Q3 2024 HealthStream Inc Earnings Call

Scott Roberts

Thanks Bobby and good morning, everybody. So, let’s begin with the financial highlights for the third quarter. And then after that, I’ll go over the updated financial expectations as we head into the final quarter of the year.
Unless otherwise noted, the comparisons will be against the same period of last year.
Revenues for the quarter were $73.1 million, and they were up 3.9% operating income was $6.5 million, which was up 33.6%.
Net income was $5.7 million and it was up 48%. Our earnings per share was $0.19 per share, which is up from $0.13 per share and adjusted EBITDA was $17.7 million. And it was up 9% revenue is increased by $2.8 million or 3.9% coming in at $73.1 million compared to $70.3 million in last year’s third quarter, revenues from our subscription products accounted for 96% of total revenues and were $69.9 million increasing by $2.5 million or 3.6%. And professional services revenues were $3.2 million an increase by $0.3 million or 10.8% subscription revenue growth was led by a variety of our innovative solutions such as credential stream with 34% growth shiftwizard with 17% growth. Our stable solution with 38% growth and the DEA made of course a new solution that we launched in Q4 of last year growth in these products among others helped overcome some declines of our legacy products such as the Ansos product suite, Echo and MSOw, which are often on premises as opposed to S solutions taken together the products I just mentioned along with quality manager resulted in third quarter revenue declines of approximately $2 million compared to the prior year. Third quarter.
Finally, revenues from professional services included approximately $0.4 million from a one -time payment associated with a customer acquisition.
Our remaining performance obligations were 549 million as of the end of the quarter compared to 511 million for the same period of last year. And we expect approximately 43% of the revenue backlog to be converted over the next ’12 months.
Gross margin was 66.5% for both the current quarter and the prior year quarter.
Our cloud hosting and software costs contributed most of the increase in cost of revenues over the prior year quarter. And growth in these 2 areas reflect investments in our technology infrastructure, including the H stream platform, as well as some other solutions that we’re moving from data centers to the cloud operating expenses, excluding cost of revenues increased by 0.6%. And most of this year over year increase was from product development which was up 11% and sales and marketing which was up 1.8%.
G A costs declined by 9% and depreciation and amortization declined by 3.2%.
And both of these declines primarily resulted from the recovery of sales taxes that we paid in prior years.
The impact on G&A was the reduction of expense of approximately 0.4 million and a reduction of depreciation and amortization expense of approximately0.2 million.
These are non-recurring transactions that positively benefited the third quarter adjusted EBITDA as I mentioned earlier came in at $17.7 million, which was up 9% and adjusted EBITDA margin was 24.2% compared to 23.1% last year.
Now let’s move over to our balance sheet metrics. We ended the quarter with cash and investment balances of $94.9 million which is up from $83 million last quarter.
During the quarter, we deployed $6.8 million for capital expenditures and paid $0.9 million to shareholders through our dividend program. We also made $1.5 million of income tax payments in the quarter.
Our day sales outstanding improved to 37 days compared to 43 days last year.
Year-to-date. Our cash flows from operations were down 7.3% or $3.7 million from the prior year coming in at $46.5 million compared to $50.2 million last year.
And free cash flows were down 12.4% or $3.6 million and were $25.2 million compared to $28.8 million last year. And the primary reason for the decline in both cash flows from operations and free cash flows resulted from about $3.6 million more of income tax payments compared to the prior year.
Our balance sheet remains strong with $94.9 million of cash and no debt providing us with several options to strategically deploy available capital to improve shareholder value.
So let me take a moment here to describe our capital allocation approach 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.
The third is returning a portion of our profits back to shareholders in the form of cash dividends.
And our fourth priority is that our board may authorize share repurchase programs which have, which we also have a successful track record of executing.
From an M&A perspective, we may maintain an active pipeline and we continue to evaluate opportunities that fit our criteria which include industry, product and financial among others.
Now, while our M&A markets and health care technology have been slower than usual over the past ’18 months, we expect to see them to begin to pick back up in the next ’12 months.
In respect to our dividend program. Yesterday, our board of directors declared a quarterly cash dividend a 0.28% per share to be paid in November. We currently do not have an active share repurchase program in place. So our board continues to evaluate such programs as it deems appropriate and moving on to guidance in our earnings release. Yesterday, we provided updated financial expectations for revenues net income and adjusted EBITDA.
We now expect consolidated revenues to range between $290 million to $292 million.
We expect net income to range between $18.5 million and $19.5 million and for adjusted EBITDA to range between $66 million and $67.5 million.
And we still expect capital expenditures to range between $28 million and $30 million.
As a reminder, this guidance does not include assumptions for any acquisitions that we may complete during the remainder of the year.
As noted during our call last quarter, we expected revenues to be around the lower end of the range or about $292 million for the year. But we’ve revised our full year range to potentially come in a little lower than that, probably about around a million dollars or so lower.
One of the primary reasons influencing a revised forecast is one that we discussed last quarter as well. We have a larger customer that is billed based on consumption of certain content and this customer had a lag in consumption during the second quarter and we expected that they would not only return to the normal rate of consumption in the second half of the year, but the customer would accelerate beyond their normal consumption rate in order to catch up from the second quarter lag.
And while we’re pleased that the customers consumption rate has now returned to more a more normal level. Their consumption did not accelerate above the normal level as we had been expecting. And for this reason, we’re now estimating revenue to come in a little lower than we previously projected for the year.
We also believe that we’re well positioned for adjusted I EBITDA to come in favorably, which is why we’ve raised the midpoint and narrowed the range to now be between $66 million and$ 67.5 million .
Well, guys that concludes my comments for this quarter’s call. Thanks for your time as usual and I’ll now turn it over to Robby for some additional updates.

Robert Frist

Thank you, Scotty. iam going to dive into a few more areas and turn it over to questions. I want to remind, start by reminding everyone that our H Stream technology platform is the center of our platform. As a service strategy, increasingly our own application suites are being powered at the platform level by H stream and third parties are beginning to use our platform and it’s growing set of API is to build or enhance their own solutions.
Each of our subscription based core application and learning credentialing and scheduling is provided to customers via the H stream platform. Additionally, an H stream membership package that comes in the form of a subscription and is tailored to each of the three core application suites is concurrently purchased with the respective products. And we talked about earlier, we call each of these packages for example, H stream for learning H stream for credentialing and H stream for scheduling. Each of these subscription products provide customers access to the H stream platform and it is a defined access which API is they get for example and exclusive applications, services, content and other benefits that comes with that value package. And I think each quarter we are just getting a little better at putting value into those that, that those value bundles last quarter. We shared the news that our credentialing business is expanding to address the health plan market. And I’m proud to share that our growing momentum and positive market receptivity in that area area. First, we officially announced our solution network by HealthStream at the Nam’s conference in late September. Our news plus our marketing efforts at NAMS helped us quickly generate a pipeline of opportunities at more than three dozen organizations. We expect that several of the opportunities will convert into sales over the next few months.
Secondly, we formally partner with the vas’ corporation has a large footprint in the health plan market segment. The rationale behind this exciting partnership is to bring to market an innovative solution that is specifically tailored for health plans. Many health plans want a fast solution to manage their network provider data, but they also want to outsource the actual credentialing work. We believe that only the combined network by HealthStream that we talked about plus the various solution can seamlessly fulfill both of these needs for health plans with 75,000 or more network members. So again, we think we are really well positioned with our new network by HealthStream product set.
And our new partnership announced recently with (Vri third). We built the industry’s first marketplace of CBO services, service providers for health plans. Our CBO marketplace is launching with two initial members, the HealthStream CBO. We have a very small built in CBO credential verification organization and vases for large health plans. And so, we have built into our marketplace. The first two members are our own CDO and vases.
We expect this marketplace to grow by adding both CBO members as well as customers in the quarters ahead.
I also want to note that we’ve built a data portability feature within network by HealthStream which for from which health plans can send provider data via one click to the marketplace and the applicable marketplace member can send the verified information back to the health plans credential stream system. This unique data exchange is enabled by the H Stream platform.
Now let’s move to our direct professional and pre professional markets. I mentioned that we are managing these growing communities. One is actually a true social network and the other is semi social, but it’s a more of a community of students and a community of nurses.
And so I want to talk a little bit about each of those. Our market expansion strategy over the last ’18 months has included selling directly to end users like nurses, physicians, or nursing students. And so that’s a kind of expansion of our selling model. One of the ways we reach individual, individual nurses is through our Nursegrid app, which has the Nursegrid Learn capabilities. And again, this is a great example of using our platform technologies to learn API that we talked about to power essentially a little learning store in Nursegrid the app. And so it’s, it’s the te learning Nursegrid app is now linked to a commerce enabled learning store called Nursegrid Learn. And as a reminder, Nursegrid is the number one most popular app for nurses based on ratings and downloads in the Apple Store period. It now has over 600,000 monthly active users and it is truly a growing and thriving social network. We think it is the largest social network for nurses on the planet or at least in the United States. And it’s growing at a very good clip since we acquired it where we started with about 180,000 monthly active users. It’s grown to 600,000 monthly active users. Look for some exciting announcements around Nursegrid. But Nursegrid Learn was one of the first efforts to provide value to those nurses in that growing social network. And it’s doing quite well. In fact, through the Nursegrid learn channel, we started to monetize the Nursegrid audience in a way that we think helps the nurses and also helps us generate a financial opportunity. So we’re excited about that in the third quarter of 2024 e-commerce sales to the nurse could learn channel increased approximately 117% over the prior year quarter. And I’ll give you an example product that is being provided through the nurse could learn channel that historically was only sold B to B. So an example of this is our expanded ability to sell the Stable program. The program is, is a, is named Stable, is sold to individual nurses and it is a neonatal education program created by our partner Doctor Chris Carlson. And it’s a world-renowned program for neonatal care.
Prior to this year, our sales and marketing efforts for the Stable Program, we focused on business to business, sales and health care organizations essentially directly and only the Nursegrid Learn and Nursegrid app. We now have expanded our reach by marketing stable to individual nurses whose area of specialty aligns with those critical life saving knowledge and skills for sick infants. We believe it’s a good example of how content we previously sold only through B to B channels is now finding an individual audience of purchasers as well.
In the later part of 2023 we launched an initiative to begin selling directly to nursing students and nursing schools. Our application called my Clinical exchange provides particularly useful gateway within HealthStream’s ecosystem to reach nursing students as they seek to fulfill their clinical rotation requirements to graduate from nursing school. You can think of my clinical exchange as a bridge between students, their schools and the hospitals that host them for the rotations.
Each of these groups uses my clinical exchange application to identify schedule and manage clinical rotations including facilitating important credentialing and onboarding functions for those students year-to-date. My clinical exchange students have either completed or scheduled over 285,000 clinical rotations. Every student who takes rotation through my clinical exchange becomes an individual member within HealthStream. Ecosystem third quarter, 2024 revenues from my clinical exchange were up ‘11% over the same period. Last year, we believe that both sets of health care professionals and nursing new nursing students will reap many benefits from accessing HealthStream directly throughout their careers, which is now made possible with our e-commerce enabled H stream platform enabling capabilities. Like we’ve just talked about inside of my clinical exchange and Nursegrid the social phenomena app.
So kind of we summarize by saying that if you’re interested as an investor in a profitable highly recurring revenue, SASS pass health care technology company that expect to deliver steady growth and it’s determined to share some of those gains directly, shelters in the form of a dividend, maybe help stream as a company for you guys to look at. That’s my sales pitch and I’m sticking to it. We’re excited about the accomplishments of our team. And I want to tell you just a little bit about our culture here by telling about our streaming good value that we so much work into our fabric of our company. Both in our attempts to assist in education during COVID nationally. Our attempts to facilitate learning and development during the horrible hurricanes where we provided we provide ongoing access to materials and information. Are we’re living our streaming good value throughout our, our employee base. And in fact, each year we select a charitable organization support as a company. And right now, 11,000 employees are supporting the Alzheimer’s Association for this year. And our recent health Olympics challenge, we raised over $22,000 to fight Alzheimer’s and other forms of dementia. We’re honored to join thousands of others nationwide who are committed to this worthy goal and, and, and I’m really proud of our 1,100 HealthStream ERS for living that value of streaming good. So we work into our fabric. Both our innovation of the new market releases our customer service and our focus on these charitable efforts to help make everything a little bit better. And I’m really proud of our accomplishments during the quarter. Thank you to HealthStreamers listening. Our analysts will now turn it over for Q&A to get the Q&A session started.

Operator

Thank you, sir. The question and answer session will begin at this time.(Operator Instructions).our questions will be taken in the order that they are received one moment while we take our first question.
And our first question is going to come from the line of Matt Hewitt with Craig Hallum. Your line is open. Please go ahead.

Matthew Hewitt

Good morning and thank you for taking the questions maybe first up on the top line. With, with revenue growth particularly, you know, your 3 year kind of objectives that you’ve rolled out previously have talked about getting the 7% to 10% growth with the new accelerators on the pricing side, that’s going to add a little bit of a goose to, to the top line. But what, what else could you do or what else do you see that could drive a little bit faster growth on the revenue side?

Robert Frist

Yeah, let me break down those objectives first and then comment on each of them. So the first was in that three year objective when we disclosed that as an objective and I think November of ’22 and an investor day. And by the way, we are going to try to target another investor day early next year, probably in late January, early February, but we’ll work on that announcement later. But in that meeting in November ’22 we did announce growth targeting 7% but here is the breakdown. It was 5% to 7% organic and, and it’s, you know, it looks like this year we’re going to come in around 4%. So we’re right within striking distance of the five, the bottom of that range. And of course, we would love to be at the top of the range. But, you know, if you think of the organic growth profile, we’ve been able to deliver, but it looks like we’ll wrap up this year around 4% factoring in our, our new Guidance we just issued. And so we’re right within striking distance, that goal, we haven’t quite hit it. We’ve hit it a couple of times in a few quarters since that announcement. But, blended again this year, we are looking at right about 4%. And you know, you can hear all the excitement about the new products. So the answer is how can we do better is continue gaining traction with all these new products. And some of these are brand new products like the insights plus application that we just talked about generating new revenue. And so it’s exciting how those all those are is like, well, why is the growth rate higher? And the answer is when you look inside a lot of the ways we built our market share is through acquisitions and sometimes we inherit legacy application suites and we’ve addressed some of these that are more material like the andso Legacy application suite. And, and in general, we need to preserve those customers as customers and migrate them to our newer applications as we can. But occasionally we struggle with that and, and we have to work through it. And so and then offset this Scotty just mentioned about 2 million of our growth was net negative growth from a loss in attrition in some of those legacy applications to the market. So two competitors, look, this is a ferociously competitive environment. We have dozens of competitors and, and talk about them and, and everyone’s fighting for share and, we think on our new products, we’re getting more than our fair share of our share and there’s many new products to come. But we also work through these, these legacy issues. So, you know, we’ll work on both sides of this equation which is to reduce the attrition in these legacy applications. If we could reduce it by a little bit, our growth rate would pop up and continue launching new products as you’ve heard today. And working in pricing escalators as we’ve heard today. And and, and you hear that at the core and the most important thing is the core, go forward applications, credential, stream shift, wizard HealthStream learning center powered by things like insights plus and its family of products are, are, are picking up share and had really good year over year, quarterly growth rates. So we’ll hold to that. We’ll try to reduce attrition and then hopefully that’ll bleed to a little better growth rate in the future. But looks like we’ll wrap this year at about 4% and kick off some really good free cash flows and cash flows for the year

Matthew Hewitt

That that’s super helpful Thanks Bobby and then maybe shifting gears here a little bit. The, the macro environment, you know, the customer spending environment was pretty challenging last year. I think you noted it on several calls. It sounds like that’s starting to show signs of improvement. Is that in fact, what is happening? Are you seeing some improvement on the customer spending side? And is it your expectations that that will continue maybe even accelerate as we get into 25?

Robert Frist

Well, we did open this call by talking about our pipelines and we feel good about our pipelines and credentialing and scheduling and with the new products and learning as well. So you know, we feel good about the pipe now, they need to materialize and to close deals in both in Q4, we have really good expectations and in Q1 and Q2, but the pipelines are strong. So the, you know, the way again to work on this growth rate is to focus on retention and in these legacy applications and being more successful in what I’ll call retention and migration strategies. And you know, we’ll turn our attention to that next year and see if we can do better in those areas. But yes, I mean, we open the call by talking about our, our confidence in the pipelines. I do not know if those are pipelines are not closed deals. So, but they look good, you know, we measure pipeline as a multiple of your objectives. And typically, what you want to hear from a measured pipeline is two and three and four times coverage of the of the quotas you’re setting essentially. And, and in those pipelines, in both cases, we see, you know, 3X coverage, which is kind of a for those that are in sales. I know that’s a kind of a healthy sign of the opportunity. Again, they do need to matriculate and turn into actual contracts, but it feels good on the pipeline side

Matthew Hewitt

That that’s helpful. All right, thank you.

Operator

Thank you. And one moment for our next question and our next question is going to come from the line of Stephanie Davis with Barclays, your line is open. Please go ahead.

Stephanie Davis

Hey guys, thank you so much for taking my questions. First one I have you’ve been really bullish and expansion in the health plan channel and I believe you mentioned prepared remarks. So I was wondering just given some of the NCO earnings that we’ve been seeing lately if there could be maybe a step back and spend as they kind of focus more internally.

Robert Frist

Yeah, I’m not stepping quite as close to that. We have teams focused on that and they’re really excited about our positioning in that market. And I think from a cost standpoint, you did hear about some of the things like the interoperability between our credential stream application we use on the on the hospital side and then used on the provider on the on the payer side and on the insurance side. And I think, I think those will provide efficiencies. And so we think we’re competitively positioned to gain share and maybe be the more efficient provider in those areas. So even if they have some kind of pressure on them, you know, my goal has always been take, take regulatory training. It’s a mandate in regulatory training be the lowest cost highest quality provider in the industry. And then you’ll be selected even in a down market. And so maybe there’s a little of that. But again, I amless familiar overall pressures on that space. It’s a new one for us. We have a team of people that are very familiar with that and, and they’re excited about their pipeline. So I can’t really characterize it. I can just say that I think the pipelines look good in that, in that vertical for us and we think we have some synergies to offer them. We mentioned the wallet today as well that that will provide them more efficient technologies than their the current strategy use,

Stephanie Davis

Helpful color. Another one on the sales channel, you’re just, you’re rolling out a ton of new products recently. You’ve got another one being not there earlier in the call. How are you thinking about kind of having a cohesive messaging to your clients as you, you have? So many new products that you’re coming out with and how does that kind of play into the sunsetting too of some of these maybe debated sunsetting of keeping some of these legacy platforms on board?

Robert Frist

Right. Well, it’s, it’s a great point. We’re, we’re trying to create some cohesive understanding of the H stream platform and its capabilities. First, I would say the first half of next year before we do any kind of kind of global repositioning of our capabilities. we arekind of repositioning at the product level now to show the enhanced capabilities and you’re right about the new products. So we, we have been working for many years and it’s fun to be able to announce something like we’ve been working on insights plus for I would say about ’18 months with, I don’t know, ’15 or more developers at least and, and to watch it start to roll out and be in customers hands in the last two weeks is super exciting and, and the both at and, and that as you pointed out, we’re essentially able to retire old reporting engines, some of which were sold and some of which were included in our base subscriptions. But watching those get, you know, be sunset and replace the new one that generates higher which is new order value or contract value is, is exciting and we do have another announcement, I’ll just kind of tease this out by, by hopefully by year end we’ll be announcing another new product. And to your point, the platform strategy enables more rapid development of products and generally a lower internal cost because you’re using platform level services to build and piece together new capabilities that then turn into products. And so, I I kind of obviously, I am excited that we’re at that era where we’re going to be able to more rapidly introduce more capabilities to our customers. And then as far as positioning and selling, I think in the second half of next year, we have the opportunity to really present maybe what we call a suite of suites. You know, we’ll go a little slow walk this a little bit. But as you can really show the strategic and tactical and operational benefits of 3 application suites that truly work together, then you can begin to position a little bit more like the big guy’s position, you know, more like an EHR E&P like where you kind of have a suite of suites that works together and you know, a lot of times CEOS of health systems pick their E&P based on the breadth of their offerings and how they, how they work together. They don’t always deliver on that interoperability promise. So we’re being a little careful and as we see these new capabilities manifest before we market them, overly market them. But I’d say certainly by the second half of next year, we’ll be attempting to position and more robustly to our, to the c suites of our customers that our capability sets go beyond the areas they’re originally intended to serve, you know, just learning, serving. HR and the Chief Medical Officer buying credentialing. I think in each area, I think we have the opportunity to demonstrate more capabilities in the second half of next year.

Stephanie Davis

Thank You.

Operator

Thank you one moment for our next question.
And our next question comes from the line of (Jared Ho with William Blair). Your line is open. Please go ahead.

Hey, good morning and thanks for taking the questions. Maybe I’ll ask one on the the new reporting tool sets for the learning application suite. You know, nice to hear about the, the positive roll out there. I was just hoping to hear a little bit more about any incremental functionality that’s now available with this sort of next gen version of the reporting tool. I think you referred to the, the legacy tech stack as you kind of Asian architecture. And then just to clarify, is this something you’ll push out as contracts come up for renewal over the next couple of years or can you actually go to clients a bit more proactively? Just it sounds like it is a pretty meaningful upgrade. So kind of wondering what the cadence of that looks like.

Robert Frist

Yeah, great. i am glad to comment on as much of that as I can. Of course, there are teams that are really detailed here. But I will say this the excited for many reasons. One, the architecture of this new reporting capability for learning will be the same architecture we used for to enhancing reporting data analytic for all of our products across the company. Again, when you talk about a platform strategy expect leverage. And so, this is the first roll out of new enterprise class reporting capabilities, analytics capabilities, benchmarking capabilities. And nd you’re also right to know that it’s built on much more modern faster scalable technologies. And we mentioned Snowflake, for example, the performance benchmarks are multiples better than our older engines. And so secondly, on the economics, if you take a look at its impact on learning, I I’d say not to oversimplify, but the older methods were, you know, slow getting people their data, harder to extract less configurable, less able to integrate multiple multiple data sources. Essentially, the te old data warehousing technologies were just clunky. And now we can pull data in from other applications and the reporting capabilities. So the flexibility is just much, much greater as we release the he basic insights that comes with the HLC replaces the old kind of reporting capabilities. And then insights plus provides a new level of analytics helping measure learning effectiveness, for example. And there’s minimal benchmarking service now, but that’ll come soon. And so yes, there’s an upgrade economic pathway as well. So not only is it faster, better, smarter, more flexible and based on newer tech stack, and I think our customers, you know, one of the biggest things you do in learning is you, you pull data and you make sure you’re compliant and you make sure you’re on track and how you comparing to others in the industry, how you benchmarking your scores. What do you, what does your workforce know, what’s the competency profile so that use of data is critical and it’s so great to be able to replace, you know, ’15 year old architecture with a modern one. And in the last 30 days, start to really deploy it into our top accounts and ad get great feedback. So and ad again, we did mention it has incremental new order by incremental contract by. So when you buy the insights plus it’s a, it’s a buy up and results in incremental revenue growth for us. So for all those reasons, we’re excited and don’t forget, you know, you can expect announcements over the next three quarters on new reporting capabilities for other products built on the same new technical architecture. So you know, watch for that as well. You know, by the middle of next year, we expect to really lever these capabilities across our whole ecosystem which again is reflective of the platform strategy. Thanks for the question.

Great. That isgreatto hear. And, and then maybe as a follow up, I’ll switch gears a little bit just on capital allocation and specifically the M&A environment thinking about the, the comment or the expectation that we could see that start to pick up over the next ’12 months or so. iam curious what’s driving that inflection in your view, I guess, is that just stability in the macro environment or something else that maybe catalyzing some of those meal opportunities here? And then, is there anything you would share in terms of areas of the solution set today that you think would, would make sense to bolster through M&A versus organic investment?

Robert Frist

Yeah. Great, great question. Lots to that question. I do think the macro conditions are improving for strategic buyers like us, meaning a little bit of a price recalibration for targets that, that, you know, maybe that’s got a little frothy that that said there’s, you know, anywhere there’s a really hot, really great company, there’s also a lot of active bidding. Now there’s a lot of private equity money on the side that, but I would say just overall the macro conditions for us, the way I view them through our lens are, are, are we think improving? And so, we’re, we’re, we’re working hard to try to make that a reality and, and you know, to finish the discussion earlier where we talked about the 7% to 10% growth. I broke it down into two pieces. I failed to talk about the second piece. So the first piece was 5 to 7 organic, which we’re going to deliver for this year. It looks like the other was 1 to 3 inorganic. But remember that was spread over multiple years. And so while we’ve been very quiet on the M&A front for, I’d say ’24 months now, somewhat intentionally but also somewhat trivial to macro conditions. We’ve teed up some deals, decided they weren’t the right fit. We decided to focus on the core three apps and the platform technology for, for ’24 months. But now we’re getting to where we feel we can fold things in. And I think the first things you’ll see for us and hopefully in the next two quarters are small immaterial tuck ins, but they support existing lines of business. Yes, like categorically what we, what we launch, I think over the next couple quarters, you’ll see things that you will understand that fully be supportive of the businesses that we’re currently in. So learning credentialing and scheduling predominantly and our two social networks that we talked about our ’22 communities, one for students and one for nurses. And so I think you’ll see investments early. The next set of M&A we do in the next couple quarters would be related relatable to those products. And then, then we might consider, you know, later, second half of next year, if things expanded our model. But we’ll, we’ll kind of slow walk around this and ’24 months of inactivity followed by a couple of quarters and, and, and hopefully, for example, we did just complete a minority investment. First one in quite some time a few weeks ago. And it’s about a million dollar investments, immaterial small, but it’s into a company that will bolster our business opportunities with Nursegrid, learn the app we talked about. So we’re super excited about that watch for that announcement, but it’s a little million dollar capital deployment into a company that will improve our ability to service nurses on the Nursegrid network. We will even. So we’re super excited about that. We’ll, we’ll work on announce that later, but smaller deals probably anything done in the next quarter or two would be immaterial, technically, measurably immaterial but supportive of current lines and then maybe later next year as things as we get where we want to be with our platform, we would expand the definition of our business by expanding the types of acquisitions. We look at hope that helps characterize our M&A program, but we wanted to be active. We obviously have $95 million of cash or almost $95 million of cash. We have an untapped line of credit. Currently, it’s $50 million and and probably have much more access to debt if we needed it. So we’re going to be looking and we’ve teed up a few deals, that, that we’ll work on again. Immaterial and scope and nature. But, show that there’s some life in the pipeline.
I hope I didn’t drop you guys still there.

Operator

Thank you one moment for our next question and our next question is going to come from the line of Richard close with Canaccord Genuity your line is open. Please go ahead.

Richard Close

Yes, thanks. Congratulations on this success. Bobby, you know, I think it’s been two quarters in a row. Now, you have given some examples of pretty significant growth in a customer on renewal. But you were, you know, I mean, I guess last quarter sort of warning us, not warning but saying, hey, you know, that is not necessarily, you know, completely normal in all cases. But if you’re getting the escalators and now you have these new products, do you think that these larger renewals or expansions are going to be, become more prevalent?

Robert Frist

Well, of course, it’s our, our focus and we have, you know, 60 account managers that look at blending new products into every renewal. So we’re getting a little better, I’d say at showing showcasing more products at renewal and, and they’re getting more logical because they feel like more extensions when they’re interoperable or there’s a case to be major interoperability in the near future. And so I hope, I mean, our, our, if you look at our sales organization, let’s say it’s a 200 plus people. It’s roughly 130 or so or quote of car specialists, meaning they represent specific products and 60 or so our account manager that, that work on what you just talked about creating a better blend and they really watch the renewals and focus on the AR R. The, the account Management Group focuses on the, the annual recurring revenue and account and, and usually if an account has ’10 products, they drop two and add three or four, you’re trying to drive the AR R up. And so they’re looking at changing the blend and mix of products in the accounts and I, you know, hopefully they continue to get better and better at that. The cases I gave today, which show growth were critical because they featured the adoption of the platform technology, the AP is and the other pull through products. So for that reason, we’re excited, but you’re right, we needed to be more typical than, than atypical and, and we do have 60 people focused on making that happen.

Richard Close

Okay. That’s helpful. And then Scotty maybe just a little bit more on the consumption contract or customer, you know, that led to the lowering of the revenue. Was there anything specific that, you know, the levels didn’t accelerate as you expected? You know, for the second half, anything to call out?

Scott Roberts

Yeah, I mean, I think that’s kind of what I explained on the call was that they did pick up in the third quarter versus the second quarter, but, just don’t see the pathway to get to the, I guess, recoupment of the, of the deficit that we saw in the second quarter. So they didn’t like, over, over, you know, consume in a, in a manner that we felt like it was going to push through to get to the, to the deficit that we saw. So we kinda, you know, kind of forecasting that to be a little bit off again.

Richard Close

Okay. And then just really quick on the product declines. You know, when does that sort of move to the rear view mirror? Is that just like as things come up for renewal, how is there any time line? We can sort of set in terms of that?

Robert Frist

No, not yet Richard, but I’ll, I’ll work on that here. Here’s what I would say right now. We’re very carefully, kind of classified our many lines of revenue by whether they’re growth products, new products, we call them legacy products, which means they’re supported and encouraged and maintain. Like if you look at even even ansos right now, we call a legacy product, but it’s not a sunset product yet. And so we’re not in the active phase of saying, look, we’re, we’re we are actively sunsetting, we’re changing the support models, we are not there yet. And so I I think next year we’ll get a little closer to the, the life cycles and trajectories of some of these core legacy products, which, you know, if you think about how we built credentialing, we bought a company called Morrissey, a company called helpline and they still have a lot of legacy customers and they’re profitable customers. They’re also the highest risk customers because our competitors try to convert them just like we do to newer software. And so if you think of Morrissey and helpline and Ando as three examples of legacy, what we need to do in the, in the coming year is figure out when legacy becomes sunsetting. And none of those are sunsetting right now, we’re still supporting them again, they contribute to our EBITDA and our overall cash flows. But they are definitely not growing. They are either shrinking by converting up to the same in this case, credential streamer Ship Lizard, or we are losing them to the market as, as they’re also targets for our competitors. But we are supporting them, we’re having our quarterly, you know, updates to them. We’re having webinars, those customers, we’re trying to maintain them because they are profit contributors to our business.
And so right now, I would say in these three major ones, we just talked about Morsey helpline and so we classify them as legacy customers and we service, service them really well or, and we try to improve our service to them we do a little less frequent patching and updates, but we still maintain and, and make current of their basic infrastructure and holding them for the day when they’ll be ready, we’ll be ready to ask them to make a firm migration. And so, that’s kind of where we are, I’d say next year, we’ll get more clarity on, on quantifying those and, and kind of having a path for them. And once they’re officially declared to be sunsetting products, then, you know, that would still probably be a multi year journey where, where people have choices on migration strategies and things like that. So I think it’s going to take us some time to work through it, but I think we’re getting better at stabilizing them in the last few quarters instead of losing them to the market. But again, it is the single biggest challenge we face in our total growth profile is, attrition in those legacy customers.

Richard Close

Okay. Thank you very much. Congratulations.

Operator

Thank you. And one moment for our next question and our next question comes from the line of
Constantine Davides with citizens JMP Securities. Your line is open. Please go ahead.

Constantine Davides

Thanks. Bobby, just a couple of platform questions. First. I think it’s been a couple quarters since you’ve given this. I’m just wondering how many users have claimed it of each stream ID at this point. And then second, I guess more of a bigger, bigger, bigger picture question just when you’re on the other side of this platform initiative?
Do, do you see it helping more in terms of accelerating the top line growth file of the business profile of the business? Or is the impact more going to be just in terms of the margin profile of HealthStream?

Robert Frist

Well, we wouldn’t have undertaken this you know, nearly four year journey and actually, in many ways, goes back before that, where we started changing our, our strategies around data accumulation, things like that. So we, we wouldn’t have undertaken this if we didn’t think it provide a growth trajectory to the company, both, you know, hopefully operating leverage of shorter time to develop new products and better cross selling of products. And so, you know, I think we hope that the end of this rainbow is not just better core technologies, but a better growth rate as well. So I just want to make sure we don’t just talk about it as a tech stack. It’s, it’s a tech stack that we think drives growth and allows us to think about growing in, in new and exciting ways somewhat related to that. You know, the when we integrate a partner, like I mentioned, we made a minority investment and I’m going to go ahead and tell more about it because I misspoke. I just got texted to correct it. Well. And so we put a quarter of a million in. So, again, very small investment into a small fintech start up called Plany. And now, so I’m announcing that and nd, and it’ll be using our ur platform technologies to integrate their services, which we think their services will bring value to the 600,000 nurses in our Nursegrid network. And sometime before year end, we’ll announce the integration of their capabilities in the nurse grid and ad generate new financial opportunities for the company leveraging our platform strategies, our platform technologies to achieve that rapidly. So check out plan, it’s a fintech that provides the money saving strategies to nurses that we think will be beloved as much as Nursegrid for helping nurses save money when they’re you know, they’re eliminating student debt and paying off loans. And so when you, when you think of an ecosystem powered by a platform, you think of new ways to generate growth and this little minority investment we just made of about a quarter million dollars in plan.
That is a good example of the kind of thinking that that a true ecosystem, a true platform company can think about that wouldn’t have been possible, even thought of as a revenue growth opportunity before the platform was built and executed on. As far as the end of the rainbow. There is no. And when you’re a platform company, it’s a an endless pursuit. And so you have to have discipline and how much capital you put in, how fast you build it. But there won’t be a crossing of the chasm here where we’re kind of oh the platform’s done, you know, it just creates new opportunities to build and, and therefore, and then, but the new opportunities can create new types of data monetization strategies or growth strategies. And so, again, overall super excited, I, you know, we’re three or four years into its development. But the fun part is this year, we started seeing real tactical and operational benefit and as evidence by our ability to quickly integrate a partner like Plany and or launch a revolutionary new reporting and analytics framework that we charge for called Insights Plus.

Constantine Davides

Thanks. And just the, the first part of the question on the, how many users have claimed their I DS at this point?

Robert Frist

We haven’t released claimed ID numbers. Maybe that’s something we could consider for our investor conference, which again, we’ll, we’ll target that late January, early February before our, our next year report, probably. But certainly, next, early next year, we’ll try to get an investor. That’d be a good topic to talk about that because as you know, it’s a complicated topic, there’s, there’s a number of I DS issued and then there’s those that are claimed and then there’s those that have what we call multiple keys on that key chain. So having a unique idea is one thing. But having a unique idea for each of our ’27 different applications is another thing. And so the whole we call Keys on keychains initiative, maybe that’s something we can address in our investor day.

Constantine Davides

Great. And then one last one for me on scheduling are, are we at the point where sequentially the growth in shift wizard is starting to eclipse the, the attrition of the legacy product.

Robert Frist

Maybe another. So in our invest, that’d be another great opportunity to look at these crossover opportunities when you look at because the same question maybe exists when you look at credential stream against the acquired companies, Morris and help line which again have installed customer bases. It might be a good discussion to, to take a few of these cases and talk about that crosswalk. I mean, we’re excited to be able to show net growth of 4% even during the crosswalk. But obviously, we’ve had more of a drag on overall growth from, from these legacy applications than we wanted. But ut nevertheless feel that, you know, we have good plans in place and do our best to manage through those migrations over the coming years.
I feel a bit like a politician answering that because we haven’t published the crosswalks yet and the, the plans and as I said, even earlier, they’re more classified as legacy customers. There are no active rollout of sunsetting plans. And so but that’s something we’ll tackle in the coming years.

Operator

Thank you. And one moment for our next question and our next question is going to come from the line of Vince Colicchio with Barrington research. Your line is open. Please go ahead.

Vince Colicchio

Yeah, thanks, Bobby. Most of my questions have been answered. Just curious, could you update us on ship wizard as far as how far along it is in terms of being, where you want it to be for the large organization market?

Robert Frist

Yes, I did just get an update on that the other day and in our recent board meeting actually yesterday. And here’s what I would say about that. I think by the end of Q2 next year, we’ll be better than feature parity. And that’s at all levels of scalability reporting and data because we just mentioned, for example, we launched Insights Plus for learning. We turn our attention to data management on, on, on credentialing as well. So, and on scheduling. And so I think what I would say is Q2 of next year, we should have the kind of feature parity and, and, and beyond, we think will actually be better than the legacy application set. So I think, and, and also we’re already at the place where the ship wizard revenue run rate is higher than the ansos revenue run rate. I believe that’s an accurate statement. So we’ve begun the crossover and on the feature period that we think is necessary to improve our retention rates. I would say Q2 of next year.
Thank you.

Operator

Thank you. And I would like to hand the conference back over to Robert Frist CEO for any further or closing remarks.

Robert Frist

Well, thank you. I think we’ve covered everything I wanted to cover today. So we’ll look forward to reporting our next quarterly earnings call our year end results, which will be later or early next year. I think end of February, it’s going to be a while since we talked to you guys. That’s, we’ll probably work to insert an Investor Day and there’s somewhere between and we’ll focus on wrapping up the year strong. So thank you everyone for participating in our earnings call and we look forward to continue dialogue with investors in the coming days. Thanks. Bye.

Operator

This concludes today’s conference call. Thank you for participating and you may now disconnect.