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HEALTHSTREAM INC (HSTM)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 was mixed: revenue grew 1.0% to $73.5M, but EPS fell to $0.14 and adjusted EBITDA declined 5%; management trimmed full‑year guidance on macro headwinds and CredentialStream scaling issues now addressed .
  • Results missed Wall Street consensus: EPS $0.14 vs $0.17*, revenue $73.5M vs $74.9M*, and adjusted EBITDA $16.2M vs $17.2M*; headwinds included legacy product attrition (-$1.7M), prior-year perpetual license compare (-$0.9M), and customer bankruptcy impacts (-$0.6M) .
  • Strategic positives: signed one of the largest deals in company history (~$14M, 5-year competency suite bundle), strong RPO ($613M; 40% next 12 months), record cash from operations ($27.1M), and DSO improved to 37 days .
  • Capital return and catalysts: dividend raised to $0.031/share; new $25M share repurchase program authorized May 8, 2025, providing buyback capacity as guidance resets .

What Went Well and What Went Wrong

What Went Well

  • Closed one of the largest contracts in company history (~$14M over 5 years) anchored by the Competency suite, displacing multiple competitors; bookings exceeded internal expectations despite timing delays elsewhere .
  • Strong product momentum: CredentialStream revenue +25% YoY, ShiftWizard +19% YoY, Competency suite +12% YoY; core business ex-legacy and bankruptcy grew >6% .
  • Execution on cash metrics: RPO reached $613M (40% converting in 12 months, 68% in 24 months), DSO improved to 37 days, CFO highlighted record cash flow from operations ($27.1M) and free cash flow ($18.2M) .

What Went Wrong

  • CredentialStream scaling/performance issues caused implementation delays and slower time to revenue recognition; guidance trimmed to reflect timing lag and client confidence recovery needs (issues now addressed) .
  • Macro pressure on elective content (e.g., health equity/belonging) plus funding challenges at FQHCs and academic institutions drove hesitancy and deal pushouts (4–5 medium-sized deals slipped from Q1 to Q2) .
  • Legacy runoff and tough prior-year compares: -$1.7M from legacy credentialing/scheduling attrition, -$0.9M from 2024 perpetual license sale not repeating, and -$0.6M from a bankrupt customer pressured revenue/margins; gross margin fell to 65.3% (vs 66.2% LY) and adjusted EBITDA margin to 22% (vs 23.4%) .

Financial Results

MetricQ1 2024 (oldest)Q4 2024Q1 2025 (latest)Consensus Q1 2025
Revenue ($USD Millions)$72.8 $74.2 $73.5 $74.9*
Diluted EPS ($)$0.17 $0.16 $0.14 $0.17*
Gross Margin (%)66.2 66.2 65.3 N/A
Adjusted EBITDA ($USD Millions)$17.1 $16.2 $16.2 $17.2*
Adjusted EBITDA Margin (%)23.4 21.8 22.0 N/A
  • Revenue drivers (Q1 2025): +$3.9M growth across portfolio offset by (-$1.7M) legacy attrition, (-$0.9M) perpetual license decline, and (-$0.6M) bankruptcy .
  • Cash & investments: $113.3M; no debt .
  • Dividend: $0.031 per share declared for May 30, 2025 .

Segment/Product growth (YoY, Q1 2025)

Product / SuiteYoY Growth
CredentialStream+25%
ShiftWizard (Scheduling)+19%
Competency Suite+12%
Legacy Credentialing/Scheduling attrition-$1.7M revenue impact
Perpetual license compare (legacy Scheduling)-$0.9M impact
Bankruptcy impact (customer)-$0.6M impact

KPIs and balance sheet

KPIQ4 2024Q1 2025
Remaining Performance Obligations (RPO)$621M $613M; 40% next 12 months, 68% next 24 months
DSO (days)35 37
Cash from Operations ($M)N/A$27.1
Free Cash Flow ($M)N/A$18.2
Deferred Revenue – current ($M)$84.2 (12/31/24) $102.0 (3/31/25)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($M)FY 2025$302.0–$307.0 $297.5–$303.5 Lowered
Net Income ($M)FY 2025$19.2–$21.4 $18.6–$21.0 Lowered
Adjusted EBITDA ($M)FY 2025$70.0–$74.0 $68.5–$72.5 Lowered
Capital Expenditures ($M)FY 2025$31.0–$34.0 $31.0–$34.0 Maintained
Dividend per shareQ1/Q2 2025$0.031 (declared Feb 24) $0.031 (May 30 payment) Maintained
Share Repurchase AuthorizationAnnouncedN/AUp to $25M through May 31, 2026 New

Management cited macro conditions and CredentialStream scaling/implementation delays (now addressed) as key drivers of the guidance trim; bookings and pipeline remain strong .

Earnings Call Themes & Trends

TopicQ3 2024 (older)Q4 2024 (prior)Q1 2025 (current)Trend
hStream Platform & InteroperabilityEmphasized platform strategy; record revenue/adj. EBITDA “Year of the platform,” APIs adoption (400+ developers, 184 accounts) Continued focus; interoperability across suites, HLX built on platform Strengthening
AI InitiativesLimited detailHLX described as AI-native; pilots, AI search Internal AI pilots; near-term expense before efficiencies; product AI features expanding Building
CredentialStream ScalingN/AHITRUST r2 achieved; strong sales/migrations Scaling issues created temporary service quality and implementation delays; resolved; backlog strong Headwind turning neutral
Macro/Elective ContentN/ABankruptcy impacts in 2024 Funding cuts, elective content demand down; DEI-related content headwinds; deal timing pushouts Headwind
Pricing EscalatorsN/AEscalators increasingly deployed ~95%+ success inserting escalators; targeting 3–5% annually Supportive
M&AN/ARekindling M&A in 2025; active pipeline More deal flow; disciplined bids; potential activity ahead Potential catalyst
Product PerformanceRecord quarter metrics ShiftWizard +17%, CredentialStream +28%, Competency +8% (Q4) ShiftWizard +19%, CredentialStream +25%, Competency +12% (Q1) Positive

Management Commentary

  • “We signed one of the largest customer contracts in the history of our Company during the first quarter.” — Robert A. Frist, Jr., CEO .
  • “We now expect consolidated revenues to range between $297.5 million $303.5 million… adjusted EBITDA to range between $68.5 million and $72.5 million.” — Scott Roberts, CFO .
  • “Issues of technology scaling with CredentialStream… have been addressed but are impacting the year.” — CEO .
  • “Absent the impact of the legacy products, and the customer bankruptcy… the core business actually grew over 6%.” — CFO .
  • “All three primary products… contracts go out with pricing escalators.” — CEO .

Q&A Highlights

  • Portfolio mix and resilience: Majority of products tied to requirements (credentialing for accreditation, resuscitation training, OSHA compliance), while elective content (DEI/health equity) faced demand pressure .
  • Large deal nature: ~$14M was a new logo via Competency suite bundle, bringing Learning adoption and displacing multiple point solutions .
  • Legacy product path: Three outcomes—migrate to SaaS (preferred), remain on supported legacy, or churn; company has not yet “sunset” legacy lines, making timing variable, but problem shrinks over time .
  • Pricing: High success (>95%) in adding annual escalators (3–5%) to renewals across Learning, Credentialing, Scheduling .
  • M&A valuations: Active pipeline; disciplined bidding; unwilling to chase overpriced assets; debt-free with $113.3M cash for flexibility .

Estimates Context

  • Q1 2025 vs consensus: Revenue $73.5M vs $74.9M* (miss ~$1.4M), EPS $0.14 vs $0.17* (miss $0.03), adjusted EBITDA $16.2M vs $17.2M* (miss ~$$1.0M). Management attributed variance to legacy attrition, prior-year perpetual license compare, bankruptcy, macro elective content softness, and CredentialStream implementation timing .
  • Coverage: EPS estimates count 3*, revenue estimates count 6* for Q1 2025. Values retrieved from S&P Global.

Key Takeaways for Investors

  • Near-term: Results and guidance reset create a window for expectations recalibration; watch for closure of 4–5 pushed deals (incl. resuscitation vendor switch) and improved CredentialStream implementations to drive Q2–Q4 revenue cadence .
  • Cash generation and balance sheet strength: Record operating cash flow, rising deferred revenue, and no debt support organic investments, tuck-in M&A, dividend continuity, and opportunistic buybacks under the new $25M program .
  • Product momentum: Double-digit growth across core SaaS suites (CredentialStream/ShiftWizard/Competency) and platform-led differentiation (HLX, Insights Plus) underpin medium-term thesis; pricing escalators add structural tailwind .
  • Execution watchpoints: Monitor macro exposure to elective content, legacy runoff pace, and the timing lag from longer-term contracts; gross margin and adj. EBITDA margin trends should stabilize as mix improves and platform efficiencies compound .
  • Guidance: FY25 ranges lowered but still imply YoY growth in revenue and adjusted EBITDA; upside levers include backlog conversion, pipeline strength, and potential M&A contribution later in the year .

Values retrieved from S&P Global.*