | Total operating costs and expenses | $62,685 | $61,385 | $124,016 | $121,553 | | Operating income | $2,953 | $3,431 | $6,989 | $6,731 | | Net income | $3,083 | $2,441 | $5,976 | $4,732 | | Net income per share (Diluted) | $0.10 | $0.08 | $0.19 | $0.15 | [Condensed Consolidated Statements of Comprehensive Income (Unaudited)](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income%20(Unaudited)%20%E2%80%93%20Three%20and%20Six%20Months%20ended%20June%2030%2C%202022%20and%202021) Outlines the unaudited condensed consolidated statements of comprehensive income for the three and six months ended June 30, 2022 and 2021 | (in thousands) | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income | $3,083 | $2,441 | $5,976 | $4,732 | | Total other comprehensive (loss) income | $(780) | $351 | $(508) | $585 | | Comprehensive income | $2,303 | $2,792 | $5,468 | $5,317 | [Condensed Consolidated Statement of Shareholders' Equity (Unaudited)](index=6&type=section&id=Condensed%20Consolidated%20Statement%20of%20Shareholders'%20Equity%20(Unaudited)%20%E2%80%93%20Three%20and%20Six%20Months%20ended%20June%2030%2C%202022%20and%202021) Presents the unaudited condensed consolidated statement of shareholders' equity for the six months ended June 30, 2022 and 2021 | (in thousands) | Balance at Dec 31, 2021 | Net Income (H1 2022) | Repurchase of Common Stock (H1 2022) | Issuance of Common Stock in Acquisition (H1 2022) | Balance at June 30, 2022 | | :------------- | :---------------------- | :------------------- | :----------------------------------- | :----------------------------------------------- | :----------------------- | | Common Stock Amount | $270,791 | — | $(19,889) (Q1) / $(3,143) (Q2) | $4,084 | $253,036 | | Retained Earnings | $68,122 | $2,893 (Q1) / $3,083 (Q2) | — | — | $74,098 | | Total Shareholders' Equity | $339,019 | $2,893 (Q1) / $3,083 (Q2) | $(19,889) (Q1) / $(3,143) (Q2) | $4,084 | $326,732 | [Condensed Consolidated Statements of Cash Flows (Unaudited)](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows%20(Unaudited)%20%E2%80%93%20Six%20Months%20ended%20June%2030%2C%202022%20and%202021) Details the unaudited condensed consolidated statements of cash flows for the six months ended June 30, 2022 and 2021 | (in thousands) | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $27,981 | $24,324 | | Net cash used in investing activities | $(13,980) | $(10,639) | | Net cash used in financing activities | $(23,635) | $(411) | | Net (decrease) increase in cash and cash equivalents | $(9,689) | $13,226 | | Cash and cash equivalents at end of period | $37,216 | $49,792 | [Notes to Condensed Consolidated Financial Statements (Unaudited)](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements%20(Unaudited)) Provides essential details and explanations for the unaudited condensed consolidated financial statements [1. BASIS OF PRESENTATION](index=8&type=section&id=1.%20BASIS%20OF%20PRESENTATION) The unaudited condensed consolidated financial statements adhere to US GAAP for interim reporting, with necessary adjustments - The unaudited Condensed Consolidated Financial Statements are prepared in accordance with US GAAP for interim financial information, with all adjustments considered necessary for fair presentation[16](index=16&type=chunk) - Operating results for the three and six months ended June 30, 2022, are not necessarily indicative of the results expected for the full year ending December 31, 2022[16](index=16&type=chunk) [2. RECENT ACCOUNTING PRONOUNCEMENTS](index=8&type=section&id=2.%20RECENT%20ACCOUNTING%20PRONOUNCEMENTS) The Company early adopted ASU 2021-08 on January 1, 2022, changing accounting for contract assets and liabilities in business combinations - The Company early adopted ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, on **January 1, 2022**[18](index=18&type=chunk) - The new guidance requires contract assets and liabilities acquired in a business combination to be recognized and measured as if the acquirer had originated the contracts, differing from previous fair value measurement[18](index=18&type=chunk) - The impact of the new standard will depend on the magnitude of future acquisitions but has not had a material impact to date[18](index=18&type=chunk) [3. REVENUE RECOGNITION AND SALES COMMISSIONS](index=8&type=section&id=3.%20REVENUE%20RECOGNITION%20AND%20SALES%20COMMISSIONS) Revenue is recognized upon transfer of control, disaggregated by segment, with subscription services as primary source - Revenue is recognized when control of promised goods or services is transferred to the customer, following a five-step model[19](index=19&type=chunk)[22](index=22&type=chunk) Revenues by Business Segments (in thousands) | Business Segments (in thousands) | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | **Workforce Solutions** | | | | | | Subscription services | $50,971 | $50,740 | $101,524 | $100,511 | | Professional services | $1,503 | $1,418 | $2,989 | $2,894 | | **Provider Solutions** | | | | | | Subscription services | $11,500 | $10,905 | $23,022 | $21,502 | | Professional services | $1,664 | $1,753 | $3,470 | $3,377 | | **Total revenues, net** | **$65,638** | **$64,816** | **$131,005** | **$128,284** | - Approximately **$455 million** of revenue is expected to be recognized from remaining performance obligations, with about **46%** expected within the next **12 months**[25](index=25&type=chunk) - Sales commissions are capitalized and amortized over the expected period of benefit, typically the contract term or approximately **three years** for non-commensurate commissions[26](index=26&type=chunk) [4. INCOME TAXES](index=10&type=section&id=4.%20INCOME%20TAXES) Income taxes use the asset and liability method; the effective tax rate for H1 2022 was 19%, down from 28% due to a tax benefit Income Tax Provision (in thousands) | Income Tax Provision (in thousands) | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Income tax provision | $549 | $925 | $1,415 | $1,847 | | Effective tax rate | 15% | 27% | 19% | 28% | - The effective tax rate for the six months ended June 30, 2022, was **19%**, compared to **28%** for the same period in 2021[28](index=28&type=chunk) - The lower effective tax rate in 2022 was primarily due to a **$0.2 million** tax benefit associated with a non-taxable gain from the change in fair value of the minority interest in CloudCME, LLC[28](index=28&type=chunk) [5. SHAREHOLDERS' EQUITY](index=10&type=section&id=5.%20SHAREHOLDERS'%20EQUITY) The company manages stock awards and compensation, completing a **$20.0 million** share repurchase and expanding another by **$10.0 million** Stock-Based Compensation Expense (in thousands) | Stock-Based Compensation Expense (in thousands) | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total stock-based compensation expense | $917 | $782 | $1,691 | $1,398 | - The Company completed a **$20.0 million** share repurchase program on **March 8, 2022**, repurchasing **853,023 shares** at an average price of **$23.45**[33](index=33&type=chunk) - An additional **$10.0 million** share repurchase program was approved on **March 14, 2022**, under which **402,050 shares** were repurchased for **$8.1 million** during the six months ended June 30, 2022[34](index=34&type=chunk)[109](index=109&type=chunk) [6. EARNINGS PER SHARE](index=12&type=section&id=6.%20EARNINGS%20PER%20SHARE) Basic and diluted EPS are calculated based on net income and weighted average shares, with diluted EPS increasing for Q2 and H1 2022 Net Income Per Share (Diluted) | Net Income Per Share (Diluted) | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :----------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Diluted EPS | $0.10 | $0.08 | $0.19 | $0.15 | | Weighted average diluted shares (in thousands) | 30,512 | 31,616 | 30,744 | 31,571 | - Approximately **228,000** and **223,000** common equivalent shares were excluded from diluted EPS calculations for the three and six months ended June 30, 2022, respectively, due to their anti-dilutive effect or contingent performance conditions[35](index=35&type=chunk) [7. MARKETABLE SECURITIES](index=14&type=section&id=7.%20MARKETABLE%20SECURITIES) Marketable securities, primarily corporate debt, decreased from **$5.041 million** to **$2.000 million** and are all current assets Marketable Securities (Fair Value, in thousands) | Marketable Securities (Fair Value, in thousands) | June 30, 2022 | December 31, 2021 | | :--------------------------------------- | :------------ | :---------------- | | Corporate debt securities | $2,000 | $5,041 | | Total | $2,000 | $5,041 | - All investments in marketable securities are classified as current assets because they mature within **one year** from the balance sheet date[38](index=38&type=chunk) [8. BUSINESS COMBINATION](index=14&type=section&id=8.%20BUSINESS%20COMBINATION) HealthStream acquired the remaining **82%** of CloudCME, LLC for **$4.0 million** cash and **$4.1 million** stock, resulting in **$5.6 million** goodwill - On **May 18, 2022**, HealthStream acquired the remaining **82%** ownership interest of CloudCME, LLC for approximately **$4.0 million** in cash and **$4.1 million** in common stock[39](index=39&type=chunk) - The acquisition resulted in the establishment of **$5.6 million** in goodwill and **$5.1 million** in intangible assets[39](index=39&type=chunk) - The results of operations for CloudCME are included in the Company's Consolidated Financial Statements from the date of acquisition and are part of the Workforce Solutions segment[39](index=39&type=chunk) [9. BUSINESS SEGMENTS](index=14&type=section&id=9.%20BUSINESS%20SEGMENTS) HealthStream operates in Workforce Solutions and Provider Solutions segments, with performance measured by operating income before specific corporate allocations - The Company provides services through two business segments: Workforce Solutions and Provider Solutions[40](index=40&type=chunk) - Workforce Solutions focuses on clinical development, learning, and compliance, while Provider Solutions addresses credentialing, privileging, and enrollment needs[40](index=40&type=chunk) Revenues by Business Segment (in thousands) | Revenues by Business Segment (in thousands) | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :---------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Workforce Solutions | $52,474 | $52,158 | $104,513 | $103,405 | | Provider Solutions | $13,164 | $12,658 | $26,492 | $24,879 | | **Total revenues, net** | **$65,638** | **$64,816** | **$131,005** | **$128,284** | Operating Income by Business Segment (in thousands) | Operating Income by Business Segment (in thousands) | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Workforce Solutions | $8,767 | $9,222 | $18,153 | $18,249 | | Provider Solutions | $1,702 | $2,166 | $4,013 | $4,221 | | Unallocated | $(7,516) | $(7,957) | $(15,177) | $(15,739) | | **Total operating income** | **$2,953** | **$3,431** | **$6,989** | **$6,731** | [10. DEBT](index=15&type=section&id=10.%20DEBT) The company maintains a **$65.0 million** revolving credit facility for working capital and acquisitions, with no outstanding balance as of June 30, 2022 - The Company has a **$65.0 million** Revolving Credit Facility with Truist Bank, with a maturity date of **October 28, 2023**[45](index=45&type=chunk) - The facility is intended for general working capital needs, permitted acquisitions, and stock repurchase/redemption transactions[47](index=47&type=chunk) - As of **June 30, 2022**, there were no outstanding balances on the Revolving Credit Facility, and the Company was in compliance with all covenants, including funded debt leverage and interest coverage ratios[49](index=49&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=17&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Discusses HealthStream's financial condition and results, covering business overview, COVID-19 impact, key metrics, and liquidity [Special Cautionary Notice Regarding Forward‑Looking Statements](index=17&type=section&id=Special%20Cautionary%20Notice%20Regarding%20Forward%EF%B9%A3Looking%20Statements) Provides a cautionary notice on forward-looking statements, advising investors to consider risks from the 2021 Form 10-K - Forward-looking statements involve known and unknown risks, uncertainties, and other factors that may cause actual results to differ materially[51](index=51&type=chunk) - Investors should not place undue reliance on forward-looking statements and should consider the risks set forth in the **2021 Form 10-K**[51](index=51&type=chunk)[52](index=52&type=chunk) [Business Overview](index=17&type=section&id=Business%20Overview) HealthStream provides SaaS-based applications to healthcare organizations, unifying them under the hStream platform to improve outcomes - HealthStream provides primarily SaaS-based applications for healthcare organizations to improve business and clinical outcomes[53](index=53&type=chunk) - The company is unifying its applications under a single technology platform, hStream, to leverage each other more efficiently[54](index=54&type=chunk) Significant Financial Metrics (Q2 YoY) | Significant Financial Metrics (Q2 YoY) | Q2 2022 | Q2 2021 | Change | % Change | | :------------------------------------ | :------ | :------ | :----- | :------- | | Revenues | $65.6M | $64.8M | +$0.8M | +1% | | Operating income | $3.0M | $3.4M | -$0.4M | -14% | | Net income | $3.1M | $2.4M | +$0.7M | +26% | | Diluted EPS | $0.10 | $0.08 | +$0.02 | +25% | | Adjusted EBITDA | $13.1M | $14.5M | -$1.4M | -10% | [COVID-19 Pandemic and Other Recent Developments](index=18&type=section&id=COVID-19%20Pandemic%20and%20Other%20Recent%20Developments) COVID-19 continues to cause staffing challenges and delayed sales, impacting H1 2022 revenue and posing economic challenges - The COVID-19 pandemic continues to cause staffing challenges for healthcare customers, including labor shortages and increased costs, leading to delayed sales for certain elective products[57](index=57&type=chunk) - Delayed bookings from the height of the pandemic negatively impacted revenue growth in the first half of 2022, but increased bookings in H1 2022 are expected to benefit revenue in the latter half of 2022[58](index=58&type=chunk) - Current U.S. economic challenges, including recessionary concerns, inflation, and supply chain disruptions, are increasing labor, supply chain, and capital expenditures for the company and its customers[59](index=59&type=chunk) [Key Business Metrics](index=18&type=section&id=Key%20Business%20Metrics) Management tracks net revenues, operating income, Adjusted EBITDA, and hStream subscriptions, showing significant year-over-year growth Key Business Metrics (in millions) | Key Business Metrics (in millions) | Q2 2022 | Q2 2021 | H1 2022 | H1 2021 | | :--------------------------------- | :------ | :------ | :------ | :------ | | Revenues, net | $65.6 | $64.8 | $131.0 | $128.3 | | Operating Income | $3.0 | $3.4 | $7.0 | $6.7 | | Adjusted EBITDA | $13.1 | $14.5 | $27.1 | $28.1 | - hStream subscriptions increased to approximately **5.30 million** at **June 30, 2022**, from **4.52 million** at **June 30, 2021**, indicating growth in the value of the customer base[60](index=60&type=chunk)[61](index=61&type=chunk) [Critical Accounting Policies and Estimates](index=20&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) The company's financial statements rely on estimates for revenue recognition, income taxes, and goodwill, with no material changes - Critical accounting policies and estimates include revenue recognition, accounting for income taxes, and goodwill[63](index=63&type=chunk)[69](index=69&type=chunk) - There have been no changes in the Company's critical accounting policies and estimates from those reported in its **2021 Form 10-K**[63](index=63&type=chunk) [Three Months Ended June 30, 2022 Compared to Three Months Ended June 30, 2021](index=20&type=section&id=Three%20Months%20Ended%20June%2030%2C%202022%20Compared%20to%20Three%20Months%20Ended%20June%2030%2C%202021) Q2 2022 revenues increased **1%** to **$65.6 million**, operating income decreased **14%**, and net income rose **26%** to **$3.1 million**, boosted by an acquisition gain Revenues by Business Segment (in thousands) | Revenues by Business Segment (in thousands) | Q2 2022 | Q2 2021 | Change | % Change | | :---------------------------------------- | :------ | :------ | :----- | :------- | | Workforce Solutions | $52,474 | $52,158 | $316 | 1% | | Provider Solutions | $13,164 | $12,658 | $506 | 4% | | **Total revenues, net** | **$65,638** | **$64,816** | **$822** | **1%** | - Workforce Solutions revenue growth was partially offset by a **$0.9 million** decline from the legacy resuscitation business and lower installed software license sales from the legacy Scheduling application suite[65](index=65&type=chunk) - Cost of revenues decreased **2%** to **$22.2 million**, primarily due to lower royalties payable for legacy resuscitation products[67](index=67&type=chunk)[68](index=68&type=chunk) - Sales and marketing expenses increased **15%** to **$10.9 million**, driven by increases in personnel expenses, contract labor, marketing, travel, and sales commissions[73](index=73&type=chunk)[74](index=74&type=chunk) - Net income increased **26%** to **$3.1 million**, and diluted EPS rose to **$0.10**, primarily due to a **$0.9 million** gain from the change in fair value of the minority interest in CloudCME[78](index=78&type=chunk)[80](index=80&type=chunk) [Six Months Ended June 30, 2022 Compared to Six Months Ended June 30, 2021](index=24&type=section&id=Six%20Months%20Ended%20June%2030%2C%202022%20Compared%20to%20Six%20Months%20Ended%20June%2030%2C%202021) H1 2022 revenues increased **2%** to **$131.0 million**, operating income rose **4%** to **$7.0 million**, and net income grew **26%** to **$6.0 million** Revenues by Business Segment (in thousands) | Revenues by Business Segment (in thousands) | H1 2022 | H1 2021 | Change | % Change | | :---------------------------------------- | :------ | :------ | :----- | :------- | | Workforce Solutions | $104,513 | $103,405 | $1,108 | 1% | | Provider Solutions | $26,492 | $24,879 | $1,613 | 6% | | **Total revenues, net** | **$131,005** | **$128,284** | **$2,721** | **2%** | - Workforce Solutions revenue growth was driven by recent acquisitions and other solutions, offsetting an expected **$2.6 million** decline in legacy resuscitation products[83](index=83&type=chunk) - Cost of revenues decreased **3%** to **$44.2 million**, primarily due to lower royalties for legacy resuscitation products in Workforce Solutions[85](index=85&type=chunk)[86](index=86&type=chunk) - Sales and marketing expenses increased **15%** to **$21.3 million**, driven by higher personnel costs, sales commissions, travel, and marketing expenses[89](index=89&type=chunk)[90](index=90&type=chunk) - Net income increased **26%** to **$6.0 million**, and diluted EPS rose to **$0.19**, largely due to the **$0.9 million** gain from the CloudCME acquisition and a lower income tax provision[94](index=94&type=chunk)[95](index=95&type=chunk)[96](index=96&type=chunk) - Adjusted EBITDA decreased **4%** to **$27.1 million** for the six months ended June 30, 2022[97](index=97&type=chunk) [Reconciliation of Non-GAAP Financial Measures](index=27&type=section&id=Reconciliation%20of%20Non-GAAP%20Financial%20Measures) Reconciles Adjusted EBITDA, a non-GAAP measure, to GAAP net income, used to assess operating performance by excluding specific items - Adjusted EBITDA is a non-GAAP financial measure used by management to evaluate the Company's operating performance, excluding certain GAAP accounting, non-cash, and non-operating items[98](index=98&type=chunk)[99](index=99&type=chunk) - The definition of Adjusted EBITDA includes an adjustment for deferred revenue write-downs associated with fair value accounting for businesses acquired prior to **January 1, 2022**, to provide a more comparable view of operating performance[100](index=100&type=chunk) Adjusted EBITDA Reconciliation (in thousands) | Adjusted EBITDA Reconciliation (in thousands) | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | GAAP net income | $3,083 | $2,441 | $5,976 | $4,732 | | Deferred revenue write-down | $83 | $1,231 | $177 | $2,852 | | Interest income | $(16) | $(22) | $(31) | $(40) | | Interest expense | $33 | $33 | $65 | $65 | | Income tax provision | $549 | $925 | $1,415 | $1,847 | | Stock-based compensation expense | $917 | $782 | $1,691 | $1,398 | | Depreciation and amortization | $9,420 | $9,149 | $18,742 | $18,302 | | Change in fair value of non-marketable equity investments | $(943) | — | $(943) | — | | Non-cash paid time off expense | — | — | — | $(1,011) | | **Adjusted EBITDA** | **$13,126** | **$14,539** | **$27,092** | **$28,145** | [Liquidity and Capital Resources](index=28&type=section&id=Liquidity%20and%20Capital%20Resources) Net cash from operations increased to **$28.0 million**, while investing and financing activities used **$14.0 million** and **$23.6 million** respectively, with **$37.2 million** cash on hand - Net cash provided by operating activities increased by **$3.7 million** to **$28.0 million** for the six months ended June 30, 2022, primarily due to lower royalties paid[104](index=104&type=chunk) - Net cash used in investing activities was **$14.0 million**, including **$4.0 million** for business combinations (CloudCME) and **$11.8 million** for capitalized software development[105](index=105&type=chunk) - Net cash used in financing activities was approximately **$23.6 million**, primarily due to **$23.1 million** for repurchases of common stock[106](index=106&type=chunk) - Working capital decreased to negative **$9.6 million** at **June 30, 2022**, from positive **$6.5 million** at **December 31, 2021**, mainly due to cash reduction for acquisitions and repurchases, and an increase in deferred revenue[107](index=107&type=chunk) - The Company believes its existing cash and cash equivalents (**$37.2 million**), marketable securities (**$2.0 million**), cash from operations, and available borrowings under its **$65.0 million** revolving credit facility will be sufficient to meet anticipated working capital needs and capital expenditures for the foreseeable future[107](index=107&type=chunk)[110](index=110&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=30&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) HealthStream faces market risks from interest rates, foreign currency fluctuations, and strategic investments, with no outstanding debt as of June 30, 2022 - The Company is exposed to market risk from changes in interest rates, foreign currency risk (Canadian dollar, New Zealand dollar, and Australian dollar), and investment risk[113](index=113&type=chunk)[115](index=115&type=chunk) - As of **June 30, 2022**, the Company had no outstanding debt, but future borrowings under its revolving credit facility would be subject to variable interest rates[114](index=114&type=chunk) - The Company's investment portfolio includes strategic investments in privately held early-stage healthcare technology companies, which may introduce volatility to its Consolidated Financial Statements[118](index=118&type=chunk) [Item 4. Controls and Procedures](index=30&type=section&id=Item%204.%20Controls%20and%20Procedures) The CEO and CFO confirmed the effectiveness of disclosure controls and procedures as of June 30, 2022, with no material changes to internal control - The Chief Executive Officer and Principal Financial Officer concluded that HealthStream's disclosure controls and procedures were effective as of **June 30, 2022**[120](index=120&type=chunk) - There was no change in HealthStream's internal control over financial reporting during the second quarter of 2022 that materially affected, or is reasonably likely to materially affect, internal control over financial reporting[121](index=121&type=chunk) [PART II. OTHER INFORMATION](index=31&type=section&id=Part%20II.%20Other%20Information) Provides other information, including risk factors, unregistered sales of equity securities, and a list of exhibits [Item 1A. Risk Factors](index=31&type=section&id=Item%201A.%20Risk%20Factors) No material changes have occurred to the risk factors previously disclosed in the 2021 Form 10-K - There have been no material changes to the risk factors previously disclosed in the **2021 Form 10-K**[122](index=122&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=31&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) HealthStream issued **208,567** common shares for **$4.1 million** in a private placement and repurchased **402,050** shares for **$8.1 million** - In connection with the CloudCME acquisition, the Company issued **208,567 shares** of common stock, valued at **$4.1 million**, in a private placement[123](index=123&type=chunk) - During the first six months of 2022, the Company repurchased **402,050 shares** for **$8.1 million** under an expanded **$10.0 million** share repurchase program[124](index=124&type=chunk) Share Repurchase Activity (Q2 2022) | Share Repurchase Activity (Q2 2022) | Total Shares Purchased | Average Price Paid per Share | Maximum Dollar Value Remaining | | :---------------------------------- | :--------------------- | :--------------------------- | :----------------------------- | | Month 1 (April 1 - April 30) | 126,765 | $19.88 | $2,500,020 | | Month 2 (May 1 - May 31) | 26,722 | $18.98 | $1,992,953 | | Month 3 (June 1 - June 30) | 5,916 | $18.98 | $1,880,642 | | **Total (Q2)** | **159,403** | **$19.70** | **$1,880,642** | [Item 6. Exhibits](index=32&type=section&id=Item%206.%20Exhibits) Lists exhibits filed with the Form 10-Q, including the 2022 Omnibus Incentive Plan and CEO/CFO certifications - Exhibits include the HealthStream, Inc. **2022 Omnibus Incentive Plan**, certifications of the Chief Executive Officer and Principal Financial Officer pursuant to the Sarbanes-Oxley Act, and Inline XBRL documents[127](index=127&type=chunk) [SIGNATURE](index=33&type=section&id=SIGNATURE) The report was signed on behalf of HealthStream, Inc. by Scott A. Roberts, Chief Financial Officer, on July 28, 2022 - The report was signed on behalf of HealthStream, Inc. by Scott A. Roberts, Chief Financial Officer, on **July 28, 2022**[131](index=131&type=chunk)

Financial Data and Key Metrics Changes - Revenues for Q2 2022 were $65.6 million, up 1% year-over-year [9] - Operating income decreased by 14% to $3 million [9] - Net income increased by 26% to $3.1 million [9] - Earnings per share rose by 25% to $0.10 [9] - Adjusted EBITDA was $13.1 million, down 10% from the previous year [9][13] Business Line Data and Key Metrics Changes - Workforce Solutions revenues were $52.5 million, up 1% [9] - Provider Solutions revenues were $13.2 million, up 4% [9] - ShiftWizard scheduling application demonstrated 28% revenue growth compared to the same period last year [10] Market Data and Key Metrics Changes - The company reported a gross margin of 66.1%, an improvement from 65.1% year-over-year [10] - The company ended the quarter with cash and investment balances of $39.2 million, down by $6.2 million since last quarter [13] Company Strategy and Development Direction - The company aims to deliver an improved top line growth rate of around 6% for the second half of the year, more than double the growth rate of the first half [7] - The focus is on enhancing interoperability through the emerging hStream platform, with a developer portal expected to launch in Q3 2022 [18][20] - The company is transitioning to a business-to-professional model, allowing individual healthcare professionals to access the platform directly [21][22] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about returning to a more offensive strategy, indicating a positive shift in market conditions and customer engagement [5][28] - The management noted that customer purchasing decisions are beginning to pick up, with increased engagement reported by sales teams [7][30] - The company reaffirmed its guidance for consolidated revenues to range between $267.5 million and $273 million for the year [15] Other Important Information - The company has repurchased approximately $48 million of shares since March 2020, retiring about 6.5% of its outstanding shares [6][14] - The acquisition of CloudCME for approximately $4 million complements previous acquisitions and enhances the company's software solutions for CME management [14] Q&A Session Summary Question: Context on the company's current position and market trends - Management indicated a combination of internal transitions being behind them and favorable market trends contributing to their confidence in growth [26][28] Question: Confidence in accelerated growth in the second half - Confidence stems from improved purchasing processes and a return to normal sales patterns, alongside a competitive advantage in the CredentialStream application [34] Question: Update on CredentialStream implementations - Management reported improvements in implementation processes and tools, contributing to a healthy backlog of new contracts [35] Question: Labor market and wage inflation - The company is successfully hiring but noted that they are bringing in slightly less experienced individuals to manage costs amid wage inflation [38][39] Question: Increased travel for sales force - Travel budgets are expected to remain below pre-pandemic levels, focusing on customer-facing travel to enhance relationships [40] Question: Performance of the resuscitation business - The resuscitation business is tracking expectations, with competitive dynamics remaining strong [42] Question: Monetization of myClinicalExchange and NurseGrid - The company is exploring new monetization strategies and aims to maintain engagement with healthcare professionals throughout their careers [44][45] Question: Update on clinical programs performance - The HealthStream Learning Center saw strong new additions, with over 100,000 new subscribers in the quarter, indicating a positive trend in clinical programs [47][48]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Commission File No.: 000-27701 HealthStream, Inc. (Exact name of registrant as specified in its charter) Tennessee 62-1443555 (State or other jurisdiction of incorporation or organization) 500 11th Avenue North, Suite 1000, Nashville, Tennessee 37203 (Address of principal executive offices) (Zip Code) (I.R.S. Employer Identification No.) ...

HealthStream, Inc. (NASDAQ:HSTM) Q1 2022 Earnings Conference Call April 26, 2022 9:00 AM ET Company Participants Mollie Condra - Vice President, Investor Relations and Communications Robert Frist - Chairman and Chief Executive Officer Scotty Roberts - Senior Vice President and Chief Financial Officer Conference Call Participants Jared Haase - William Blair Matt Hewitt - Craig-Hallum Capital Group Vincent Colicchio - Barrington Research Richard Close - Canaccord Genuity Operator Good morning and welcome to ...