Edited Transcript of HSTM.OQ earnings conference call or presentation 23-Feb-21 2:00pm GMT

Q4 2020 HealthStream Inc Earnings Call NASHVILLE Feb 23, 2021 (Thomson StreetEvents) — Edited Transcript of HealthStream Inc earnings conference call or presentation Tuesday, February 23, 2021 at 2:00:00pm GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * Mollie Condra HealthStream, Inc. – VP of IR & Communications * Robert A. Frist HealthStream, Inc. – Chairman, Co-Founder & CEO * Scott Alexander Roberts HealthStream, Inc. – CFO and Senior VP of Accounting & Finance ================================================================================ Conference Call Participants ================================================================================ * Jared Phillip Haase William Blair & Company L.L.C., Research Division – Research Analyst * Matthew Gregory Hewitt Craig-Hallum Capital Group LLC, Research Division – Senior Research Analyst * Richard Collamer Close Canaccord Genuity Corp., Research Division – MD & Senior Analyst * Vincent Alexander Colicchio Barrington Research Associates, Inc., Research Division – MD ================================================================================ Presentation ——————————————————————————– Operator [1] ——————————————————————————– Ladies and gentlemen, thank you for standing by, and welcome to the HealthStream, Inc. Fourth Quarter and Full Year 2020 Earnings Conference Call. (Operator Instructions) Please be advised that today’s conference is being recoded. (Operator Instructions) I would now like to hand the conference over to one of your speakers today, Mollie Condra, Vice President, Investor Relations and Communications. Ma’am, please go ahead. ——————————————————————————– Mollie Condra, HealthStream, Inc. – VP of IR & Communications [2] ——————————————————————————– Thank you. Good morning, and thank you for joining us today to discuss our fourth quarter and full year 2020 results. Also on the conference call with me today are Robert A. Frist, Jr., CEO and Chairman of HealthStream; and Scotty Roberts, CFO and Senior Vice President. I would also like to remind you that this conference call may contain forward-looking statements regarding future events and the future performance of HealthStream that involve risks and uncertainties that could cause the actual results to differ materially from those projected in the forward-looking statements. Information concerning these risks and other factors that could cause the results to differ materially from those forward-looking statements are contained in the company’s filings with the SEC, including forms 10-K, 10-Q and our earnings release. Additionally, we may reference 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 may refer to in this call. So at this time, I’ll now turn the call over to Bobby Frist. ——————————————————————————– Robert A. Frist, HealthStream, Inc. – Chairman, Co-Founder & CEO [3] ——————————————————————————– Thank you, Mollie. Good morning, and welcome to our fourth quarter and full year 2020 earnings call. There’s a lot to cover today. To call 2020 unprecedented hardly seems to scratch the surface. I think we can all agree the year was unlike any other. And of course, this call will synopsize the things that happened in the year and talk a bit about the future. Despite the adverse conditions of the pandemic the HealthStreamers never stopped living our mission and vision, and we’re focused on improving the quality of health care, and it seems that never has that vision been more important than at this time. So our employees are really focused on execution. To start our call, I’d like to look forward to talking about how we were busy through the last 24 months, especially this last year, laying the groundwork for what we believe will generate long-term shareholder value. As part of that discussion, I’m going to update you on each of the key transitions that we’ve discussed in the past several calls and characterized and recharacterize them. With only 10 months ago, we’re reaching an inflection point where the major business risk associated with these transitions like market acceptance, product adoption and technology viability are behind us. We’ll talk more about these transitions in a moment, but first, let’s look at financial guidance, which we are pleased to reinstate now. We expect revenue to be in the range of $242.5 million to $252.5 million. And adjusted EBITDA to be in the range of $34 million on the low end to $38.3 million on the higher end. In my view, one of the most remarkable things about this guide is projecting the potential for revenue growth despite a $38.4 million revenue decline in legacy resuscitation products from 2020 to 2021, and the $4.3 million to $5.3 million negative impact of acquisition-related deferred revenue write-downs. That’s a lot to overcome, and I’m proud out of our team for working hard to put us in a position to have a good shot at showing top line growth on a year-over-year basis despite these really tough headwinds. Another thing that you’ll note is that we are guiding to adjusted EBITDA instead of operating income this year. At this point, we believe adjusted EBITDA guidance, coupled with revenue guidance, provides a better indicator of the company’s financial performance, and it will be useful to current and potential investors. In our calculation of adjusted EBITDA, I want to point out that we exclude the accounting impact of deferred revenue write-downs from acquisitions. Given that we’ve recently completed 5 acquisitions, we believe that providing guidance through a metric that excludes the fluctuations associated with this accounting treatment will help to provide a more consistent view over time. Now I want to take you through what we intend to accomplish through these business transitions that we’ve mentioned and talked about in the prior quarters, actually over a 2-year period. And a little bit about our growth philosophy and the way we think about these objectives in general. And this means we’re going to be giving directional information that covers not just 2021, but a little bit into 2022, which is a longer view than we normally provide. So building on the anticipated results for 2021, which I just gave, we want to talk a little bit of what a return to normalcy might look like for us in 2022. So just some expectations about 2022 after having just talked about guidance for 2021. First, our goal is to deliver organic high single-digit revenue growth rates. And so I think that’s an important statement to make given what’s happened in the last 24 months with these changes in our revenue model. Second, our goal is approximately a 65{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3} gross margin profile. And I think that’s still a few points higher than we delivered in the fourth quarter, and we feel directionally comfortable that that’s where we’re headed in the coming 24 months, a 65{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3} gross margin profile. And third, we would expect in 2022 to see a return to adjusted EBITDA margins of 15{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3} to 20{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3} of revenues. And I think that’s maybe one of the more important metrics for us to look at as we climb through the challenges presented by the revenue decline associated with the legacy resuscitation revenue products. Achieving and, perhaps, more importantly, sustaining these objectives requires consistent investment innovation. And I think it’s important to note that in 2021, while we’re also fighting through the changes both organically and inorganically of the decline in resuscitation revenues, we are investing very actively in the businesses that we acquired. And we’re fortunate to begin here with a solid balance sheet to do that, no debt and $65 million credit facility that remains fully available to us. Among other things, this allows us to invest in organic R&D initiatives as well as making the appropriate investments to help our recent acquisitions achieve their potential. We acquire companies to ensure the HealthStream remains the innovative and disruptive technology platform that our customers and investors expect it to be. Now let’s talk about these 3 transitions. In each of our quarterly calls of the last couple of years, I provided updates with regard to each. As I said last quarter, a lot of the challenges previously associated with these transitions are now behind us. Some of the transitions will go on for years, but we’re reaching an inflection point where some of the key business risks associated with transitions are behind us or imminently behind us as there’s only 10 months remaining in the 36-month horizon that I articulated a few years ago. So let’s go through one at a time. First, we have transitioned our sales and marketing efforts from the legacy resuscitation products to our new resuscitation offering. As a reminder, the Red Cross Resuscitation Suite program is comprised of BLS, ALS and PALS competency development curricula, and we launched it in January 2019. It brings updated, highly adaptive competency-based development solution to health care professionals. It offers certification to health care professionals successfully demonstrating proficiency of lifesaving resuscitation knowledge and skills. Our customers’ focus has necessarily shifted in the last year to responding to developments related to COVID-19 and treating COVID-19 patients. We have continued to see new sales this week. For the full year 2020, over 180 new contracts were signed for the Red Cross suite. I think this is quite an accomplishment given its relative newness to the market. Some of these customers included, for example, Norton Healthcare and Cedars-Sinai Medical Center and other customers like Air Methods who chose to expand their services even more broadly across their organization in the year. The second transition involves the adoption of and migration to our new VerityStream application suite. In the first quarter of 2018, we announced the launch of VerityStream, our new application for managing a full spectrum of credentialing, privileging and enrollment needs in health care organizations. During the fourth quarter of 2020, 39 customer accounts were contracted to the VerityStream application suite, bringing our cumulative total to approximately 345. These customers represent a mix of new customers and existing customers who chose to migrate from our legacy credentialing, privileging platforms to the new VerityStream application suite. Some of the customers we contracted in the fourth quarter include University of Utah Health, HonorHealth system and St. Charles Health System. Importantly, all new customers, including the distinguished ones I just mentioned, come on to our new enterprise solution, the VerityStream platform application suite. The third transition involves our customers upgrading to the hStream platform, which is the essential technology that powers all the activity in the HealthStream ecosystem. Increasingly, our products, applications and content offerings are connecting to the new hStream infrastructure. In the fourth quarter, we added approximately 380,000 net new hStream subscriptions, bringing our cumulative total to approximately 4.2 million subscriptions. Our quarterly updates with regard to these 3 business transitions began at the start of 2019, approximately 24 months ago from today. We are, therefore, about 2/3 of the way through what I originally described as a likely 36-month journey. As I mentioned, many of the major transitional risks previously associated with these transitions are now behind us. For example, we now see strong market acceptance of the Red Cross suite and its certification, as we now have customers in all 50 states. We have seen compelling product adoption of our VerityStream application suite, with approximately 345 customers and many notable referenceable accounts. We have seen firm technology viability of our hStream platform, as evidenced by the large-scale deployment of applications, which utilize services from a new hStream pass architecture. What’s important to understand is that in each case, the viability of what we are transitioning to is now part of our core business. We’ll talk about them less and less as transitions moving forward and more and more about how these other solutions are contributing to realizing the revenue growth, gross margin and EBITDA objectives that I highlighted earlier in the call. At this time, I’m going to turn it over to Scotty Roberts to provide a more detailed discussion of financial metrics in the fourth quarter and then come back around for some closing comments and questions. ——————————————————————————– Scott Alexander Roberts, HealthStream, Inc. – CFO and Senior VP of Accounting & Finance [4] ——————————————————————————– Good morning, and thanks to everyone joining us today. During this morning’s call, I plan to review our financial results for the fourth quarter, provide more information about our M&A activity as well as discuss guidance expectations for 2021, and I’ll briefly touch on the impact of COVID-19. The discussion of our financial results will be for continuing operations only and comparisons will be against the prior year fourth quarter unless otherwise stated. For the fourth quarter, revenues were $61.8 million or down 1{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3}. Operating income was $1.1 million and down 66{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3}. Income from continuing operations was $0.9 million or down 74{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3}. EPS from continuing operations was $0.03 per diluted share, down from $0.11 per diluted share in the prior year. And adjusted EBITDA was $10.7 million or down 4{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3}. After pausing our M&A plans earlier this year, we had an active quarter to close out the year. During the fourth quarter, we acquired ShiftWizard, ANSOS and myClinicalExchange. And in January, we acquired ComplyALIGN. We’re excited about the future opportunities these companies provide us and our customers. Given that 2 of these 3 acquisitions closed in the final month of the quarter, the impact on the quarter’s results I just highlighted included revenues of $2.1 million, which is net of deferred revenue write-downs of $0.9 million. It also included $1.2 million of the diligence expenses and $0.7 million of amortization expense. I’ll provide more information about how these acquisitions impact our 2021 forecast in a few minutes. Revenues from the Workforce Solutions segment totaled $49.7 million for the fourth quarter and were down 2{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3} or $1.2 million compared to the prior year. Revenues from the legacy resuscitation products declined by $5.7 million during the fourth quarter. For the full year, revenues from the legacy products were $38.4 million compared to $58.9 million in 2019, and they’re expected to be 0 in 2021. Other workforce revenues increased by $4.5 million or 12{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3} and was comprised of an increase from platform and content subscriptions of $2.4 million or 7{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3} and $2.1 million from the acquisitions completed in the quarter. Revenues from the American Red Cross simulation suite program, which includes both subscriptions and simulation equipment, was also a strong contributor to the fourth quarter revenue growth. Revenues from the Provider Solutions segment totaled $12.1 million for the fourth quarter and grew by 3{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3} over the prior year, which was primarily associated with the acquisition of CredentialMyDoc that we completed in December of 2019. Our gross margin improved to 63.2{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3} compared to 60.3{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3} last year. Reductions in the lower-margin legacy resuscitation revenues and increased revenues from other higher-margin products continue to yield improvement in our overall gross margin. Operating expenses, excluding cost of revenues, were up 10{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3} or $3.5 million over the prior year. This increase reflects our investments in product development, incremental expenses from the acquired companies and diligence costs. While we increased investments in these areas, we continued to benefit from lower expenses resulting from travel restrictions and trade show cancellations of approximately $1.7 million as a result of COVID-19. The combination of these factors led to our operating income declining by $2.2 million or 66{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3} to $1.1 million and adjusted EBITDA declining by $0.5 million or 4{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3} to $10.7 million. As Bobby mentioned, we’ve updated our definition of adjusted EBITDA to adjust for the impact of deferred revenue write-downs associated with the fair value accounting for acquired businesses. The impact of deferred revenue write-downs was $0.9 million during the fourth quarter of 2020 and $51,000 during the fourth quarter of 2019. Our cash flows from operations were $35.9 million this year compared to a record high of $65.7 million last year. The reduction in cash flows from operations was primarily due to lower cash receipts of about $23 million, mostly coming from the reduction in legacy resuscitation products, and higher overall expenses compared to the prior year. DSO increased to 50 days compared to 39 days in the fourth quarter of last year. Acquisitions completed during the fourth quarter increased our DSO by 6 days. Despite facing uncertainty and challenges caused by the pandemic, we were able to maintain a strong financial position over the course of the year. We implemented measures to control expenses and maintain liquidity, enabling us to operate without significant disruption or financial strain, while continuing to pursue strategic opportunities to deploy capital. We used $102 million of cash to fund 3 acquisitions during the fourth quarter. Our capital expenditures were $7.5 million during the quarter and $21 million for the full year. In addition, share repurchases approximated $3.6 million for the quarter and were $20 million for the full year. And we ended the year with cash and investment balances of $46.5 million. Now let’s turn to our financial expectations for 2021. While there remains uncertainty about the extent, timing and duration of COVID-19’s continued impact on our operating results and financial condition, we are providing financial guidance for 2021 as follows. Consolidated revenues are forecasted to range between $242.5 million and $252.5 million, with workforce revenues forecasted to range between $195 million and $203 million. And provider revenues forecasted to range between $47.5 million and $49.5 million. Revenues within the workforce segment include contributions from the acquisitions that we’ve completed since October, which is net of deferred revenue write-downs between $4.3 million and $5.3 million. We are forecasting adjusted EBITDA to range between $34 million and $38.3 million. As a reminder, adjusted EBITDA is a non-GAAP financial measure used by management, and we believe it’s also useful to investors in assessing the company’s performance. We anticipate that capital expenditures, which includes both capitalized software development and content, to range between $25 million and $27 million. It’s important to note that 2021 revenues will reflect a $38.4 million reduction from the legacy resuscitation products, which also negatively impacts adjusted EBITDA compared to 2020. Over the past 2 years, we have marketed and sold the American Red Cross Resuscitation Suite and expect increasing contributions to revenue and adjusted EBITDA from these products in 2021. At the same time, they are not expected to fully replace the lost revenues or profits from the legacy resuscitation products this year. In terms of profitability, we’re targeting this inflection point to occur around the second half of 2022, if we remain successful in gaining market share for this solution. We’ve also continued to diversify our product portfolio with higher-margin solutions to improve profitability. Proprietary applications such as VerityStream, which is our credentialing and privileging application, innovative workforce development solutions, such as our partnership with American Red Cross, and the newly acquired staff scheduling applications are examples of investments that we’ve made to improve gross margins. For 2021, we anticipate gross margins to be in the mid-60{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3} range, which we believe is a level that we can maintain throughout the year and through 2022. As mentioned, the capital deployed over the past year was primarily focused on acquiring assets and technologies in the scheduling space that we believe can enhance our profitability metrics over time. To improve our market position, we plan to reinvest expected returns from these acquisitions and make incremental investments into sales, marketing and product development. We anticipate these investments, along with the impact of deferred revenue write-downs, intangible amortization, integration costs and transition services will result in a $2 million to $3 million reduction to our adjusted EBITDA, which is reflected in our guidance. Absent the impact of the deferred revenue write-down and absent our decision to actively reinvest in these companies we acquired last year, we believe these companies taken in the aggregate, which show a net profit as opposed to net losses for the year. Our forecast assumes that customer purchasing decisions for our products gradually return to pre-pandemic levels over the course of the year and that new bookings and renewals performed better than they did in 2020. It also assumes a gradual return of our own pre-pandemic spending, such as travel and trade shows, which essentially ceased after the first quarter of last year. Collectively, our forecast includes meaningful investments in sales, marketing and product development in 2021, which are expected to result in a decline in adjusted EBITDA compared to 2020, but believe will support revenue growth and adjusted EBITDA improvements beyond 2021. Our forecast does not include the impact of any acquisitions that we may complete during 2021 other than the ComplyALIGN acquisition, which was completed in January. Now let me wrap up by providing some additional thoughts about COVID-19’s impact on our business. While our forecast assume a gradual improvement in sales and renewals, the pandemic’s negative financial impact on our customers may continue to cause uncertainty in their purchasing decisions for our products. We continue to closely monitor our liquidity, including weekly cash flows, customer payment patterns and bankruptcy notes. We did not experience any significant bad debts during the past year, but our DSO increased in the fourth quarter though remained within an acceptable range of our expectation. Although we have experienced somewhat slower collections from customers, economic conditions may worsen and our customers’ financial condition may deteriorate, which could negatively impact our future cash flows. Finally, we ended the quarter with approximately $46.5 million in cash and investments. We also renewed our revolving credit facility in the fourth quarter and increased the borrowing capacity to $65 million. We think it’s important to responsibly manage expenses and maintain adequate access to capital while balancing investment opportunities for growth and innovation. We remain focused on allocating capital to support future growth initiatives and improving shareholder value, including through acquisitions. Although for the near term, we’ll be focused on integrating the companies we’ve recently acquired. We also have approximately $10 million remaining under our share repurchase program. We believe our multiyear objectives to grow revenues, improve gross margins and deliver incremental EBITDA are in the long-term best interest of shareholders and the company. That concludes my remarks for today. Thanks for your time. And I will now turn the call back over to Bobby. ——————————————————————————– Robert A. Frist, HealthStream, Inc. – Chairman, Co-Founder & CEO [5] ——————————————————————————– Thank you, Scotty. Some closing comments here before we go to questions. It’s really been a great year for our technology innovation at HealthStream. Our driving innovation is 1 of our core values that we express to our nearly 1,000 employees in our constitution. And we believe that we’re living up to this value. I’ll give you some examples. In the fourth quarter alone, 6 of our products, altogether, won 15 excellence awards from the Brandon Hall Group, which is considered the leading preeminent research organization in the country focused exclusively on learning and technology. Included among this list was the American Red Cross Resuscitation Suite and our implementation of it, which won both best advance in gaming or simulation technology and best advance in learning management technology. Our nurse residency programs also won 2 awards, 1 for best advance in onboarding technology and another for best advance in emerging learning technology. So really excited to celebrate these technical innovations now being recognized industry-wide as leading in our industry. In the fourth quarter, we were awarded 2 patents for our next-generation clinical solutions, and there’s — we’ve been working on developing intellectual property portfolio, and we’re succeeding. So in the fourth quarter, we were awarded 2 patents for our next-generation clinical solutions that are specifically designed to help health care providers drive outcomes and recognize efficiencies. The first patent covers our proprietary system and methodology for using data to build role-based specialty pathways for resuscitation education and certification. So it kind of complements alongside the Red Cross Resuscitation Suite to deliver innovation in this area of critical training and education. We’re currently using this patent in connection with our partner, AORN, to provide specialized training to perioperative nurses, for example. We also received a patent around the natural language capabilities of our proprietary AI engine, which I look forward to telling you more about soon. We are pleased to see the national recognition of this caliber bestowed to HealthStream and to our solutions. We’ve been putting a lot of energy into their development over the years. So it’s very exciting and rewarding to see that happen. Operationally, we’ve been very busy. During 2020, we acquired 4 companies, and we added a fifth just last month. So we’re excited to welcome all 5 companies to the HealthStream family, and I’d like to take an opportunity to say something about each one. 3 of the 5 acquisitions, NurseGrid, ShiftWizard and ANSOS are focused on hospital scheduling. Together, they form a brand-new solution group for us, which we refer to as HealthStream Scheduling. This solution group is led by HealthStream’s senior executive, Scott McQuigg, and it forms the third leg of our company’s 3-legged stool. And some of you may be wondering what I mean by this metaphor, and maybe you heard me talk about it before or already figured it out. But we review our workforce development solutions as forming 1 leg of the stool, our provider solutions is forming another leg, and scheduling is the final leg that balances of the stool. Each of these 3 solutions importantly share a lot in common. For example, each represents enterprise software designed to help our health care customers fulfill the mission of providing care. Each of the 3 solution groups are also positioned to leverage one another as they connect through and leverage the core foundation of our past technology platform known as hStream. Working together, customers will be able to make sure that they have the right people at the right place and time, providing patient care in the right way. We’ve worked hard to assemble all 3 legs of the stool and the platform that powers them and connects them — and interconnect them. And you’ll probably hear me use this metaphor for our business again in the future. In many ways, while the revenue has the potential for slight growth in 2021, the company, I feel, is fundamentally stronger because it’s a more diversified set of revenue streams and a higher gross margin profile. So we’re kind of excited that, although, on the surface, things may look similar to the prior year. Really, it’s a stronger, more diversified and more interconnected company that’s well positioned. So back to the acquisitions. We’re excited to add myClinicalExchange and ComplyALIGN to HealthStream. And we haven’t talked a lot about this, so I’ll take a second on those. myClinicalExchange fits our model of ecosystem expansion really well through their SaaS solution, they interface with hospitals and with nursing and medical students applying for internships at those hospitals. By collecting and processing student data, myClinicalExchange is able to help thousands of students get the internships they seek in these hospitals by presenting their credentials to hospitals in the form the hospitals require. Albeit a small one at this time, this marks our first expansion with the nursing and medical student markets. We also — it also has the benefit of being familiar to us as it’s a software solution that directly benefits our hospital customers. And then ComplyALIGN, as the name indicates, aligns directly with our core compliance business. And historically, one of our strengths is in this compliance area. Through its SaaS-based policy management solutions it allows hospitals to manage and update very policies they require to remain in compliance and ensure they’re providing the best care possible. This is a heavy lift in most hospitals as most maintain well over 1,000 dynamic policies and procedures at any given time. We’re pleased to now be in a position to help them with this task as it kind of overlays a lot of the regulatory and educational products that we offer. As we’ve grown both organically and inorganically, we’ve also been fortunate to add senior leadership around key areas of business. In January, Kevin O’Hara joined HealthStream as a Senior Vice President and General Manager of Platform Solutions. And that’s, of course, hStream. For those of you who have been following the company for a while, Kevin’s name may sound familiar. He’s actually returning to HealthStream as he was an executive here for almost a decade. He left in 2011 to become the CEO of an innovative start-up, and after leading it to its success and selling it, we’re very fortunate to have him returning to oversee the growth development integration of our hStream platform. Also in January, Scott Fenstermacher joined the executive team as our Senior Vice President of Sales. Scott’s outstanding sales leadership since 2012 when he joined HealthStream to build and lead the ICD-10 solutions team. Since that time, he’s been instrumental to the company’s growth and made it an easy decision to promote him to our enterprise Head of Sales. We also want to take this opportunity to honor and thank Dr. C. Martin Harris for his decade of distinguished service on our Board of Directors. Dr. Harris served as Chief Information Officer for the Cleveland Clinic for 20 years, and more recently joined Dell Medical School at the University of Texas, Austin. Dr. Harris, his last day on the Board, will be at the end of this week, and we wish him all the best in his future endeavors, which we are sure will benefit the practice of medicine and quality of care for years to come. I wanted to close with a couple of things and acknowledgments. Throughout the pandemic, we have never been more honored to support the brave health care professionals providing care for those who need it. Given as we’ve just crossed over the grim milestone of 0.5 million COVID-related deaths in the U.S., there are and appears to be reason for optimism as the number of new cases is declining and vaccines are increasingly becoming accessible for more and more people. Hopefully, this period will soon become a chapter in our history, from which we moved forward. Until then, we continue to recognize and support the heroic and tiresome work of each and every front line worker. In particular, I want to recognize health care workers in Texas who have been forced to contend with the loss of electricity and water over the past few frigid days. Your perseverance epitomizes the value and grit that will move us past the last 12 months of tragedies. Finally, I want to thank our employees for your persistence and hard work, remaining focused in the face of these great challenges and delivering what I think is a relatively exciting forward look into 2021 and 2022, and exciting new products and technologies that have a chance to change the industry and improve the quality of health care. Thank you to our nearly 1,000 HealthStream employees. At this time, I’d like to turn it over to questions from our investor community. ================================================================================ Questions and Answers ——————————————————————————– Operator [1] ——————————————————————————– (Operator Instructions) Our first question comes from the line of Ryan Daniels with William Blair. ——————————————————————————– Jared Phillip Haase, William Blair & Company L.L.C., Research Division – Research Analyst [2] ——————————————————————————– This is Jared Haase for Ryan. I wanted to just start just talking through — about the 2022 outlook that you had mentioned and appreciate to get some of that color. In terms of the high single-digit organic growth outlook, Bobby, I’m curious if you could maybe just talk a little bit more about some of the specific drivers that you’re seeing that kind of gives you the visibility or the comfort in providing that outlook? And if you could maybe talk kind of around sort of the expectations for each of those 3 legs of the stool, as you alluded to a moment ago? ——————————————————————————– Robert A. Frist, HealthStream, Inc. – Chairman, Co-Founder & CEO [3] ——————————————————————————– Well, I can’t do all of that, but I can do some of it. And we’re fortunate to be in a position to redevelop guidance with some degree of confidence for 2021, which we stated. And then we thought it was important to say what it might look like as we fight through this year of — the final year of the year-over-year comparisons of the decline of $38.4 million of the resuscitation suite from — and so there are many things that give us confidence about these kind of general guidepost we’ve got lined for 2022, and we thought it would be important to convey them. So the single-digit growth, there’s a lot of reasons for confidence in that. There’s a lot of things that are kind of built into our model from the acquisitions we’ve just performed that give us confidence in kind of return. Things like the deferred revenue write-down, obviously, will work through the accounting treatments, and that will show some growth. But more importantly, organic growth in a lot of product areas we feel confident — we feel more confident in. And that’s demonstrated by recent sales activities from some of our newer platforms. So the — and first and foremost, and also contributing to one of the other goals and objectives, the 65{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3} gross margins is the success, adoption and market penetration of the Red Cross Resuscitation Suite program. And so we — 180 contracts in a year is quite an accomplishment. New customers returning customers, we’ve moved, in my view, material market share through what was once considered almost a controlled market by single entity to a new empty that’s credible, have scientific evidence behind their products and is a fierce competitor in the market. So we have continued optimism for that core part of this workforce development portfolio. And then there’s also a set of organic products that we haven’t talked about as much, but we made investments many years ago to build this new AI engine, and it’s called Jane. And we’ve seen recent success at scale of the new Jane platform. And so we’ve signed one of our first multimillion-dollar contracts for Jane early this year. And it’s, again, a relatively new product that’s a derivative of technologies we acquired up to 4 and 5 years ago. So it’s finally coming to market and it’s a powerful differentiated application set. You’ll be hearing more about Jane in the coming months, but you asked what gives confidence in some of these, it’s a high-margin, organically created, but derived from some acquired companies years and years ago, application set that we think has a potential to have an impact on the market. And so watch for more news on Jane in the coming months. But again, we signed our first multimillion-dollar contract on Jane just about a month ago, so early this year. And so — and then finally, the VerityStream. We talked about all these transitions and the VerityStream transition story will go on for a long time. We’ll — it’ll take us a while to move customers off the acquired companies. But the real risk and the reason we started talking about that migration and transition of the business risk 2.5 years ago was because we acquired several companies, got a market-leading position, but we had to build a replacement platform. And we had to prove its viability and move customers to it. And today, with over 345 contracts on the new platform, the one which we’re migrating to, and several examples of customers successfully migrated, I think the type of risk that comes with a new product is maybe market failure or market failure to be adopted or the technology viability is real. And — but now I kind of — you heard me today declare that while the transition, the actual movement of customers from old platforms to new, won’t be over in 10 months. The real risk was that the new platform simply didn’t meet the needs in the market. And it does. We have 345 contracts, satisfied, referenceable customers, and we’re gaining market share on the VerityStream platform. So those are 3 of the reasons. Now, we have acquired these 3 companies to build a scheduling business and we enter a market and, again, a market-leading position right across 3 diverse platforms. And so we have our work cut out for us in this third leg of the stool. But we also remain optimistic that, that area, for us, is an area that makes sense to focus on. Nurses are one of our largest audiences in our entire network, several million nurses are in the HealthStream network. And we have the innovation of the NurseGrid platform along with the market share and market-leading concepts of ShiftWizard and ANSOS. We have a lot to work with there, and we have optimism. Now, you did see a lot of investment in 2021. I believe over 30 new positions are being added to those investments instead of seeking operational synergies, we actually approved the hiring of about 30 or more new employees to add to sales, marketing, technology development of this third leg of the stool, if you will. So 2021 is year of investment, which is why we had to talk a bit about 2022. So reasons for optimism? Organic products that are seeing market success, partnerships that were once in great doubt and had questions hanging over them are seeing market adoption, and migrations to the new platform and the hStream platform, we’re getting it more and more interconnected. It’s not — it’s an immature platform, but it’s a proven, like the technology is working now, components of the PaaS architecture, and they’re not just concepts anymore, they’re actually working. And adding 380,000 subscriptions to that PaaS architecture gives me great optimism that we can provide the kind of guidance we did. And so high single-digit revenue growth for 2022 coming off a year of — a guidance range, which provides for — the potential for growth, again, which is — and to me, outstanding that our teams have essentially backfilled $38.4 million of revenue loss this year through organic and inorganic efforts. And so — and then the 65{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3} gross margin. Again, we are a software company. We do have higher cost than some software companies because a lot of our application sets also sell content, which is from partnerships. We have royalty costs. But on the whole, we see this move from high mid-50s to the mid-60s. And the gross margin profile of the company being something that we can objectively try to maintain and achieve in the next 24 months. So I see continued improvement there and have confidence in that because of the kind of nature of the shift in our — the way we’ve done our partnerships. And then the — and so for those reasons, I have a lot of confidence as we think about 2021 guidance we just provided in detail and what I guess I’ll frame as goals and objectives for 2022. ——————————————————————————– Operator [4] ——————————————————————————– And our next question comes from the line of Matt Hewitt with Craig-Hallum Capital Group. ——————————————————————————– Matthew Gregory Hewitt, Craig-Hallum Capital Group LLC, Research Division – Senior Research Analyst [5] ——————————————————————————– We did notice in your guidance last night in the press release that you were — there is the potential for growth which was pretty commendable given the headwinds that you’re facing. First one, the last couple of quarters, Bob, you’ve talked about maybe hospitals being a little reluctant given the pandemic and everything that they were already facing to purchase new software transition from one platform to another. As the vaccines are being administered and as the rate of infection appears to be declining. How are those conversations changing? And what are your expectations as we get into — even closer to the summer months and into the back half of the year? ——————————————————————————– Robert A. Frist, HealthStream, Inc. – Chairman, Co-Founder & CEO [6] ——————————————————————————– Well, I mean, first, we see our customers, the hospitals and health care providers and surgery centers and all learning to operate in a manner that allows them to provide for COVID and traditional services. And they’re just learning. They’re learning to deliver these services and vaccinate people and be a part of the solution set, while also doing the more normal programs and service lines and surgeries that they did in the past. So I’m not declaring by any means it’s over, and there’s lots of concerns about new variants and other challenges that may face us. But resilience has been amazing. They’ve fought through all of this in an unvaccinated state themselves. And now I think there’s some growing confidence that with our health care workforce vaccinated, the emergence of the new vaccines, the rate of deployment increasing of the vaccine, just that there’s this new sense of opportunity. And our surveys of the nurse workforce showed an incredible burnout and fatigue, and that was a month ago, but I’m sensing even in the last month a little bit of a shift in that, where people can see some light at the end of the tunnel. So hospital operations certainly aren’t normal again. But they are entertaining that the operating future is different. Telemedicine will be a more permanent part of the landscape, for example, and maybe an area where we need to focus in on some of our opportunities on education training in those areas. So every challenge presents opportunities, and I’m not declaring a return on normalcy, there are plenty of risk in front of us, but we do see operations kind of proceeding, like, “Okay, this is what hit us. Now we need to move forward and continue to modernize how we operate, how we train and educate, how we manage the time and schedules of our employees, how we credential and privilege and onboard our new physicians.” And so we see a bit of return to like we just are going to operate through all this. So I think, and you heard a lot of our caveats in our guidance about this kind of gradual return to normalcy. And that’s how we built all of our models is, for example, travel and expenses coming back in the second half of the year because we think we’ll be able to go visit our customers again as they’re indicating now that they’re more back to operating. Administering of vaccine is one more vaccination. They’ve done vaccinations for decades. So now they’re returning to an operational mode instead of a planning mode. And so gradual turn to normalcy is what we’re hoping for in the next 18 months. ——————————————————————————– Matthew Gregory Hewitt, Craig-Hallum Capital Group LLC, Research Division – Senior Research Analyst [7] ——————————————————————————– Got it. And then the last couple of years, you’ve done a lot of heavy lifting with these platform upgrades. And I’m curious, as you’ve now — and you indicated this in your prepared remarks, as you’ve shown that these new applications, these new platforms are functional, they work, they can help the customer, does the sales cycle shorten because of that? Or is it hard to differentiate between the newness of the application of the platform versus what we’ve been dealing with COVID. So it’s really hard to tell whether the sales cycle shortens because of one or the other or a combination of the 2? ——————————————————————————– Robert A. Frist, HealthStream, Inc. – Chairman, Co-Founder & CEO [8] ——————————————————————————– Yes. I don’t — I’m not going to project shortened sales cycles right now because there’s just too much uncertainty. I would say that it gets — as our PaaS architecture matures in the next 2 years, it gets easier and easier to launch organic products and attempt to service them out into our network more rapidly. And so — and as our application suites get more connected to hStream, it gives them more ability to iterate faster and drive new product concepts. And so part of this move to PaaS is hopefully a kind of a speedier ecosystem. And then if you think of a profile of the company, what’s really been achieved throughout all this is actually just — well, optically, the growth, let’s just say, looks at the $250 million range is kind of within the range and kind of near what we achieved this year. It looks kind of optically flat. But really what happened is amazing. It’s a far more diversified $250 million company. It’s 3-legged stool instead of 2. What was once a major dependence on a single vendor is now a dependence on an emerging vendor partnership and a retention of the old relationships. So it’s important to note that while we are losing this — the nearly $60 million or in this year, $38.4 million of revenue from the old AHA, Laerdal partnership, we have maintained a strategic relationship with them that will generate revenues in the future from the way the new relationship is structured. And so again, diversified even within the portfolio, we now are able to provide success in the eyes of the Red Cross, of gaining market share, in eyes of AHA helping deliver their product into the market. And so — but not being part of the sales and marketing of the products. So it’s just a much more diversified business model in total across the $250 million in revenue, and that’s been achieved in the face of this challenge of COVID and this declining — rapidly declining $60 million product, but there’s less reliance on it, and there’s a whole new segment in our business that allows us to — or our new business focus area that allows us to hedge against future risk. So I think it’s a fundamentally stronger, more diversified company. ——————————————————————————– Matthew Gregory Hewitt, Craig-Hallum Capital Group LLC, Research Division – Senior Research Analyst [9] ——————————————————————————– Got it. And then 1 quick 1 here, and then I’ll hop back into the queue. And I don’t know if this is for you, Bobby or Scotty, if you can answer this, but now with 3 legs to the stool, just from a modeling perspective, should we anticipate 3 different segments: Workforce Solutions, Provider Solutions and the new piece? Or will you just stay with the 2, at least for the near future? ——————————————————————————– Robert A. Frist, HealthStream, Inc. – Chairman, Co-Founder & CEO [10] ——————————————————————————– Yes. I think for the near future, it stays the same. And my hope and ambition kind of like Salesforce.com is that eventually, the unifying factor of all of our businesses, the hStream PaaS architecture. And essentially, we have a future where we see 1 architecture and then application sets that connect to it. And so if anything, directionally, it would be my hope someday that we’re more of a single platform company and — with lots of diversified revenue streams that are connected to it instead of segments. And so directionally, that’s more where we’re headed than more segments. I think we’re headed towards an hStream platform and a unifying metric like the hStream subscriber base and interactivity between the application sets down to the PaaS architecture. So if anything, our businesses are becoming our focus areas and application sets are becoming more symmetrical and not more segmented. ——————————————————————————– Operator [11] ——————————————————————————– And our next question comes from the line of Richard Close with Canaccord Genuity. ——————————————————————————– Richard Collamer Close, Canaccord Genuity Corp., Research Division – MD & Senior Analyst [12] ——————————————————————————– Great. Can you hear me okay? ——————————————————————————– Robert A. Frist, HealthStream, Inc. – Chairman, Co-Founder & CEO [13] ——————————————————————————– Yes. ——————————————————————————– Richard Collamer Close, Canaccord Genuity Corp., Research Division – MD & Senior Analyst [14] ——————————————————————————– Okay. Excellent. I had some communication issues this morning. So that’s good. With respect — maybe for Scotty, I think you mentioned this, but I didn’t necessarily get it all. But with respect to the deferred revenue write-down and that’s an add-back on adjusted EBITDA, did you quantify the size of that, that’s expected here in 2021? ——————————————————————————– Scott Alexander Roberts, HealthStream, Inc. – CFO and Senior VP of Accounting & Finance [15] ——————————————————————————– Yes, we did. And it’s actually in the earnings release, too, there’s a reconciliation table to our guidance for that measure, and it’s between $4.3 million and $5.3 million. That’s the impact we’re expecting for 2021. ——————————————————————————– Richard Collamer Close, Canaccord Genuity Corp., Research Division – MD & Senior Analyst [16] ——————————————————————————– Okay. Great. I appreciate that. And I apologize I don’t have internet access this morning. So sort of scrambling. Bobby, with respect to the 3 areas, Workforce and then the Provider Solutions and the scheduling, how do you think about the total addressable markets, and your growth versus what the market is growing in those various segments? ——————————————————————————– Robert A. Frist, HealthStream, Inc. – Chairman, Co-Founder & CEO [17] ——————————————————————————– Richard, I see a lot of room for innovation in each of the 3 areas and interconnectivity. And so — and then derivative opportunities that come from the fact that we’re in those 3 lines. And so a core audience, for example, that’s common to a lot of those applications, is the nursing workforce. We have a market-leading position and nurses logging into our platforms. And there’s a lot of derivative opportunities that come from that. And so as we think more of an ecosystem with data mobility between the different application sets we’ve talked about, Provider Solutions, the learning and development and the workforce development and the scheduling, we just see a lot of opportunity that increases the net opportunity and the benefit to customers and these health systems. We’ve talked about some of the interconnectivity, and there’s just dozens of examples of where we’re headed. But simple things like credentials earned in the workforce development network, automatically populating into the credential and privileging platform is a good example. A scheduling system that’s informed by the competency profile to match the skills and competencies of the nurses to the patient acuity or this better matching algorithm someday in scheduling are potential. And so we think that those kind of opportunities present financial opportunities as well as we integrate the data and leverage the ecosystem itself. And so within each of the 3 focus areas, I think, there’s plenty of room to just kind of gain market share because our products are innovative. But the real power comes if we’re successful connecting all these to our growing PaaS architecture, hStream, and achieve some of the long-term objectives of more rapid iteration of application design, more leveraging of core technology infrastructure instead of replicating in each of the 3 legs of the stool, more data mobility is an example of the credential flowing from 1 system to another automatically giving competitive advantage to our platforms or our applications and benefit to our customers. And so obviously, I’m optimistic. Now these are niches, these are not yet EHR-sized opportunities or — but I think they are material to the workflows of how these organizations operate and material to the core asset of their workforce, how to retain and develop them. And so I think — and there’s a lot of dissatisfaction with the current status in many of these areas. And so I think when you have dissatisfaction, you have old archaic systems, like the way time management is done or scheduling is done is just archaic, I think there’s room to innovate and deliver value and value can equate to financial opportunities. So relative to our size, we see a lot of opportunity and planning to pursue over the next few years to show the kind of growth we’ve talked about now in our guidance. ——————————————————————————– Richard Collamer Close, Canaccord Genuity Corp., Research Division – MD & Senior Analyst [18] ——————————————————————————– Okay. Maybe as a follow-up to that. With respect to the go-to-market and sales process, is it — I mean, are you — is the buyer essentially the same person? Or is it different parts of the hospital administration that is dealing with each of these offerings? I guess, how centralized is it, or is it decentralized in terms of the purchasing? ——————————————————————————– Robert A. Frist, HealthStream, Inc. – Chairman, Co-Founder & CEO [19] ——————————————————————————– It’s — within the 3 legs of the stool, they’re probably product sets and application sets that target 7 different buyers. And so it is distributed across the budgets. There are a few key players that are more common across the 6 or 7 areas. So some of the more niche areas would be compliance, for example, and hospitals handle compliance in different ways. But the Chief Nursing Officer, say, is a common decision-maker in the scheduling business and all the workforce development solution sets like the Jane platform, the Red Cross Resuscitation Suite program. And so there are some common buyers, and then there’s some focus areas. So we have a really strong revenue cycle education program that targets the VP of Finance, and we have a small sales team focused on reaching the financial operations of hospitals. We have a much larger sales operation focused on building relationships with Chief Nursing Officers and to take the appropriate products in. And then Provider Solutions sold into the medical office, maybe the Chief Medical Officer and other decision-makers like them are targets for those solutions. So in some ways, I like that we’re tapping into 6 or 7 areas of the budget by 6 or 7 different business leaders. And there are a few common buyers like the Chief Nursing Office that are a little bit more important than others in successful adoption of our product sets. I do think, for example, the CFO is interesting, plays a role in scheduling because the cost of contingent labor is so important in the successful financial management hospital, but also to the Chief Nursing Officer because you want satisfied nurses in how you manage their schedule and their work-life balance. And so those 2 together, we believe, are the key buyers, for example, in the scheduling business. The Chief Financial Officer is kind of relatively new for us. We’ve been selling to the VP of Finance our revenue cycle, but in scheduling, you have to get to the Chief Financial Officer and Chief Nursing Officer. So I don’t know if you view that as positive or negative. I view it as attacking their budget opportunities in many places with specialized sales organizations as a competitive advantage. ——————————————————————————– Richard Collamer Close, Canaccord Genuity Corp., Research Division – MD & Senior Analyst [20] ——————————————————————————– Okay. That’s helpful. And then on the Provider Solutions, you obviously have had buy in terms of new and new customers as well existing, transitioning to VerityStream. But as you sit back here, like, I guess, maybe 3 or 4 years from the acquisitions that you made to get into the credentialing side of things and then integration and rollout of the new product, has the — is the growth opportunity there has — I guess, as that has developed, has the growth opportunity disappointed you from the standpoint of did you think there was more opportunity in there? Just any thoughts in terms of just looking back and seeing how that market either has met expectations or exceeded or not met expectation? ——————————————————————————– Robert A. Frist, HealthStream, Inc. – Chairman, Co-Founder & CEO [21] ——————————————————————————– Yes. I think the transition is difficult. To build a replacement platform requires a lot of investment and kind of fortitude by the team to see it through and get it ready. But in the last 12 months, we’re starting to see the benefits of that hard work as we start to win a better share of the RFPs and kind of gain in market acceptance and adoption of that platform. So I think the returns are still in front of us. So would I’ve liked to gotten there sooner? Yes. Was it harder than anyone wants it to be? Yes. It’s hard to acquire 3 or 4 companies, assemble one brand and build a replacement product, keep your customers and migrate them to the new platform. And so it has taken a little longer to get to and great efforts from our teams to get us there. But I do feel like the opportunity is still in front of us on that whole set of applications. The suite itself has grown to be much more comprehensive than just credentialing, for example, as it moved into privileging and onboarding and now performance management dimensions around physician performance management. So a lot of the data that’s coming on those platforms, the suite has expanded to be one of the most comprehensive in managing kind of the onboarding performance management of physicians over time and not just credentialing and privileging. So we’re really excited about the expansion view of that application set. It is a relative niche though compared to like the scale of EHRs. Like, I don’t think credentialing and privileging is that kind of a multibillion-dollar revenue opportunity. But again, relative to our current scale, it’s plenty of growth opportunity to deliver a substantially larger company and, in this case, area application set. We think there’s plenty of room to keep showing really solid growth. ——————————————————————————– Richard Collamer Close, Canaccord Genuity Corp., Research Division – MD & Senior Analyst [22] ——————————————————————————– Okay. Do I have time to ask 1 more or… ——————————————————————————– Robert A. Frist, HealthStream, Inc. – Chairman, Co-Founder & CEO [23] ——————————————————————————– Sure. ——————————————————————————– Richard Collamer Close, Canaccord Genuity Corp., Research Division – MD & Senior Analyst [24] ——————————————————————————– So given the response there and Provider Solutions and obviously, the — you did have a big uplift there in terms sort of rolling out a SaaS — unified SaaS product. As we think about the scheduling, and there’s been 3 or 4 now acquisitions on that front. As you think about the integration, the existing products that you acquired and then thinking about over the next year or so and the investments, how big of an uplift is it? I mean, are you sunsetting those products over time? Is this — you’re integrating them and this is going to be a new SaaS platform, some — similar to VerityStream? How should we think about that? ——————————————————————————– Robert A. Frist, HealthStream, Inc. – Chairman, Co-Founder & CEO [25] ——————————————————————————– Yes. I think similar, but with lessons learned of the VerityStream journey. And the other cool thing is that we’d already seen in the market some demands. When we bought NurseGrid, there were demand to integrate it with ANSOS from some of our field customers even before we owned ANSOS. And so some of the work through a partnership had already begun on integration and seeing the leverage points and opportunity. So it’s kind of cool that there’s a bit of a jump-start based on market forces of making those platforms leverage each other. I think the first 24 months — I mean, obviously, you heard me say we’re going to add 30-or-so personnel to those acquired companies to really round out sales, marketing and product development. And so you’ll see a stronger push earlier into energizing the sales organization. And as I mentioned just now, some of the work of vision for integrating the technologies, for example, I think, will integrate NurseGrid benefits and technologies into ANSOS and into ShiftWizard first. And I would say, within this year, we would see benefits of those systems talking to each other, where the NurseGrid application brings a strategic and competitive benefit to both ShiftWizard and ANSOS. Beyond that, we’re assembling a leadership team. We have a 35-page playbook on how we did it with VerityStream to build a brand and platform, make technical decisions on its path. But in all cases, we’ll be wiring these applications to the hStream platform in the coming 24 months, and that’s in our forecast. We’ll be connecting them to each other, NurseGrid, ANSOS and NurseGrid to ShiftWizard. And we’ve already begun the segment which of the applications are more appropriate for which scale and size of opportunity. The branding of it and how it works will take us a little longer to figure out, but we’re putting the necessary investments in, and we have a — again, a 35-page playbook, a confluence of the VerityStream on how to pursue this. And we’re really excited about it. So I think we’ve got the right 3 assets together and the right team is forming around this opportunity. And like anything, it’s its own transition. That will result in new applications, software and branding probably emerging in the next 24 months. But I think, Richard, your comment of thinking of it like VerityStream is a good analogue. It’s the way we thought about when we acquired the assets that we were going to invest — not look for synergies right now, we’re going to look for strategic advantage for the applications and then invest and strengthen what were relatively small sales organization into stronger one and getting the technical benefits of connecting to hStream, which is a maturing PaaS architecture. So I think it’s right to think of it. But hopefully, the journey can be a little less painful and a little faster than the VerityStream journey because we’re better at it, and we’ve learned how to do it. ——————————————————————————– Operator [26] ——————————————————————————– And our next question comes from the line of Vincent Colicchio with Barrington Research. ——————————————————————————– Vincent Alexander Colicchio, Barrington Research Associates, Inc., Research Division – MD [27] ——————————————————————————– Yes, Scotty — a question for Scotty. What is the revenue contribution you’re expecting from acquisitions in 2021? ——————————————————————————– Scott Alexander Roberts, HealthStream, Inc. – CFO and Senior VP of Accounting & Finance [28] ——————————————————————————– We didn’t guide specifically to those acquisitions in this latest release and conference call. But if you look back at, I think last quarter, we talked briefly about ShiftWizard contributing, historically, around $4 million. So they were a growing company. We’re going to, obviously, feel a little bit of the brunt of deferred revenue write-down from the acquisitions. But ShiftWizard, trailing 12 months was about $4 million when we acquired it. And then in the ANSOS announcement that we did back in December or late November, we kind of gave some forward-looking expectations on that transaction as well. I think it was in $16 million to $19 million, that’s net of deferred revenue write-down. So it’s somewhere in the mid-20s when you add back our deferred revenue write-downs. And then the other acquisitions are much smaller in scale. There will be some contribution there. But we’re not quantifying it and speaking to it separately. ——————————————————————————– Vincent Alexander Colicchio, Barrington Research Associates, Inc., Research Division – MD [29] ——————————————————————————– Okay. And then Bobby, not to beat a dead horse with the Verity, so to speak. Did you mention what portion of your declines have migrated to the new platform? ——————————————————————————– Robert A. Frist, HealthStream, Inc. – Chairman, Co-Founder & CEO [30] ——————————————————————————– No, we haven’t. But we had — we have lots of customers to go, but we’re seeing steady conversions that — I mentioned the 39 this quarter. So we’re seeing conversions and new market share gains on the platform. But no, we’re probably not going to report it because the margin profile is similar, and it’s going to take a long time to migrate everyone. And we right now don’t have plans to force any migrations. And so we’re just going to treat it as 1 software unit. But all the new sales, new customers and transitioning customers are seeing increasing benefit to moving to the new platform. So I think the concept of this as a transition, we’ve kind of recharacterized it as the transition of customers from old to new platform will take time, but the financial implications of that are not huge because they both were good, relatively high-margin software application sets. ——————————————————————————– Vincent Alexander Colicchio, Barrington Research Associates, Inc., Research Division – MD [31] ——————————————————————————– And then one last 1 for me. The changed health care business, what did the historical growth rate look like in that business? ——————————————————————————– Robert A. Frist, HealthStream, Inc. – Chairman, Co-Founder & CEO [32] ——————————————————————————– Well, I don’t know what we filed on the historical business. But it’s — and so I don’t know what we filed on that. So that will show up in the Qs and the Ks, I imagine, historical financials. But they are solid, more of a margin profile and large customer acquired business for us. And the innovation and growth was going to come from the ShiftWizard platform. So I don’t have that number for you, Vince. ——————————————————————————– Vincent Alexander Colicchio, Barrington Research Associates, Inc., Research Division – MD [33] ——————————————————————————– No worries. ——————————————————————————– Scott Alexander Roberts, HealthStream, Inc. – CFO and Senior VP of Accounting & Finance [34] ——————————————————————————– Vince, we haven’t disclosed any historicals on that one yet. But you should see something in our financials as we file our 10-K here pretty soon. ——————————————————————————– Operator [35] ——————————————————————————– And I’m showing no further questions at this time. And I’d like to turn the conference back over to Robert Frist for any further remarks. ——————————————————————————– Robert A. Frist, HealthStream, Inc. – Chairman, Co-Founder & CEO [36] ——————————————————————————– Thank you. Look forward to reporting the next quarter earnings call here shortly. They come up rather quick as we do year-end and then move into first quarter. Thank you, guys, and we look forward to the next call. ——————————————————————————– Operator [37] ——————————————————————————– Ladies and gentlemen, this concludes today’s program. You may all disconnect. Everyone, have a great day.