HEALTHSTREAM INC 10-Q

Item 1. Financial Statements HEALTHSTREAM, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (In thousands) September 30, December 31, 2025 2024 ASSETS Current assets: Cash and cash equivalents $ 53,544 $ 59,469 Marketable securities 39,047 37,748 Accounts receivable, net 27,675 30,189 Accounts receivable - unbilled 6,047 5,133 Prepaid and other current assets 21,261 20,583 Total current assets 147,574 153,122 Property and equipment, net 11,143 10,741 Capitalized software development, net 45,699 43,370 Operating lease right of use assets, net 15,667 17,453 Goodwill 191,623 191,220 Intangibles, net 45,369 55,548 Other assets 42,855 39,312 Total assets $ 499,930 $ 510,766 LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities: Accounts payable $ 3,924 $ 6,628 Accrued royalties 5,642 5,190 Accrued liabilities 10,643 10,141 Accrued compensation 6,600 9,507 Deferred revenue 85,687 84,227 Total current liabilities 112,496 115,693 Deferred tax liabilities 19,671 14,596 Deferred revenue, noncurrent 1,289 1,655 Operating lease liability, noncurrent 15,292 17,366 Other long-term liabilities 1,989 2,101 Commitments and contingencies Shareholders’ equity: Preferred Stock, no par value, 10,000 shares authorized, no shares issued or outstanding — — Common stock, no par value, 75,000 shares authorized; 29,652 and 30,432 shares issued and outstanding at September 30, 2025 and December 31, 2024, respectively 228,753 252,432 Retained earnings 121,972 108,972 Accumulated other comprehensive loss ( 1,532 ) ( 2,049 ) Total shareholders’ equity 349,193 359,355 Total liabilities and shareholders’ equity $ 499,930 $ 510,766 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 Nine Months Ended September 30, 2025 September 30, 2024 September 30, 2025 September 30, 2024 Revenues, net $ 76,474 $ 73,095 $ 224,355 $ 217,411 Operating costs and expenses: Cost of revenues (excluding depreciation and amortization) 26,507 24,470 78,357 72,825 Product development 12,107 12,100 36,228 36,208 Sales and marketing 12,143 11,497 36,101 34,676 General and administrative 7,330 8,457 23,396 26,325 Depreciation and amortization 10,820 10,073 32,441 30,779 Total operating costs and expenses 68,907 66,597 206,523 200,813 Operating income 7,567 6,498 17,832 16,598 Interest income 788 1,007 2,676 2,856 Other expense, net ( 103 ) ( 26 ) ( 141 ) ( 134 ) Income before income tax provision 8,252 7,479 20,367 19,320 Income tax provision 2,166 1,754 4,559 4,202 Net income $ 6,086 $ 5,725 $ 15,808 $ 15,118 Net income per share: Basic $ 0.20 $ 0.19 $ 0.52 $ 0.50 Diluted $ 0.20 $ 0.19 $ 0.52 $ 0.50 Weighted average shares of common stock outstanding: Basic 29,688 30,409 30,151 30,374 Diluted 29,811 30,590 30,283 30,512 Dividends declared per share $ 0.031 $ 0.028 $ 0.093 $ 0.084 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 Nine Months Ended September 30, 2025 September 30, 2024 September 30, 2025 September 30, 2024 Net income $ 6,086 $ 5,725 $ 15,808 $ 15,118 Other comprehensive (loss) income, net of taxes: Foreign currency translation adjustments ( 293 ) 290 511 ( 229 ) Unrealized gain on marketable securities 39 43 6 36 Total other comprehensive (loss) income ( 254 ) 333 517 ( 193 ) Comprehensive income $ 5,832 $ 6,058 $ 16,325 $ 14,925 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) Nine Months Ended September 30, 2025 Common Stock Retained Accumulated Other Comprehensive Total Shareholders’ Shares Amount Earnings (Loss)/Income Equity Balance at December 31, 2024 30,432 $ 252,432 $ 108,972 $ ( 2,049 ) $ 359,355 Net income — — 4,332 — 4,332 Comprehensive income — — — 30 30 Dividends declared on common stock ($ 0.031 per share) — — ( 943 ) — ( 943 ) Stock-based compensation — 1,104 — — 1,104 Common stock issued under stock plans, net of shares withheld for employee taxes 93 ( 1,070 ) — — ( 1,070 ) Balance at March 31, 2025 30,525 $ 252,466 $ 112,361 $ ( 2,019 ) $ 362,808 Net income — — 5,389 — 5,389 Comprehensive income — — — 741 741 Dividends declared on common stock ($ 0.031 per share) — — ( 946 ) — ( 946 ) Stock-based compensation — 836 — — 836 Common stock issued under stock plans, net of shares withheld for employee taxes 22 ( 5 ) — — ( 5 ) Excise tax on repurchases of common stock — ( 135 ) ( 135 ) Repurchases of common stock ( 650 ) ( 18,121 ) ( 18,121 ) Balance at June 30, 2025 29,897 $ 235,041 $ 116,804 $ ( 1,278 ) $ 350,567 Net income — — 6,086 — 6,086 Comprehensive loss — — — ( 254 ) ( 254 ) Dividends declared on common stock ($ 0.031 per share) — — ( 918 ) — ( 918 ) Stock-based compensation — 794 — — 794 Common stock issued under stock plans, net of shares withheld for employee taxes 11 ( 121 ) — — ( 121 ) Excise tax on repurchases of common stock — ( 64 ) — — ( 64 ) Repurchases of common stock ( 256 ) ( 6,897 ) — — ( 6,897 ) Balance at September 30, 2025 29,652 $ 228,753 $ 121,972 $ ( 1,532 ) $ 349,193 Nine Months Ended September 30, 2024 Common Stock Retained Accumulated Other Comprehensive Total Shareholders’ Shares Amount Earnings (Loss)/Income Equity Balance at December 31, 2023 30,298 $ 249,075 $ 92,368 $ ( 691 ) $ 340,752 Net income — — 5,227 — 5,227 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 Net income — — 4,168 — 4,168 Comprehensive loss — — — ( 45 ) ( 45 ) Dividends declared on common stock ($ 0.028 per share) — — ( 851 ) — ( 851 ) Stock-based compensation — 1,094 — — 1,094 Common stock issued under stock plans, net of shares withheld for employee taxes 10 ( 6 ) — — ( 6 ) Balance at June 30, 2024 30,408 $ 250,368 $ 100,063 $ ( 1,217 ) $ 349,214 Net income — — 5,725 — 5,725 Comprehensive income — — — 333 333 Dividends declared on common stock ($ 0.028 per share) — — ( 851 ) — ( 851 ) Stock-based compensation — 1,131 — — 1,131 Common stock issued under stock plans, net of shares withheld for employee taxes 7 ( 71 ) — — ( 71 ) Balance at September 30, 2024 30,415 $ 251,428 $ 104,937 $ ( 884 ) $ 355,481 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) Nine Months Ended September 30, 2025 2024 OPERATING ACTIVITIES: Net income $ 15,808 $ 15,118 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 32,441 30,779 Stock-based compensation 2,734 3,285 Amortization of deferred commissions 9,190 9,060 Provision for credit losses 568 2,027 Deferred income taxes 5,055 ( 960 ) Loss on equity method investments 150 150 Other ( 1,146 ) ( 1,205 ) Changes in operating assets and liabilities: Accounts and unbilled receivables 1,033 4,744 Prepaid and other current assets ( 180 ) 785 Other assets ( 11,881 ) ( 8,995 ) Accounts payable and accrued expenses ( 5,192 ) ( 8,371 ) Accrued royalties 453 1,266 Deferred revenue 1,094 ( 1,183 ) Net cash provided by operating activities 50,127 46,500 INVESTING ACTIVITIES: Proceeds from maturities of marketable securities 41,286 46,170 Purchases of marketable securities ( 41,434 ) ( 51,531 ) Proceeds from sale of non-marketable equity investments — 765 Purchase of other investments ( 1,500 ) — Payments associated with capitalized software development ( 21,910 ) ( 20,107 ) Purchases of property and equipment ( 3,481 ) ( 1,198 ) Net cash used in investing activities ( 27,039 ) ( 25,901 ) FINANCING ACTIVITIES: Taxes paid related to net settlement of equity awards ( 1,196 ) ( 932 ) Payment of cash dividends ( 2,809 ) ( 2,551 ) Repurchases of common stock ( 25,018 ) — Net cash used in financing activities ( 29,023 ) ( 3,483 ) Effect of exchange rate changes on cash and cash equivalents 10 40 Net (decrease) increase in cash and cash equivalents ( 5,925 ) 17,156 Cash and cash equivalents at beginning of period 59,469 40,333 Cash and cash equivalents at end of period $ 53,544 $ 57,489 NONCASH INVESTING AND FINANCING ACTIVITIES: Purchases of property and equipment, accrued but not paid $ 181 $ 28 Capitalized software development, accrued but not paid $ 746 $ 583 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. We believe that our single platform strategy, as represented by hStream, is the best way to realize our mission of improving the quality of care by developing the people who deliver care and the best way to create value for our shareholders in the process. 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 and certain prior period amounts have been reclassified to conform to the current period presentation. Operating results for the three and nine months ended September 30, 2025 are not necessarily indicative of the results that may be expected for the year ending December 31, 2025. The Condensed Consolidated Balance Sheet at December 31, 2024 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, 2024 (included in the Company's Annual Report on Form 10 -K, filed with the Securities and Exchange Commission on February 28, 2025). Business Segments The Company’s chief operating decision maker ("CODM") is its Chief Executive Officer. Since January 1, 2023, the Company’s business has been organized and managed around a consolidated, enterprise approach, including with regard to technology, operations, accounting, internal reporting (including the nature of information reviewed by the CODM), organization structure, compensation, performance assessment, and resource allocation. The Company’s CODM uses consolidated net income to make operating decisions, assess financial performance, and allocate resources. Further, the CODM reviews and utilizes functional expenses (cost of revenues, product development, sales and marketing, general and administrative, and depreciation and amortization) at the consolidated level to manage the Company's operations. Other segment items included in consolidated net income are interest income, other expense, net, and income tax provision, which are reflected in the Condensed Consolidated Statements of Income. Expenditures for additions to long-lived assets for the consolidated entity were $ 34.2 million and $ 29.8 million for the nine months ended September 30, 2025 and 2024 , respectively. Non-Marketable Equity Investments The aggregate carrying amount of non-marketable equity investments accounted for using the measurement alternative for equity investments that do not have readily determinable fair values was $ 1.5 million as of September 30, 2025 and December 31, 2024 , which the Company evaluates for impairment at each reporting period. Cumulatively, there have been no adjustments recorded due to changes in the fair value of the non-marketable equity investments the Company held as of September 30, 2025 . The fair value of non-marketable equity investments is not estimated if there are no identified events or changes in circumstances that may have a significant adverse effect on the fair value of the investment. 6 Table of Contents HEALTHSTREAM, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 2. RECENT ACCOUNTING PRONOUNCEMENTS In November 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("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 CODM 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 ASU 2023 - 07 on an interim and annual basis. ASU 2023 - 07 was 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 adopted this standard effective January 1, 2024 using a retrospective method. In December 2023, the 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. The Company is currently evaluating the effect of this standard on its disclosures and will adopt the standard effective for the annual period ending December 31, 2025. In November 2024, the FASB issued ASU 2024 - 03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures: Disaggregation of Income Statement Expenses , which requires disclosure of disaggregated information about specific categories underlying certain income statement expense line items in the footnotes to the financial statements for both annual and interim periods. This ASU is effective for fiscal years beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted. The Company is currently evaluating the impact of the adoption of this standard. In September 2025, the FASB issued ASU 2025 - 06, Intangibles — Goodwill and Other — Internal-Use Software (Subtopic 350 - 40 ): Targeted Improvements to the Accounting for Internal-Use Software , to modernize the accounting guidance for the costs to develop software for internal use. The standard applies to costs incurred to develop or obtain software for internal use. ASU 2025 - 06 amends the existing standard that refers to various stages of a software development project to align better with current software development methods, such as agile development. Under the new standard, entities will commence capitalizing eligible costs when (i) management has authorized and committed to funding the software project, and (ii) it is probable that the project will be completed and the software will be used to perform the function intended. The new standard also supersedes the guidance related to costs incurred to develop a website. ASU 2025 - 06 is effective for annual periods beginning after December 15, 2027. The guidance can be applied on a prospective basis, a modified basis for in-process projects, or on a retrospective basis. The Company is currently evaluating the impact of this accounting standard on its consolidated financial statements. 3. 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 to 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 September 30, Nine Months Ended September 30, 2025 2024 2025 2024 Subscription services $ 73,887 $ 69,918 $ 216,617 $ 209,136 Professional services 2,587 3,177 7,738 8,275 Total revenues, net $ 76,474 $ 73,095 $ 224,355 $ 217,411 For both the three months ended September 30, 2025 and 2024 , the Company recognized $ 0.2 million in impairment losses on receivables and contract assets arising from the Company's contracts with customers. For the nine months ended September 30, 2025 and 2024 , the Company recognized $ 0.6 million and $ 2.0 million in impairment losses on receivables and contract assets arising from the Company's contracts with customers, respectively. During the three months ended September 30, 2025 and 2024 , the Company recognized revenues of $ 45.9 million and $ 45.0 million, respectively, from amounts included in deferred revenue at the beginning of the respective periods. During the nine months ended September 30, 2025 and 2024 , the Company recognized revenues of $ 81.9 million and $ 79.4 million, respectively, from the amounts included in deferred revenue at the beginning of the respective periods. As of September 30, 2025 , approximately $ 621 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 39 % of these remaining performance obligations over the next 12 months, 67 % over the next 24 months, and 85 % over the next 36 months, with the remaining amounts recognized thereafter. 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. The Company’s effective tax rate was 22 % for both the nine months ended September 30, 2025 and 2024 . 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. On July 4, 2025, the federal budget reconciliation legislation, commonly referred to as the One Big Beautiful Bill Act ("OBBB”), was signed into law. The OBBB includes significant changes to federal tax law and other regulatory provisions that may impact the Company, including modifications to capitalization of research and development expenses and accelerated fixed asset depreciation. The legislation did not have a material impact on the Company's income tax expense during the three months ended September 30, 2025, and it is not expected to materially impact the Company's effective income tax rate for 2025. 5. SHAREHOLDERS' EQUITY Dividends on Common Stock During the nine months ended September 30, 2025 , the Company's Board of Directors (“Board”) declared the following quarterly dividends under the Company's dividend policy (in thousands, except per share data): Dividend Payment Date Dividend Declaration Date Dividend Per Share Record Date Cash Outlay March 21, 2025 February 24, 2025 $ 0.031 March 10, 2025 $ 943 May 30, 2025 May 5, 2025 $ 0.031 May 19, 2025 $ 946 August 29, 2025 August 4, 2025 $ 0.031 August 18, 2025 $ 919 Additionally, o n November 3, 2025, the Board declared a quarterly cash dividend of $ 0.031 per share, payable on November 28, 2025 to holders of record on November 17, 2025 . Stock-Based Compensation The Company has stock awards outstanding under its 2016 Omnibus Incentive Plan and 2022 Omnibus Incentive Plan. Stock Option Activity A summary of stock option activity for the three months ended September 30, 2025 is as follows (in thousands, except weighted-average exercise price). Weighted- Common Average Aggregate Shares Exercise Price Intrinsic Value Outstanding at beginning of period 90 $ 20.34 Granted — — Exercised — — Expired — — Forfeited — — Outstanding at end of period 90 $ 20.34 $ 711 Exercisable at end of period 90 $ 20.34 $ 711 The weighted average remaining contractual term of options outstanding at September 30, 2025 was 5.2 years. 8 Table of Contents HEALTHSTREAM, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Restricted Share Unit Activity A summary of Restricted Share Unit ("RSU") activity for the three months ended September 30, 2025 is as follows (in thousands, except weighted-average grant date fair value): Weighted- Number of Average Grant Date Aggregate RSU’s Fair Value Intrinsic Value Outstanding at beginning of period 485 $ 26.46 Granted 40 29.00 Vested ( 15 ) 24.60 Forfeited ( 2 ) 24.66 Outstanding at end of period 508 $ 26.72 $ 16,852 As of September 30, 2025 , total unrecognized compensation expense related to non-vested RSUs was $ 6.7 million, net of estimated forfeitures, with a weighted average expense recognition period remaining of 2.7 years. Total stock-based compensation expense recognized in the Condensed Consolidated Statements of Income is as follows (in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2025 2024 2025 2024 Cost of revenues (excluding depreciation and amortization) $ 50 $ 49 $ 154 $ 152 Product development 199 200 626 599 Sales and marketing 110 139 363 415 General and administrative 435 743 1,591 2,119 Total stock-based compensation expense $ 794 $ 1,131 $ 2,734 $ 3,285 Share Repurchase Plan On May 8, 2025, the Company announced a share repurchase program approved by the Company’s Board of Directors under which the Company was authorized to repurchase up to $ 25.0 million of its outstanding shares of common stock. Pursuant to this authorization, the Company was authorized to make repurchases in the open market, including under a Rule 10b5 - 1 plan, through privately negotiated transactions, or otherwise. During the three and nine months ended September 30, 2025, the Company repurchased and subsequently retired 255,833 shares and 905,786 shares valued at $ 6.9 million and $ 25.0 million, respectively, pursuant to this authorization. This share repurchase program is no longer in effect as the maximum dollar amount under this program was expended during the three months ended September 30, 2025 as referenced above. 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 224,000 and 177,000 for the three months ended September 30, 2025 and 2024 , respectively, and 171,000 and 169,000 for the nine months ended September 30, 2025 and 2024 . The following table sets forth the computation of basic and diluted earnings per share (in thousands, except per share data): Three Months Ended September 30, Nine Months Ended September 30, 2025 2024 2025 2024 Numerator: Net income $ 6,086 $ 5,725 $ 15,808 $ 15,118 Denominator: Weighted-average shares outstanding 29,688 30,409 30,151 30,374 Effect of dilutive shares 123 181 132 138 Weighted-average diluted shares 29,811 30,590 30,283 30,512 Net income per share: Basic $ 0.20 $ 0.19 $ 0.52 $ 0.50 Diluted $ 0.20 $ 0.19 $ 0.52 $ 0.50 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): September 30, 2025 Adjusted Cost Unrealized Gains Unrealized Losses Fair Value Level 2: U.S. treasury securities $ 39,019 $ 29 $ ( 1 ) $ 39,047 Total $ 39,019 $ 29 $ ( 1 ) $ 39,047 December 31, 2024 Adjusted Cost Unrealized Gains Unrealized Losses Fair Value Level 2: U.S. treasury securities $ 37,726 $ 24 $ ( 2 ) $ 37,748 Total $ 37,726 $ 24 $ ( 2 ) $ 37,748 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 September 30, 2025 and December 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 September 30, 2025 , the Company was in compliance with all covenants. There were no balances outstanding on the Revolving Credit Facility as of or during the three and nine months ended September 30, 2025 . 9. SUBSEQUENT EVENT On October 8, 2025, the Company acquired all of the outstanding equity of Virsys12, LLC ( "Virsys12" ), a Brentwood, Tennessee-based healthcare technology company that offers payers and health plans an innovative provider data management suite used for onboarding, credentialing, and network management. The consideration paid at closing for Virsys12 consisted of approximately $11.2 million in cash, giving effect to customary purchase price adjustments, and is subject to a post-closing working capital adjustment. In addition, up to an additional $ 4.0 million in cash may be paid over a three -year period following closing, contingent upon the achievement of certain financial targets. This acquisition expands the Company's existing provider data management and credentialing solution for payers and health plan enterprises, called Network by HealthStream TM , launched 14 months ago, which is a part of its broader, market-leading Credentialing application suite. The acquisition will be accounted for using the acquisition method of business combination under ASC 805, Business Combinations . The Company will provide preliminary purchase price allocation information and other disclosures required by ASC 805 in our Annual Report on Form 10 -K to be filed for the year ending December 31, 2025. 11 Table of Contents