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HI

HEALTHSTREAM INC (HSTM)·Q3 2025 Earnings Summary

Executive Summary

  • Record quarter: revenue $76.47M (+4.6% YoY), adjusted EBITDA $19.10M (+7.9% YoY), diluted EPS $0.20; both revenue and EPS exceeded Wall Street consensus (EPS $0.18*, revenue $75.52M*). Bold beat: EPS +$0.02; revenue +$0.95M . Values retrieved from S&P Global*.
  • FY25 guidance narrowed with unchanged midpoints: revenue $299.5–$301.5M, net income $20.3–$21.5M, adjusted EBITDA $69.5–$71.5M, capex $33–$34M; includes ~$0.9M Q4 contribution from Virsys12, offset by ~$3M decline in legacy products .
  • Strategic progress: acquired Virsys12 to expand payer credentialing; “career networks” (NurseGrid, My Clinical Exchange) scaling with 391k hStream IDs and ~6k weekly additions, deepening platform connectivity .
  • Capital returns: dividend of $0.031/share declared; completed $25M buyback, and announced new $10M repurchase program on Nov 11, 2025—potential support for shares .

What Went Well and What Went Wrong

What Went Well

  • Record revenue and adjusted EBITDA; CEO: “HealthStream delivered record quarterly revenues of $76.5 million and record quarterly adjusted EBITDA of $19.1 million.”
  • Strong product growth in core suites: CredentialStream +23% YoY revenue, ShiftWizard +29%, Competency Suite +18%; core business +8% excluding legacy declines .
  • Commercial quality indicators: RPO rose to $621M (from $549M), with 39% expected to convert to revenue in 12 months and 67% in 24 months; DSO improved to a record-low 33 days .

What Went Wrong

  • Legacy application headwind: legacy credentialing/scheduling revenues fell $1.7M YoY in Q3 and expected to decline ~$3M in Q4, dampening reported growth despite core momentum .
  • Gross margin compressed to 65.3% (from 66.5%) on higher cloud hosting and software licensing costs tied to CredentialStream and hStream platform .
  • Professional services revenue fell $0.6M YoY in Q3; mix shift plus platform/SaaS investments raised labor, hosting, third-party software, and amortization, pressuring operating leverage versus potential .

Financial Results

Quarterly Progression (oldest → newest)

MetricQ1 2025Q2 2025Q3 2025
Revenue ($USD Millions)$73.49 $74.40 $76.47
Operating Income ($USD Millions)$4.38 $5.89 $7.57
Net Income ($USD Millions)$4.33 $5.39 $6.09
Diluted EPS ($USD)$0.14 $0.18 $0.20
Adjusted EBITDA ($USD Millions)$16.20 $17.64 $19.10
Adjusted EBITDA Margin (%)——25.0%
Gross Margin (%)——65.3%

Year-over-Year and Street Comparison (Q3 2025 vs Q3 2024)

MetricQ3 2024Q3 2025 ActualConsensusBeat/Miss
Revenue ($USD Millions)$73.10 $76.47 $75.52*Beat by $0.95M*
Diluted EPS ($USD)$0.19 $0.20 $0.18*Beat by $0.02*
Operating Income ($USD Millions)$6.50 $7.57 ——
Adjusted EBITDA ($USD Millions)$17.70 $19.10 ——
Gross Margin (%)66.5% 65.3% ——

Values retrieved from S&P Global*.

Revenue Mix and Growth Drivers (YoY change by quarter)

CategoryQ1 2025 YoY ChangeQ2 2025 YoY ChangeQ3 2025 YoY Change
Subscription Revenue+$0.6M +$2.9M +$4.0M
Professional Services Revenue+$0.1M -$0.1M -$0.6M

KPIs and Operating Metrics

KPICurrent PeriodPrior/ContextNotes
Remaining Performance Obligations (RPO)$621M $549M YoY 39% in 12 months; 67% in 24 months
Day Sales Outstanding (DSO)33 days 37 days YoY Record low
Cash + Investments$92.6M $90.6M in Q2 No debt
Capex (Q3)$7.5M $9.2M in Q2 Platform/app investments
Dividend per Share$0.031 $0.031 in Q2 CFO stated $0.31 on call; official declaration is $0.031
Core Suite Growth (YoY)CredentialStream +23%, ShiftWizard +29%, Competency Suite +18% —Revenue contribution growth
Adjusted EBITDA Margin25.0% 24.2% PY +80 bps YoY

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($USD Millions)FY 2025$297.5–$303.5M $299.5–$301.5M Narrowed range; midpoint unchanged
Net Income ($USD Millions)FY 2025$19.5–$22.4M $20.3–$21.5M Narrowed, raised low end
Adjusted EBITDA ($USD Millions)FY 2025$68.5–$72.5M $69.5–$71.5M Narrowed, raised low end
Capital Expenditures ($USD Millions)FY 2025$31.0–$34.0M $33.0–$34.0M Narrowed, raised low end
DividendQuarterly$0.031/share $0.031/share Maintained

CFO noted guidance includes ~$0.9M Q4 revenue from Virsys12 and ~$3M decline in legacy credentialing/scheduling .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2 and Q-1)Current Period (Q3 2025)Trend
CredentialStream scaling/issuesQ1 trimmed outlook citing scaling impacts and macro headwinds Higher cloud/software costs; YoY credentialing growth +23%; margin pressure mentioned Improving growth, cost headwinds moderating via mix
Career Networks (NurseGrid, My Clinical Exchange)Limited emphasis in prior PRs391k hStream IDs; ~6k new IDs/week; monetization pathways (education commerce, jobs, partner Plannery) Scaling user base; early monetization
Payer credentialing expansion (Virsys12)No prior acquisition; Network by HealthStream launched ~15 months ago Acquired Virsys12; ~$0.9M Q4 rev; mix of subscription + consulting; HITRUST certification Strategic expansion; integration underway
Margins trajectoryQ2 record EBITDA; mix shift to higher-margin SaaS/PaaS CEO expects upward margin pressure over time, tempered by partner product mix (e.g., Red Cross content) Long-term positive
Legacy product attritionQ1 noted $1.7M attrition impact Q3 -$1.7M YoY, Q4 expected -$3M offset to growth Ongoing headwind as migrations/losses continue
Bundling strategy (small/rural hospitals)Not highlighted previouslyLaunch of Critical Access Bundle; broader bundling (Competency Suite) to drive adoption/value Expanding bundles to address macro pressure

Management Commentary

  • CEO: “HealthStream delivered record quarterly revenues of $76.5 million and record quarterly adjusted EBITDA of $19.1 million… hStream platform is starting to create new business and social network opportunities in connecting… healthcare professionals and organizations.”
  • CEO on NurseGrid: “It is becoming… the LinkedIn for nurses in healthcare… a place for nurses to connect… coordinate schedules… and maintain a career portfolio.”
  • CFO on guidance mechanics: “Revenue estimate includes contributions of approximately $900,000 from Virsys12… offset by a $3 million expected decline in our legacy credentialing and scheduling products.”
  • CEO on margin outlook: “Overall trajectory would be upward pressure on the margins… most of the new things we’re introducing are intrinsically higher-margin SaaS and PaaS products.”

Q&A Highlights

  • Virsys12 revenue mix and contribution: Estimated ~$0.9M in Q4; mix includes subscription plus consulting/implementation; aims to leverage strong implementation expertise .
  • Adjusted EBITDA margin trajectory: Long-term upward bias as mix shifts to higher-margin SaaS/PaaS; partner content can dilute in high-sales quarters .
  • Career networks monetization: Six strategies underway—credit-card education commerce (~$40k/month), job capabilities, Plannery partnership for student debt consolidation (>$2M consolidated), enterprise communication tools; early stage but scaling .
  • ShiftWizard upmarket readiness: Not yet for “biggest of the big,” but winning upper mid-market ($1M+ deals); pipeline building; platform data services integration in progress .
  • Bundling amid small/rural hospital pressure: Critical Access Bundle launched; broader bundling to simplify decisions and improve economics (e.g., Competency Suite) .

Estimates Context

  • Q3 2025 EPS and revenue beat consensus: EPS $0.20 vs $0.18*, revenue $76.47M vs $75.52M*. Estimate depth: EPS # of estimates = 2*, revenue # of estimates = 5*. Values retrieved from S&P Global*.
  • Implications: Modest beats against a narrow guidance range suggest estimate revisions likely stable-to-slightly higher near term, with Q4 legacy decline (~$3M) tempering full-year uplift .

Key Takeaways for Investors

  • Core growth intact: Double-digit growth in CredentialStream and ShiftWizard, plus rising Competency Suite adoption, support steady recurring revenue expansion despite legacy attrition .
  • Beat and raise (low-end): Q3 revenue/EPS beats and higher low-end FY25 guidance (revenue, EBITDA, net income) de-risk year-end; watch Q4 legacy headwind magnitude .
  • Strategic optionality: Virsys12 expands into payer credentialing with HITRUST credentials and analyst recognition; near-term contribution small, but positions HSTM in adjacent TAM .
  • Platform flywheel: hStream ID connectivity across enterprise and career networks is deepening data assets and engagement; early monetization showing proof points (education commerce, jobs, partnerships) .
  • Margin path: Mix shift to SaaS/PaaS should drive gradual margin expansion; partner content mixes can create quarter-to-quarter noise—focus on sustained adjusted EBITDA growth (+7.9% YoY) .
  • Quality of cash flows: DSO at record low (33 days), rising RPO ($621M) and strong cash/investments ($92.6M, no debt) underpin capital allocation flexibility (dividends, buybacks, M&A) .
  • Trading lens: Near-term catalysts include integration updates for Virsys12, progress on NurseGrid job monetization, and confirmation of Q4 legacy decline magnitude versus guidance; new $10M buyback adds support .

Additional notes:

  • Q3 results were released via press release; no separate Item 2.02 8‑K results filing was identified in the period search. The press release and earnings call transcript were used as primary sources .