HealthStream (HSTM) Q1 2019 Earnings Call Transcript

HealthStream (HSTM -1.96%)
Q1 2019 Earnings Call
April 23, 2019 9:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good morning, ladies and gentlemen, and welcome to the HealthStream first-quarter 2019 earnings conference call. [Operator instructions] As a reminder, this call will be recorded. I would now like to introduce your host for today's conference, Ms. Mollie Condra, vice president, investor relations, and communications.

Mollie Condra -- Vice President, Investor Relations, and Communications

Thank you, and good morning. Thank you for joining us today to discuss our first-quarter 2019 results. Also on the conference call with me are Robert A. Frist Jr., CEO and chairman of HealthStream; and Scottie Roberts, interim CFO and vice president of accounting and finance.

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 risk and uncertainties that could cause the actual results to differ materially from those projected in the forward-looking statements. Information concerning these risk 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 and 10-Q. So with that start, I'll turn the call over to Bobby Frist.

Bobby Frist -- Co-Founder and Chief Executive Officer

Thank you, Mollie. Good morning, and welcome to our first-quarter 2019 earnings calls. Across all of our core financial metrics, we ended the first quarter of 2019, strong. Compared to the same quarter last year, revenues were up 19%, operating income was up 44% and adjusted EBITDA was up 22%.

We ended the first quarter with a cash balance of $147 million. Supporting these strong financial results in the first quarter, we reiterated our revenue guidance and raised operating income guidance. However, I want to share with you three important factors that should be taken into consideration as you contemplate the rest of the year. First, we now believe that quarterly revenue from sales of legacy resuscitation products peak toward the end of the first-quarter 2019.

We expect a sequential decline in revenue from legacy resuscitation products beginning in the second quarter and continuing throughout 2019 and 2020, and declining to zero in the first quarter of 2021. As a result of these revenues peaking in the first quarter, we necessarily wouldn't expect the same year-over-year growth rate through the remaining quarters of 2019. Second, as we discussed on our last quarterly call, we are moving our corporate location to a new office in Nashville, Tennessee. This will necessitate an increase of approximately 2 million for the remainder of 2019 in operating expenses, which is already factored into our 2019 guidance.

This incremental operating expense increase reflects the current Nashville market conditions, but it is still less expensive than it would have been to stay in our previous location. Third, we expect to increase expenses throughout 2019 in product development, sales and marketing. Our new hStream technology platform and resuscitation solutions are two areas among several where we are actively investing in innovative new products and services for our customers. Now, the quarter was busy in lots of ways with those items discussed.

I want to talk about the longer list of accomplishments during the first quarter. We acquired a company, we launched and began contracting for our new Red Cross resuscitation solution. We expanded our executive team and we launched the first cohort of companies that are integrating with the hStream platform technologies. And let's highlight a couple of those.

As a reminder, our new Red Cross resuscitation suite is comprised of BLS, ALS and PALS, which is Pediatric Advanced Life Support. Competency development curricula, it brings an updated, highly adaptive competency-based development solution to the healthcare professional market. It offers certification to healthcare professionals successfully demonstrating proficiency and life-saving resuscitation knowledge and skills. I'm excited to report that in the first 90 days since launch, we have contracted with eight new customers for the American Red Cross resuscitation suite.

These new contracts are from a mix of hospitals and healthcare facilities from across the continuum of care. Six of the new contracts were signed in the first quarter and two were signed this month. So in just a short 90-day since launch, we're already beginning the contracting process and winning customers. In fact, some were direct takeaways from the previous platform.

The first implementations of the new resuscitation suite are set to begin in May, so we are not expecting material financial contributions for 2019 from this suite. We have a solid pipeline and are encouraged by the market's reception to our new solution for resuscitation certification that we believe is more innovative, more effective and more cost-efficient. Second area to discuss is our acquisition. In January, we announced our acquisition of Providigm.

We're representing an investment in our continuum of care offerings and expanding our footprint in this market. This acquisition is a natural fit because of the workforce development requirements in skilled nursing facilities overlap with those in acute care hospitals. It is exciting to deploy our capital into adjacent growth opportunity early in the year. During the first quarter, Providigm was focused on product development activities of abacus, its market-leading, SaaS-based quality improvement program adopted by over 2,200 skilled nursing facilities.

New CMS requirements take effect in November of this year that require skilled nursing facilities to have programs in place to assess competencies, provide competency-based education and document their effectiveness for their clinical staff. This focus on building SaaS software, which is well aligned with HealthStream's core business, has led us to scale back on Providigm's facility survey services, which is a nonrecurring and historically contributed approximately 1 million in annual revenue. The integration of Providigm is well under way with HealthStream teams making progress to welcome our new colleagues into our culture and operations. With those two updates in mind and the three highlights I provided earlier and the excellent financial performance, I'd like to turn it over to Scottie Roberts to provide a more detailed discussion of the financial metrics for the first quarter of 2019.

Scottie Roberts -- Vice President of Accounting and Finance

Thanks, Bobby, and good morning. Today, I'll discuss our first-quarter financial results and provide some updates on our 2019 guidance. As a reminder, the discussion of our results will be for continuing operations only, as last year's first quarter included the divestiture of the patient experience business. I'll begin with our highlights for the first quarter: Our revenues were up 19% to 65.2 million; operating income was up 44% to 5.4 million; income from continuing operations was up 32% to 4.8 million; our earnings per share from continuing operations were $0.15 per diluted share, compared to $0.11 per diluted share in the prior-year first quarter; and adjusted EBITDA from continuing operations was up 22% to 12.5 million.

Revenues from our workforce solutions segment were 54.3 million, and grew by 21% over the prior year. Several factors contributed to the growth in Workforce revenues. First, revenues from our legacy resuscitation products increased by 41% to 17.3 million in the first quarter, compared to 12.3 million in the prior year. Strong sales of these products in the fourth quarter of last year contributed to the year-over-year increase.

We expect revenues from the legacy resuscitation products to approximate 59 to 60 million in 2019, with approximately 56% of the revenue expected in the first half of the year and 44% in the second half of the year. Revenues from these products for each remaining quarter of 2019 are expected to decline sequentially compared to the first quarter, and are also expected to be flat in aggregate compared to the same periods in the prior year. As Bobby just mentioned, we made our first sales of the New American Red Cross resuscitation suite products in the first quarter, and we expect some modest contributions to revenue later in 2019, which is factored into our guidance. We'll continue to provide updates on the progress of this product line transition over the next several quarters.

The Providigm acquisition, which occurred in January, added 1.5 million of revenues during the first quarter. During our last earnings call, I mentioned that Providigm was expected to contribute 8 million of revenues in 2019. We have now scaled that expectation back and expect Providigm to contribute approximately 7 million of revenues this year. This revision is based on our decision to discontinue Providigm's facility survey business ahead of schedule.

The facility survey business is a service and not a software-driven business line, which does not generate recurring revenue. We have chosen to focus instead on Providigm's core business, which is a SaaS-based quality improvement application known as abacus. Revenues from our provider solutions segment were 10.9 million and grew by 10% over the prior year. The new SaaS-based platform, Verity, which was launched over a year ago, is beginning to contribute to this segment's revenue growth.

Our gross margins declined slightly to 58.8% this quarter, compared to 59.4% in the prior year, which was influenced by the growth in revenues from our lower-margin legacy resuscitation products. Our operating expenses were up 14% over the prior year and were mostly influenced by growth in staffing levels and the addition of expenses from Providigm. Compared to the prior year, product development expenses increased by 15%, sales and marketing expenses increased by 5%, depreciation and amortization increased by 8% and G&A expenses increased by 29%. This growth in operating expenses reflects our investment back into the business to enhance our product capabilities, expand our sales and marketing efforts and meet various other needs to support our operations.

Our operating income was up 44% to 5.4 million, and adjusted EBITDA improved by 22% to 12.5 million. Also during the first quarter, discontinued operations associated with the sale of the patient experience business last year, includes an additional gain of 1.2 million. The additional gain resulted from the release back to us of escrow fund associated with the transaction. Now let's take a look at the balance sheet and our cash flow statement.

Through the first quarter, we have deployed over 37 million of our capital by making several key investments: We acquired Providigm in January for 18 million in cash; we spent over 16 million for capital expenditures; and have invested a little over 3 million for minority interest in companies that will integrate their solutions with hStream. Also included in these amounts are expenditures for our new corporate office, which approximated 8 million in the first quarter. Our cash and investment balances ended the quarter at 147 million and working capital was 113 million. Our day sales outstanding were 52 days for the first quarter, compared to 60 days for the prior-year first quarter.

Deferred revenues were also up 6.5 million due to strong sales activity at the end of last year and timing of billings to customers. I'd like to also mention that during the first quarter, we adopted the new accounting standard for leases, which resulted in us recording certain operating leases onto the balance sheet for the first time, increasing our total assets and liabilities by approximately 32 million. The adoption of the new leases accounting standard will reduce our working capital position due to increases in current liabilities for the lease obligations, but it's not expected to impact our financial condition, results of operations or cash flows. Now let's review our financial guidance.

Yesterday's earnings release included updated financial guidance for 2019. We are reiterating our revenue guidance issued on February 19th, and continue to anticipate that consolidated revenues will range between 251 and 258 million, with revenues from the workforce solutions segment ranging between 207 and 213 million, and revenues from the provider solutions segment ranging between 44 and 45 million. We're increasing guidance for operating income and now expect operating income to range between 11 and 13 million for 2019, compared to the previous range of 10 to 12.4 million. Operating income for each remaining quarter of the year is expected to decline from levels experienced in the first quarter.

The primary drivers of the anticipated declines include lower revenues from legacy resuscitation products, increased investments in product development, sales and marketing and higher expenses for our new corporate office. We anticipate the capital expenditures will be approximately 36 million, compared to the previous guidance of 35 million, and we expect the annual effective income tax rate to range between 26 and 28%. This guidance does not include the impact of any other acquisitions that we may complete during 2019. Thank you for your time this morning.

And now, I'll turn the call back over to Bobby.

Bobby Frist -- Co-Founder and Chief Executive Officer

Thank you, Scottie. As we wrap up, there are kind of two more topical areas I'd like to hit. So let's close with an update on Verity, our provider solutions business and a discussion and update on our strategy for hStream, our platform-as-a-service technology. First, let's take Verity.

In the first quarter of 2018, we announced the launch of Verity, our new SaaS-based platform for managing credentialing and privileging in healthcare organizations. As we've previously discussed, the migration of HealthLine and Morrisey customers from a hybrid SaaS platform to the new Verity SaaS platform will extent over several years. As of the end of the first-quarter 2019, 70 customers have contracted for the new Verity platform, and our first customers have been fully implemented on Verity. This is a very exciting inflection point, and I'm proud to announce these successful migrations and 70 new contracts for the Verity platform.

As our company has extensive experience and expertise in making such platform migrations, we anticipate continued progress in this effort as customers enjoy the benefits of the new Verity platform. Across our provider solutions products, new business sales were strong in the first quarter of 2019 and included several takeaways from competitors. Some of the larger agreements signed in the first quarter were from, for example, Stanford Health, SCL Health, Probity Medical Center, and Joint Township District Memorial Hospital. So it's exciting to see this new exciting platform make progress in the marketplace and through actual implementations and live customers.

What an exciting time for the Verity team. Let's turn our attention to hStream for just a moment. hStream's SaaS-based platform has long been -- well, HealthStream's SaaS-based platform has long been one of the most adopted workforce development platforms in healthcare. To facilitate innovation and growth of our ecosystem, HealthStream's new platform technology, hStream, was launched 12 months ago.

Already, healthcare organizations representing 1.84 million subscriptions have contracted for hStream. That's up from 1.51 million subscriptions at year-end 2018. The hStream platform-as-a-service capabilities are facilitating new types of application and media partnerships to deliver valuable services and impactful content to our healthcare organization customers. hStream also serves as a bridge between our workforce development and provider solutions business segments.

In third quarter of 2018, Verity began including hStream for Verity subscriptions and contracts for its new SaaS platform. At the end of the first quarter, of the 1.84 million total hStream subscriptions contracted, over 69,000 of those hStream subscriptions were from a Verity contract. In January, we announced the addition of Scott McQuigg to our executive team, where he serves as senior vice president of hStream solutions. He is responsible for identifying, growing and developing new hStream content, applications and partnerships.

To that end, we announced in the April -- in April, the first cohort of companies integrating with hStream. Those companies included Innosonian America, NurseGrid, Perception Health and CloudCME. Each of these companies have developed innovative healthcare solutions and will benefit from greater exposure, easier connectivity and more rapid implementation with the nation's healthcare workforce via hStream. As part of supporting innovation and growth of these companies, HealthStream also chose to make a minority investment in NurseGrid, Perception Health and CloudCME.

The addition of our first cohort of four outstanding companies that are integrating with hStream is a great start to the unique powerful solutions that our platform-as-a-service approach can bring to customers. Strategically, everyone wins. Customers get more choices and services, companies gain greater visibility with the nation's largest network of healthcare professionals and HealthStream facilitates the most expansive marketplace of workforce options for the healthcare industry. As we discussed last quarter, we believe that the number of hStream subscriptions is an increasingly important metric for measuring progress across our business initiatives.

We look forward to reporting of the progress of hStream both in terms of subscriptions and the value it brings to our customers and partners. In closing, I'd like to remind you of our annual shareholders meeting, which will be held on Thursday, May 23rd at 2:00 p.m. Central Time, here in Nashville, in our new corporate office at Capitol View. I hope many of you will be able to attend this and visit us for this important meeting.

At this time, I'd like to turn it over for questions from the investor community. 

Questions and Answers:

Operator

[Operator instructions] And our first question comes from Ryan Daniels with William Blair. Your line is open.

Ryan Daniels -- William Blair -- Analyst

Yeah, good morning and thanks for taking the questions. Bobby, one for you. You talked a little bit more about your novel resuscitation products and kind of the successful early launch with new clients. I'm curious if you can talk a little bit more about what exactly is resonating with those clients with the new product? Is it pricing? Is it capability, functionality? Just what is driving the interest there, to give us a better feel for potential sales outlook for that product?

Bobby Frist -- Co-Founder and Chief Executive Officer

Yeah, it's just definitely capability. One of things we're most excited about is that the courses are adaptive and they are truly adaptive. Which means that the time in course is shortened because -- through the pre-assessment process, the future delivered content is targeted to that individual. So in prior versions, you may have taken a test and then the course didn't change, but it helped guide you through the material.

In this -- in the new platform, the pre-tests and the pre-assessments actually change the material that's delivered to you and is more targeted to where you start and enter. So we'd say, it kind of meets you where you are. And that results in a compressed time frame and a more targeted delivery of content. Also, the physical product we think is exciting as well.

The manikin partner that we have chosen to launch with, and again, we're open architecture in connecting the multiple manikin partners to continue to drive innovation, but the first launch partner is Innosonian America, and they have some very innovative and unique features built into their hardware as well. In addition to being Bluetooth and iPad-based feedback and providing feedback on our lower-end products comparable to the very highest-end products in the marketplace, the manikins provide a unique and patented feedback -- visual feedback to the users, which we think adds a tremendous value to the learning experience. And also, not only have we adapted the program at the individual level to optimize their time in the program, we've built a series of tools that allows for optimization at the institutional level. We call this feature the interval valve.

And it allows organizations to set and adjust the practice intervals for the people participating in the program. We think this flexibility is greatly appreciated by the customers and a great win when they -- we all agree industrywide that more practice is a better thing. But each organization needs the flexibility to adapt to the practice intervals that they see fit for different audiences in their workforce. For this platform, the new American Red Cross resuscitation suite, coupled with tools built by HealthStream, provide this unique institutional-level adaptability.

So it's adaptable at the individual level and adaptable at the institutional level, along with innovative new and lower-cost hardware. And cost is a variable. We know that the markets are very sensitive and that it's not a really good time to be increasing cost. So if we can deliver a superior educational experience with a proper knowledge test based on the same international standards at a lower cost, we think that is also greatly appreciated by our customers.

And I think we're finding out that we've achieved those objectives, and we're working hard to take that message into the broader market. So while it's a small start, it's fun to know that we've been able to win a few hearts and minds early in what's going to be a rather long-end introduction process to bring these exciting new products to the market.

Ryan Daniels -- William Blair -- Analyst

OK. That's super helpful color. And then my last one and I'll hop off into the queue, the Providigm integration. Are there any other major milestones or changes that you anticipate? I know you talked about a earlier exit for the survey business, maybe it allows you to integrate the core business, cross sell that a little more actively.

So just any updates on what's left there? And then has it led to any cross sells of the core workforce product into that client base as well?

Bobby Frist -- Co-Founder and Chief Executive Officer

Sure. We're just getting started with Providigm and its opportunity. It's really exciting. And several announcements pending in that area.

One of the things driving the business, first, was just to get it organized and be a SaaS application company, and the exit of the survey business gets us really far along that journey and it's essentially going to be a nice high gross margin SaaS business now, and we're excited about that. Secondly, there is a deadline moving in November that's going to create more formal requirements around the linkage between the quality programs that the abacus system supports and the education and training initiatives and intervention initiatives for the workforce. So as you can imagine, the Providigm teams are working diligently to launch new software that will meet these needs better. And then right behind that, we hope to announce better integrations with the educational platforms and technologies of HealthStream to provide that more automated remediation development capability that we're all hopeful for in the industry.

So it's an exciting time at Providigm. We're adding some resources in customer support. We're narrowing its focus down to the SaaS applications. And we're gearing up for the launch in November to meet these new government requirements -- enhanced software to meet those requirements.

Ryan Daniels -- William Blair -- Analyst

OK. Great. Thank you

Operator

And our next question comes from Matt Hewitt with Craig Hallum. Your line is open.

Matt Hewitt -- Craig-Hallum Capital Group LLC -- Analyst

Good morning. Thank you for taking the questions.

Bobby Frist -- Co-Founder and Chief Executive Officer

Sure. Go ahead, Matt. Good to talk to you.

Matt Hewitt -- Craig-Hallum Capital Group LLC -- Analyst

So I guess, following on some of the resuscitation questions. First, with the competitive conversions, the takeaways, one of the things that was talked about last year was the American Heart Association card. Have you found a workaround for that? Maybe walk through the process and some of the opportunities to take more customers from the prior relationship.

Bobby Frist -- Co-Founder and Chief Executive Officer

Well, first, there is a great greenfield opportunity. There's a lot and lot -- there's a lot of healthcare organizations that still do traditional training and education in this area. So there's a lot of opportunity for everyone in the open space to really bring people to more modern methods of training and education. And so we're excited about that opportunity.

The -- from the card standpoint, the great news here is that the American Red Cross brand is a global brand. It's associated with high quality. As you probably know, the American Red Cross is one of the top providers of blood supply to the U.S. health system.

And there's really no more rigorous quality assurance programs that can be made to protect our blood supply. The American Red Cross is known for managing a significant portion of America's blood supply. So it's a very credible, of course, global international brand. And they're putting their best efforts in science.

In addition to participating in the international process for setting the standards on resuscitation training, they're putting their best efforts into this product development and their brand. So we will be issuing an American Red Cross certificate, and we feel that it is an eminently credible brand that stands for high quality and excellent outcomes. So we're very excited to be bringing that message to the market. It's also important to note that both organizations have high-quality programs that are based on the same science, it's in international, global, public domain science.

And so as long as programs are built to those standards, while it will take time to educate the market because ironically a lot of the U.S. market really doesn't understand or appreciate how these global standards are set, we've been busy educating the market about those standards for quite some time. And we're getting receptivity as they have greater understanding that both programs in the market that are market-leading are mapped to and created from and derived from the same high-quality international standards and science.

Matt Hewitt -- Craig-Hallum Capital Group LLC -- Analyst

That's great. And then, I guess, shifting gears here a little bit. Under the old metrics that you provided regarding learning center implemented versus fully contracted. And now you're providing these hStream metrics, a big jump, 1.51 million to 1.84 million in the quarter.

I realize it's early days, but under the old metrics, it was 25,000 to 50,000 a quarter was kind of the expected range. What are your expectations for hStream? Or is it still too early to even know?

Bobby Frist -- Co-Founder and Chief Executive Officer

Sure. It's a little too early, but I can tell you a few kind of characterizations. The first is that as we're renewing contracts, and our typical contracts are two, three and four years. So if you took it on hold and thought of maybe a three-year contract average, it's immune to about a third of our base is up for renewal each year.

We're so far very successful in incorporating the features and benefits of this hStream platform integration technology. In fact, there is a whole set of upgrades to existing software that customers get when they include the hStream subscription in their contracts. So, so far, we've had a very seamless migration as these contracts come up for renewal that add the language in the contract representing the subscription to hStream, and then providing some of the benefits that come with it. For example, the old HealthStream learning center, there is a package of new updates to the learning platform that come when you subscribe to hStream.

The hStream subscription also helps you have access to some free content libraries, which is very exciting. And so there are plenty of benefits associated with upgrading to hStream. And so we haven't met really any resistance in that process so far. So our hope is that as we continue to go through the renewal process, we'll continue to include the hStream platform and activate the benefit that customers receive from that subscription.

Matt Hewitt -- Craig-Hallum Capital Group LLC -- Analyst

Fantastic. All right. Thank you very much.

Operator

And our next question comes from Richard Close with Canaccord. Your line is open.

Richard Close -- Canaccord Genuity Inc. -- Analyst

Great. Thank you. Congratulations. I guess, a couple of housekeeping in terms of just clarification.

The HeartCode, I just want to be sure I had this right, was 17.3 million in the fourth -- first quarter, that's what you said?

Scottie Roberts -- Vice President of Accounting and Finance

That's correct.

Richard Close -- Canaccord Genuity Inc. -- Analyst

OK. Great. And then just the comments on the operating income and for the remainder of the year, obviously, not expected to be at the level of first quarter. Can you talk a little bit maybe about the cadence in terms of second quarter through the fourth quarter? Is it like a step down -- you expect a step down in each of the quarters? Or is it evenly distributed through the remainder of the year?

Scottie Roberts -- Vice President of Accounting and Finance

Yeah, so it's -- there'll definitely be a sequential decline. We talked about operating income declining versus first quarter. And some of the drivers of that, the legacy resuscitation products starts to fall off. Beginning in the second quarter, should expect a sequential decline in the revenues for that and actually will be flat compared to the second, third and fourth quarters of last year.

So most of the increase we expected for the year has already occurred in that product category. That's 5 million of growth year over year, and that's the anticipated.

Richard Close -- Canaccord Genuity Inc. -- Analyst

Hello? Hello?[Technical difficulty]

Operator

Please standby.

Bobby Frist -- Co-Founder and Chief Executive Officer

Hopefully you can hear me. Richard, are you still there? Can you hear us? We had to switch lines.

Operator

[Operator instructions] Richard, your line is open.

Richard Close -- Canaccord Genuity Inc. -- Analyst

OK. Great. Hopefully that wasn't on my side. So thanks for the operating income answer.

One of the questions I had, Bobby, you mentioned a 3 million in investments that you made in the quarter with respect to, I guess, some of the health -- or hStream partners. Can you talk a little bit about the strategy with respect to making the investments in these companies? Is there something we should think about in terms of like most hStream partners might have some sort of investment in them by you guys? And what do you get out of that essentially? Is there any type of revenue share or a benefit for you?

Bobby Frist -- Co-Founder and Chief Executive Officer

Sure, sure let's talk about that. A great question. So it is a new model. And so we have this, these new forms of connectivity that will allow applications that we like.

Historically, we've sold a platform and like a learning platform and it drove consumption of content. And that's been a nice virtuous cycle. We sell a credentialing system and it drives consumption of things like privilege libraries and other form of content asset. In this case, what we're finding is that we can find companies that have really nice applications that may meet a need inside of our customers and help accelerate their growth as a business by better connectivity to our network of customers.

And so early on, as we learn how these connectivities work, we help these customers have access to our customer -- these partners have access to our customer base and we integrate the technologies that are kind of -- it's early stage, it's our first view. We want a little more control on those integration processes, a little more control over security. We want to have a little more say in the direction of -- a little more of a voice in the direction of the companies and its growth strategies as it relates to our customer base and our market, which is, as you know, very large. And so in a few of these early ones, we have taken an equity position.

But we only take the equity position to support some of that strong connectivity and early steering. I do not expect -- we have other partners that are integrating with hStream whether no equity involved. And in all cases, we expect a revenue share for helping connect these partners to our customers and helping them have visibility for their applications in our base. And so a good example would be CloudCME.

It's a really fantastic company. It's got a really nice and growing customer base. We found that it has -- it's a small company with a small overlapping customer base. About half their customers were HealthStream customers.

And in fact, for them to implement at one of our health systems before their relation with HealthStream, they required almost all the same work that we would go through, data collection, connectivity of the HRIS system. And this little application is very focused on the continuing medical education office at hospitals. And we had -- we found we had about 15 customers in common, but the customers were treating as independently. Meaning, that we both had to go through the security audits, we both had to go through the data integration, we both had to set up data migration strategies.

And so through the relationship with HealthStream, there'll be a more automated quicker way. They can integrate once with the HealthStream network and then be activated our customers, which we think will shorten their sales and implementation cycles and help them grow. And for that, we will take a revenue share. It's very akin to the way a force.com application partner works or an Apple App Store app works.

And again, we're new and it's an immature process. We just hired new leadership and some of the connections aren't as deep as we'd like them to be. So it's very new. But our -- the ultimate hope is that in the case of these companies, they have more seamless connectivity to our platform, which gives them more seamless connectivity to our marketplace.

And when they sell and grow their business and succeed, they will share some of those revenues with us for helping them grow and have access to our marketplace. And so it's new, but you can think of these as new forms applications, new form of content that we plan to lever. And what's exciting about it is each of those companies will be out promoting their connectivity to our platform as they walk into our customers. And we've begun the tour, for example, with NurseGrid.

NurseGrid's a very exciting company. They're the top, we believe. They're the No. 1 nurse application in the Apple app store and the Android app store.

It's a business to business -- it's a business-to-consumer app. The nurses download the app and allows them to share things like their schedules with each other so that they can coordinate time together and know who's working on their shift. While the company has built a business-to-business application that connects to all those end-users and allows the hospitals to better manage the schedules of their employees. So now we are beginning to introduce the business-to-business software to our health system customers, it's fantastic because we walk in and say, health system a, did you know you have 3,000 of your nurses already using NurseGrid? Wouldn't you like to take a look at this application unless you connect to those 3,000 nurses and facilitate their schedule management.

And so HealthStream will be helping NurseGrid take their business-to-business application into our customer base. And that in turn will help them connect to those nearly million downloads of the NurseGrid application. So another -- and we will revenue share for facilitating their growth and connectivity to our customers. And it also -- since it's a workforce management application, it fits a growing need in our ecosystem and it's consistent with managing the people of healthcare just as CME cloud is focused on the physician education office in a hospital and is also in alignment with our educational offerings that we bring to the table.

So in those two cases, we're bringing innovative Apple app-driven applications to our customers that are consistent with our workforce development theme, where we think we can help the companies grow. A minority investment, noncontrolling, so we can be involved in a bit of their governance to help them grow and then also oversee more tightly their technical integration and then a revenue share on the back end when they are successful. Our goal is to make them the fastest-growing applications in their respective categories by connecting them to our customer base. And again, it's very early game, Richard.

We only have these first three announced are going to probably take our time with these three before signing up a lot more. We're going to try to make sure some of them are successful before we go any further. I hope that helps.

Richard Close -- Canaccord Genuity Inc. -- Analyst

Yeah, that does. So the -- just I know you made an investment in juice analytics several years ago. And so this is -- seems different than that previous type of investment that you had made?

Bobby Frist -- Co-Founder and Chief Executive Officer

It's a little different. Although what we've done with juice is built some of our own house brand. And so they are infrastructure-level technology. And in turn, we've built, for example, our KnowledgeQ product uses the juice platform.

So in a sense, they are one of the first applications to be integrated with our network, but this is predated formation of these platform-as-a-service capabilities. And so juice is a good example of really the earliest form of integration of a software application to our network and really is the foundation for the concepts of hStream and platform-as-a-service for us.

Richard Close -- Canaccord Genuity Inc. -- Analyst

OK, great. Thank you.

Bobby Frist -- Co-Founder and Chief Executive Officer

Thank you.

Operator

[Operator instructions] And we have a question from Frank Sparacino with First Analysis. Your line is open.

Frank Sparacino -- First Analysis -- Analyst

Hi, guys. Just one for me, Bobby. If you look at workforce, and we strip away the legacy resuscitation business, the remaining business roughly 37 million this quarter. Can you give us a sense what would be some of the larger product lines in there? And then what is driving that growth year over year, which was pretty healthy in Q1?

Bobby Frist -- Co-Founder and Chief Executive Officer

Yeah, it's -- so there are several subsets of product families inside the workforce development. The first is clinical. And we have a great clinical leader in Trisha Coady, recently promoted to our c-suite, and she runs a very robust portfolio of clinical development and clinical education and clinical competency products, one of which is the American Red Cross resuscitation suite. But also in that family of products is our brand-new CE path, which is -- you remember us talking about our CE center.

And so it's kind of the second generation of CE center. It's a more intelligent continuing education platform for the broader clinical work staff. And it's really a fantastic product. It's an enhancement to the old CE center product, which was an aggregated educational library for the nurse professionals, for example.

So CE path is one of the new products here. We're really excited about it. It has more intelligence in how it recommends the courses and has a very large library. I think about 2,000 courses in CE path and it's a subscription content service.

So fantastic product. There are also software tools like Checklist that continue to perform very well. It's as basic as it sounds, but a lot of quality processes and educational processes, our Checklist is used to manage those processes. And our Checklist is, of course, fully integrated with our overall platform.

It allows for a preceptor to sign off on a preceptee, it allows for someone to sign off on a process, it's got all these functions built into it. And the Checklist product as hundreds of thousand -- I think over 800,000 subscribers now. And so that's an exciting product that's continuing to grow. So -- and then finally, in the clinical area, we have just birthed Jane, which is our new -- brand-new AI base.

We think, first of its kind in the market. And again, we're looking forward to our first sales of it. But the Jane is our new artificial intelligence-based clinical development system. And it takes development to a whole new level as it uses AI technologies from IBM to assess your clinical reasoning ability and then present developmental options and an individualized development plan to a healthcare worker, in this case, nurse.

And so -- and Jane is built, by the way, on two acquisitions we did three years ago. Nurse testing, which was a testing company, as well established testing company. And PBDS, which was a clinical reasoning and judgment system. It's taken us three years to build -- rebuild those businesses into this new AI-powered clinical development system and we're most excited about that and that's feature-driven, not present.

But CE path and Checklist are two examples. Also in the workforce section is the compliance product set. There the staple product is the third-generation compliance tool set, we call it KnowledgeQ. It uses the benchmark and analytic tool we mentioned from juice analytics, which is branded as part of KnowledgeQ.

It has a compliance course library, which is barring on the industry standard and has a long history of success there. So it's the first data-driven compliance optimization tool. It allows you to minimize time in the program, while maximizing education on these federally required topics. And so KnowledgeQ continues to gain in the market acceptance and market share, it's probably one of our faster growing products in the compliance suite.

And you should know that the teams building that are from an acquisition, HCCS up in New York, which is our compliance organization. Has a 45 dedicated employees as minimally that maintain and build these compliance products, and KnowledgeQ is probably the staple product in that family. And then, of course, resuscitation. You know the challenges to that and the caveats around that are.

We've kind of switched our partners there. We maintain a business relationship with the prior partner, which is going to be successful and we're supportive of their high-quality products. But we only sell, market and distribute and contract for the new American Red Cross resuscitation program. That partnership is off to a great start.

It's two years of behind the scenes development, an effective launch in the middle of the late January, the first sales coming in, in late March and early April. And so, while it's very new and it's subscription-based and it's going to take a long time to continue to bring this to market, we're really very excited about its early progress. We're both, we're ahead of plan and where we hope to be, we hope to just more educating the market. So those are some of the drivers that are all in workforce that we're excited about.

There are challenges in workforce as well and the resuscitation business being the primary and overwriting challenge that we'll continue to provide clear disclosures on or around that business. But as you can see, there's a lot of exciting new things coming inside the workforce section of our business as well.

Frank Sparacino -- First Analysis -- Analyst

Thank you, Bobby.

Operator

And our next question comes from Vincent Colicchio with Barrington Research. Your line is open.

Vincent Colicchio -- Barrington Research -- Analyst

Yeah, Bobby, most of mine were asked. I just have one. So could you provide an update on cross-selling activity within the provider solutions segment in terms of how its performing versus your expectations and maybe some of the things you can do to make it accelerate that?

Bobby Frist -- Co-Founder and Chief Executive Officer

Yeah, I think what's exciting there is that kind of all of the assets from the acquisitions have a place in the new Verity platform. And really the key now is to migrate customers to that platform, then they have access to purchase all the assets that were kind of derivatives from where they were acquired. And so the key is those 70 contracts for Verity and growing and the migrations that allows them to buy from a broader menu of services solutions, data validation. And so a lot of our energy for the next 36 months will be on both winning new customers to this new exciting platform and migrating them.

That puts us in the best position to upsell. So some of the early Verity wins include a broader spectrum of purchasing across what used to be kind of a disparate set of services to this integrated SaaS platform. And again, if I had to say, the focus of that business for the next probably 36 months is going to be these migrations and then upsell once they are on the platform.

Vincent Colicchio -- Barrington Research -- Analyst

OK. So basically, things are progressing in line with your expectation. It's a matter of transitioning to the Verity platform?

Bobby Frist -- Co-Founder and Chief Executive Officer

Yeah. I feel that we've been through several challenges with these three businesses in three locations, three different platforms, all the while building the new platform and finally launching it. And so to see the first successful migrations and wins, the feature set of the new platform is incredibly thoughtful. It includes capabilities from all the prior platforms and acquisitions that customers love the most.

So we think it is a highly competitive and very well-positioned new platform and that all of our focus will be on getting people on it and they can avail themselves of the buy-ups, the features that they would have bought separately from the prior companies.

Vincent Colicchio -- Barrington Research -- Analyst

OK. Thank you.

Operator

And we have a follow-up from Richard Close with Canaccord. Your line is open.

Richard Close -- Canaccord Genuity Inc. -- Analyst

Great. And just a follow-up on that last question, Bobby. What do you think the long-term growth rate is on the provider solutions for you guys?

Bobby Frist -- Co-Founder and Chief Executive Officer

Well, Richard, we -- because of all of these transitions, the migration to Red Cross, because the transition to the new SaaS application in Verity and the wholly new types of opportunities like the cohort of companies we went through, that are not producing revenue yet. Our long-term growth rates are really hard to see and as you know, we've narrowed our guidance down to annual growth rates. Our ambition is to be high growth, high margin, SaaS and PaaS software application network. But currently, obviously, with all these downward pressures, i.e.

the resuscitation product decline, that's going to be hard to show optically to the market for quite some time. So what we're going to do is try to pick some of the higher-growth products and talk about their growth rates, highlight the movement to hStream, highlight the movement of Verity to give people confidence that there are elements growing within. Because, again, as we talked about, the challenges of the next three quarters are to avoid modeling them after the first quarter. The first quarter in many ways represents kind of a culmination of some of the old product lines and the old performance.

And so I think we really want to spend our time focused here on managing expectations as we get through all these migrations, in particular, these next three quarters, where we're going to see the sequential declines resulting from the fall off now after peaking in the resuscitation revenue. So that said, growth rate, we provided our guidance for the year and you can already tell that, although revenues were up 19% in the first quarter of our prior year, we expect sequential declines from here forward and a lower overall blended rate for the year. So we're trying to manage growth rate expectations down into the low single -- into the single digits, not the low single digits, into the single digits.

Richard Close -- Canaccord Genuity Inc. -- Analyst

OK. And then just a clarity on Frank's question in terms of -- on the workforce. Providigm, that 1.5 million that was included in first-quarter workforce revenue, correct? That's where that resides?

Scottie Roberts -- Vice President of Accounting and Finance

Yeah, at the workforce solutions product category that will reflect in workforce.

Richard Close -- Canaccord Genuity Inc. -- Analyst

OK. OK. Just wanted to make sure I was looking at that right.

Bobby Frist -- Co-Founder and Chief Executive Officer

Thank you. Yes, it was a good quarter, but we want to speak to all of our investors and analysts to know that we're heading into some headwinds here, but we're obviously very excited about all the new products coming to market, new development, the new office, it's going to bring us all together and the new energy that goes with that. There are many, many things to be excited about. We also want to be cautious and have people be thoughtful about how they think about of the intermediate and short-run future, because there'll be plenty of financial challenges presented by these declining revenue streams.

I'm very excited and confident we'll work our way through those as we always have and come out stronger on the backside, but it's going to be quite some headwinds as we head into for the next several quarters. The good news is some of these migrations are well under way, we have early success in all the key areas that I considered challenges, the movements of the new Verity platform, we have early success there, the early contracts on our new American Red Cross program, which is very exciting. So the early indicators are that we have a good strategy to rebuild from what will be a declining and important product line historically to us. Thank you all for your time.

I guess, I'll see you if there are any remaining questions.

Operator

There are no further questions on the phone line.

Bobby Frist -- Co-Founder and Chief Executive Officer

Well, thank you. Congratulations to our employees for delivering a strong quarter, and we all know we're going to have to continue to bear down and focus on customer needs for the next several quarters to fight through all these opportunities and challenges. I look forward to seeing all of you to come visit the new operations in Nashville, bring us all together again, spread out all over Middle Tennessee it's going to be fun to be back together. Thank you to our investors for listening and following our story and look forward to reporting the next quarterly earnings report.

Operator

[Operator signoff]

Duration: 54 minutes

Call Participants:

Mollie Condra -- Vice President, Investor Relations, and Communications

Bobby Frist -- Co-Founder and Chief Executive Officer

Scottie Roberts -- Vice President of Accounting and Finance

Ryan Daniels -- William Blair -- Analyst

Matt Hewitt -- Craig-Hallum Capital Group LLC -- Analyst

Richard Close -- Canaccord Genuity Inc. -- Analyst

Frank Sparacino -- First Analysis -- Analyst

Vincent Colicchio -- Barrington Research -- Analyst

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