HEALTHSTREAM INC 10-Q

Item 1. Financial Statements HEALTHSTREAM, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (In thousands) March 31, December 31, 2026 2025 ASSETS Current assets: Cash and cash equivalents $ 48,711 $ 36,161 Marketable securities 17,787 20,843 Accounts receivable, net 38,435 32,153 Accounts receivable - unbilled 5,009 6,845 Prepaid and other current assets 23,081 23,654 Total current assets 133,023 119,656 Property and equipment, net 10,203 10,661 Capitalized software development, net 45,621 45,581 Operating lease right of use assets, net 14,445 15,272 Goodwill 212,701 217,518 Intangibles, net 63,657 64,930 Other assets 47,791 46,756 Total assets $ 527,441 $ 520,374 LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities: Accounts payable $ 5,086 $ 7,769 Accrued royalties 6,588 5,595 Accrued liabilities 14,409 11,166 Accrued compensation 4,029 11,199 Deferred revenue 106,402 88,417 Total current liabilities 136,514 124,146 Deferred tax liabilities 17,977 18,246 Deferred revenue, noncurrent 1,320 1,344 Operating lease liability, noncurrent 14,067 14,684 Other long-term liabilities 5,571 7,931 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; 29,305 and 29,579 shares issued and outstanding at March 31, 2026 and December 31, 2025, respectively 225,089 231,797 Retained earnings 128,469 123,587 Accumulated other comprehensive loss ( 1,566 ) ( 1,361 ) Total shareholders’ equity 351,992 354,023 Total liabilities and shareholders’ equity $ 527,441 $ 520,374 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, 2026 March 31, 2025 Revenues, net $ 81,203 $ 73,485 Operating costs and expenses: Cost of revenues (excluding depreciation and amortization) 27,758 25,487 Product development 13,606 12,047 Sales and marketing 12,960 12,149 General and administrative 8,002 8,669 Depreciation and amortization 11,365 10,755 Total operating costs and expenses 73,691 69,107 Operating income 7,512 4,378 Interest income 414 931 Other expense, net ( 106 ) ( 61 ) Income before income tax provision 7,820 5,248 Income tax provision 1,910 916 Net income $ 5,910 $ 4,332 Net income per share: Basic $ 0.20 $ 0.14 Diluted $ 0.20 $ 0.14 Weighted average shares of common stock outstanding: Basic 29,376 30,444 Diluted 29,424 30,587 Dividends declared per share $ 0.035 $ 0.031 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, 2026 March 31, 2025 Net income $ 5,910 $ 4,332 Other comprehensive (loss) income, net of taxes: Foreign currency translation adjustments ( 188 ) 49 Unrealized loss on marketable securities ( 17 ) ( 19 ) Total other comprehensive (loss) income ( 205 ) 30 Comprehensive income $ 5,705 $ 4,362 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, 2026 Common Stock Retained Accumulated Other Comprehensive Total Shareholders’ Shares Amount Earnings Loss Equity Balance at December 31, 2025 29,579 $ 231,797 $ 123,587 $ ( 1,361 ) $ 354,023 Net income — — 5,910 — 5,910 Comprehensive loss — — — ( 205 ) ( 205 ) Dividends declared on common stock ($ 0.035 per share) — — ( 1,028 ) — ( 1,028 ) Stock-based compensation — 1,309 — — 1,309 Common stock issued under stock plans, net of shares withheld for employee taxes 68 ( 582 ) — — ( 582 ) Excise tax on repurchases of common stock — 72 — — 72 Repurchases of common stock ( 342 ) ( 7,507 ) — — ( 7,507 ) Balance at March 31, 2026 29,305 $ 225,089 $ 128,469 $ ( 1,566 ) $ 351,992 Three Months Ended March 31, 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 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, 2026 2025 OPERATING ACTIVITIES: Net income $ 5,910 $ 4,332 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 11,365 10,755 Stock-based compensation 1,309 1,104 Amortization of deferred commissions 3,286 3,150 Provision for credit losses 92 237 Deferred income taxes — 751 Loss on equity method investments 40 72 Other ( 160 ) ( 399 ) Changes in operating assets and liabilities: Accounts and unbilled receivables ( 4,550 ) ( 1,002 ) Prepaid royalties ( 1,695 ) ( 1,200 ) Other prepaid expenses and other current assets 2,300 1,469 Other assets ( 2,611 ) ( 2,781 ) Accounts payable and accrued expenses ( 7,044 ) ( 7,296 ) Accrued royalties 994 425 Deferred revenue 17,900 17,457 Net cash provided by operating activities 27,136 27,074 INVESTING ACTIVITIES: Cash paid for acquisitions ( 302 ) — Proceeds from maturities of marketable securities 13,400 11,268 Purchases of marketable securities ( 10,197 ) ( 9,171 ) Purchases of other investments ( 1,750 ) ( 500 ) Payments associated with capitalized software development ( 6,727 ) ( 7,790 ) Purchases of property and equipment ( 740 ) ( 1,055 ) Net cash used in investing activities ( 6,316 ) ( 7,248 ) FINANCING ACTIVITIES: Taxes paid related to net settlement of equity awards ( 582 ) ( 1,070 ) Payment of cash dividends ( 1,028 ) ( 943 ) Repurchases of common stock ( 6,723 ) — Net cash used in financing activities ( 8,333 ) ( 2,013 ) Effect of exchange rate changes on cash and cash equivalents 63 7 Net increase in cash and cash equivalents 12,550 17,820 Cash and cash equivalents at beginning of period 36,161 59,469 Cash and cash equivalents at end of period $ 48,711 $ 77,289 NONCASH INVESTING AND FINANCING ACTIVITIES: Purchases of property and equipment, accrued but not paid $ 262 $ 197 Capitalized software development, accrued but not paid $ 741 $ 330 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 primarily provides 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, whether through the Company's enterprise applications or emerging career networks. 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 months ended March 31, 2026 are not necessarily indicative of the results that may be expected for the year ending December 31, 2026. The Condensed Consolidated Balance Sheet at December 31, 2025 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, 2025 (included in the Company's Annual Report on Form 10 -K, filed with the Securities and Exchange Commission on February 26, 2026). Business Segment The Company’s chief operating decision maker ("CODM") is its Chief Executive Officer. The Company’s business is 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 $ 12.2 million and $ 10.7 million for the three months ended March 31, 2026 and 2025 , respectively. Non-Marketable Equity Investments The aggregate carrying amounts of non-marketable equity investments accounted for using the measurement alternative for equity investments that do not have readily determinable fair values were $ 3.0 million and $ 1.5 million as of March 31, 2026 and December 31, 2025 , respectively, 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 March 31, 2026 . 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) Fair Value Measurement During the three months ended March 31, 2026, the Company recorded a purchase accounting adjustment to reduce the fair value of contingent consideration by $ 2.3 million related to the MissionCare Collective acquisition from the original estimate recorded based on updated information received from valuation specialists (see Note 9 to the Condensed Consolidated Financial Statements). March 31, December 31, Contingent Consideration: 2026 2025 Beginning balance $ 6,450 $ 535 Purchases/Initial recognition ( 2,300 ) 6,000 Total (gains) losses: Included in earnings — ( 85 ) Included in other comprehensive income — — Payments — — Ending balance $ 4,150 $ 6,450 2. RECENT ACCOUNTING PRONOUNCEMENTS In November 2024, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“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 July 2025, the FASB issued ASU 2025 -05, Measurement of Credit Loss for Accounts Receivable and Contract Assets . The ASU provides a practical expedient for the calculation of current expected credit losses for current accounts receivable and contract assets, allowing entities to assume that current conditions as of the balance sheet date will persist through the forecast period. The Company adopted the ASU effective January 1, 2026 on a prospective basis and elected the practical expedient for the calculation of current expected credit losses. The adoption did not have a material impact on the Company’s allowance for doubtful accounts. 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. In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements , which clarifies the guidance in Topic 270 to improve the consistency of interim financial reporting. The standard provides a comprehensive list of required interim disclosures and introduces a disclosure principle requiring entities to disclose events since the end of the last annual reporting period that have a material impact on the entity. ASU 2025-11 is effective for fiscal years beginning after December 15, 2027, including interim periods within those fiscal years, with early adoption permitted. The Company is currently evaluating the impact of adopting ASU 2025-11. 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 7 Table of Contents HEALTHSTREAM, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) The following table represents revenues disaggregated by revenue source (in thousands). Sales taxes are excluded from revenues. Three Months Ended March 31, 2026 2025 Subscription services $ 78,392 $ 70,789 Professional services 2,811 2,696 Total revenues, net $ 81,203 $ 73,485 For the three months ended March 31, 2026 and 2025 , the Company recognized $ 0.1 million and $ 0.2 million in impairment losses on receivables and contract assets arising from the Company's contracts with customers, respectively. During the three months ended March 31, 2026 and 2025 , the Company recognized revenues of $ 42.7 million and $ 44.3 million, respectively, from amounts included in deferred revenue at the beginning of the respective periods. As of March 31, 2026 , approximately $ 687 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 83 % over the next 36 months, with the remaining amounts recognized thereafter. 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 24 % and 17 % for the three months ended March 31, 2026 and 2025 , 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. During the three months ended March 31, 2026, the Company recorded discrete tax expense of $ 0.2 million, which consisted of discrete tax expense associated with stock-based awards and reserves for uncertain tax positions. During the three months ended March 31, 2025, the Company recorded discrete tax benefits of $ 0.2 million, which consisted of a tax benefit associated with stock-based awards partially offset by discrete tax expense related to reserves for uncertain tax positions. 5. SHAREHOLDERS' EQUITY AND STOCK-BASED COMPENSATION Dividends on Common Stock During the three months ended March 31, 2026 , the Company's Board of Directors (“Board”) declared the following quarterly dividend 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 20, 2026 February 23, 2026 $ 0.035 March 9, 2026 $ 1,028 Additionally, o n May 4, 2026, the Board declared a quarterly cash dividend of $ 0.035 per share, payable on May 29, 2026 to holders of record on May 18, 2026 . Stock Option Activity A summary of stock option activity for the three months ended March 31, 2026 is as follows (in thousands, except weighted-average exercise price). Weighted- Common Average Aggregate Shares Exercise Price Intrinsic Value Outstanding at beginning of period 233 $ 22.54 Granted — — Exercised — — Expired — — Forfeited — — Outstanding at end of period 233 $ 22.54 $ 33 Exercisable at end of period 90 $ 20.34 $ 33 The weighted average remaining contractual term of options outstanding at March 31, 2026 was 7.8 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 March 31, 2026 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 518 $ 26.57 Granted 57 20.61 Vested ( 95 ) 24.13 Forfeited — — Outstanding at end of period 480 $ 26.34 $ 9,935 The aggregate fair value of RSUs that vested during the three months ended March 31, 2026 and 2025, as of the respective vesting dates, was $ 2.3 million and $ 2.9 million, respectively. Stock-Based Compensation Total stock-based compensation expense recognized in the Condensed Consolidated Statements of Income is as follows (in thousands): Three Months Ended March 31, 2026 2025 Cost of revenues (excluding depreciation and amortization) $ 56 $ 53 Product development 273 229 Sales and marketing 168 145 General and administrative 812 677 Total stock-based compensation expense $ 1,309 $ 1,104 As of March 31, 2026 , total unrecognized compensation expense related to non-vested stock options, RSUs, and performance-based RSUs where the performance criteria has been established was $ 8.6 million, net of estimated forfeitures, with a weighted average expense recognition period remaining of 2.7 years. Share Repurchase Plan On November 11, 2025, the Board approved a share repurchase program under which the Company was authorized to repurchase up to $ 10.0 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 Rule 10b5 - 1 plans, through privately negotiated transactions, or otherwise. The terms of this program provided that it would terminate on the earlier of February 26, 2026 or when the maximum dollar amount had been expended. During the three months ended March 31, 2026, the Company repurchased and subsequently retired 222,978 shares of common stock at an aggregate fair value of $ 5.0 million, reflecting an average price per share of $ 22.42 (excluding the cost of broker commissions and the 1 % share repurchase excise tax imposed by the Inflation Reduction Act of 2022 ). This share repurchase program terminated in January 2026 when the maximum dollar amount under this program was expended. On March 13, 2026, the Company announced the adoption of a new share repurchase program approved by the Board under which the Company is authorized to repurchase up to $ 10.0 million of its outstanding shares of common stock. Pursuant to this authorization, the Company is authorized to make repurchases in the open market, including under Rule 10b5 - 1 plans, through privately negotiated transactions, or otherwise. This share repurchase program terminates on the earlier of September 12, 2026 or when the maximum dollar amount under the plan has been expended. During the three months ended March 31, 2026, the Company repurchased and subsequently retired 119,367 shares of common stock at an aggregate fair value of $ 2.5 million under this authorization, reflecting an average price per share of $ 20.94 (excluding the cost of broker commissions and the 1 % share repurchase excise tax imposed by the Inflation Reduction Act of 2022 ), and the Company continued to repurchase shares pursuant to this authorization during the second quarter of 2026 , repurchasing 90,131 additional shares valued at $ 1.8 million through April 30, 2026. 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 409,000 and 105,000 for the three months ended March 31, 2026 and 2025 , 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, 2026 2025 Numerator: Net income $ 5,910 $ 4,332 Denominator: Weighted-average shares outstanding 29,376 30,444 Effect of dilutive shares 48 143 Weighted-average diluted shares 29,424 30,587 Net income per share: Basic $ 0.20 $ 0.14 Diluted $ 0.20 $ 0.14 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, 2026 Adjusted Cost Unrealized Gains Unrealized Losses Fair Value Level 2: U.S. treasury securities $ 17,778 $ 10 $ ( 1 ) $ 17,787 Total $ 17,778 $ 10 $ ( 1 ) $ 17,787 December 31, 2025 Adjusted Cost Unrealized Gains Unrealized Losses Fair Value Level 2: U.S. treasury securities $ 20,817 $ 26 $ — $ 20,843 Total $ 20,817 $ 26 $ — $ 20,843 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, 2026 and December 31, 2025 , 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 March 13, 2026, the Company entered into the First Amendment (the "First Amendment") to Amended and Restated Revolving Credit Agreement, amending the Amended and Restated Revolving Credit Agreement dated October 6, 2023 ( the “Revolving Credit Facility"; the Revolving Credit Facility, as amended by the First Amendment, the "Amended Revolving Credit Facility"). The First Amendment made certain revisions to the restricted payments provision in the Revolving Credit Facility (including to broaden the scope of certain parameters restricting dividends and share repurchases by the Company), and did not otherwise change the terms of the Revolving Credit Facility. The Revolving Credit Facility amended and restated 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 Amended 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 Amended 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 Amended Revolving Credit Facility has a maturity date of October 6, 2026. The Company's obligations under the Amended Revolving Credit Facility are unsecured. In addition, if the Company forms or acquires any domestic subsidiaries, the loans and other obligations under the Amended Revolving Credit Facility will be guaranteed by such domestic subsidiaries. At the Company’s election, the borrowings under the Amended 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 Amended 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 Amended 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 Amended 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, 2026 , the Company was in compliance with all covenants of the Amended Revolving Credit Facility. There were no balances outstanding on the Amended Revolving Credit Facility as of or during the three months ended March 31, 2026 . 11 Table of Contents HEALTHSTREAM, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 9. BUSINESS COMBINATIONS Virsys12 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 $ 11.4 million payable in cash, after giving effect to customary purchase price adjustments and 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 expanded the Company's existing provider data management and credentialing solution for payers and health plan enterprises, called Network by HealthStream TM , which is a part of its broader, market-leading Credentialing application suite. The acquisition was accounted for using the acquisition method of business combination under ASC 805. The results of operations for Virsys12 have been included in the Company’s Condensed Consolidated Financial Statements from the date of acquisition. A summary of the purchase price is as follows (in thousands): Cash $ 11,430 Fair value of contingent consideration 1,000 Total consideration $ 12,430 The following table summarizes the preliminary fair value of the assets acquired and liabilities assumed as of the date of acquisition (in thousands): Cash $ 741 Accounts and unbilled receivable 72 Prepaid and other current assets 595 Operating lease right-of-use asset 252 Property and equipment 13 Deferred tax assets 529 Goodwill 6,108 Intangible assets 7,050 Accounts payable and accrued liabilities ( 926 ) Deferred revenue ( 2,004 ) Net assets acquired $ 12,430 The excess of preliminary purchase price over the preliminary fair values of net tangible and intangible assets is recorded as goodwill. The preliminary fair values of tangible and identifiable intangible assets and liabilities are based on management’s estimates and assumptions. The preliminary fair values of assets acquired and liabilities assumed continue to be subject to change during the measurement period (up to one year from the acquisition date) as the Company finalizes the valuation of these items. The primary areas of the preliminary purchase price allocation that are not finalized include the composition and valuation of an indemnification asset and liability related to sales tax attributes, which is preliminarily valued at $ 0.4 million. The primary intangible asset acquired was developed technology. The fair value estimate for developed technology intangible asset included significant assumptions in the prospective financial information, such as revenue growth, obsolescence factor, EBITDA margin, and the discount rate. Additionally, these assumptions are forward looking and could be affected by future economic and market conditions. The goodwill balance is primarily attributed to the assembled workforce, additional market opportunities from offering Virsys12 products, and expected synergies from integrating Virsys12 with other products or other combined functional areas within the Company. The goodwill balance is deductible for U.S. income tax purposes. The following table sets forth the preliminary components of identifiable intangible assets and their estimated useful lives as of the acquisition date (in thousands): Fair value Useful life Customer relationships $ 700 10 years Developed technology 5,900 5 years Non-compete 250 5 years Trade name 200 3 years Total intangible assets subject to amortization $ 7,050 12 Table of Contents HEALTHSTREAM, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) The following unaudited pro forma financial information summarizes the results of operations of the Company and Virsys12 as though the companies were combined as of January 1, 2024 ( in thousands, except per share data): Three Months Ended March 31, 2025 Total revenues $ 75,236 Net income $ 4,139 Net income per share - basic $ 0.14 Net income per share - diluted $ 0.14 These unaudited pro forma combined results of operations include certain adjustments arising from the acquisition, such as amortization of intangible assets, depreciation of property and equipment, and interest expense related to Virsys12's previously outstanding debt. The unaudited pro forma combined results of operations is for informational purposes only and is not indicative of what the Company’s results of operations would have been had the transaction occurred as of January 1, 2024 or to project the Company’s results of operations in any future period. MissionCare Collective On December 15, 2025, the Company acquired all of the outstanding equity of MissionCare Collective, LLC ("MissionCare"), a healthcare workforce company that includes the largest caregiver network in the United States. The consideration paid at closing for MissionCare consisted of approximately $ 24.9 million payable in cash at closing, after giving effect to customary purchase price adjustments and a post-closing working capital adjustment. In addition, 165,684 shares of HealthStream common stock valued at $ 4.0 million were issued at closing through a private placement, and up to an additional $ 10.0 million in cash may be paid over a three -year period following closing, contingent upon the achievement of certain financial targets. The acquisition will be accounted for using the acquisition method of business combination under ASC 805. The results of operations for MissionCare have been included in the Company’s Condensed Consolidated Financial Statements from the date of acquisition. A summary of the purchase price is as follows (in thousands): Cash $ 24,880 Common stock issued 4,000 Fair value of contingent consideration 2,700 Total consideration $ 31,580 The following table summarizes the preliminary fair value of the assets acquired and liabilities assumed as of the date of acquisition (in thousands): Cash $ 165 Accounts receivable 618 Prepaid and other current assets 1,046 Deferred tax assets 1,226 Goodwill 14,993 Intangible assets 18,600 Accounts payable and accrued liabilities ( 1,238 ) Deferred revenue ( 3,830 ) Net assets acquired $ 31,580 13 Table of Contents HEALTHSTREAM, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) The excess of preliminary purchase price over the preliminary fair values of net tangible and intangible assets is recorded as goodwill. The preliminary fair values of tangible and identifiable intangible assets and liabilities are based on management’s estimates and assumptions. The preliminary fair values of assets acquired and liabilities assumed continue to be subject to change during the measurement period (up to one year from the acquisition date) as the Company finalizes the valuation of these items. During the three months ended March 31, 2026, the Company recorded adjustments to intangible assets and contingent consideration based on information received during the period from valuation specialists, as well as recorded the post-closing working capital adjustment, which resulted in the Company recording a measurement period adjustment which decreased goodwill by $ 4.6 million. The measurement period adjustment had an immaterial effect on current or prior period earnings. The primary areas of the preliminary purchase price allocation that are not finalized include the composition and valuation of an indemnification asset and liability related to sales tax attributes, which is preliminarily valued at $ 1.0 million. The primary intangible assets acquired were customer relationships and developed technology. The fair value estimate for customer relationships intangible asset included significant assumptions regarding prospective financial information with respect to the acquisition, including with respect to revenue growth, customer attrition, EBITDA margin, and the discount rate. The fair value estimate for developed technology intangible asset included significant assumptions, including the estimate of employee hours that would be needed to recreate the technology. Additionally, these assumptions are forward looking and could be affected by future economic and market conditions. The goodwill balance is primarily attributed to the assembled workforce, additional market opportunities arising from offering MissionCare products, and expected synergies from integrating MissionCare with other products or other combined functional areas within the Company. The goodwill balance is deductible for U.S. income tax purposes. The following table sets forth the preliminary components of identifiable intangible assets and their estimated useful lives as of the acquisition date (in thousands): Fair value Useful life Customer relationships $ 9,000 7 years Developed technology 8,800 5 years Trade name 800 8 years Total intangible assets subject to amortization $ 18,600 The following unaudited pro forma financial information summarizes the results of operations of the Company and MissionCare as though the companies were combined as of January 1, 2024 ( in thousands, except per share data): Three Months Ended March 31, 2025 Total revenues $ 75,711 Net income $ 4,486 Net income per share - basic $ 0.15 Net income per share - diluted $ 0.15 These unaudited pro forma combined results of operations include certain adjustments arising from the acquisition, such as amortization of intangible assets. The unaudited pro forma combined results of operations is for informational purposes only and is not indicative of what the Company’s results of operations would have been had the transaction occurred as of January 1, 2024 or to project the Company’s results of operations in any future period. 14 Table of Contents