HSTM - NASDAQ

Good morning, and welcome to HealthStream's Second Quarter 2025 Earnings Conference Call. At this time, I would like to inform you that this conference is being recorded [Operator Instructions] I will now turn the conference over to Mollie Condra, Head of Investor Relations and Communications. Please go ahead, Ms. Condra.

Thank you, and good morning. Thank you for joining us today to discuss our second quarter 2025 results. Also on the conference call with me today is Robert A. Frist, Jr. CEO and Chairman of HealthStream; and Scotty Roberts, CFO and Senior Vice President of Finance and Accounting. I would also like to remind you that this conference call may contain forward-looking statements regarding future events and the future performance of HealthStream that could involve 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, and these include Forms 10-K, 10-Q and our earnings release. Additionally, we may reference measures such as adjusted EBITDA, which is a non-GAAP financial measure. A table providing supplemental information on adjusted EBITDA and reconciling to net income attributable to HealthStream is included in the earnings release that we issued yesterday and that we may refer to in this call. So with that start and that opening, I'll now turn the call over to CEO, Bobby Frist.

Good morning. Thank you, Mollie. Good morning, everyone. It does seem like a quarter of follow-ups. We've got some news to share about from our last earnings call related to our sales pipeline, macroeconomic conditions and, of course, financial results. So I'm going to hit highlights first of the financial results, which we feel good about the quarter and the results we'll be reporting. In the second quarter, we achieved record quarterly revenue, which is always an exciting milestone shows we're moving up into the right. I like that which is up 4% from the second quarter of last year. Operating income was up 33.4% and net income was up 29.3%, while adjusted EBITDA was up 11.3%, all those are over the same quarter last year. We increased our expectations for net income for full year 2025 in our financial guidance and reiterated our expectations for revenue, adjusted EBITDA and capital expenditures. And so later in the call, Scotty, of course, will expand on each of those. And there's some exciting developments in all of our core application suites, learning, credentialing and scheduling, which we'll provide in the back half of this presentation. And those are the things we're most excited about to help driving our business results. First, let's look back to our prior quarterly call. In our last call, we mentioned we were tracking a handful of while we characterize them as medium or large-sized deals that were originally expected to close in the first quarter. And I'm pleased to report that 4 of the 5 deals that we were tracking were signed during the second quarter. And the average new order contract value of those was $2.2 million across each of the four deals that's closed. And also in good news, the fifth deal is expected to be signed here early in the third quarter. So I feel like that's a positive update on the five deals that we -- while the timing wasn't as we expected the business outcome was solid and that it looks like we've landed 4 of the 5 and the fifth seems imminently, will be executed. So the market conditions, we'll talk more about that here in a bit. But we're excited to have that be our follow-up on the four deals that we talked specifically referenced last quarter. Also, I think it's positive that those five deals were really nice balance across our broad portfolio of applications and suites. One of the deals closed, for example, was a multimillion dollar multiyear contract from a very prestigious health system for our American Red Cross Resuscitation program. That's one of our leading partnerships and content offerings in our whole ecosystem. So we're very pleased to see a big win up in the Northeast for that product, again, multiyear, multimillion dollar contract. And now that they're a customer HealthStream, we're pleased to have them in the network, and we hope to continuously grow that account over time as they drive more and more value from a growing library of our solutions. Another deal included a wide range of our products, including our competency suite, which is demonstrating the success of our new bundling strategy and how our customers value our ability to handle the end-to-end needs of their competency program. So I really like that this new bundling strategy around our staff development here, competency assessment and development, which includes a broad swath of our competency-oriented products won a multimillion dollar deal during the second quarter. The third deal kind of rounding them out was a CredentialStream deal. So again, exciting to see progress from CredentialStream as well. It's another large health system and that selected CredentialStream to go enterprise-wide. And our scheduling application was the fourth that's already been signed for ShiftWizard contracted by another top health organization as well. So these are four enterprise deals balanced across learning and development and our content offerings, our scheduling application and our CredentialStream application. So again, I think the diversity of the wins was as important as the size of the wins, and it was nice to see them all come through here -- 4 of the 5 come through, again, with the fifth still expected. I think another topic that's probably on the top of mind for everybody is AI. And it seems like no earnings call is complete without talking about AI and AI strategies. And I think this call should be no exception. At HealthStream, there are multiple dimensions of AI, its impact, and we're focused on utilizing AI to manage our business more efficiently, of course. And so there, we're looking at role augmentation, efficiency and development of the applications we build. And so we have lots of prototypes and pilots going on in the efficiency category. And then, of course, we're working hard to use AI to create competitive differentiation throughout all of our product suites and product offerings. And so a series of pilots spooling up using AI to reshape our future road maps. So both those dimensions are well underway. And it's not like this is new for us. HealthStream has an established history of utilizing AI to improve health care. And in fact, beginning with the launch of our GenAI program over five years ago. Our GenAI was one of the first solutions to use AI to assess the clinical competency and we'd say the clinical reasoning ability of nurses, and so it's a little different than a knowledge test that was using AI, natural language processing and machine learning to set out the clinical reasoning ability the kind of the quality of the clinical decisions being made from nurses. And so we think it's a pioneering product, and it's just getting smarter and more effective over the years. In fact, we were just awarded another patent in connection with our GenAI and its use of natural language processing and deep learning to facilitate competency assessment of clinical staff, particularly nurses. So we're excited to have earned yet another patent related to our GenAI technology as it continues to be kind of foundational for our moves in and towards AI. AI is playing an important role in our new learning application. That application is called the HealthStream Learning experience and actually, in the back half of this presentation, we're going to give an update on the business associated with this new advance. But the HealthStream Learning Experience application or the HLX, as we call it, was announced last quarter. The HLX is a modern health care specific application that offers the workforce personalized, and this is key self-directed intelligent learning and development pathways. And those incorporate a wide range of learning modalities. So we've kind of extended the dimensions of content available while we build these self-directed intelligent learning pathways for health care professionals using the HLX. And of course, it's engaging the individuals in a new way of a thoroughly modern user experience. Also incorporated into the HLX is OpenAI's Chat or GPT-4.0, LLM, and that's powering faster and more precise search capability for HLX users helping establish the foundation for powering smarter, more relevant recommendations based on the learner's profile of experience. Is kind of the more the HLX knows about you, the better recommendations it can make for your career development, skill development, competency development and testing and evaluations. And so super excited about the HLX and its advanced incorporation of OpenAI's GPT4.0 LLM. And so I just want to give another example of our advances with AI. We think that these together, GenAI and HLX are just a few of the examples of HealthStream's movement towards AI, and getting our customers equipped to the latest tools in this case, in employee development and competency assessment. I think central to successful implementation AI is building a culture focused on AI. And we're working really hard to get all of our officers on board with everything from collecting the data they'll ultimately need potentially train Agentic AI to envisioning pilot programs and equipping our teams with tools. For example, during this quarter, all of our developers will have a choice of being equipped with either Cursor AI or Copilot, and so we're excited to get that out of the pilot mode and into kind of full production mode, we're excited to make those tools available to our developer -- our in-house developer capabilities. Let's see, I think every company is going to have to go on a journey of working to define how all the roles in the company will be augmented with the power of AI and HealthStream is deep into that journey, setting up a really nice governance structure over our AI projects and beginning to fund the use of these technologies and pilots and product development. So really excited about my team's advances there and the leadership of our tech leaders in the company helping us lead us forward in building a culture of incorporating AI into our business strategies and operations. Before we go further on the call and before I turn it over to Scotty, I think it's useful in case we have new potential investors in HealthStream is just to kind of summarize to everyone the HealthStream story and reiterate what we are and we stand for. So first and foremost, HealthStream is a healthcare technology company dedicated to developing, credentialing and scheduling the health care workforce through SaaS-based solutions. And each of those are becoming, we believe, more valuable because of the interoperability that we are achieving through our hStream technology platform. We're kind of in this transition of trying to move from SaaS applications to a PaaS the Platform as a Service architecture to power up and make those SaaS applications interoperable. The company holds 20 patents for its innovative products, and I just announced a new one in our GenAI. I've been awarded over 40 Brandon Hall Awards in the recent years, showing our excellence in our learning, construction and development programs. 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, about 97% of our revenues are subscription-based. As I just mentioned, we have also started to open our sales channels directly to healthcare professionals and nursing students across the continuum of healthcare training. We are profitable, we have no interest-bearing debt and a strong cash balance of $90.6 million. We're solely focused on healthcare and more specifically the healthcare workforce and those preparing to enter it. The 12.6 million healthcare professionals and nursing students in the United States comprise the core total addressable market for our SaaS solutions and now, of course, our PaaS-based ecology of applications. At this time, I'll turn it over to Scotty Roberts, our CFO, for a more detailed look at our financial performance here in the quarter with a forward look as well.

All right. Thanks, Bobby, and good morning. Let's go over the financial results for the second quarter. Unless otherwise noted, the comparisons will be against the same period of last year. Revenues were a record of $74.4 million, up 4%. Operating income was $5.9 million, up 33.4%. Net income was $5.4 million, up 29.3%. Earnings per share was $0.18 per share, up from $0.14 per share and adjusted EBITDA was $17.6 million and was up 11.3%. Revenues increased by $2.8 million or 4% and were $74.4 million compared to $71.6 million in last year's second quarter. Revenues from subscription products were up $2.9 million or 4.2% while professional service revenues were down $0.1 million or 3.5%. Our core solutions continued to deliver strong subscription revenue growth with CredentialStream growing by 26%, ShiftWizard growing by 21% and competency suite growing by 18%, offsetting the strong growth in these solutions were declines from legacy products and credentialing and scheduling totaling $1.8 million compared to last year. Excluding the impact of legacy products from the core business, the core business grew over 8% in the quarter. Our remaining performance obligations were $618 million as of the end of the second quarter that compares to $538 million for the same period of last year. We expect approximately 39% of the remaining performance obligations will be converted to revenue over the next 12 months and that 68% will be converted over the next 24 months. Gross margin came in at 64.6% compared to 66.8% in the prior year quarter. Gross margin was impacted by an increase in our cloud hosting costs which are primarily for the CredentialStream application and the hStream platform. As noted on the last earnings call, to improve the scalability and performance of CredentialStream, we added more capacity in our Azure hosting environment. In addition, changes in product mix resulted in higher royalty costs in the quarter. Operating expenses, excluding cost of revenues, declined by 2.9%. Sales and Marketing expenses were up 3.5% and was primarily from additions to our staffing. Depreciation and amortization was up 4.8%, and that was primarily from capitalized software amortization. Our General and Administrative expenses were down 22.6%, and that's due to lower bad debt charges and lower rent resulting from the commencement of the sublease for a portion of our Nashville office space. And finally, product development expenses were flat compared to last year. Net income improved to $5.4 million, and that was up 29.3% over last year. And finally, adjusted EBITDA came in at $17.6 million, and that was up 11.3%, and our adjusted EBITDA margin was 23.7%, and that compares to 22.1% last year. Moving on to the balance sheet. We ended the quarter with cash and investment balances, with $90.6 million compared to $113.3 million last quarter. And during the second quarter, we deployed $9 million for capital expenditures. We paid $0.9 million to shareholders through our dividend program, and we repurchased $18.1 million of our common stock under the share repurchase program that we announced in May. Our days sales outstanding improved to 35 days compared to 45 days last year. And this improvement resulted from more timely customer payments compared to the prior year. As I mentioned just a moment ago, our bad debt charges were lower compared to last year, although we did have a midsized customer file bankruptcy, resulting in an increase to our allowance for doubtful accounts in the quarter of approximately $150,000. On a year-to-date basis, cash flows from operations were $32.1 million compared to $27.4 million in the prior year, an increase of 17.2%. Also on a year-to-date basis, free cash flow improved by $1.3 million or 10.1% and were $14.2 million compared to $12.9 million last year. This improvement is a result of the growth in our billings and improved cash collections, but was partially offset by a $3.4 million increase in payments for capital expenditures. With $90.6 million of cash and investments, free cash flows and no debt, we are well positioned to deploy capital to improve shareholder value. We maintain a disciplined approach to capital allocation and how we prioritize our use of capital. Our utmost priority is making organic investments back into the business, which is evident by our annual capital expenditure and R&D plans. The second is pursuing acquisition opportunities, which we have a long track record of executing. Third is returning a portion of our profits back to shareholders in the form of cash dividends. And the fourth priority is that our Board may authorize share repurchase programs, which they did last quarter. Speaking of, in May, our Board of Directors authorized a $25 million share repurchase program. And during the second quarter, we repurchased $18.1 million of our common stock, and we've made $6.9 million of share repurchases during the month of July, completing the full program. From an M&A perspective, we maintain an active pipeline and continue to evaluate opportunities that may align with our product and platform strategy. In respect to our dividend program, yesterday, our Board of Directors declared a quarterly cash dividend of $0.031 per share to be paid on August 29 to holders of record on August 18. I'll wrap up my comments this morning with a recap of our financial outlook for the year, which is mostly unchanged except for a refinement to our net income outlook. We continue to expect that consolidated revenues will range between $297.5 million and $303.5 million. We now expect that net income will range between $19.5 million and $22.4 million, mainly because we now expect lower depreciation and amortization. We continue to expect that adjusted EBITDA will range between $68.5 million and $72.5 million and continue to expect capital expenditures to range between $31 million and $34 million. This guidance does not include assumptions for any acquisitions that we may complete during the year. And that concludes my comments for this quarter's call. As always, thanks for your time, and I'll now turn the call back over to Bobby for further updates.

Thank you, Scotty. I think then this section, we'll jump into the business update, highlight the successes we've achieved in our learning, credentialing and scheduling application suites during the second quarter. As many of you know, our learning business includes our flagship application, HealthStream Learning Center along with many other applications, assessment tools and content libraries, including our clinical content products. HealthStream Learning Center continues to grow as do many of the solutions that are delivered through it. Today, however, I want to focus on our brand-new learning application, HealthStream Learning Experience, and we brought that up in the first half of the call, we call it the HLX. As I mentioned, it is a modern healthcare specific application offers the workforce personalized self-directed intelligent learning and development pathways. This is a nice contrast to the HealthStream Learning Center which is really more of an assignment driven, helps organize compliance-oriented training where you push content to individuals. HLX helps shape educational pathways for individuals and it's more self-directed in nature. So the two together give a really rounded approach to learning and development. And it's a completely modernized built and one thing that is very excited about it, well, there's two things. First, last month, the HealthStream Learning Experience went live with 47,000 users at a large health system. So it's moved, clearly, it's graduated from the pilot phase to a revenue-generating product in the quarter. So it's very exciting to go live with 47,000 users at a large health system. In response to the early [indiscernible] an executive at that organization said, the utilization we are seeing thus far is incredible. And so we're excited to see it kind of move from the R&D labs and the pilot phase to a go-live billable product, and we look forward to building out a strong pipeline for this application. It's important to note that the application is bought alongside or in conjunction with HealthStream Learning Center. So it extends the capabilities and the learning models and the forms of content that can be delivered instead of replacing it. And they work together through their APIs, which are available in our platform services to create a really powerful set of enterprise- class learning tools for large organizations, specifically in healthcare. The other thing about HLX is really our first hStream platform native application and that means it was built directly on and is fully integrated with our hStream platform. And we've been talking about this for a long time. One of the benefits you'd expect from becoming a platform company is more rapid development of scaled enterprise class applications. And this, of course, is a case in point. From concept to now billable launchable product, enterprise-class product was about 18 months. And this is from whiteboard design to, again, a go-live billable event with a new customer, it was about 18 months. And I know that can seem like a long time, but it really is quite incredible to get that to happen. So again, we look forward to launching it into the broader market as an upsell opportunity to our large customer base and new customer acquisition. Let's move to the credentialing suite. It's a broad suite of applications, that empowers health organizations to credential privilege and enroll, mostly their physician population. And last quarter, we did share with you we experienced some technology scaling issues with our CredentialStream product. And it is a happy report here that those issues have been resolved, and we're back on track with improved processes and expanded capacity. And Scotty mentioned that hitting our gross margin a little bit. So we've ramped up our capacity to handle what was then -- I think we're crossing over about 1 million subscriptions to the CredentialStream application suite. And so we had a capacity issue. We talked about it last quarter. We put our best and brightest minds on it in addition to scaling out our Azure infrastructure. And we believe that those issues are resolved, and we're back on track with both improved processes and expanded capacity that will facilitate ample future growth. In fact, of our three primary application suites, CredentialStream was the strongest revenue grower versus the same period last year. So we're already benefiting from extra capacity as we continue to add customers. I should note that the rapid and comprehensive measures we deployed to eliminate our scaling issues did result in some unplanned operating costs in the quarter, which did have a drag on EBITDA and gross margin. And again, Scotty covered that. But I think there were wise investments. And of course, I wish we had been in front of it a little more and not have this response needed. But our response was excellent, our teams responded and we feel like we've tamped down and eliminated the capacity-related issues with CredentialStream. We believe that credentialing is a key area where we are well positioned to innovate in ways that will drive profits and productivity for our customers. Specifically, we're enhancing our CredentialStream suite to help health organizations reduce the time it takes between a physician starting work are being hired offered a role and actually generating revenue by providing reimbursable care to patients. On average, we estimate based on a research, it takes about 120 days or more to onboard enroll credential and privilege a physician. And of course, if that's an important surgeon, every day that they're not doing surgery, as a day of lost revenue, we call it time to revenue for these hospital organizations, healthcare organizations. And so for businesses -- from a caregiver standpoint and from a business standpoint, that's lost time and lost opportunity. And we're working with our customers and intent on collapsing that 120 days so that physicians can get to work faster. And we think that our suite of software, particularly as they're more integrated, for example, between our learning applications and credentialing, we're in a really good position to actually have an impact on a metric like that 120 days time to revenue, whereas nonintegrated with learning functions like onboarding and HR separated from credentialing we're less in a position. And so as the features of the platform manifest in interoperability, we think we'll be able to help our customers achieve true business outcomes like shortening the time to revenue on newly hired physicians which is a little hint of the future of the power of becoming a platform company instead of just separate applications, and we're well underway in developing and delivering on those capabilities. Finally, I do want to touch on scheduling a bit. Our core product in scheduling the ShiftWizard we continue to deliver strong revenue growth from ShiftWizard. In terms of quarterly revenue contribution, we are pleased that ShiftWizard eclipsed our legacy ANSOS suite of products in the second quarter and continues to be our top-performing product in scheduling. We think the growth trajectory of ShiftWizard really speaks to the market doing it as a best-in-class solution for clinical staff scheduling. Like previous quarters, our sales of ShiftWizard came both from competitive takeout as well as growth within existing customers. And then the backside of that is, unfortunately, the rate of decline in our legacy ANSOS suite of products is still dragging down the overall growth rate in our scheduling suite of applications. We've talked about this legacy drag before. Part of the positive news is that the tail of the ANSOS legacy product suite revenue has diminished such that next year, we expect to start seeing less in terms of negative offset the ShiftWizard's strong growth performance. So just a few quarters away we feel we'll have made material progress in this particular challenge with the legacy products. Switching gears, I want to briefly address the signing of the One Big Beautiful Bill, which is a landmark event in healthcare policy. Exactly how the bill will shape health care is something that will continue to unfold and something that will present various opportunities and challenges to our customers over time. Fortunately, we believe that HealthStream is uniquely well positioned to help customers more efficiently and effectively accomplish their workflow needs at a time when doing so is the top focus for CEOs across the nation. Regardless of the relative advantages or disadvantages customers are expecting from new healthcare policies, they have been preparing for several months now. We believe that, that is one of the main reasons that the handful of deals I mentioned in the first of the call, it took a little longer to close than we originally expected. Customers are taking a little more time to make the right purchasing decisions. We believe that HealthStream's innovative solutions are the right solutions, and we're pleased that our -- 4 of our 5 customers, hopefully the fifth soon to follow, came to that same conclusion and decision. We also believe that our hStream technology platform is beginning to produce results just in time, meaning the customers can begin to experience the benefits of interoperability. This is the year, as I declared, it's the year of the platform. And what we mean by that is not necessarily a platform delivering incremental revenues just yet but that the benefits of interoperability are beginning to manifest visibly to our customers, which, again, I think, represents kind of a fundamental shift from individual applications to really an ecology of interoperable SaaS applications. So we're excited, we've kind of declared this as a year of the platform, and we expect to spend the rest of this year educating and demonstrating to our customers the benefits of that emerging interoperability. I'd like to remind everyone that in our call, that if you think of the profile of our company, we're obviously looking to appeal to the investor community, and we're profitable. We're highly recurring revenue. We're a SaaS with an emerging path healthcare technology, and we're focused on the health care workforce industry. We expect to deliver steady growth and we've determined to share some of the gains directly to shareholders in the form of a small dividend. And we think maybe HealthStream is that's the kind of profile you're looking for. Kind of a conservatively run but visionary aggressively on our visionary and what we're trying to build. Maybe a good company and stock for you to look at. I'd like to conclude with those comments, and now I'll turn it back over to the operator to begin the question-and-answer session.

[Operator Instructions] The first call comes from the line of Matthew Hewitt of Craig-Hallum.

Maybe first up, on the gross margins, Scotty, you have kind of explained what the headwinds were there in the quarter. Should you -- or should we anticipate the gross margins kind of bouncing back up here in Q3? Or is it going to take a few quarters to kind of get those back up the couple of hundred basis points that they were down?

Probably, we'll still can see it to have around the 65% mark for the remainder of the year. We still -- we'll see those ongoing costs related to the scale and performance improvements that we put in place, but we're also trying to take measures to manage that cost line item for us overall. So we'll take a few quarters to get there, but we'll kind of see it hover around 65%-ish it's kind of still in line with our kind of midterm objectives that we set forth several years back. So we're kind of falling to the bottom of that range, but we're still kind of in the 65% to 66% range.

Got it. And then regarding the HLX platform, congratulations on some of the early success that you're seeing there. Bobby, I think you mentioned 47,000 users are now live. You got some positive feedback from that account. Maybe a little bit of color on what does the pipeline look for -- look like for that application? And what -- how should we be thinking about a ramp for that as we get into the back half of this year and look at '26?

Well, the first is that the ramp is forecasted in all of our guidance. So there's no exceptional change. Subscription business is steady incremental improvement is the way to grow a subscription business. I think the HLX gives us yet another opportunity to add that. It is an incremental add for base customers or a new entry point for new customers. And we've begun in the piloting phase for the last, say, six months. We've begun to tease it out with our sales team to seed the market with some educational materials about it. So I think now the pipeline building begins now that we have a live customer that, in fact, billing has begun for. So it is a revenue-generating product now. There's an incremental add-on. It is a subscription product and the business of building interest and pipeline for it begins now as we go to the live product and equipping the sales team with the tools they need to promote its availability. I think it's an important product. It's kind of a paradigm shift that progressive organizations are more likely to adopt earlier. The ones that have a great interest in maintaining and developing the workforce and given them the tools for self-development again, which is different than kind of a command and control model of regulatory compliance training, this is more oriented towards development and retention and maybe cross training and so people can gain new skills and new areas. And so I think it's very relevant for today's workforce and to our customer base and the serious business of building a pipeline is now beginning. We'll report on that in the coming quarters. But again, I think it is an incremental opportunity, it's not something where we're changing our guidance based on the launch of the products. So I just want to -- I want to be careful. It's an exciting new subscription product that we hope to see incremental gains from.

The next question comes from the line of John Pinney of Canaccord Genuity.

This is Richard Close. I had a question, Bobby, can you talk a little bit more about the comments with respect to ShiftWizard and the legacy products offsetting some of that growth? And just maybe a little bit more detail in terms of like the timing you said next year, essentially that offset is essentially going away. Just walk me through that. We got on a little late here. So I just want to go over that again, make sure I understand.

Sure. There wasn't a lot of detail, but I think the tone of both is that the go-forward SaaS applications have superseded in terms of absolute value and growth rates, the revenue of the legacy applications from which we're trying to migrate. So in both cases, and we're kind of achieving new milestones where each quarter, the legacy applications get a little smaller and a little less material to the overall financial outlook, while the subscription products as you heard, have good growth rates and are now the majority of the revenue in that category. So I think that we did mention the offset this quarter. I think, Scotty, mentioned, Scotty, it was about $1.8 million was the declines from the family of legacy products across credentialing and scheduling, and we didn't break it out by a specific line. But those declines for our overall growth rate down relative to the growth rates you're seeing on the subscription products. So we just, again, characterized it all. I think in ShiftWizard, we give a little bit more color just that the growth of ShiftWizard and the decline of ANSOS is hitting rates where in a couple more quarters, it will be even less material overall. And so maybe we can see a little more of the organic growth rate of ShiftWizard start to contribute as opposed to kind of almost fully offset growth when the loss is $1.8 million and the gains are across subscriptions is $2.9 million, you can see that it really affects growth.

Okay. That's helpful. And were you going to add something there?

No, I was just going to say Scotty, if you want to add more, but I think those are the highlights. And each quarter, we'll try to give a little more clarity as we progress.

Okay. That's helpful. And then on CredentialStream, I guess, through some costs at that to get back on track as you said. Was there any reputational damage or anything to call out with respect to retention or anything like that based on what happened in the first quarter?

Well, certainly, when your services aren't as you would expect at the level of excellence you demand of yourself and your customers' demand, there's frustration. We continue to remain in high-level context, our account management programs and our executive leadership with all of our key customers. And of course, there's some frustration in there. We think we can get through it all with minimal impact. There's always some consequence to it, but that's, of course, factored into how we think about our overall guidance. So I don't think there'll be any major surprises. That would change how we change our outlook on the year. It's hard to go through 25 years of history like this and occasional bumps in the process as you expand in this case, an expansion related growth problem caught us a bit off guard. But I feel really good about how we responded and are working with all of our customers to get them all through it as well. And on the back side, just more capacity, more speed, more focused to do even better and to avoid this kind of problem in the future. So overall, nothing that would change our outlook for the year.

Okay. That's helpful. And then I guess my final question or final two. Just following all the health care related news sources and all that. There's been a decent not huge in terms of employment cuts by various hospitals and 100 here, 100 there, that type of thing. I guess, I'm curious how you think about that in terms of on overall subscriptions, I mean, you're -- you have such a deep penetration and maybe that's just modest cuts here and there, but how you're thinking about the whole health care employment market and any impact to HealthStream?

I think overall, health care employment will continue to grow over the next five years and roles may change and more nurse practitioners, less primary care doctors, there may be overall relative shortages to demand. But I think overall, there's just going to be more health care needs. And so -- and while if you look at research organizations are going through this reduction in funding from the federal government for research, sure their role position eliminations there. Hopefully, the country finds a way to reinstigate its research programs and find new funding sources. But I think those are relatively small to the overall demand for health care services, the new types of roles being created and growing rapidly like nurse practitioners and the supply of new nurses. I think the capitalistic market is responding to try to fill the demand for skilled competent health care givers and we think we're part of that journey. So I don't see material changes certainly not downward in the employment numbers. Certain subsegments in the market are particularly challenged financially right now, like the skilled nursing market, it kind of has good years and bad years. I'd say these are more challenging years in that market. We're present in that market. So as they change both ownership models, private equity and experience potentially less access to federally funded patient-- insured patients. There's going to be pockets of challenges. The small rural hospitals may face challenges, but that almost depends on things we can't tell yet, which is like the state's response to the new legislation. For us, these macro conditions, I think employment will go up. And so that was the root of your question is around the number of people. I think over time, there'll be more health care providers. The way we would relate most closely to the macro uncertainty in the macroeconomic divisions are definitely -- the legislation is known. The impact is unknown and kind of downstream and depends on a lot of interactions that are yet to be seen, like state responses to the federal funding changes. For us, that would manifest in how we think about the sales pipeline. And right now, we're seeing record sized pipelines. But as you -- as we clearly noted, expected close dates are getting pushed, it seems that customers maybe have more committees deciding the wisdom and timing of purchases and so what we'll be watching most and probably be more of a next year phenomenon is the impact of potentially slower purchasing. So I don't think it will be a lack of number of people or lack of demand for healthcare services. For us, we'll have to see the downstream impact in purchasing patterns. And we clearly experienced a little of that in Q1 as deals move into Q2 and even part of that pipeline that was expected in Q1 delivered -- we think will now deliver in early Q3. So that's a little bit of a lag effect, and that's the way we're most thinking about these macro conditions.

[Operator Instructions] The next question comes from the line of Vincent Colicchio of Barrington Research.

Yes, Bobby, curious, how are the price accelerators playing out? And were they included in the four large deals you just landed?

Yes. I need to check specifically those, but I believe we're now officially working them into every new and renewed contract and generally being accepted as more an established pattern across all of health care IT. So we're glad to have that model in place and credentialing, learning and scheduling as contracts are gained and renewed we're working on price escalators. And they're, of course, negotiated, but we're actually finding it's reasonable negotiation. We're trying to get essentially as best we can close to cost of living level adjustments on an annual basis. So this will take 3, 3.5 more years to play out fully, but it's exciting to be layering it in with every single renewal of new contract. In fact, I think it would be an exception to not have them at this point.

And could you provide an update on NurseGrid, in particular, I'm interested in the e-commerce performance?

Yes. I didn't -- I don't have the numbers right in front of me, but NurseGrid, we have three or four monetization strategies on NurseGrid and several of them are at play. The core one is we launched NurseGrid Learn in the application and I believe it's doing in excess of about 50,000 a month in collective commerce revenue. So we're generating revenue now through that network, it's exciting. We're also meeting needs for the nurses. We have a strategic partnership with group called Plannery and business relationship with them and Plannery is helping nurses consolidate student debt and save money. And so it's not really an advertising relationship, it's a business relationship, but their services are highly valued by our nurses and we're beginning to refer business to them and share in that business outcome. But while importantly, saving money for nurses. So it's really a fantastic kind of value add. We launched a job function on the site, which is not yet generating revenue, but generating lots of interest. And so watch for that in the coming quarters as we learn to help our nurses see opportunities in front of them. And so -- and then finally, the audience for NurseGrid continues to grow organically passing, I believe it's -- I'll shoot I hope someone text me I think it's 640,000 monthly active users on NurseGrid. And I'll watch my text and correct that if I'm off a little bit. But I think it's growing around 1,500 to 2,000 a week. One other important point about NurseGrid is we've now shifted the app to use our platform identity management service. So all the nurses on NurseGrid are logging in with an hStream ID, which is an identity capability issued by our Platform-as-a-Service capabilities. And that's going to allow us to bring even more value to the nurses on NurseGrid as we're able to bring forward things like some of their credentials like, for example, if they had earned an American Red Cross certificate, it can now show up in their portfolio on NurseGrid. So I think it will be even more useful to the nurses to be able to use and benefit from the platform identity service. And so watch for more announcements in that area as well. Lots of advances with NurseGrid and more to come.

This does conclude the question-and-answer portion of our call. I would now like to hand it back over to Robert Frist for -- excuse me, for closing remarks.

Well, thank you, everyone, for participating in this earnings call. We look forward to the next quarter. Thanks to all HealthStreamers who made this all possible. I love being the spokesperson for your excellent work and look forward to reporting out on the next quarterly earnings call. Thank you, everyone, and see you next time.