HEALTHSTREAM INC 10-Q

Item 1. Financial Statements HEALTHSTREAM, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (In thousands) March 31, December 31, 2024 2023 ASSETS Current assets: Cash and cash equivalents $ 52,407 $ 40,333 Marketable securities 31,265 30,800 Accounts receivable, net of allowance for doubtful accounts of $ 901 and $ 781 at March 31, 2024 and December 31, 2023, respectively 39,635 34,346 Accounts receivable - unbilled 4,419 4,100 Prepaid royalties, net of amortization 10,960 10,202 Prepaid software maintenance and subscriptions 6,609 7,397 Other prepaid expenses and other current assets 2,094 3,032 Total current assets 147,389 130,210 Property and equipment, net of accumulated depreciation of $ 20,459 and $ 19,503 at March 31, 2024 and December 31, 2023, respectively 12,537 13,005 Capitalized software development, net of accumulated amortization of $ 132,960 and $ 127,009 at March 31, 2024 and December 31, 2023, respectively 41,118 40,643 Operating lease right of use assets, net 19,483 20,114 Goodwill 191,072 191,379 Customer-related intangibles, net of accumulated amortization of $ 59,128 and $ 57,095 at March 31, 2024 and December 31, 2023, respectively 52,511 54,742 Other intangible assets, net of accumulated amortization of $ 15,750 and $ 16,603 at March 31, 2024 and December 31, 2023, respectively 11,939 13,289 Deferred commissions 30,671 31,700 Non-marketable equity investments 4,103 4,134 Other assets 782 726 Total assets $ 511,605 $ 499,942 LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities: Accounts payable $ 5,313 $ 7,465 Accrued expenses 16,776 22,717 Accrued royalties 5,713 4,556 Deferred revenue 98,268 83,623 Total current liabilities 126,070 118,361 Deferred tax liabilities 16,868 16,132 Deferred revenue, noncurrent 2,076 2,169 Operating lease liability, noncurrent 19,484 20,247 Other long-term liabilities 2,253 2,281 Shareholders’ equity: Common stock, no par value, 75,000 shares authorized; 30,398 and 30,298 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively 249,280 249,075 Retained earnings 96,746 92,368 Accumulated other comprehensive loss ( 1,172 ) ( 691 ) Total shareholders’ equity 344,854 340,752 Total liabilities and shareholders’ equity $ 511,605 $ 499,942 See accompanying Notes to the unaudited Condensed Consolidated Financial Statements. 1 Table of Contents HEALTHSTREAM, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (In thousands, except per share data) Three Months Ended March 31, 2024 March 31, 2023 Revenues, net $ 72,760 $ 68,946 Operating costs and expenses: Cost of revenues (excluding depreciation and amortization) 24,617 23,856 Product development 12,032 11,680 Sales and marketing 11,773 11,728 Other general and administrative expenses 8,312 8,865 Depreciation and amortization 10,336 9,926 Total operating costs and expenses 67,070 66,055 Operating income 5,690 2,891 Other income, net 853 250 Income before income tax provision 6,543 3,141 Income tax provision 1,316 518 Net income $ 5,227 $ 2,623 Net income per share: Basic $ 0.17 $ 0.09 Diluted $ 0.17 $ 0.09 Weighted average shares of common stock outstanding: Basic 30,313 30,591 Diluted 30,418 30,659 Dividends declared per share $ 0.028 $ 0.025 See accompanying Notes to the unaudited Condensed Consolidated Financial Statements. 2 Table of Contents HEALTHSTREAM, INC. CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) (In thousands) Three Months Ended March 31, 2024 March 31, 2023 Net income $ 5,227 $ 2,623 Other comprehensive loss, net of taxes: Foreign currency translation adjustments ( 476 ) ( 33 ) Unrealized loss on marketable securities ( 5 ) ( 2 ) Total other comprehensive loss ( 481 ) ( 35 ) Comprehensive income $ 4,746 $ 2,588 See accompanying Notes to the unaudited Condensed Consolidated Financial Statements. 3 Table of Contents HEALTHSTREAM, INC. CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (UNAUDITED) (In thousands, except per share data) Three Months Ended March 31, 2024 Common Stock Retained Accumulated Other Comprehensive Total Shareholders’ Shares Amount Earnings Loss Equity Balance at December 31, 2023 30,298 $ 249,075 $ 92,368 $ ( 691 ) $ 340,752 Net income — — 5,227 — 5,227 Other comprehensive loss — — — ( 481 ) ( 481 ) Dividends declared on common stock ($0.028 per share) — — ( 849 ) — ( 849 ) Stock-based compensation — 1,060 — — 1,060 Common stock issued under stock plans, net of shares withheld for employee taxes 100 ( 855 ) — — ( 855 ) Balance at March 31, 2024 30,398 $ 249,280 $ 96,746 $ ( 1,172 ) $ 344,854 Three Months Ended March 31, 2023 Common Stock Retained Accumulated Other Comprehensive Total Shareholders’ Shares Amount Earnings Loss Equity Balance at December 31, 2022 30,579 $ 254,832 $ 80,213 $ ( 981 ) $ 334,064 Net income — — 2,623 — 2,623 Other comprehensive loss — — — ( 35 ) ( 35 ) Dividends declared on common stock ($0.025 per share) — — ( 767 ) — ( 767 ) Stock-based compensation — 945 — — 945 Common stock issued under stock plans, net of shares withheld for employee taxes 103 ( 791 ) — — ( 791 ) Balance at March 31, 2023 30,682 $ 254,986 $ 82,069 $ ( 1,016 ) $ 336,039 See accompanying Notes to the unaudited Condensed Consolidated Financial Statements. 4 Table of Contents HEALTHSTREAM, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (In thousands) Three Months Ended March 31, 2024 2023 OPERATING ACTIVITIES: Net income $ 5,227 $ 2,623 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 10,336 9,926 Stock-based compensation 1,060 945 Amortization of deferred commissions 2,957 2,712 Provision for credit losses 174 209 Deferred income taxes 771 800 Loss on equity method investments 31 127 Other ( 346 ) ( 85 ) Changes in operating assets and liabilities: Accounts and unbilled receivables ( 5,782 ) ( 4,787 ) Prepaid royalties ( 758 ) ( 1,889 ) Other prepaid expenses and other current assets 959 482 Deferred commissions ( 1,928 ) ( 1,490 ) Other assets ( 56 ) 147 Accounts payable and accrued expenses ( 7,416 ) ( 4,773 ) Accrued royalties 1,157 1,090 Deferred revenue 14,552 14,504 Net cash provided by operating activities 20,938 20,541 INVESTING ACTIVITIES: Business combinations, net of cash acquired — ( 6,621 ) Proceeds from maturities of marketable securities 14,000 1,000 Purchases of marketable securities ( 14,124 ) ( 2,850 ) Proceeds from sale of non-marketable equity investments 765 — Payments associated with capitalized software development ( 7,019 ) ( 7,566 ) Purchases of property and equipment ( 742 ) ( 879 ) Net cash used in investing activities ( 7,120 ) ( 16,916 ) FINANCING ACTIVITIES: Taxes paid related to net settlement of equity awards ( 855 ) ( 791 ) Payment of cash dividends ( 849 ) — Net cash used in financing activities ( 1,704 ) ( 791 ) Effect of exchange rate changes on cash and cash equivalents ( 40 ) ( 21 ) Net increase in cash and cash equivalents 12,074 2,813 Cash and cash equivalents at beginning of period 40,333 46,023 Cash and cash equivalents at end of period $ 52,407 $ 48,836 See accompanying Notes to the unaudited Condensed Consolidated Financial Statements. 5 Table of Contents HEALTHSTREAM, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. OVERVIEW AND BASIS OF PRESENTATION Company Overview HealthStream provides primarily Software-as-a-Service ("SaaS") based applications for healthcare organizations—all designed to improve business and clinical outcomes by supporting the people who deliver patient care. The Company is focused on helping individuals and organizations in healthcare meet their ongoing learning, clinical development, credentialing, and scheduling needs. The Company also provides its solutions to nursing schools and nursing students. The Company is organized and operated according to its One HealthStream approach, with its hStream technology platform at the center of that approach. Increasingly, SaaS-based applications in the Company's diverse ecosystem of solutions utilize the Company's proprietary hStream technology platform to enhance the value proposition for customers by creating interoperability with and among other applications. As used in this Quarterly Report on Form 10 -Q (“Form 10 -Q”), “HealthStream,” “Company,” “we,” “us,” and “our” mean HealthStream, Inc. and its subsidiaries, unless the context indicates otherwise. Basis of Presentation The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States (“US GAAP”) for interim financial information and with the instructions to Form 10‑Q and Article 10 of Regulation S‑X. Accordingly, condensed consolidated financial statements do not include all of the information and footnotes required by US GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. All intercompany transactions have been eliminated in consolidation. Operating results for the three months ended March 31, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2024. The Condensed Consolidated Balance Sheet at December 31, 2023 was derived from the audited Consolidated Financial Statements at that date but does not include all of the information and footnotes required by US GAAP for a complete set of financial statements. For further information, refer to the Consolidated Financial Statements and Notes thereto for the year ended December 31, 2023 (included in the Company's Annual Report on Form 10 -K, filed with the Securities and Exchange Commission on February 26, 2024). 2. RECENT ACCOUNTING PRONOUNCEMENTS Accounting Pronouncements Recently Adopted In November 2023, the Financial Accounting Standards Board ("FASB") issued ASU 2023 - 07, Segment Reporting (Topic 280 ): Improvements to Reportable Segment Disclosures . The new guidance requires disclosures of significant reportable segment expenses that are regularly provided to the chief operating decision maker and other segment items on an interim and annual basis. Entities with a single reportable segment will also be required to apply the disclosure requirements in Accounting Standards Update ("ASU") 2023 - 07 on an interim and annual basis. ASU 2023 - 07 will be effective for the Company for annual periods beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024. The Company is currently evaluating the impact of adopting ASU 2023 - 07. Recently Issued Accounting Pronouncements Not Yet Adopted In December 2023, FASB issued ASU 2023 - 09, Income Taxes (Topic 740 ): Improvements to Income Tax Disclosures , which requires public entities to provide disclosure of disaggregated information in the entity’s tax rate reconciliation, as well as disclosure of income taxes paid disaggregated by jurisdiction. ASU 2023 - 09 is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact of adopting ASU 2023 - 09. 6 Table of Contents HEALTHSTREAM, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 3. REVENUE RECOGNITION AND SALES COMMISSIONS Revenue Recognition Revenues are recognized when control of the promised goods or services is transferred to the customer in an amount that reflects the consideration the Company expects to be entitled in exchange for transferring those goods or services. Revenue is recognized based on the following five step model: • Identification of the contract with a customer • Identification of the performance obligations in the contract • Determination of the transaction price • Allocation of the transaction price to the performance obligations in the contract • Recognition of revenue when, or as, the Company satisfies a performance obligation The following table represents revenues disaggregated by revenue source (in thousands). Sales taxes are excluded from revenues. Three Months Ended March 31, 2024 2023 Subscription services $ 70,205 $ 66,015 Professional services 2,555 2,931 Total revenues, net $ 72,760 $ 68,946 For both the three months ended March 31, 2024 and 2023 , the Company recognized $ 0.2 million in impairment losses on receivables and contract assets arising from the Company's contracts with customers. During the three months ended March 31, 2024 and 2023 , the Company recognized revenues of $ 40.0 million and $ 39.1 million, respectively, from amounts included in deferred revenue at the beginning of the respective periods. As of March 31, 2024 , approximately $ 514 million of revenue is expected to be recognized from remaining performance obligations under contracts with customers. The Company expects to recognize revenue related to approximately 44 % of these remaining performance obligations over the next 12 months, with the remaining amounts recognized thereafter. Sales Commissions Sales commissions earned by the Company's sales employees are considered incremental and recoverable costs of obtaining a contract with a customer. The Company recorded amortization of deferred commissions of $ 3.0 million and $ 2.7 million for the three months ended March 31, 2024 and 2023 , respectively, which is included in sales and marketing expenses in the accompanying Condensed Consolidated Statements of Income. 7 Table of Contents HEALTHSTREAM, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 4. INCOME TAXES Income taxes are accounted for using the asset and liability method, whereby deferred tax assets and liabilities are determined based on the temporary differences between the financial statement and tax bases of assets and liabilities measured at tax rates that will be in effect for the year in which the differences are expected to affect taxable income. The Company computes its interim period provision for income taxes by applying the estimated annual effective tax rate to year-to-date pretax income or loss and adjusts the provision for discrete tax items recorded in the period. During the three months ended March 31, 2024 and 2023 , the Company recorded a provision for income taxes of approximately $ 1.3 million and $ 0.5 million, respectively. The Company’s effective tax rate was 20 % and 16 % for the three months ended March 31, 2024 and 2023 , respectively. The Company’s effective tax rate primarily reflects the statutory corporate income tax rate, the net effect of state taxes, foreign income taxes, the effect of various permanent tax differences, and recognition of discrete tax items. The Company recognizes excess tax benefits and tax deficiencies associated with stock-based awards as a component of its provision for income taxes. During the three months ended March 31, 2024 , the Company recorded discrete tax benefits of $ 17,000 , which consisted primarily of a $ 129,000 tax benefit associated with stock-based awards, partially offset by $ 112,000 of discrete tax expense related to reserves for uncertain tax positions. During the three months ended March 31, 2023 , the Company recorded discrete tax benefits of $ 53,000 , which consisted primarily of a $ 133,000 tax benefit associated with stock-based awards. This tax benefit was partially offset by $ 80,000 of discrete tax expense related to reserves for uncertain tax positions. 5. SHAREHOLDERS ’ EQUITY Dividends on Common Stock During the three months ended March 31, 2024, the Company's Board of Directors (“Board”) declared the following quarterly dividend under its dividend policy: Dividend Payment Date Dividend Declaration Date Dividend Per Share Record Date Cash Outlay March 22, 2024 February 19, 2024 $ 0.028 March 11, 2024 $ 849,000 Additionally, o n April 22, 2024, the Board declared a quarterly cash dividend of $ 0.028 per share, payable on May 17, 2024 to holders of record on May 6, 2024 . Stock-Based Compensation The Company has stock awards outstanding under its 2016 Omnibus Incentive Plan and 2022 Omnibus Incentive Plan. The Company accounts for its stock-based compensation plans using the fair-value based method for costs related to share-based payments, including restricted share units (“RSUs”) and stock options. During the three months ended March 31, 2024 , the Company issued 45,640 RSUs subject to service-based time vesting, with a weighted average grant date fair value of $ 26.79 per share, measured based on the closing fair market value of the Company's stock on the date of the grant. During the three months ended March 31, 2023 , the Company issued 45,907 RSUs subject to service-based time vesting, with a weighted average grant date fair value of $ 26.25 per share, measured based on the closing fair market value of the Company’s stock on the date of grant. 8 Table of Contents HEALTHSTREAM, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) During the three months ended March 31, 2023, the Company granted 138,000 performance-based RSUs, the vesting of which occurs over a five -year period and is contingent upon continued service and achieving certain performance criteria established by the compensation committee of the Board (the “Compensation Committee”) on an annual basis in increments of 15 %, 20 %, 20 %, 20 %, and 25 % based on performance in 2023, 2024, 2025, 2026, and 2027, respectively. The performance criteria for the second -year tranche, or 27,600 of these performance-based RSUs, is based on 2024 adjusted EBITDA. The measurement date for these 27,600 performance-based RSUs was established during the three months ended March 31, 2024 with a weighted average grant date fair value of $ 26.79 per share, measured based on the closing fair market value of the Company's stock on the date the performance criteria was established. The performance criteria for the remaining 89,700 performance-based RSUs has not yet been determined and will be established on an annual basis in 2025, 2026, and 2027, as applicable; therefore, the measurement date for these remaining 89,700 performance-based RSUs cannot be determined until the performance criteria have been established. During the three months ended March 31, 2022, the Company approved the grant of 91,042 performance-based RSUs, the vesting of which occurs over a five -year period and is contingent upon continued service and achieving certain performance criteria established by the Compensation Committee on an annual basis in increments of 15 %, 20 %, 20 %, 20 %, and 25 % based on performance in 2022, 2023, 2024, 2025, and 2026, respectively. The performance criteria and measurement date for the third -year tranche, or 18,211 of these performance-based RSUs, is based on 2024 adjusted EBITDA and was established during the three months ended March 31, 2024 with a grant date fair value of $ 26.79 per share, measured based on the closing fair market value of the Company's stock on the date the performance criteria was established. The performance criteria for the remaining 40,967 performance-based RSUs has not yet been determined and will be established on an annual basis in 2025 and 2026, as applicable; therefore, the measurement date for these remaining 40,967 performance-based RSUs cannot be determined until the performance criteria have been established. Total stock-based compensation expense recognized in the Condensed Consolidated Statements of Income is as follows (in thousands): Three Months Ended March 31, 2024 2023 Cost of revenues (excluding depreciation and amortization) $ 53 $ 48 Product development 197 167 Sales and marketing 136 113 Other general and administrative 674 617 Total stock-based compensation expense $ 1,060 $ 945 Share Repurchase Plan On September 13, 2023, the Company announced that the Board authorized a share repurchase program to repurchase up to $ 10.0 million of the Company's outstanding shares of common stock. The share repurchase program expired according to its terms on March 31, 2024. Under this program, the Company repurchased a total of 404,188 shares at an aggregate fair value of $ 8.9 million, reflecting an average price per share of $ 22.07 (excluding the cost of broker commissions). No repurchases occurred under this program during the three months ended March 31, 2024 . 9 Table of Contents HEALTHSTREAM, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 6. EARNINGS PER SHARE Basic earnings per share is computed by dividing the net income available to common shareholders for the period by the weighted average number of common shares outstanding during the period. Diluted earnings per share is computed by dividing the net income available to common shareholders for the period by the weighted average number of potentially dilutive common and common equivalent shares outstanding during the period. Common equivalent shares are composed of incremental common shares issuable upon the exercise of stock options and RSUs subject to vesting. The dilutive effect of common equivalent shares is included in diluted earnings per share by application of the treasury stock method. The total number of common equivalent shares excluded from the calculations of diluted earnings per share, due to their anti-dilutive effect or contingent performance conditions, was approximately 176,000 and 268,000 for the three months ended March 31, 2024 and 2023 , respectively. The following table sets forth the computation of basic and diluted earnings per share (in thousands, except per share data): Three Months Ended March 31, 2024 2023 Numerator: Net income $ 5,227 $ 2,623 Denominator: Weighted-average shares outstanding 30,313 30,591 Effect of dilutive shares 105 68 Weighted-average diluted shares 30,418 30,659 Net income per share: Basic $ 0.17 $ 0.09 Diluted $ 0.17 $ 0.09 7. MARKETABLE SECURITIES The fair value of marketable securities, which were all classified as available for sale and which the Company does not intend to sell nor will the Company be required to sell prior to recovery of their amortized cost basis, included the following (in thousands): March 31, 2024 Adjusted Cost Unrealized Gains Unrealized Losses Fair Value Level 2: U.S. treasury securities $ 31,261 $ 6 $ ( 2 ) $ 31,265 Total $ 31,261 $ 6 $ ( 2 ) $ 31,265 December 31, 2023 Adjusted Cost Unrealized Gains Unrealized Losses Fair Value Level 2: U.S. treasury securities $ 30,791 $ 10 $ ( 1 ) $ 30,800 Total $ 30,791 $ 10 $ ( 1 ) $ 30,800 The carrying amounts reported in the Condensed Consolidated Balance Sheets approximate fair value based on quoted market prices or alternative pricing sources and models utilizing market observable inputs. As of March 31, 2024 , the Company did not recognize any allowance for credit impairments on its available for sale securities. All investments in marketable securities are classified as current assets on the Condensed Consolidated Balance Sheets because the underlying securities mature within one year from the balance sheet date. 10 Table of Contents HEALTHSTREAM, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 8. DEBT Revolving Credit Facility On October 6, 2023, the Company entered into an Amended and Restated Revolving Credit Agreement ("Revolving Credit Facility"), amending the Revolving Credit Facility dated as of November 24, 2014, as amended, with certain lenders party thereto from time to time, and Truist, as Administrative Agent for the lenders. Under the Revolving Credit Facility, the Company may borrow up to $ 50.0 million, which includes a $ 5.0 million swingline sub-facility and a $ 5.0 million letter of credit sub-facility, as well as an accordion feature that allows the Company to increase the Revolving Credit Facility by a total of up to $ 25.0 million, subject to securing additional commitments from existing lenders or new lending institutions. The Revolving Credit Facility has a maturity date of October 6, 2026. The Company's obligations under the Revolving Credit Facility are unsecured. In addition, if the Company forms or acquires any domestic subsidiaries, the loans and other obligations under the Revolving Credit Facility will be guaranteed by such domestic subsidiaries. At the Company’s election, the borrowings under the Revolving Credit Facility, other than the swingline loans, bear interest at either ( 1 ) a base rate defined as the highest of (a) the rate which the Administrative Agent announces from time to time as its prime lending rate, as in effect from time to time, or (b) the Federal Funds Rate, as in effect from time to time, plus one -half of one percent ( 0.50 %) per annum (any changes in such rates to be effective as of the date of any change in such rate), plus in each case an applicable margin that varies with the company’s funded debt leverage ratio; or ( 2 ) a term secured overnight financing rate (“SOFR”) defined as the greater of (a)(i) the forward-looking term rate based on SOFR determined as of the reference time for such interest period with a term equivalent to such interest period plus (ii) a term SOFR adjustment equal to 0.10 % per annum and (b) zero, plus, in each case, an applicable margin that varies with the Company’s consolidated total leverage ratio. The Company’s borrowings under the swingline loans bear interest at the base rate plus the applicable margin. The initial applicable margin for base rate loans is 0.50 % and the initial applicable margin SOFR loans is 1.50 %. The applicable margins will be adjusted quarterly, in each case two ( 2 ) business days after the Administrative Agent's receipt of the Company's quarterly financial statements. The Company is also required to pay a commitment fee accruing on the unused revolving commitment, which fee initially is 20 basis points per annum and a letter of credit fee, accruing at a rate per annum equal to the applicable margin for SOFR loans then in effect on the daily average amount of such lender’s letter of credit exposure. Principal is payable in full at maturity on October 6, 2026, and there are no scheduled principal payments prior to maturity. Interest on base rate loans and swingline loans is payable quarterly in arrears, and interest on SOFR loans is payable at the end of each interest period, and in the case of interest periods longer than three months, on each day which occurs every three months after the initial date of such interest period. The purpose of the Revolving Credit Facility is for general working capital needs, permitted acquisitions (as defined in the Amended and Restated Revolving Credit Agreement), and for stock repurchase and/or redemption transactions that the Company may authorize. In addition, the Revolving Credit Facility required the Company to meet certain financial tests, including, without limitation: • a funded debt leverage ratio (consolidated debt/consolidated EBITDA) of not greater than 3.0 to 1.0; and • an interest coverage ratio (consolidated EBITDA/consolidated interest expense) of not less than 3.0 to 1.0. In addition, the Revolving Credit Facility contains certain customary affirmative and negative covenants that, among other things, restrict additional indebtedness, liens and encumbrances, changes to the character of the Company’s business, acquisitions, asset dispositions, mergers and consolidations, sale or discount of receivables, creation or acquisitions of additional subsidiaries, and other matters customarily restricted in such agreements. As of March 31, 2024 , the Company was in compliance with all covenants. There were no balances outstanding on the Revolving Credit Facility as of or during the three months ended March 31, 2024 . 11 Table of Contents