Healthstream Inc (HSTM) Q1 2021 Earnings Call Transcript

Healthstream Inc (HSTM -0.81%)
Q1 2021 Earnings Call
Apr 27, 2021, 9:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good morning, and welcome to HealthStream's First Quarter 2021 Earnings Conference Call. [Operator Instructions]

I will now turn the conference over to Mollie Condra, Vice President of Investor Relations and Communications. Please go ahead, Ms. Condra.

Mollie Condra -- Vice President Investor Relations and Communications

Thank you, and good morning. Thank you for joining us today to discuss our first quarter 2021 results. Also in the conference call with me today are: Robert A. Frist, Jr., CEO and Chairman of HealthStream; and Scotty Roberts, CFO and Senior Vice President. I would also like to remind you that this conference call may contain forward-looking statements regarding future events and the future performance of HealthStream that could involve risks and uncertainties that could cause the actual results to differ materially from those projected in the forward-looking statements. Information concerning these risks and other factors that could cause the results to differ materially from those forward-looking statements are contained in the company's filings with the SEC including Forms 10-K, 10-Q and our earnings release. Additionally, we may reference measures such as adjusted EBITDA, which is a non-GAAP financial measure. The table providing supplemental information on adjusted EBITDA and reconciling to net income attributable to HealthStream is included in the earnings release that we issued yesterday and they refer to in this call.

So with that start, at this time, I'll turn the call over to Bobby Frist.

Robert A. Frist Jr. -- Chief Executive Officer

Thank you, Mollie. Good morning, and welcome to our first quarter 2021 earnings conference call. There is so much news to cover this morning. I can't wait to get started. But I think context is very important. And so first, we'll contextualize that the nation continues to move through the pandemic, and there are reasons for cautious optimism, especially here in the U.S., given that over half of the adults have now at least one vaccine dose and a 1/3 are fully vaccinated. And as we celebrate this remarkable progress, there are plenty of challenges still remaining regarding the pandemic that affects us as individuals and of course, our company as well. For example, figuring out our new work-from-home models and our approach to operating as a business and making them more whatever the new norm is, the new permanent new norm is going to be. We're working on that diligently now. So, what I can tell you with absolute certainty is that HealthStream's mission that's focused on the people of healthcare and improving the quality of healthcare by helping develop, retain, engage and credential those that are in healthcare remains constant. And as you listen to our call today, I hope you recognize our commitment to that mission, how we're striving to achieve it. And you're going to hear how we're executing on it through some of our exciting new products. Many of which have been in development for years and are emerging into the marketplace as we speak. So I'm going to give a little more detail today about some of these exciting new products or progress with them.

So to start out, I do want to start on our financial guidance, which we updated after a strong first quarter of necessity. The quarter included a record high adjusted EBITDA that's in our company's history and record quarterly sales per VerityStream, which is, as you know, have been working diligently on VerityStream for several years to -- through a combination of three or four acquisitions to build a new application set and credentialing and privileging.

And we're seeing it emerge now delivering record quarterly sales, and I can't wait to share more details on that. And there are also two multimillion-dollar contracts for our emerging products. These are products that we are excited about and now we're glad to see the market get excited about them as well. And so with all of that context, we expect revenue for the full year 2021 to be in the range of $245 million to $255 million. Adjusted EBITDA to be in the range of $40 million to $44 million. So, I'm excited to provide that updated guidance to all of our financial community and current investors. As I stated in our call in February, I believe one of the most remarkable things about this guidance is that we are projecting potential revenue growth despite a $38.4 million revenue decline in legacy resuscitation products from 2021 to -- 2020 to 2021 and the $4 million to $4.3 million negative impact of acquisition-related deferred revenue writedowns. So despite these headwinds, our first quarter performance gives us confidence in our improved financial expectations for 2021, where we believe we have a good shot at showing top line revenue growth on a year-over-year basis. So I think that's a great accomplishment by our team to figure out the balance of both organic growth, as we'll talk about, and inorganic growth to deliver what looks like the potential now to actually deliver growth in the year with such material financial headwinds from a declining product set.

So, I want to take a moment to reiterate some of the directional information I provided in our last call on what we could expect beyond the current year, which is a little bit longer view than we normally provide. It's building on our anticipated results for 2021. In 2022, we expect to deliver organic high single-digit revenue growth rates. And second, we've been focused on our gross margin profile. We're expecting a gross margin profile of 65%, approximately 65% in that time frame as well.

And third, a return to adjusted EBITDA margins of 15% to 20%, and we saw some depression in those margins as we saw the product changes and investment changes we've been making in the last few years, but we see a return to those margins for adjusted EBITDA in 2021. So, it's not only the continued success of our long-standing product portfolios, but also the market's enthusiastic response to our innovative new solutions that contributes to our confidence in the company's future growth. And I'm going to highlight a couple of those now. One of those new innovative products that we call Jane. It's the first of its kind in the market to our best of our knowledge. Jane is AI-driven. It has components of really exciting technology in it, but it's not the technology that's exciting about it, it’s about what it does for clinicians. It's one of the first intelligent competency development systems in the market. It's got components like natural language processing by IBM Watson. And so the state-of-the-art technology is changing the way nurses assess and develop and maintain their clinical competencies. Let me explain how it works just a little bit. We -- through two acquisitions through our M&A program, we acquired testing services and data sets that some of which had 30 years of history on how to evaluate the clinical confidence of nurses specifically. And over the years, we painstakingly converted that data into a dynamic algorithms that involve components of AI, capable of having real-time conversations with nurses. Next, we developed high-quality videos and simulations that present clinical events that nurses respond to in real time by telling Jane what they believe is happening and what should be done for the patient. This produces an assessment that identifies nurse's strengths and areas for improvement.

But we didn't stop there. In order to make Jane a true virtual coach like a mentor to nurses, we took our proprietary taxonomy engine and connected it from the assessments that I talked about that are included in Jane to a library of 1,800 content titles. This allows Jane to provide a personalized learning plan to each nurse by identifying particular areas of need and then recommending actual education and training to address their unique individual needs. So you can probably tell we're excited about Jane and I'm excited about because it's been, what, over five years in development. And we started selling it 18 months ago. And we're not the only ones excited about Jane. Jane, just recently won six of the industry's most prestigious awards, including two first place awards from the Brandon Hall Group. One was a gold medal for a Best Advance in AI and Machine Learning and another was a gold medal for Best Advance in Emerging Learning Technology. So we're excited that others are seeing what we see in our new Jane capabilities. These awards recognize that Jane has moved assessments from the pen and paper world and click through online tests to an immersive multimedia journey that is specifically tailored to each nurse. We're also pleased that Jane was awarded a patent to further recognize its one-of-a-kind technology and approach.

Awards aside, we think the greatest accolade Jane can deliver is adoption by our customers, right, because we think it can have an impact on eventually the skills, the capabilities and competencies of their staff. In 2020, when we first began offering Jane at scale, our goal is to sell Jane to one account per week, every week of the year. We actually accomplished that goal and on a similar pace so far in 2021. As I mentioned earlier, we had a leading health system make a multimillion dollar enterprisewide purchase of Jane. It's kind of the first of its type kind of at scale in this first quarter of 2021.

As customer utilization grows and Jane's capabilities expand, we look forward to updating you on how Jane is helping healthcare providers improve the quality of care that patients receive. And it's -- I think it's one of the most exciting developments we've had at HealthStream in a long time. And it's not an overnight thing. It's taken many years to build, tune and refine and test and have customers evaluate the Jane technologies. So our focus remains on innovation, and that's a little hard to see given all the transitions we've been talking about in the last several years. But we think these innovations can deliver improved outcomes and higher skilled workers in healthcare. So I do want to talk a bit about the transition though, an important part of our strategic focus has involved several key transitions we've discussed really for over two years. I believe we've crossed an inflection point where the major business risks associated with the transitions are like market acceptance. So these are the major -- will the market accept what we built? Will we get any adoption of the technology? Will the technology be viable? There's always questions like that if you've been building technology for a long time. And it's my sense that many of those kind of major business risks, I call them existential risks, are behind us, and we're kind of doing operational risk phase on these three transitions. And so it's a different kind of risk. And we're two years into this three year -- a little more than two years into the 3-year transition. And I guess I'm kind of declaring the existential risks of these major transitions behind us. And we have normal market competitive risks and the normal dynamics. But the technologies we've been building are viable now, and they're starting to make a difference. So for example, the Red Cross Resuscitation Suite program comprised of BLS, ALS and Pall's competency development curricula. We launched it in January of 2019.

It brings an updated, highly adaptive competency -based development solution to healthcare professionals. It offers certification to healthcare professionals successfully demonstrating proficiency of lifesaving resuscitation knowledge and skills. So it's a really well-defined product. And I think when we first went on the journey in early '19, we were uncertain of its adoption. But just by way of an update, the program has been adopted across all 50 states. And since its launch, we've amassed over 289 new contracts signed by customers, which includes healthcare facilities of all types and sizes from across the continuum of care. It includes some of the industry's largest acute care health systems like HCA, Community Health Systems, Quorum and Trinity, along with many of the most award-winning thought-leading acute care organizations like Cedar Sinai and Kettering Health Network. And in the nonacute space as well, we have really great wins and customer benefits going to, say, Fresenius Medical Care, one of the largest renal care providers in the U.S. and the LHC Group, a leading home healthcare service provider operating in 35 states. So all of them have seen the innovation of the Red Cross Resuscitation Suite, particularly how it's executed through the HealthStream network, the HealthStream platform, bringing just really exceptional capabilities to this relatively new product. But like I said, with 289 new contracts and some of those representing hundreds and hundreds, if not more locations and facilities and thousands, over 0.5 million workers have now moved through the program or engaged in the program. We're through the concept of look, will it be accepted as a viable solution in the market? I mean, now we face normal execution against our competition. How much market share can we gain? How will it continue its growth trajectory? So, it's helpful to think through a bit of history. It took us 12 years to build our highest level of adjusted EBITDA contribution from our legacy resuscitation offering. So, 12 years of selling and marketing the legacy products.

We expect to eclipse that level of adjusted EBITDA contribution from sales of our Red Cross Suite in just 3.5 years. So by the middle of 2022 is our current forecast where we will eclipse what was the highest level of adjusted EBITDA from the prior legacy platform. So we do have some time to go in front of us, but we're on an incredible trajectory with the Red Cross Resuscitation Suite. And speaking of resuscitation offering, it's important to understand, too, that we're building a more comprehensive portfolio of simulation offerings and resuscitation offerings. So, in February of 2020, we announced the addition of the stable program. That's a leading neonatal education solution. It's highly respected and it's now available online, exclusively through HealthStream. And we saw strong sales in the first quarter that was adding to our thousands of subscriptions to the stable program. It's just a really well-known program nationally, in some cases, internationally. And we've helped deliver -- develop and take it online in an online format from a classroom format and it's being well received in the market. So our portfolio is no longer dependent on a single application point in our simulation suite and our resuscitation training offerings. It's being broadened. So, we're committed to the continued diversification of that product portfolio and have exciting new advances coming in areas like OB, specific dimensions to resuscitation in specific care settings. The second transition that we talked about is VerityStream, and we've created it through four acquisitions and been working diligently for four years to build a kind of a common vision, a common theme to focus on credentialing and privileging and enrollment needs in healthcare. And during the first quarter of 2021, 45 customer accounts contracted for the VerityStream application suite.

And we call that the credential stream suite, bringing our cumulative total to approximately 390 customers on the new credential stream suite. And this included one new customer that signed a multiyear, multimillion dollar contract for VerityStream’s next-generation SaaS application, and it represents the single largest sale in VerityStream history. And so we're really excited that this product, this transition, if you will, from four acquisitions to one common approach and one SaaS application suite called Credential Stream. With 390 accounts now contracted for that new platform, we think we're beyond just proving its technical liability. And so the existential risk of the four acquisitions, bringing them into one company we think is behind us. Now we're in the normal business risk of how much market share can we gain against the competition. And how well can we position the product for future growth and how competitive it will be. I think we're well positioned on all those fronts with VerityStream and the Credential Stream platform. And it's measured by the kind of customers you see coming on to the platform. In the first quarter, Providence Health System and Mount Sinai Health System, and Atlantic Health System and Seattle's Children Hospital, all these new customers, including the distinguish ones I just mentioned, came on to the new enterprise credential stream platform through contract, and we're in the midst of working through implementation strategies for all of them. So, we're excited to be gaining adoption of the best-in-class solution. It's our belief. And with best-in-class customers, it's really kind of an exciting part of this transitional journey. And again, there's always challenges in front of us, learning the new selling models that are more virtual and getting through all these implementation backlogs from new signed customers to get to revenue recognition. There's plenty to do to continue to execute in this area, and there's plenty of business risks.

But I do think that at this point, 27 months into this migration, we've at least proven the viability and the acceptability and the market acceptance of the credential stream platform built by the VerityStream team. They've done a fantastic job. The third area to talk about is the upgrade or kind of a move to a past strategy through the hStream platform. And we do have a lot of work left here. Not all of our application sets, particularly our new acquisitions in the fourth quarter and the first quarter are wired to or even benefiting from this new pass architecture we've been building for over 3.5 years. But increasingly, we are connecting them to the pass architecture, and that's allowing us to develop things more rapidly. It's allowing us to interconnect applications that connect down to the hStream platform. It's allowing us to put value-added services in the new platform that can manifest back out in the application sets like the learning and development set, credentialing and privileging set and the scheduling and capacity management set of applications. So we're finding ways to this pass applicated infrastructure we've been building to connect to and power up into each of those application sets. So, just a quick update on that. In the first quarter, we added approximately 121,000 net new hStream subscriptions, bringing our cumulative total to about 4.34 million subscriptions. Those are subscriptions, not subscribers. It's important to note. If you're using an application that connects to hStream, you're going to get a subscription to hStream. And that could be tailored a little bit based on the application you're licensing from us, the features of hStream you're getting and the benefits from that subscription. And so it is possible for an individual to have multiple subscriptions to the hStream platform by buying multiple applications that connect to the hStream platform or drive benefits from it, say, economically like maybe a discount.

So, hStream brings value to customers and partners alike. And it's important to remember that since inception, for example, the Mercari Cross Suite has been powered by the hStream PaaS architecture. Our updates with regard to these business transitions began at the start of 2019. That's 27 months ago from really about now. And we continue to work on each of these transitions. But as I've said, we're moved to an operational execution phase of this. So we're going to talk a lot less about transitions and transitional risks on a go-forward basis and talk a little bit more about the things that are exciting that are emerging like Jane and other new products that are coming into the market as we speak. At this time, I think it's important to take a look at the finances. The one thing we want everyone to hear and our analysts here, we had a really good first quarter. Obviously, we're excited about it. But there are reasons for -- to be conservative as we go forward, including increased need for investment, some onetime expenses that were not in Q1 that as we return to normal operations, like putting pay raises back in place for employees, we'll have increased expenses. So we still need to -- even though we had a strong first quarter be cautious about how we model the future because we're still in an investment phase.

With that, I'll turn it over to Scotty Roberts.

Scott A. Roberts -- Chief Financial Officer and Senior Vice President, Accounting and Finance

Good morning, everyone. Let me start with a summary of our results for the quarter. Our revenues were $63.5 million, which is up 3% over last year and included modest growth within both reporting segments. Revenues for 2021 were impacted by a $1.6 million reduction associated with deferred revenue writedowns, which were primarily related to acquisitions that we completed during the fourth quarter of last year. Operating income was $3.3 million or down 54%. Net income was $2.3 million or down 68%. And EPS was $0.07 per diluted share, down from $0.22 per diluted share in the prior year. Operating income, net income and EPS were all down, in part because last year's first quarter included a $3.4 million noncash reduction to cost of revenues. While these GAAP-based financial measures experienced declines, our non-GAAP performance measure, adjusted EBITDA, improved to $13.6 million or up 14%, which is a record quarterly high for the company. Both business segments achieved revenue growth over the prior year. Workforce Solutions revenues were $51.3 million and were up 3%, and revenues from Provider Solutions were $12.2 million and were up 4%. As we've previously discussed the past several years, we no longer sell legacy resuscitation products and revenues from these products have been declining over the past two years as subscriptions expired. We indicated that revenues would cease at the end of 2020, which essentially occurred as expected. However, with our partner support, we extended utilization of these products for a small group of customers, which resulted in a $1.8 million of revenues on legacy products during the first quarter. Similarly, we expect legacy product revenues in the second quarter of approximately $700,000 and then to be de minimis for the remainder of the year. Revenues from the legacy products were $11.2 million last year.

And despite a year-over-year decline of over $9 million, we more than offset the decline in revenues through contributions from recent acquisitions, coupled with growth and other solutions from both segments. Excluding revenues from the legacy resuscitation business, consolidated revenues grew by 22%, which was comprised of 8% organic growth and 14% from acquisitions. Our gross margin was 66.5% compared to 66.9% last year. Gross margins last year were also positively impacted by the onetime $3.4 million noncash reduction to cost of revenues. If you exclude the impact of this favorable adjustment, gross margins would have been 61.3% last year. This margin improvement is in line with our goal to achieve a gross margin in the mid-60% range for 2021. Operating expenses, excluding cost of revenues, were up 15% or $5 million. This increase reflects both investments in our core business as well as incremental expenses associated with acquired businesses, including integration and transition services costs. Operating expenses from the acquired companies makes up the majority of the $5 million year-over-year increase. Offsetting these cost increases though were lower expenses, such as commissions associated with the decline in legacy resuscitation revenues, reduced travel as a result of COVID-19. And we had a nonrecurring noncash expense reduction based on changes to our paid time off policy. The combination of these factors led to our operating income declining by $3.9 million or 54% to $3.3 million, while adjusted EBITDA improved by $1.7 million or 14% to $13.6 million. Our cash flows from operations improved to $19.1 million this year compared to $6.1 million last year, which mainly resulted from higher collections. Our DSO was 52 days compared to 44 days last year, and this increase was primarily impacted by the additional receivables from acquisitions that we completed at the end of last year.

Free cash flows were $11.9 million compared to $1 million last year, and we ended the quarter with cash and investment balances of $56 million. Coming off the closing of three acquisitions in the fourth quarter of last year, we completed one more during the first quarter, which is included in our Workforce segment. We paid $2 million in cash to fund this acquisition. We also increased our position in an existing minority investment by $1 million during the quarter. Our capital expenditures incurred, which includes capitalized software development, were $4.3 million.

Now let's review our financial expectations for 2021, which we've updated after our strong first quarter performance. As a reminder, though, COVID-19's continued impact on our operating results and financial condition could influence our actual performance compared to our guidance assumptions. We are raising our revenue ranges and now forecast that consolidated revenues will range between $245 million and $255 million, with Workforce revenues forecasted to range between $197 million and $205 million and Provider revenues forecasted to range between $48 million and $50 million. Also following the first quarter's performance, we're also raising our EBITDA forecast to now range between $40 million and $44 million, which equates to a 17% EBITDA margin at the midpoint of our guidance ranges. We anticipate the capital expenditures, which includes both capitalized software development and content to range between $25 million and $27 million. For purposes of modeling the full year and better understanding our guidance, we want to highlight some key variances between the first quarter's results and the rest of the year. In short, we believe it would be a mistake to annualize the first quarter performance when trying to extrapolate cumulative performance for the year. This is true for the following reasons.

Our first quarter revenue performance benefited from a couple of factors that will not recur at the same level, including the $1.8 million in legacy resuscitation revenues that I described earlier, which we expect to be only about $700,000 in the second quarter. And we also had some nonrecurring professional services and onetime software license revenues from our scheduling and capacity management solutions during the quarter. Also, our adjusted EBITDA guidance reflects increased investments in sales, marketing and product development, which will accelerate across the remainder of the year. These investments will be more weighted toward the new companies that we've recently acquired. In addition to making these new investments, our forecast also assumes that business travel gradually resumes and it also includes annual compensation increases, which were frozen last year, and those will take effect beginning in Q2. We also anticipate that costs associated with acquisition integrations will continue over the next three quarters at levels higher than the first quarter. We expect those to decline when these integrations are completed.

And finally, our forecast does not include the impact of any other potential acquisitions that we may complete during the remainder of 2021. Now let me take a moment to provide a few comments about the COVID-19 impact on our business. While our forecast assume a gradual improvement in sales and renewals, the pandemic may continue to negatively impact our customers, which may continue to cause uncertainty in their purchasing decisions for our products. Since the onset of the pandemic, our business operations shifted to remote selling and remote implementation. And over the past year, we've conducted very little travel to our clients. Our customers have generally limited or prohibited vendors to their facilities during the pandemic. Our sales and operations teams have adapted well to accomplishing their work virtually, and we're pleased with their ability to maintain sales pipelines, win new business and implement our solutions, all without traveling. While we have adapted to this new operating environment, we continue to experience some continued uncertainty in our customers' purchasing decisions.

With a diverse product portfolio, bookings of certain products have performed better than others at times. And overall, our bookings for the first quarter outpaced the same period last year. Product categories where we gain momentum include the multiyear multimillion-dollar contract for our Jane solution and our credentialing and privileging solutions achieved record sales results this quarter. Our offices remain closed, and all employees continue to work remotely, but we are optimistic that we can reopen later this year and provide the opportunity for our employees to connect and collaborate in person again. We're also continuing to monitor our liquidity, including weekly cash flows, customer payment patterns and bankruptcy notices. We've been fortunate not to experience any significant bad debts and our customer payment patterns have been more stable over the past few months. Although, if economic conditions worsen and our customers' financial condition deteriorates, it could negatively impact our future cash flows. We ended the quarter with approximately $56 million in cash and investments, no debt, and full availability under our $65 million line of credit facility. Our share repurchase program expired last month, and we remain open to establishing a new program in the future depending on market conditions and other needs for capital allocation. We also continue to evaluate potential M&A opportunities. We believe our multiyear objective to grow revenues, improve and maintain gross margins and deliver incremental EBITDA are in the long-term best interest of shareholders and the company.

Thank you. That concludes my comments for this morning. Bobby, back over to you.

Robert A. Frist Jr. -- Chief Executive Officer

Thank you, Scotty. Speaking of working from home, in my office is a fireplace, the top of the fireplace had a songbird. So, I guess I was competing with the song bird to share the news and that moves the locations. So hopefully, you can hear me better. And it’s kind of fun to just adapt to all the new working conditions. As Scotty mentioned, our President and COO, is working on our return to office strategies now for our 1,000 employees. And we're excited to get back together again and work together again here in the not-too-distant future. So a few more things to cover as we wrap up and then before we go to Q&A. Our last earnings call, we introduced this metaphor of a 3-legged stool to describe the totality of our business. The 3-legged stool is standing on the foundation of our past hStream architecture. So I thought I'd just refresh you on that analog and then we'll probably drop the 3-legged stool analog, but know that we have these three focus areas for our business. And so with each of our solution group areas representing a leg of the stool, let's kind of review what they are. The first learning and development solutions, long-standing core of our business is learning and development. And obviously, we expand and have next-generation technologies are like the Jane platform working alongside of our HealthStream Learning Center. The most adopted learning platform in healthcare. Then there's our credentialing and privileging solutions. Of course, that's the VerityStream organization, 250 employees strong and gaining momentum with setting new records in the quarter. Credentialing and privileging is an area we think that we have a good market positioning in and are beginning to show what we've built to the world and be well received. And then the new area that we're assembling through acquisitions in the fourth quarter -- first quarter and earlier last year, is our scheduling capacity management solutions. And that's kind of in the storming phase now.

We're assembling the management team, figuring out the best of each of the platforms. We bought some really exciting platforms like the NurseGrid platform or application set, the ANSOS application set and the ShiftWizard application set, all of which were recognized for different capabilities. And it's our -- I think our unique skill of picking the best of all of those and the people and assembling a strategy that can lever each of the best of those teams that we've assembled an application. So, we'll be excited to speak to you more about scheduling and capacity management advances in the coming years. And it won't be without its challenges. Anytime you inherit three companies, three cultures and three application sets, there's always going to be hurdles. But I feel like we're -- we've learned a lot from how we assembled in credential and privileges and plan to use that playbook to do even a better job with scheduling capacity management. Each of these solution groups is leveraged to connect to the PaaS technology, the platform, hStream. And again, while the wiring isn't all there yet, and we and the hStream platform is maturing, increasingly, I'm optimistic that the platform is viable and its ability to create, say, interoperability between the application sets is real. Everything from identity management, the hStream identity management system to the data mobility across application sets are things that -- and to the API libraries we're building that will improve the rapid development of new applications and services like our taxonomy service, took us three years to build with medical librarians, but the taxonomy service is a core service of the hStream platform.

And for those of you who don’t know how ecosystems are built, the taxonomy is kind of the connected web. It relates topics and content and application tables and data sets to each other and allows you to use them and manifest them in new ways and new products. So we're really excited about all that's happening with the hStream platform. The tech team is leading that and Jeff Cunningham, as our CTO, have been leading the continued evolution of that platform. And I'm just excited to see some of the capabilities emerging now as we connect that platform to advances in learning technologies like Jane and American Red Cross Resuscitation Suite.

So, I think our customers are increasingly able to make sure that the right people are at the right place and the right time and providing patient care in the right way. The competency development systems and screening for sanction screening and verifying credentials to make sure it's the right people, right place, right time with the right care provided is something that increasingly we see HealthStream's tool sets playing an important role in. When we talk about growth, it's important to think about the people of HealthStream and the challenging conditions of the pandemic. And It's fun to celebrate when they achieve something unique. And we continue to look at the data out of our comparably survey where we had over 11,000 comments from our nearly 800 employees at the time. They're all put on public display on comparably.com and comparably continues to parse that data from our employees and tell us where we perform well. So we just received news from them that in April, HealthStream received an award from comparably called best operations team.

So all the people that self-identified as operations people at HealthStream when compared to other companies that if -- where employees identified as operations personnel rated our environment is positive and one which they're proud to operate in. So congratulations to the best operations team as determined by comparably.com at HealthStream. Again, it's fun to continue to learn from the feedback of our employees. There's 11,000 publicly made comments. We essentially conducted our employer views in front of the world, and we learned a lot about it, our employees did and we're using that data to make our company better.

As we wrap up, I just want to remind everybody that on Thursday, May 20, at 2:00 p.m. Central, we will have our virtual annual shareholder meeting, again, virtual as last year. And that should make it easier to participate for those of you that are shareholders and look forward to giving you that report here on May 20 at 2:00 p.m. Central.

With that, I'd like to turn it over to questions for the operator to take questions.

Questions and Answers:

Operator

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

Jared Haase -- William Blair -- Analyst

Jared Haase for Ryan. Thanks for taking my questions and congrats on a solid quarter. I wanted to ask two questions related to the demand environment generally. So the first, you're looking at the VerityStream product line. I know, Bobby, you talked about having record quarterly sales there, as well as the single largest sale in the history of that product line. So nice to see some of the success. I'm just curious if you could talk a little bit further on what's driving that success in the marketplace. If there's any specific tailwinds or competitive advantages to call out there?

Robert A. Frist Jr. -- Chief Executive Officer

Yes. I can't comment a bit on that. I think we acquired four companies that are all in the space. We carefully sorted through the best capabilities of those companies. For example, some had the best privileging libraries, which are kind of a data asset. Some had the best workflows. And when we built the credential stream platform, we not only incorporated the best of those into that platform. We also created a more comprehensive view of all the services and related functions around the core credentialing process. And so it's my belief that our application suite in credentialing, privileging and enrollment is just simply more complete in its thoughtfulness and approach to not just the credentialing process but the related processes like the physician onboarding process. There are elements of that where credentialing plays a role. The privileging process, which affects the time to practice from the time you hire a new positions to the time they can actually practice medicine on your behalf and organization. So the vision that the team put together and as they built the new credential stream platform, I think is simply more robust than the competition. So what we're beginning to see is an improving win rate in the head-to-head competitions because of the completeness of the vision of VerityStream team and the execution of the platform. That said, there was definitely a delay period through the middle of last year where organizations just stopped shopping. If they had something that was OK or it functioned.

They weren't really in a position to evaluate other vendors or switch platforms even if it's a better platform. We're beginning to see a little bit more heads up from our customers, and they see the benefits of the more comprehensive platform. So I'd say they're looking more and they're considering at a higher rate, replacing legacy platforms that we think we believe are less effective. Even sometimes in the case of our own legacy platforms that they acquired from us, they're more interested in upgrading to the newer ones. And so now there's still going to be implementation lags just because of the nature of where everybody is operationally. We're kind of emerging from the pandemic, at least in the U.S. And there are definitely hotspots, as you know, in our country, where there, again, the health systems are experiencing operations being overwhelmed again. But on the whole, just a general improved buying environment. And I do think we have one of the more complete application suites in the area for VerityStream, now known as the credential stream application set.

Jared Haase -- William Blair -- Analyst

Got it. Yes, that's super helpful. And then I wanted to circle back on some of the comments you made around the...

Robert A. Frist Jr. -- Chief Executive Officer

One other thing I'd like to add just because I want people to hear it, is that, we're also beginning to see this first small benefits of its connectivity to the hStream ecosystem. So for example, the ability now, if a customer is on the Red Cross Resuscitation Suite, they use our learning platform and their VerityStream customer of the credential stream application set. If those three conditions exists, the data flows seamlessly from the consumption of the Red Cross program as an earned credential in the learning platform to manifest automatically in the credential platform. And that may sound simple, but really, it's the integration of those three applications that creates a seamless workflow reduces the burden of gathering the information of that credential in the credentialing process. And so it's the first sign of light of the power of interconnectivity between application sets when connected through hStream engineering, which we talk about. Everyone wants to know, what's the concrete benefit of hStream? That's one small example. And it's a unique VIM diagram, like you have to be on our learning platform with Red Cross program and with our credential stream platform. But when those three conditions exists, you definitely have an easier workflow, automated data communication and less manual intervention to credential that part of the physician's record. So I want to give that example because I think there'll be dozens more over time, and we're just getting the first signs of power of the HealthStream ecosystem.

Jared Haase -- William Blair -- Analyst

Yes, yes. I think that all makes sense. And just a follow-up that I wanted to add, I wanted to circle back to some of the comments you made on the Jane product. And I think you mentioned it's kind of one of the first AI-driven workforce competency management products in the marketplace. So I'm curious how you would characterize sort of the demand from health systems for workforce management solutions within the context of their broader AI priorities, right? I think we often hear about things like whether it's chatbots or patient engagement or other sort of AI solutions related more so to operations or patient throughput, things like that. So just curious how you would characterize workforce development or competency management tools within sort of the broader budget or context for the AI priorities?

Robert A. Frist Jr. -- Chief Executive Officer

Yes. It's a great question. I think just in general, and this is a disappointment for us for our long legacy is that the value of high-quality education and training is often hard to quantify even though we all strive. We kind of intuitively know that the more confident the team is, the better the healthcare outcomes. But proving it is difficult. And so often, education and training is lower in the budget priorities. And I think that's sad because I think patient outcomes could be most greatly affected if they increased their willingness to invest in those areas instead of just new equipment and technologies. And the incremental gains of a new MRI machine are good, but they may not be nearly as much as the focused competency development on your clinical staff. That said, you asked me where it ranks. I'd say it's lower in the priority poll. When things get tight, education tends to be cut. Investment in competency is most appreciated by the highest of quality organization. So the leading organization is investing in Jane right now are the ones that I think I view as the enlightened customers. They're the ones that see the link between competency and clinical outcomes. And unfortunately, some of it has to be a little bit more of an intuitive link. But Jane has definitely make it easier to see that length because it more accurately quantifies not just knowledge deficits, but competency kind of decision-making deficits. And that's where the errors occur when clinicians make poor decisions and it's hard to judge.

It takes an expert to judge someone's quality of decision-making. And now that expert capability is built into Jane. And so I would say it's early adopter. It's a higher price point than products we usually sell. So the adoption of the store, you heard me say one per week. That's great. It's 52 contracts last year. But against the thousands of organizations, I think, need it. It's very low. And part of that is because of the higher price point. Part of that is because it's a lower priority as you asked me to prioritize. And part of that is because it's going to take time for people to get the link between investment and competency development, not just now like testing, the actual competency development and quality outcomes. And so that's the journey we're on, and we serve a higher purpose. The education training of the healthcare workforce is sometimes not as valid as it should be, but I think the enlightened organization, particularly the ones that are -- that just bought at the system level are beginning to see the potential impact on clinical outcomes by making real dollar investments into staff clinical comps development. That's my hope. That's our ambition. We believe in it. We need the rest of the world to see it. I think some of these thought-leading organizations that are buying Jane now will begin to have a competitive advantage. And by that, I mean, better patient outcomes.

Jared Haase -- William Blair -- Analyst

Okay. Great. Yes.

Robert A. Frist Jr. -- Chief Executive Officer

Sadly, it is a lower priority though. And so when the tough things get tough, education training, competency development, all in the weaker organization gets pushed to the bottom along with things like marketing. And that's always been a frustration pipe for every educator on the planet. It's hard to quantify and know the value of investing in quality competency development.

Jared Haase -- William Blair -- Analyst

Thank you.

Operator

Thank you. And our next question comes from Matt Hewitt from Craig-Hallum Capital Group. Your line is now open.

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

Good morning and congratulations on a great quarter. I guess, this might follow -- be a good follow-up to that question. When you think back to Q2 and Q3 last year, you had hospitals that were dealing with the pandemic that were shifting employees from one -- from maybe from elective surgeries to emergency care. You had some employees that were even laid off. As we were kind of getting through that now with the vaccinations and with some pockets of pandemic easing. How are hospitals shifting their priorities? And how does that play into your products, quite frankly. I mean, where are you seeing them prioritize VerityStream or some of the other solutions. Is that -- are you seeing that in your discussions with them? And how does that play out over the remainder of the year?

Robert A. Frist Jr. -- Chief Executive Officer

Well, I think, if you think about the last decade, there's been a big move toward the EHRs and huge growth for them. And a lot of those transitions have been done. There's still work in front of them there. The digitization of the patient record, the mobility of data, a lot of that, made a lot of progress on that. As patients, we know it's very -- still kind of immature feeling. But a lot of products have been made there. I think there's a continued move toward focus on quality outcomes and the organizations that are bigger and stronger that can afford to invest in achieving the quality outcomes, I think, are beginning to prioritize the tool sets that can get them there. And then there's just some -- all of our products, another good thing about how some are positioned is that we help provide against the regulatory requirements. It's a highly regulated environment. And for example, the credentialing and privileging process is not just important to ensure quality workers, quality physicians and nurses are in the staff, but it's important to keep those that aren't quality out of practicing medicine. And so there's kind of gatekeeper functions on quality provided by the credentialing services that are important, and they need to be accurate and the tools need to be good. And so new products like our workforce validate product, which looks and checks for sanctions against workers to warrant healthcare organizations when there's a sanctioned employee trying to enter the workforce, I think will be increasingly important. And maybe that's a sad comment on things, but it is. And then I do think things like Jane are well positioned to kind of be the next-generation approach to learning.

Like I think the idea of an individualized learning plan is far more exciting than assignment-driven regulatory compliance training, which is at our core. And both have to coexist. And one is more developmental and one is more regulatory in nature, but both have to be done well to achieve quality outcomes. And so I think Jane gives us a new dimension beyond just compliance training, which is required, and frankly, viewed as more commoditized like how do you do that the least expensive way and we're kind of the low-cost, high-quality provider in regulatory training. But with Jane, we're now -- we're kind of also the higher cost, higher quality educational development platform. And so I'm pretty excited about our positioning. But as was noted, the uptake, while exciting at one contract a week, we think could go a lot faster. And we're looking for the right combination of price point and value add in Jane to make it go faster. So I don't know. I think areas credential, privileging, learning and development and managing schedules and time effectively are all things that are going to go up on the radar a little bit higher. And some of the things that have consumed us wholly like COVID or EHR transitions over the last decade are going to recede a little bit in the background. So on balance, I think there will be a little more visibility to certain types of application sets that we provide. That said, there's a long runway in front of us and lots to do to convince people they need to invest in quality, the way we want to see them invest in quality.

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

Understood. And then maybe a little bit more mundane question. But as far as implementations are concerned, you spoke a little bit about the lag. Where do those sit today? Maybe where were they prepandemic? And where do you see that kind of shaking out as we exit, say, this year as we get into fiscal '22?

Robert A. Frist Jr. -- Chief Executive Officer

Yes. There's definitely a period that, I guess, February to June of last year, where really no one was even taking phone calls much less implementing new systems. And so now everybody is putting things on the schedule, thinking about when to get them done. They're a little less urgent. Everybody's had to build -- all the vendors had to build new deployment models because you can't -- you don't go on site as much to do deployments if at all. And so there's a kind of a natural lag from both the transitioning models and implementation and the slow recovery back to what the new normal is of operations for our customers. And so those two things together are creating a little bit of a lag and time to revenue issue. That said, I feel like everything is getting on the schedules now. And different products have different horizons for implementing like that multimillion-dollar multiyear contract for credentialing, it will take two years to implement fully and get the full revenue or maybe more because you're talking about taking dozens, if not in this case, more than 50 or 60 locations and upgrading legacy installed systems and SaaS systems and unifying the process. They also use it to improve the process of credentialing and privileging at the same time sort of implies operational changes. For example, we ask them to standardize on certain practices when they adopt our platform and use our taxonomies and our libraries of data to classify things. And so it's a big change management journey. But to your point and question, I think, people are putting them on the schedule and getting on with the changes they need to make -- to make the organization better now. And that feels better to me.

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

Understood. Thank you.

Operator

Thank you. And our next question comes from Richard Close from Canaccord Genuity. Your line is now open.

Richard Close -- Canaccord Genuity -- Analyst

Great, thank you. Congratulations on a solid start to 2021. Scotty, I was wondering just on a housekeeping. Can you go over the organic and acquired growth again? I didn't catch those, didn't write best enough. But if you can go over those again? And then are all the acquisitions in the workforce area just as a reminder there.

Scott A. Roberts -- Chief Financial Officer and Senior Vice President, Accounting and Finance

Sure, Richard. I think we characterized it as organic growth excluding the legacy resuscitation business. Organic growing 8% and acquisitions contributing about 14%. So the combination of both of those yielded about a 22% growth rate once you factor out the legacy business from prior year and current year. And then the acquisitions that we've completed, we've done five since the beginning of 2020, they're all included in the Workforce business unit.

Richard Close -- Canaccord Genuity -- Analyst

Okay. Great. And then with respect to the -- I guess, the third leg of the stool so to speak. Can you -- Bobby, can you just go over the scheduling area, how you're thinking about that? That's where the acquisitions have been. I'm just trying to get a feel of, do you expect a similar sort of path that you had on the credentialing side in terms of time frame on integration of those products? And then just how do you look at that?

Robert A. Frist Jr. -- Chief Executive Officer

Yes, Rich, and I think it will be a bit of a journey. The good news is the team from the VerityStream put together over a 30-page document to tell us about all that they learned about everything from how quick to work on the branding issues to how to select the core architecture and rebuild the platforms to how to combine the feature sets. Like it's a really great document road map for how to do what they've done at VerityStream. Look at the market conditions and build it right out there. So we're going to repeat the playbook. We acquired, as you know, NurseGrid early last year. And by the way, that app has continued to grow its organic user base even with minimal investments. And so it still continues to be the most popular adopted nurse app that nurses use to help manage their professional life and schedule. So really excited about NurseGrid. We acquired ShiftWizard and ANSOS assets, ShiftWizard separately and the ANSOS assets from Change Healthcare. And they each have capabilities that the market appreciates, like ANSOS is more enterprise capable than any of the others. With ShiftWizard, it's got market-leading workflows, award-winning recognition for the innovation in their application set. But it has some scale issues. And so like any set of acquisitions, we're 100 days in and finding all the things we have to work on to make it better. I got a great leader over that in Scott McQuigg, a 20-year veteran of healthcare technology. And we've got a great road map that Michael Sousa and his team VerityStream have created for Scott. And yes, we plan to repeat it again. Now hopefully, instead of four years, of assembling for all those companies, we can do it in three years or less and announce our new product strategy and vision and one that levers the best of each of NurseGrid, ANSOS and ShiftWizard, along with efforts to create smooth branding approach and catch the eye and ear and wallet of the competitive landscape. So it is a repeat playbook. We gained some market share. We gained some unique assets like NurseGrid. We gained the people that know a lot about. I have a long history of understanding time management scheduling for nurses in our company out over 120 new employees in the business unit -- for business area. It is embedded within workforce. It's a little harder to see, but we are thinking of it as a business leader in Scott McQuigg and a trajectory and a road map to get there. So it will be a bit of a repeat. I hope to get to it a little faster and have a fewer bumps than we had maybe with VerityStream, but as you can see, VerityStream, I think, is coming out the back end of that, and I can't wait to report that we've done the same thing in credentialing, I mean, in scheduling and what we call capacity management.

Richard Close -- Canaccord Genuity -- Analyst

And is there any thoughts on the margin...

Robert A. Frist Jr. -- Chief Executive Officer

A lot of our investments -- yes, the margin profile should be similar, the 60%, 65% range. Actually, it's a little higher than that right now. It's -- I think it's around 64% of that business. So it is a good SaaS or application set with decent software margins. And so we're excited about that. There's some content dimensions to what we're building and the engagement parts of those platform and promotional efforts, say, around a NurseGrid that maybe lower the gross margin a bit. But generally consistent with our goals as a unit, as an operating area and then definitely an area of investment. So for example, the sales team right now across all of those sets is about 10 strong. We plan to take it to 22 by the middle of the year. So just in the next three months, we plan to double the sales organization on scheduling capacity management.

Richard Close -- Canaccord Genuity -- Analyst

All right, thank you.

Robert A. Frist Jr. -- Chief Executive Officer

Thank you.

Operator

Thank you. [Operator Instructions] And our next question comes from Vincent Colicchio from Barrington Research. Your line is now open.

Vincent Colicchio -- Barrington Research -- Analyst

Yes, hi. Bobby, you just answered part of my question, but I'm curious if you can give us more color on what investments you'll be making this year?

Robert A. Frist Jr. -- Chief Executive Officer

Yes. Yes, a lot of investments. Things like Jane, you have to continue to invest or find those technologies and add value to that product. The VerityStream team has an incredible R&D team, and they continue to evolve their application set. So in technology, the vision is always grander than the ability to execute it and you're always chasing that and trying to decide how much money to put into R&D and product development. But clearly, the newest area of investment that will consume a material part of our growing investment rates will be shaping the leadership team and the technologies and road map for scheduling and capacity management. So I just gave one concrete example. We plan to take the sales team from, say, 10 to with new leadership to or added leadership from 10 to over 20, I think 22 in the next three months. And similarly, the tech teams there, like in that area, we'll take the best of the technology people from those three acquisitions. We've got a new leader over that tech group as kind of a CTO of the scheduling and capacity management business. And they'll be hiring and adding the team members there because they have to build a unified technology road map. So you'll see R&D increase in the scheduling application sets. And of necessity, too. Some of those applications needed to be updated and modernized. And what you'll also see is work on interconnectivity, say, between NurseGrid and ANSOS and between NurseGrid and ShiftWizard. In addition to all that, we'll be working on the branding and positioning of those product sets to create more clarity on the role of each of those technologies, and that will cost money. In addition to all of that, don't forget, we didn't do raises last year. We limited the executive bonus programs. We reduced travel and all of that in the second half of this year, which was in the second half last year, is coming back. And so that's why we need to be careful as we look at Q1. The sales and marketing ramp, the tech investments are beginning in the new areas of our business in Q2 and...

Vincent Colicchio -- Barrington Research -- Analyst

And Scotty, one for you. How much was the nonrecurring professional services and software license revenue in Q1?

Scott A. Roberts -- Chief Financial Officer and Senior Vice President, Accounting and Finance

We didn't quantify, Vince, but it was mainly from the ANSOS organization that we acquired in Q4. It's less than $1 million.

Vincent Colicchio -- Barrington Research -- Analyst

Okay. Thanks for answering my questions. And nice quarter guys.

Scott A. Roberts -- Chief Financial Officer and Senior Vice President, Accounting and Finance

Thank you.

Operator

Thank you. And I'm showing no further questions. I would now like to turn the call back over to Robert Frist for closing remarks.

Robert A. Frist Jr. -- Chief Executive Officer

Thank you to all the analysts following us. We appreciate you telling our story, and we want you to be careful as you model out. We tried to explain the second half of this year, including increased investments. And we did have a really strong first quarter, but we want to be careful to look at the new guidance ranges and make your models fit within those guidance range because we make them as thoughtful as we can, as accurate as we can. And we don't want you to overmodel or annualize Q1 because we have more investments coming into the business in Q2, Q3 and Q4. That said, we're promised -- we're excited to have raised guidance and look forward to your continued research on our company. To our shareholders, we look forward to hearing from you and our shareholder meeting. And to our employees, I just want to say thank you for your continued feedback, we listen. And we do it in a public forum, and we try to make our company better and stronger and more fun place to work. And now what I can say is many of you have been working for years on these products like Jane and it's fun to see them and workforce validate and others. And now these new acquisitions and new employees, and I want to encourage you that you're making a difference. And say thank you to all of our over 1,000 employees now at HealthStream. Thank you all. I look forward to seeing you all on the next quarterly earnings and before that at the annual shareholder meeting. Thank you. Bye-bye.

Operator

[Operator Closing Remarks]

Duration: 63 minutes

Call participants:

Mollie Condra -- Vice President Investor Relations and Communications

Robert A. Frist Jr. -- Chief Executive Officer

Scott A. Roberts -- Chief Financial Officer and Senior Vice President, Accounting and Finance

Jared Haase -- William Blair -- Analyst

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

Richard Close -- Canaccord Genuity -- Analyst

Vincent Colicchio -- Barrington Research -- Analyst

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