HEALTHSTREAM INC 10-Q

Item 1. Financial Statements HEALTHSTREAM, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (In thousands) June 30, December 31, 2026 2025 ASSETS Current assets: Cash and cash equivalents $ 46,169 $ 36,161 Marketable securities 20,562 20,843 Accounts receivable, net 31,142 32,153 Accounts receivable - unbilled 5,661 6,845 Prepaid and other current assets 26,687 23,654 Total current assets 130,221 119,656 Property and equipment, net 10,169 10,661 Capitalized software development, net 46,638 45,581 Operating lease right of use assets, net 13,818 15,272 Goodwill 212,727 217,518 Intangibles, net 59,970 64,930 Other assets 48,056 46,756 Total assets $ 521,599 $ 520,374 LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities: Accounts payable $ 6,823 $ 7,769 Accrued royalties 5,114 5,595 Accrued liabilities 11,797 11,166 Accrued compensation 5,919 11,199 Deferred revenue 92,983 88,417 Total current liabilities 122,636 124,146 Deferred tax liabilities 21,952 18,246 Deferred revenue, noncurrent 1,452 1,344 Operating lease liability, noncurrent 13,429 14,684 Other long-term liabilities 5,525 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; 29,240 and 29,579 shares issued and outstanding at June 30, 2026 and December 31, 2025, respectively 224,384 231,797 Retained earnings 134,111 123,587 Accumulated other comprehensive loss ( 1,890 ) ( 1,361 ) Total shareholders’ equity 356,605 354,023 Total liabilities and shareholders’ equity $ 521,599 $ 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 Six Months Ended June 30, 2026 June 30, 2025 June 30, 2026 June 30, 2025 Revenues, net $ 83,732 $ 74,396 $ 164,935 $ 147,881 Operating costs and expenses: Cost of revenues (excluding depreciation and amortization) 29,015 26,364 56,774 51,851 Product development 13,581 12,073 27,187 24,121 Sales and marketing 13,503 11,808 26,463 23,958 General and administrative 8,037 7,398 16,039 16,066 Depreciation and amortization 11,275 10,867 22,640 21,621 Total operating costs and expenses 75,411 68,510 149,103 137,617 Operating income 8,321 5,886 15,832 10,264 Interest income 475 958 889 1,889 Other (expense) income, net ( 100 ) 23 ( 204 ) ( 39 ) Income before income tax provision 8,696 6,867 16,517 12,114 Income tax provision 2,027 1,478 3,938 2,393 Net income $ 6,669 $ 5,389 $ 12,579 $ 9,721 Net income per share: Basic $ 0.23 $ 0.18 $ 0.43 $ 0.32 Diluted $ 0.23 $ 0.18 $ 0.43 $ 0.32 Weighted average shares of common stock outstanding: Basic 29,230 30,320 29,303 30,382 Diluted 29,314 30,450 29,369 30,519 Dividends declared per share $ 0.035 $ 0.031 $ 0.070 $ 0.062 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 Six Months Ended June 30, 2026 June 30, 2025 June 30, 2026 June 30, 2025 Net income $ 6,669 $ 5,389 $ 12,579 $ 9,721 Other comprehensive (loss) income, net of taxes: Foreign currency translation adjustments ( 306 ) 754 ( 495 ) 803 Unrealized loss on marketable securities ( 18 ) ( 13 ) ( 34 ) ( 32 ) Total other comprehensive (loss) income ( 324 ) 741 ( 529 ) 771 Comprehensive income $ 6,345 $ 6,130 $ 12,050 $ 10,492 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) Six Months Ended June 30, 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 Net income — — 6,669 — 6,669 Comprehensive loss — — — ( 324 ) ( 324 ) Dividends declared on common stock ($ 0.035 per share) — — ( 1,027 ) — ( 1,027 ) Stock-based compensation — 1,106 — — 1,106 Common stock issued under stock plans, net of shares withheld for employee taxes 25 — — — — Excise tax on repurchases of common stock — ( 12 ) — — ( 12 ) Repurchases of common stock ( 90 ) ( 1,799 ) — — ( 1,799 ) Balance at June 30, 2026 29,240 $ 224,384 $ 134,111 $ ( 1,890 ) $ 356,605 Six Months Ended June 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 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) Six Months Ended June 30, 2026 2025 OPERATING ACTIVITIES: Net income $ 12,579 $ 9,721 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 22,640 21,621 Stock-based compensation 2,415 1,940 Amortization of deferred commissions 6,872 6,017 Provision for credit losses 222 391 Deferred income taxes 3,724 467 Loss on equity method investments 66 107 Other ( 356 ) ( 776 ) Changes in operating assets and liabilities: Accounts and unbilled receivables 1,944 3,465 Prepaid royalties ( 126 ) 261 Other prepaid expenses and other current assets ( 2,525 ) ( 1,989 ) Other assets ( 5,989 ) ( 8,596 ) Accounts payable and accrued expenses ( 5,031 ) ( 3,858 ) Accrued royalties ( 481 ) ( 366 ) Deferred revenue 4,613 3,692 Net cash provided by operating activities 40,567 32,097 INVESTING ACTIVITIES: Cash paid for acquisitions ( 312 ) — Proceeds from maturities of marketable securities 23,300 26,073 Purchases of marketable securities ( 22,693 ) ( 26,100 ) Purchases of other investments ( 2,600 ) ( 500 ) Payments associated with capitalized software development ( 14,251 ) ( 14,500 ) Purchases of property and equipment ( 1,650 ) ( 3,372 ) Net cash used in investing activities ( 18,206 ) ( 18,399 ) FINANCING ACTIVITIES: Taxes paid related to net settlement of equity awards ( 582 ) ( 1,075 ) Payment of earn-outs related to acquisitions ( 401 ) Payment of cash dividends ( 2,055 ) ( 1,890 ) Repurchases of common stock ( 9,306 ) ( 18,121 ) Net cash used in financing activities ( 12,344 ) ( 21,086 ) Effect of exchange rate changes on cash and cash equivalents ( 9 ) 21 Net increase (decrease) in cash and cash equivalents 10,008 ( 7,367 ) Cash and cash equivalents at beginning of period 36,161 59,469 Cash and cash equivalents at end of period $ 46,169 $ 52,102 NONCASH INVESTING AND FINANCING ACTIVITIES: Purchases of property and equipment, accrued but not paid $ 208 $ 87 Capitalized software development, accrued but not paid $ 923 $ 611 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 and six months ended June 30, 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 $ 24.2 million and $ 23.2 million for the six months ended June 30, 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 June 30, 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 June 30, 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 In connection with the acquisitions of Total Clinical Placement System ("TCPS") in October 2024, The Clinical Hub, Inc. ("The Clinical Hub") in November 2024, Virsys12, LLC ( "Virsys12" ) in October 2025, and MissionCare Collective LLC ("MissionCare") in December 2025, a portion of the purchase price payable by the Company was in the form of contingent consideration. During the three and six months ended June 30, 2026 and 2025, the Company recorded contingent consideration liabilities representing the estimated fair value of future earnout payments to the former owners of such entities in connection with these acquisitions, contingent upon the achievement of specified revenue milestones. The contingent consideration liability is remeasured to fair value each reporting period, with changes recognized in general and administrative expense in the Condensed Consolidated Statements of Income. The Company classifies this liability within Level 3 of the fair value hierarchy because the valuation relies on significant unobservable inputs. As of June 30, 2026, the Company's ending balance contained liabilities related to TCPS, Virsys12, and MissionCare. Contingent Consideration 2026 2025 Balance at January 1 6,450 535 Purchases / Initial recognition ( 2,300 ) Total (gains) losses: Included in earnings Included in other comp income Payments Balance at March 31 $ 4,150 $ 535 Purchases / Initial recognition Total (gains) losses: Included in earnings ( 4 ) Included in other comp income Payments ( 401 ) Balance at June 30 $ 3,745 $ 535 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. 7 Table of Contents HEALTHSTREAM, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 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 June 30, Six Months Ended June 30, 2026 2025 2026 2025 Subscription services $ 79,986 $ 71,941 $ 158,377 $ 142,730 Professional services 3,746 2,455 6,558 5,151 Total revenues, net $ 83,732 $ 74,396 $ 164,935 $ 147,881 For the three months ended June 30, 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. For the six months ended June 30, 2026 and 2025 , the Company recognized $ 0.2 million and $ 0.4 million in impairment losses on receivables and contract assets arising from the Company's contracts with customers, respectively. During the three months ended June 30, 2026 and 2025 , the Company recognized revenues of $ 51.1 million and $ 49.1 million, respectively, from amounts included in deferred revenue at the beginning of the respective periods. During the six months ended June 30, 2026 and 2025 , the Company recognized revenues of $ 69.0 million and $ 69.1 million, respectively, from amounts included in deferred revenue at the beginning of the respective periods. As of June 30, 2026 , approximately $ 685 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 40 % of these remaining performance obligations over the next 12 months, 68 % over the next 24 months, and 85 % 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 20 % for the six months ended June 30, 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. 5. SHAREHOLDERS' EQUITY AND STOCK-BASED COMPENSATION Dividends on Common Stock During the six months ended June 30, 2026 , 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 20, 2026 February 23, 2026 $ 0.035 March 9, 2026 $ 1,028 May 29, 2026 May 4, 2026 $ 0.035 May 18, 2026 $ 1,027 Additionally, o n August 3, 2026, the Board declared a quarterly cash dividend of $ 0.035 per share, payable on August 28, 2026 to holders of record on August 17, 2026 . 8 Table of Contents HEALTHSTREAM, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Stock Option Activity A summary of stock option activity for the three months ended June 30, 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 38 23.96 Exercised — — Expired — — Forfeited ( 3 ) 23.93 Outstanding at end of period 268 $ 22.73 $ 1,210 Exercisable at end of period 90 $ 20.34 $ 622 The weighted average remaining contractual term of options outstanding at June 30, 2026 was 7.8 years. Restricted Share Unit Activity A summary of Restricted Share Unit ("RSU") activity for the three months ended June 30, 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 480 $ 26.34 Granted 31 24.67 Vested ( 25 ) 26.20 Forfeited ( 10 ) 26.82 Outstanding at end of period 476 $ 26.23 $ 12,980 The aggregate fair value of RSUs that vested during both the three months ended June 30, 2026 and 2025, as of the respective vesting dates, was $ 0.6 million. Stock-Based Compensation Total stock-based compensation expense recognized in the Condensed Consolidated Statements of Income is as follows (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2026 2025 2026 2025 Cost of revenues (excluding depreciation and amortization) $ 51 $ 50 $ 107 $ 103 Product development 239 198 512 428 Sales and marketing 141 109 309 253 General and administrative 675 479 1,487 1,156 Total stock-based compensation expense $ 1,106 $ 836 $ 2,415 $ 1,940 As of June 30, 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 six months ended June 30, 2026 , the Company repurchased and subsequently retired 222,978 shares of common stock at an aggregate fair value of $ 5.0 million under this authorization, 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. 9 Table of Contents HEALTHSTREAM, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 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 June 30, 2026 , the Company repurchased and subsequently retired 90,131 shares of common stock at an aggregate fair value of $ 1.8 million under this authorization, reflecting an average price per share of $ 19.95 (excluding the cost of broker commissions and the 1% share repurchase excise tax imposed by the Inflation Reduction Act of 2022 ). During the six months ended June 30, 2026, the Company repurchased 209,498 shares of common stock at an aggregate fair value of $ 4.3 million under this authorization, reflecting an average price per share of $ 20.51 (excluding the cost of broker commissions and the 1% share repurchase excise tax imposed by the Inflation Reduction Act of 2022 ). In the aggregate, during the six months ended June 30, 2026, the Company repurchased 432,476 shares of common stock at an aggregate fair value of $ 9.3 million under both of the share repurchase programs described above, reflecting an average price per share of $ 21.50 (excluding the cost of broker commissions and the 1% share repurchase excise tax imposed by the Inflation Reduction Act of 2022 ). 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 380,000 and 184,000 for the three months ended June 30, 2026 and 2025 , respectively, and 394,000 and 145,000 for the six months ended June 30, 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 June 30, Six Months Ended June 30, 2026 2025 2026 2025 Numerator: Net income $ 6,669 $ 5,389 $ 12,579 $ 9,721 Denominator: Weighted-average shares outstanding 29,230 30,320 29,303 30,382 Effect of dilutive shares 84 130 66 137 Weighted-average diluted shares 29,314 30,450 29,369 30,519 Net income per share: Basic $ 0.23 $ 0.18 $ 0.43 $ 0.32 Diluted $ 0.23 $ 0.18 $ 0.43 $ 0.32 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): June 30, 2026 Adjusted Cost Unrealized Gains Unrealized Losses Fair Value Level 2: U.S. treasury securities $ 20,570 $ 1 $ ( 9 ) $ 20,562 Total $ 20,570 $ 1 $ ( 9 ) $ 20,562 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 10 Table of Contents HEALTHSTREAM, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 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 June 30, 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. 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 June 30, 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 and six months ended June 30, 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, 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 revenue 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 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 June 30, Six Months Ended June 30, 2025 2025 Total revenues $ 76,307 $ 151,543 Net income $ 5,362 $ 9,501 Net income per share - basic $ 0.18 $ 0.31 Net income per share - diluted $ 0.18 $ 0.31 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, 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 revenue targets. The acquisition was 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 601 Prepaid and other current assets 1,046 Deferred tax assets 973 Goodwill 15,262 Intangible assets 18,600 Accounts payable and accrued liabilities ( 1,237 ) 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 six months ended June 30, 2026 , the Company recorded adjustments to accounts receivable, deferred tax assets, intangible assets, and contingent consideration based on information received during the period, including 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 $ 4.4 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 June 30, Six Months Ended June 30, 2025 2025 Total revenues $ 76,802 $ 152,513 Net income $ 5,508 $ 9,994 Net income per share - basic $ 0.18 $ 0.33 Net income per share - diluted $ 0.18 $ 0.33 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. 10. LITIGATION In connection with its business, the Company is from time to time involved in various legal actions. These legal actions may be subject to significant complexities and uncertainties, some of which are beyond the Company’s control, and may allege substantial or indeterminate monetary damages. Based on current information, management does not believe that the ultimate resolution of pending legal matters will have a material adverse effect on the Company’s consolidated financial position or liquidity. However, an adverse outcome in one or more pending legal matters could be material to the Company’s results of operations or cash flows for any particular reporting period. The Company accrues for loss contingencies when it is both probable that a loss has been incurred and when the amount of the loss can be reasonably estimated. If a loss or additional loss with respect to material legal matters is reasonably possible and the Company is able to estimate the possible loss or range of loss, the Company discloses the estimate of the possible loss or range of loss, if material and as required. However, the Company may be unable to estimate a possible loss or range of loss in some instances based on the significant uncertainties involved in, and/or the preliminary nature of, certain legal matters. On May 27, 2026, a putative collective action complaint styled Tanesha Riley v HealthStream, Inc. was filed in the United States District Court for the Middle District of Tennessee. The plaintiff alleges that certain employees in Solution Executive sales roles were misclassified as exempt employees and were not paid overtime in violation of the Fair Labor Standards Act (“FLSA”). The plaintiff seeks back wages, liquidated damages, pre-judgment interest, and attorneys’ fees. On July 21, 2026, the Company filed its answer defending against these claims. Because this matter is in its initial discovery phase and is otherwise at an early stage, the Company is unable to estimate a possible loss or range of loss, if any, related to this matter. The Company denies the allegations and intends to defend the matter vigorously. 14 Table of Contents