Q4 2023 HealthStream Inc Earnings Call
Participants
Mollie Condra; VP, IR & Communications; HealthStream Inc
Bobby Frist; CEO; HealthStream Inc
Scott Roberts; CFO & SVP, Accounting and Finance; HealthStream Inc
Matt Hewitt; Analyst; Craig-Hallum Capital Group
Stephanie Davis; Analyst; Barclays
Richard Close; Analyst; Canaccord Genuity
Constantine Davides; Analyst; Citizens JMP Securities
Vincent Colicchio; Analyst; Barrington Research
Presentation
Operator
Good morning, and welcome to HealthStream's Fourth Quarter and Full Year 2023 earnings conference call. At this time, I would like to inform you that this conference is being recorded and that all participants are in a listen-only mode. At the request of the Company, we will open the conference up for questions and answers after the presentation. I will now turn the conference over to Mollie Condra, Vice President of Investor Relations and Communications. Please go ahead, Miss Condra.
Mollie Condra
Good morning, and thank you for joining us today to discuss our fourth quarter and full year 2023 results. Also in the conference call with me this morning is Robert A. Frist Junior, CEO and Chairman of HealthStream, and Scotty Roberts, CFO and Senior Vice President of Finance and Accounting.
I would also like to remind you that this conference call may contain forward-looking statements regarding future events and the future performance of HealthStream that could involve risks and uncertainties that could cause the actual results to differ materially from those projected in the forward-looking statements. Information concerning these risks and other factors that could cause the results to differ materially from those forward-looking statements are contained in the Company's filings with the SEC, including Forms 10 K, 10 Q and our earnings release. Additionally, we may reference measures such as adjusted EBITDA, which is a non-GAAP financial measure. A table providing supplemental information on adjusted EBITDA and reconciling to net income attributable to HealthStream is included in the earnings release that we issued yesterday, and I may refer to in this call.
So with that start, I'll now turn the call over to CYO. Bobby Frist.
Bobby Frist
Good morning, everyone. I'm having a few connection issues. There might be a glitch here and there will we'll push through it, though, do the best we can what the article James call. I'm really excited about how we finished the full year 2023. There are lots of exciting things to cover, and we'll do that in great detail. In the next 30 minutes. We delivered record top line revenue of $279.1 million and record adjusted EBITDA of 461.3 million. And our guidance for 2024, we expect to surpass both of those high watermarks as we further expand our ecosystem of exciting new products, new sales channels and new target markets, significant development in our market expansion, you're managing director of digital end-user questions at nursing nurses. Our strength is now starting to approach the bid book value neutral, both applicable to them and around the circle. And to compare that to the addition of our newly released may see the cost side of our industry platform, pharmacokinetics, I guess separating its oriented purchases, both of them have 30th new name. It ended up being close to 700 orders placed in in Q3. We also amplified our ability to reach and to sell the individual nurses through nurse grid learn, which is linked via our popular nurse grid app. As a reminder, nurse grid is the number one most popular app for nurses based on ratings and downloads in the Apple Store for approximately one and six nurses in the U.S. regularly using and during the third and fourth quarters. In 2023, over 800 orders were placed by nurses. Some of the top products sold for you and comply you CY. unlimited?
Yes, I'm having some connection issues. I'm getting feedback from. So I will again, we'll push through best we can. I'm excited about our early success in selling direct to healthcare professionals with our new e-commerce enabled H TRiM platform. I believe that the ability to participate in our ecosystem throughout one's health care journey and deployment cycles. It's a great new opportunities for caregivers to advance both their skills and and there could be a reminder about our business and who we are for the benefit of anyone who is new to HealthStream.
First and foremost, HealthStream is a health care technology company dedicated to developing credentialing and scheduling health care workforce through SaaS based solutions, each of which are becoming more valuable because of the interoperability they're achieving through our IQstream technology platform. Historically, we sell our solutions on a subscription basis under contracts that average three to five years in length which rates are double. In fact, 96% of our revenues are subscription based. As I just mentioned, we have also started to open our sales channels directly to health care professionals and Northeast nursing students across the continuum. Health care training, we are profitable, have no interest-bearing debt and a strong cash balance of $71.1 million are solely focused on health care and more specifically health care workforce. The $12.3 million healthcare professionals and nursing students in the United States comprise the total addressable market for SaaS. We all, gosh, I'm going to need to wrap up. I'm a firm. It looks like we're having bigger connection issues than I thought. So I apologize for that. I'm going to have to go find another dial-in mean just a second.
Hey, Mike, I'm going to ask if you can hear me that you pickup since the script is written. If you could pick up in the paragraph.
Sure, or maybe even since you know where I dropped?
Yes, finally, I don't know how long until I get back in. So I'd start from the top sir.
Thank you, Miles.
Mollie Condra
So I'll start where Bobby left off, if I understood that correctly. So in the fourth quarter, revenues from our scheduling application ship wizard grew 31% over the prior year quarter as customers continued to report high customer satisfaction since purchasing chip wizard in October 2020, we have selected it as our primary scheduling application has significantly expanded its ability to perform at enterprise scale, and it's only going to become more powerful and more differentiated in the market in the coming year.
In the fourth quarter, we welcomed many new customers for ship wizard, including Norman Regional Hospital, Prebid health systems and Philips Health revenues from credentialing, privileging and enrollment application credential stream grew 52% in the fourth quarter versus the same period last year. In the fourth quarter, we contracted 37 new customers for our credential hStream solutions. These new credentials and customers included many highly respected health care organizations like Intermountain Healthcare, try health and Dayton Children's Hospital. So there's still a great deal to talk about. But right now, I'm going to turn it over to CFO, Scotty Roberts for a more detailed look at our financial performance and expectations. Are I Thanks, Molly, and good morning. I want to start my portion of the call today with a recap of our financial results for the fourth quarter. And then I'll go over our financial outlook for 2024. Unless otherwise noted, the comparisons will be against the same period of last year, we continued to deliver solid results as we closed out the fourth quarter of 2023. Revenues were $70.6 million, up 3%. Operating income was $4.3 million, up 38%. Net income was $4.6 million, up 87%. Earnings per share were $0.15 per share, up from $0.08 per share. And finally, adjusted EBITDA was $16 million and was up 17%. Our revenues increased by 2.1 million or 3% coming in at $70.6 million compared to $68.5 million in last year's fourth quarter. Our revenue mix continued to tilt in the direction of subscriptions versus professional services. In fact, revenues from subscription products accounted for 96% of total revenues and were $67.9 million, increasing by 4% in the quarter. Professional service revenues declined by $0.5 million or 17%, which had a negative impact on our growth rate of approximately 80 basis points.
Scott Roberts
So now let me provide some more color about the revenue results is Bobby. Molly mentioned earlier, we saw a good mix of growth contributors throughout our portfolio. But I want to call out and quantify a couple of areas that kept our growth rate for the quarter lower than it would have otherwise been and lower than we expect to see it in in 2024.
The first area that I'll highlight is associated with our and soft scheduling products. The suite of products was down $0.5 million or 13% in the quarter. Our focus continues to be on stabilizing existing and soft customers and migrating them to shift wizard. Our SaaS scheduling application, which grew its revenue by 31% in the quarter. Future declines associated with the remaining $14 million of Anthos related revenue are contemplated in our 2024 guidance.
The second area that I want to mention is our Quality Manager solution, which accounted for approximately $5.5 million of subscription revenue for the full year 2023, and it was down $0.4 million or about 23% in the quarter. We acquired this product in 2019. And unlike most of our products sold to the skilled nursing facility market and while most areas of healthcare have rebounded since COVID, skilled nursing facilities in particular have continued to experience financial pressures and source quality manager and professional services declines offset some of the exciting growth that we experienced in products like credential stream and shift wizard Our remaining performance obligations were $541 million as of the end of the year compared to $517 million the year before. We expect approximately 42% of the revenue backlog to be converted in 2024. Our gross margin was 66% compared to 65.7% last year. And this was in the range that we expected.
Moving on to operating expenses, the reorganization of the business as a single operating segment at the beginning of the year led to efficiencies and cost synergies in our operations that are reflected in our financial results. For the quarter, we were able to maintain our operating expenses, excluding cost of revenues to a modest increase of $0.4 million or 1%. And most of this year-over-year increase was from depreciation and amortization, which was up 10% and product development was up 1%. Our G&A and sales and marketing expenses were down 6% and 1% respectively. Adjusted EBITDA was $16 million, which was up 17% and adjusted EBITDA margin improved to 22.6% compared to 19.9% last year.
And now let's go over the balance sheet metrics. We ended the quarter with cash and investment balances of $71.1 million compared to $71.8 million last quarter. During the quarter, we deployed $6.6 million for capital expenditures, paid 0.8 million to shareholders through our dividend program, and we repurchased $6.8 million of our common stock under the share repurchase program announced in September.
For receivables management, our days sales outstanding of 42 days for both the fourth quarter of this year and last year. While we've had a relatively steady performance with receivables during the past year, our bad debt charges increased by approximately $600,000, which about 350,000 occurred in the fourth quarter. And our total bad debt charges for the full year approximated $1 million or about 0.37% of revenue.
Now switching over to cash flows for the full year, our cash flows from operations improved by $12.8 million or 25% coming in at $64 million. And free cash flow has improved to a record high of $36 million compared to $26.1 million last year, an increase of 38%. We have a strong balance sheet with over $71 million of cash, no debt and improving free cash flows with available capital to deploy. We apply this disciplined approach to our capital allocation strategy, which includes M&A, dividends and share repurchases. While we did not complete any acquisitions during 2023 we maintain an active M&A program to evaluate potential transactions that are that fit our investment criteria. In addition, deploying capital through cash dividends and share share repurchases are ways for us to improve shareholder value. In February of 2023, our Board of Directors adopted a dividend policy, which we returned $3.1 million of cash back to shareholders. Shareholders last year. Yesterday, our Board of Directors declared a quarterly cash dividend to be paid in March, increasing the payout by 12% over the previous quarterly dividend dividend. As for our share repurchase program. During the quarter, we made $6.8 million of share repurchases, and we have $1.1 million remaining under the program. Our current share repurchase program will expire on the earlier of March 31st, 2024, or when the maximum dollar amount under the program has been expended in the fourth quarter eight hStream subscriptions increased by 85,000 over the previous quarter to a total of approximately $5.8 million.
Now as we turn our attention to metrics that are more relatable to revenue growth and our medium term financial objectives. We are planning to retire the eight hStream subscriptions metric with this report, we believe, but we believe the eight hStream subscriptions have served as a good indicator of our ability to deploy our platform at scale. And we are now turning our attention to the future financial performance that scale can drive, at least as we've said before, eight hStream subscriptions are not intended to be used to calculate revenue per subscription or revenue per subscriber. A key reason for that is because not all products that result in revenue gains or losses require eight stream subscriptions and subscriptions do not necessarily correlate on a one-to-one basis with subscribers we can. We continue to believe that medium and medium term financial objectives that we introduced at our September of 2022 investor meeting our key performance indicators for our business. So let's refresh refresh on our medium-term objectives metrics, which support them and our performance against those metrics in 2023, our revenue growth objective is to be in the 7% to 10% range, with 5% to 7% coming from organic growth and 2% to 3% from inorganic. For 2023, we achieved revenue growth of 5%. Our gross margin objective is 65% to 68%, and we achieved 66%. And our adjusted EBITDA EBITDA margin objective is 21% to 24%, and we achieved 22%.
We're excited to now give our financial guidance for 2024, which we expect to deliver on each of the three medium-term objectives I just described. We expect consolidated revenues to range between $292 million and $296 million. We expect adjusted EBITDA to range between 64.5 and $67.5 million, and capital expenditures are expected to range between 28 and $30 million. This guidance does not include assumptions for any acquisitions that we may complete during the year. Our revenue guidance range implies a growth rate between 4.6% and 6.1%, and we expect steady performance across the year. Our ability to upsell and cross-sell solutions to existing accounts and improve our net revenue retention and acquire new customers, including targeting the nursing school market and increasing sales through our eCommerce channels are elements that we believe will help us achieve these revenue targets. We expect gross margin to be around 66% for the year. It's subscription revenue mix from solutions that we own versus partner solutions, which we pay royalties and investments in our platform and infrastructure such as cloud hosting and software will be the primary influences on gross margin. As for staffing, we have just under 1,100 employees and approximately 50 open positions as of the beginning of the year. So labor costs are expected to increase steadily across the year. We expect both product development and sales and marketing to increase in the 4% to 6% range we have plans to increase our marketing efforts this year, including our tradeshow presence and engagement directly to students and professionals. We expect that our G&A costs will increase 1% to 2%. And finally, we estimate the effective tax rate will be in the low to mid 20% range.
That concludes my comments for this quarter's call. Thanks for your time.
This morning, and I'll now turn the call hopefully back over to Bobby for some additional updates.
Bobby Frist
Okay, great. Thanks, Gary. I think I'm on a better connection now. I will discuss my GovConnection, but we're good to go. What I'm going to do is repeat my opening section because we need a good record of it. And then I'll pick up with the third section.
My final section five breakout. Again, I'll ask Scott to do the same. Just go back to the top of the scrip and get my first section in the record and finish with my third section of our of our presentation. So good morning. Thank you, Molly, for the handoff earlier. Welcome to our fourth quarter and full year 2023 earnings call, I'm excited about how we finished the full year 2023. We delivered record top line revenue of 200, $79.1 million and record adjusted EBITDA of 61.3 million in our guidance for 2024. As Scott just mentioned, we expect to surpass both of those high watermarks as we further expand our ecosystem with exciting new products, new sales channels and new target markets, a significant development in our market expansion strategy in 2023. So additional focus on selling directly to individual end users like physicians, nurses and nursing students. Our extreme platform now allows us to approach individuals with the learning most applicable to them from a check real quick and see how that came through Sky. We're modeling your covenant just fine, but okay, great job around mid-year, we began selling primarily to position on our newly released CME courses site powered by a stream platform on that site. We've seen a surge in site visits and purchases with the most popular purchase being the new DA. mandated opioid crisis with over 2,700 orders placed in the fourth quarter alone. During the last two quarters of 2023, we also amplified our ability to reach and to sell to individual nurses through nurse grid learn, which is linked via our popular nurse grid app. As a reminder, nurse grid is the number one most popular app for nurses based on ratings and downloads and Apple store with approximately one and six nurses in the U.S. regularly using it during the third and fourth quarters of 2023 and powered by our new Extreme commerce capabilities over 1800 orders were placed by nurses. Some of the top products sold directly to nurses. The nurse could learn include our stable program, our regulatory courses we call safety, Q and comply Q and see unlimited. I'm excited about our early success in selling direct to health care professionals with our new e-commerce enabled a stream platform. I believe that the ability to participate in our ecosystem throughout one's health care journey, including as a student, which is a new target for us when they're an employee at a healthcare facility or as an individual finance between jobs. Even now with this new commerce capability, we kind of create a continuous revenue opportunity out of the millions of subscribers in our network. And I think this gives them opportunity to kind of continuously develop them and engage with our ecosystem throughout their career.
Before we go further, I wanted to provide a high-level reminder about our core business and especially for the benefit of those who may be new to HealthStream.
First and foremost, HealthStream is a healthcare technology company dedicated to developing credentialing and scheduling the health care workforce through SaaS based solutions, each of which are becoming more valuable as it become increasingly interoperable through our new A. hStream platform technologies. Historically, we sell our solutions on a subscription basis under contracts that average three to five years in length, which makes our revenues recurring and predictable. In fact, as of today, 96% of our revenues are subscription based as I just mentioned, we have also started to open our sales channels directly to health care professionals and nursing nursing students across the continuum of health care training. We are profitable. We have no interest bearing debt and a strong cash balance of $71.1 million. We are solely focused on health care and more specifically the health care workforce. The 12.3 million health care professionals, which now include about $1 million nursing students in the United States, comprise a total addressable market for our SaaS solutions in the fourth quarter, revenues from our scheduling application shipped wizard grew 31% over the prior year quarter as customers continue to report high customer satisfaction since purchasing SIP wizard in October of 2020, we selected it as our primary scheduling application and significantly expanded its ability to perform at enterprise scale and is only going to become more powerful and differentiated in the market in the coming year. In the fourth quarter, we welcomed many new customers for ShiftWise and including Norman Regional Hospital Freeman health system and Phelps Health revenues from our credentialing, privileging and enrollment application credential stream grew 52% in the fourth quarter versus the same period last year. In the fourth quarter, we contracted 37 new customers for our credential hStream solutions. These new parental strain. Customers included many highly respected health care organizations like Intermountain Healthcare, try health and Dayton Children's Hospital. They're still great though to talk about. And since Scott has covered a second, I'm going to jump right down to my concluding remarks. second. All right now, during investor call in October, I mentioned that we grow our business by expanding market share and increasing wallet share. In the first half of the call, I talked about expanding our markets by selling directly to an audience of physicians, nurses, nursing students now want to provide a good example of our expanded wallet share through better retention strategy expansion and cross selling at a key customer account during the fourth quarter, one of our valued customers on the West Coast chose to expand their learning center and eight hStream subscriptions from 6,200 users to about 8,000 users. We also renewed their purchases of several content offerings like their health equity and belonging education for their staff, the checklist software tool they use for different compliance efforts and competency validation, their safety, Q and comply Q again, regulatory training content and even Epcos clinical skills program and dynamic health. Not only did this customer commit to a long term, five year renewal on those products, they decide to further leverage the power of the HD marketplace by adding our C. unlimited products with the JAI. technology. And I just love that this customer continues to trust HealthStream for their kind of the more complete education training of its workforce. You heard it some of this was in compliance, some in clinical skills, some in soft skills and business skills. So it's exciting to see the breadth that they use us for that area. But in Q4, the customer actually also purchased shipped wizard, our scheduling application versus the first time they've entered that part of our ecosystem using our ship wizard application. So I'm encouraged by the cross selling that occurred when the ship was or purchase it because it represents our focus on on that cross selling effort in all of our accounts. But in particular, this was exciting. And you are in this example, by noting that the recurring revenue from this customer grew by 55% and through that renewal process to about $216,000 in the quarter. So it's a pretty good size account and it grew by 55% when it renewed and it added not just more learning products, but also the cross-sell or upsell the purchase of the scheduling applications. And we're really excited because now we're beginning to demonstrate how those applications are, although limited and powered by new Extreme technology, some limited capabilities of how our different systems can work together.
I do want to talk just for a minute about our evolving AI. strategy going forward, we expect a are impacted how we develop products, the capabilities of our products and even kind of the some of the models for our products like the learning model gets adjusted with the application of AI technology. So we're really excited that we're making incredible progress with our gene AI. product. We really are putting our energy and AI around the Jane platform, which is used to develop and identify competency gaps for nurses. So it's a really great place to apply AI technology because we have proprietary taxonomies that can be used in navigating a custom pathway for someone. We can use the natural language processing to interpret their written feedback when they take our Jack competency testing. And so this product is really exciting. Over the last 24 months, we've received numerous awards since its introduction in the fourth quarter as recognized for three more prestigious national awards. I'm bringing the total number of awards for Jane to 11. And so I'm I'm definitely excited about this award-winning product and its recognition for pioneering new methods of learning and Apple application of AI to the learning journey. And what I'm most excited about those in the next quarter or so, we're bringing a new version of gain to market. That's specifically tailored for nursing students. And if you remember last quarter, we announced that we were going to target the nursing school market and the nursing students in that market. I think the new version of Jane, that we're preparing that market is going to be particularly impactful for those students early in their career. And so we're really excited about our emphasis on the use of AI in the learning journey, in particular, the award-winning Jane product and the new modifications that products make it appropriate for both professional staff in hospitals and nursing students in nursing schools.
In closing, I do want to highlight that our Board recently approved our just yesterday an increase in the cash dividend to be paid out to shareholders. They approve the dividend payment of $0.00028 per share, which is about a 12% increase over the previous quarter's dividend of 0.025. The upcoming dividends payable on March 22nd to holders of record on March 11th. And so if you're not in stock, you can still come in and earn that dividend and go on this journey with us. We continue to be confident in our ability to accomplish our innovative organic and our inorganic growth strategy. As we mentioned, we have about $71.1 million of cash while also returning cash to shareholders as part of our objective. So we're excited about the dividend program if you're interested in a profitable, highly recurring revenue, SaaS pass CellCare technology company that for 2020 for expect to deliver steady growth and at the time to share some of the gains directly shareholders in the form of a dividend, one that we just increased maybe HealthStream as a company and stock for you. And so that's my marketing pitch. I've always got to be a little bit of selling. Look, we're on the journey together and been building this company for a long time. And I've never been more excited about the prospects for the Company as our technologies evolve and incorporate the latest like the evolving AI. landscape. And our teams are amazing of 1,100 employees that are building incredible products and taking them to market with great passion. And so we're really excited as we launch into this new year. I'll turn it over to the operator for Q&A.
I hope that that came through, but if it didn't, we'll probably have to schedule another day like an Investor Day or something to make sure we get all this great information on the transcript. I'll turn it over to operator for questions.
Question and Answer Session
Operator
Thank you, sir. The question and answer session will begin at this time. If you're using a speakerphone, please pickup the handset before pressing any numbers. Should you have a question, please press star one one on your pushbutton telephone. If you wish to withdraw your question, please press star one. When again, Your questions will be taken in the order that they are received. Please standby for your first question.
And our first question comes from Matt Hewitt with Craig-Hallum. Your line is open.
Matt Hewitt
Good morning and thank you for taking the questions. Maybe first off, just a point of clarification. I think, Scott, you mentioned there was $14 million left in Ansoft legacy contracts. I'm just curious, will those contracts be up for renewal or conversion, I guess of this year? Or does it expand beyond this year? I'm just trying to figure out what the headwind is that you're facing maybe a little bit this year.
Bobby Frist
Yes, I'll start and take that and then let Scott add to it. The total remaining kind of our business with Anthos is about $14 million, and it is our hope and expectation and our work and focus of our work to retain all that business until which time we can eventually upgrade them to the newer technologies like chip wizard. And so it is our objective.
Now that said in the last 24 months, as Scott noted, we've experienced attrition in that group and lost them not to the market to the market, not to the translation over to shift, whether So we're working really hard to position the upgrade to Anthos a shift, whether if you remember, it's a legacy installed products. It is aging technology and we're working hard to keep the customers satisfied with where they are, our new them as their contracts come up for renewal and but also transition them when they're ready to transition to the ship wizard product. So we hope to stem some of this this rate of loss here in the coming quarters and and get them transitioned over to ship wizard as well. So I hope that set a framework and out if Scott wants to add anything he can.
Scott Roberts
Yes, Matt. I mean, it's a mix of new contracts that are what we call in their auto renewal phase. That's just that's a common practice for with that type of a previous sale and then a good mix. We also have customers that have now have entered into agreements for multiple years of renewal for that solution set. I don't have the numbers in front of me to speak to, but there is a mix of contract links in the base.
Matt Hewitt
Got it. That's helpful. Thank you. And then, Bobby, as you look at it, as you start to sell more and more directly to the end user, particularly the nurses historically you've signed and I think you mentioned again today, you're typically signing three to five year contracts with your hospital customers. But with nurses in particular, are those those are three to five year contracts or how does that change your visibility and what can you do to ensure?
Obviously, it's a big market and getting in early with those end, customers is obviously ideal, but how does that change your visibility and what can you do to maybe increase that? Thank you.
Bobby Frist
Yes, a couple of things. One, these technologies, power commerce, B2B, eCommerce, as well as direct to consumer. And so there's two opportunities here. And the main one I'm going to cover first is focusing on the nursing students while they're in the two and three-year programs to become nurses and getting that the schools up to have the commitment to put those nurses through kind of their students through Ready to Work program. And so the main focus of this is to get it where they could both be find a clinical rotation in a hospital. And of course, they pay a little fee for that through my clinical exchange by a few content bundles like the Red Cross program before they become a nurse. So they enter the market with the certificate and certificate generally has about a two year life span. And we've entered into at least one major multiyear contract with a nursing school that has committed to provision some of these services to the students and on a kind of steady basis ongoing basis before they become owners. And then as they transition from there, they can carry using a stream technology that portfolio that record forward with them into work. So that's the main focus of these commerce capabilities of the new student JAI., for example, we'd rather the school contract to provision to the students.
Now the second capability is what I opened with, which is fun and exciting and kind of a gap filler. So someone is between jobs, they noticed their license might expire if they don't take certain education for their continued education. They can still use their extreme ID login and pay for themselves, of course, and we did report a lot of activity on there, both by learning to target doctors and students, that revenue will be a little less predictable. It is good margin and it is incremental and it's picking up a gap, say, between jobs or when they're not working in a place use our enterprise software. So it's kind of a gap filler. I call it money while we sleep because it's all automated credit card purchases it will be less predictable. And but you can see that we filled a lot of gaps in the fourth quarter with both of those types. So the emphasis will be of course, on the B2B engagement with the schools and that are interested in developing nurses, the students and the nurses and then placing them in their first jobs and hospitals. So that will be the real focus. And we mentioned the modified gene product that's coming out. And our initial we have initial big when were the big nursing system that has committed to put, we believe they're piloting to put all their students through the Jane program, and we'll see we'll know more about that pilot at the end of the year. But that will be the real B2B goal as well. Hope that helps clarify. But that incremental revenue that we opened with is just fun and exciting from a rebate for content. We already own to audiences that would have normally this engage with us, say, between jobs of a nurse work at a hospital on our learning system, Delta transcript, they take six months off and then they take another job hospital that also uses HealthStream. They can pick up their education there. But now with our commerce abilities, they might in-between that login directly and consumer course may be required by their state licensure. And so it's a gap filler in a time pillar, it's incremental that will be a little less predictable, but it is good margin and so I hope that helps at least understand what we're going for you as a little bit of context to for the concept of I'm trying to make all of these business subscriptions and the people behind them kind of continuous lifetime customers of the HealthStream ecosystem. And so hopefully, it kind of clarifies that, that gap filling capability we have and it will be a boost to revenue here and there.
Matt Hewitt
Thank you. That's very helpful. Thank you.
Operator
Thank you. Our next question comes from Gerald Hassell with William Blair. Your line is open.
Yes, good morning. This is Jared Haase on for Ryan Daniels and thanks for taking our questions. And Barry, maybe just to start, I was hoping to unpack a little more color just around recent sales cycle trends. It seems like others in that we've heard in the healthcare IT space has started to flag maybe some improvements in the selling environment with health systems maybe relative to what the environment was like going into 2023. So just curious if that's something you've experienced in any meaningful way. Has that translated into any sort of favorable inflection from a selling perspective?
Bobby Frist
Yes, short term, it's in different pockets. And so we did tried to highlight some of that in the call. I don't know if some of that got modeled out. But let me kind of repeat and think through some of that, I think we did talk about at least for some of our legacy products where they have some decline and we specifically address the skilled nursing market. So that market as a whole is under a bit more duress. We see a little bit more churn in the customer base like the smaller ones, maybe combining with larger ones or even going out of business. So on the skilled nursing market, it seems that still have some remaining financial stress and a little bit harder to sell to. And so we saw some declines in that and the product set, the quality manager product that Scott you mentioned in, but we did also open by highlighting X8 repeated, so at the end, but highlighting the subscription growth and to shift wizard and credentials training, both of which, as you heard, 31% and nearly 50% year-over-year growth, which is reflected in the strength of the pipeline for those products. And so I guess I'd say it has some variability, but in some of the bigger enterprise purchasing, particularly in credential stream and chip wizard. We saw we see strong pipelines. And so maybe there's certain subsegments of the market like skilled nursing. We're learning more about nursing schools and their buying cycles. And so it will be more on that in the future. So I won't comment too much on that because we're both have new products and you focus on selling to those. But so there's some variability in there.
I'd say generally, though, the patterns of reviewing products for purchasing the availability to sell is obviously much improved from the middle of COVID where it where people simply weren't taking calls. And so I'd say there are kind of normalized a new model of selling and customers are receptive to seeing the new and exciting products that we have.
Okay. That's helpful. Thank you. And then maybe just one on the 2024 outlook and looking at the revenue guidance, it looks like the range from the low to the high end is a little bit narrower relative to the guidance for 2023. Then curious if there's anything we should infer in that just in terms of the level of confidence that you have at this point in the year, maybe relative to last year or any thing that's changed from a visibility perspective, I think we're still working through the answers sort of headwind and maybe there's some nuances as to how that kind of impacts the forecast. But maybe would just love to unpack anything that's going on from a visibility perspective at this point in the year? Yes.
Bobby Frist
I mean, generally, as we open that the business is very predictable, there's some variables and again, we noted those like answers that are less predictable. We've tried our best to factor in the topics that Scott covered on the some of the challenging areas. And I think in general, we're getting a little better and feel a little more comfortable with a slightly tighter range. And so I guess we'll just get a little better at forecasting that also interesting that we talk about the direct to consumer eCommerce to a lot of that data driven. And so for example, we mentioned how that opioid course was selling really well. I mean there is kind of a requirement around that and we're getting better at the targeting. So we're a little better at predicting those sales, which might normally be considered almost totally a or less controllable. And so I'd say using better targeting for selling and maturing a bit in our forecasting, we hope that we're able to tighten that range and give a little better guidance. So and we'll see how that plays out. But our expectation is that we can we can hit that range.
Okay. That's perfect. Thank you.
Operator
Thank you. Our next question comes from Stephanie Davis with Barclays. Your line is open and as this is Annick presents, key on for Stephanie.
Stephanie Davis
Thank you for taking our questions. On functional back to the 2024 guidance. Just curious if you could talk a little bit more about the drivers in more sequentially stable growth in margins, given your cost optimization and network expansion?
Bobby Frist
Correct. Yes, I'll let Scott take a little that I think just in general, yes, we've gone through as we've migrated from essentially and this one HealthStream model, we've been able to find operating synergies in the business by operating more like a single platform company. We are able and early last year to restructure some of our operations and duplicate some of what we're used to be segment reporting. And so some of those efficiencies are still in the model and we benefited from them this year. They're just getting better kind of operating. So you see better management of our G&A, for example, in the last 12 months and therefore, maybe more predictable as we look into next year, we hope, again, more stability that there are a few variables to that, as we just talked about a few of them in the sales model.
Also a few challenges in submarkets like the skilled nursing. We did see a little higher bankruptcies in the market, which again adds a little bit of variability to the predictability, things that are essentially beyond our control. But the things that are within our control I think we're getting better control and both from a G&A standpoint, even CapEx has an increased focus on deployment of our capital into software development and a better, I'd say, rank ordering of prioritization of projects that we think we're going to be hopefully get better and better at deploying our capital. And so I think all of that is just hopefully a maturing business is getting better at how it operates in and studying more for efficiencies on how we get where we're going. For example, these new e-commerce selling ability are providing more financial leverage as we sell with Click to purchase functions, we can lower our total cost of sales. And I think that's kind of another type of efficiency we expect to get as we deploy the new platform models that we're that we're building, I think you can be very helpful.
Stephanie Davis
And then as a quick follow-up, just curious if you could rank your capital allocation priorities crossed inorganic opportunities, dividends and share repurchases for next year?
Bobby Frist
Oh, gosh, well, I mean, the first priority is building organic products like the JNI product. That is we're going to take into the nursing school. So first priority for capital and capitalized software development is in building and enhancing existing products and building new products. And we've talked about taking ship was it more to enterprise class?
We've talked about adjusting our gene product, enhancing the AI. technologies and entering new markets with it. So our capital, the bulk of our capital goes into exciting new product development. That is the place where it should go. And then second to that would be, I guess, the inorganic opportunities. And we our last acquisition was a little over a year ago that turned out to be a really strong winner, small bite-size tuck in incremental to our platform strategy. So very excited. And I think that will be.
The second priority is that we won't force anything as demonstrated last year. We did no acquisitions last year, but we're constantly looking and expect to continue an active M&A program, especially the kinds that kind of leverage our platform technologies and where we're going the three primary application areas where we are spending to strengthen those three areas for enhances our infrastructure, our targets for us for certainly the second. And then I would say we executed a really good buyback program. I think we've done three in our 20 plus years, 24 years being public. Actually, all three of those buyback programs are in the money, which I think would be a typical of a lot of management buybacks and a management board driven buyback. So all of our buybacks have been good deployments of capital knock on wood so far. And so that has been maybe the third priority. And that program does lapse in March and no, no visibility on whether it's time for our Board to put another one in place. But right now, we have an active program that expires in March and then lastly, dividends, I think it's a very small dividend, but it sends the message of capital discipline, I think taken a little bit of money off the top for shareholders and then applying the balance of it to all the things I just talked about, I think puts a little bit of capital discipline. And it says, look, first order to remember is to make money for shareholders. We put a small dividend in place to send a very clear message that we can manage our free cash flows, build new products, enter new markets do small acquisitions that fit our also paying out a low share in the profits along the journey. It is a journey. I've been doing this a long time, and I think it does bring shelves more of the journey to share a little bit as the journey evolves. So those would be our four priorities, one, two, three four, the way I articulate them.
Stephanie Davis
Thank you.
Operator
Thank you. Our next question comes from Richard Close with Canaccord Genuity. Your line is open.
Richard Close
Yes, thanks for the questions. Congratulations on it Study 2023 study I was just curious on modeling revenue with age stream subscribers going away. Just wondering what the best way to forecast going forward.
We track the company's progress of penetrating that $12.3 million employee Pakcom and increase wallet share that you're talking about, I guess, pulling back on the age stream from the models sort of evolved into a black box and I guess it was canceled or are you considering providing any other metrics like ARR growth, third, net revenue retention or anything you help us out?
Bobby Frist
Yes. Yes, we're studying that now. So couple of things there. Firstly, just a reminder, and I think in spite of our best ever, so explain where we are in the journey, I want to remind you that first thing is that the metrics that we had out there that we just retired was for subscriptions, not subscribers. And so it really was intended to show the platform kind of expansion, but not as an infrastructure for calculating RPU or revenue per employee because we hadn't yet gotten to the place and we fully intend to over time get to the place where we could convert and talk about subscribers like the number of unique healthcare versus our network. And we have. And so we're just not it was a great metric, almost like for a single product to talk about its expansion, but it was not correlated to revenues for the reasons Scott mentioned, and it was not it doesn't correlate to subscribers and we saw some potential missed application of it to calculate revenue per subscriber. And so we think it served its purpose. We're getting our technologies out into the market and almost we report subscription sold. Our regulatory courseware gave a sense for that, but it is not a proxy for subscribers and it can't be related to revenues yet because it's not fully deployed meaning other software products that drive revenues that don't add to the subscription number. So for that reason, it's not subscriptions and subscribers has not fully deployed it. It can be used as a denominator and a revenue per employee model. So we are going to look to this year add additional both financial metrics to focus on. We already report on a full GAAP, of course, but and one of those we're studying is ARR. So we'll look towards the middle year to see if we can get to that kind of metric was I think would help all of the analysts and everyone understand the recurring revenue nature of the business and the growth trajectory. So yes, Richard, we're working on that, but I think it's time to take this metric, as we mentioned kind of off the table because it was symbolic of the growth of the platform extension, but not relatable to people yet and not related to revenue, and we saw some of that starting to happen. So we just think we need to move our focus probably towards something like ARR. That was the discussion in the last quarter and we've got a test to back test and see how that metric, how we're going to measure it. But that would be a goal would be to add some new metrics by the middle of the year.
Richard Close
Okay, great. That would be helpful. And then on Ansoft, I added it. I guess a couple of follow up questions on that. Is the remaining $14 million. Is that is that just maintenance and support revenue? That's the first question.
And then if there's any details in terms of the success rate of converting to the shift wizard product would be helpful or and then finally, the average term, I guess, length of time on the remaining contracts?
Bobby Frist
Sure. Couple of things there. The contracts have a lot of essentially there are a lot of them are all installed and they have a maintenance fee that this non non-pass, but there is some recurring nature to it. And have auto renewals unless they cancel. So there is a recurring nature to it, and it does include some of those maintenance fees basically.
So the second is on the conversion rate I'd say up to date, obviously, unfortunately not very successful at all of that, but a renewed focus by our teams. Also, as we've talked about in prior calls, we're enhancing shift wizard to better meet the needs of these enterprise customers have and so on. And so and I think every single quarter now and actually every month on shift, whether there's a new software release and it's moving us ever closer to full enterprise capability. So I think it will be a better opportunity to transition. So again, not very successful in the migrations today, as you hear from the loss that we've been reporting and we do expect and we have full energy on stabilizing that $14 million and we're going to trying to reduce the attrition rate and also succeed better this year in the conversion rate. So this isn't a story of I don't think going to zero. It's an effort to stabilize and stem the loss while also transitioning them to the newer, exciting technologies that ship Blizzard and ship later. It is very well received in the market for its current capabilities. It's just winning share. We just need to enhance some of its core functionality. And we've made a lot of progress on that enhancing core functionality around kind of enterprise-level data analysis. And so I think we look forward to by the middle of the year having great progress on that. So there will be a better destination, better destination to migrate everybody to I'll turn it over to Scott, if you want to add anything.
Scott Roberts
Yes. I'll just make a comment or two, Richard. I mean, I think yes, I tried to address with Matt earlier in the call kind of the nature of the contract length. They kind of vary from auto renewals to some that are have signed multiyear contracts. Don't have the duration run out in front of me, but and there is a good mix of data renewals plus customers under term, let's say to you that our objective is to continue to support the customers as we do want to migrate them to ship wizard, but we also want to acknowledge that there's still customers on the on that application, and we're still there to support their use of it. And so that's another consideration. And that I think as we talked about in the $14 million, we wanted to just provide that number to provide context. As Bobby said, don't expect it to get to zero, but it's one of the size of that for our investors to understand the magnitude of it.
Richard Close
Okay. That's helpful. And then under the direct to consumer just on that portion of revenue. I know it's small, but it's a different sale. How are you thinking about customer acquisition costs on the direct to consumer market? And maybe it's a little less than a typical direct consumer because they if they're in between jobs, they are already have exposure to you. Just trying to get your thoughts on that
Bobby Frist
Yes, I would say for the next couple of years, our thoughts are really just trying to keep the people that I would call quote in network sustain the network when they're between jobs and as I mentioned, pick up this new audience of students before they become professionals. And so it really isn't a broadly openly market to people to self registered to capture using existing data and from the customers that have been in network to find them between jobs or when they leave a job, they can now leave and carry their their HealthStream transcript with them and that's different. And so they kind of if they work somewhere for a couple of years and they leave they can still log back in using their extreme ID and see that they had 10 courses or And so now all we're doing to say, no, you can login and carry your transcript with you like a portfolio or a wallet can take it with you. But you can also say what a normalized will click at the bottom here to keep my license current and taken additional course. And that's happening right now with doctors that the a course that we mentioned and it's happening with nurses when they take a little bit of CY. or even when they're about to take a new job, the refresh on something before they go back into the new job. So really we are it's more of a gap filler than it is a broad consumer you said consumer, I call it direct to professional DTP, and it's really just trying to keep people in network and all the time as opposed to just kind of broadly marketing out into the wild open right now, maybe we get there someday. But really the job right now is just to make that transcript portable, make them lifetime kind of lifetime engaging with HealthStream instead of just engaging with us when they're in their job.
Richard Close
Okay. Thanks. Very helpful. And if I could slip one more in I thought on credential stream, it was interesting. You announced some try house a digital health company that seemed a little bit different. Are you seeing an uptick in opportunities in that segment on the direct-to-employer benefits area?
Bobby Frist
We are seeing, at least with the insurer ensures we're seeing some opportunity there. And so I would say, yes, kind of categorically, we there's interest in a couple of areas that maybe were are not just purely the acute care hospitals. And so there are a lot of and I guess I'd characterize them as new, but I'd just say we're getting better at pursuing a broader opportunity and not just the acute care hospital market. So the answer is yes.
Richard Close
Okay. Thank you.
Operator
Thank you. Our next question comes from Constantine Davides with Citizen's GMP Securities. Your line is open.
Constantine Davides
Thanks, good morning. Just a couple of follow-ups here on scheduling. Can you just maybe characterize where you're seeing growth with shift wizard because it's been pretty impressive in 23.
And I guess I guess just a little further on that. Is it sort of large IDNs complex, you know, academic medical center type installations or smaller hospitals and then are you typically replacing a manual kind of homegrown scheduling system or some other stand-alone technology solution for a couple of really interesting things in that space for us of one.
Bobby Frist
I would just describe it if there's kind of such thing as a very large enterprises and then there's the middle market and then there's the small urban or rural hospitals and community hospitals. It's kind of the middle there that we're getting really strong on as you probably call them, regional health systems. The other thing is that we have this great relationship that's growing with Workday, where they're bringing us in to help kind of them have a complete offering. And we've turned out to be really good partners and supporting customers need and so we're getting brought into Workday accounts to do with them to round out services. And we just found that to be a great partnership. So kind of a good referral almost a referral program for us, a good source of leads and compatibility. We just work really well that team and our our applications work together well and present well together. So that's been really exciting and fun. And usually we're taking out competitors in the market that have aging technology. And we've got this emerging new good paradigm, great user interface with ship wizard. So organizations like a U KG. and API. where where we compete, we generally are replacing something. And so I hope that answers your questions.
And in general we're trying to expand the capabilities that ship wizard to handle ever larger larger systems. We do have some large systems as customers and we just need a more robust, basically reporting and data analytics suite we have in learning, which is great. So we're going to use a lot of that infrastructure to launch a better class of data analytics and learning around scheduling, which we think will meet the needs of even the larger health system. So we're excited about that, and that should be a this year event. We're making good progress on that as well. Again, as I mentioned, with monthly releases of shift was a very exciting level of webinars. One hundreds, 100 people attend for each monthly release to see what's coming on ship, whether it is just gaining traction and momentum and excitement as we add enterprise-class features, we can go after even larger customers.
Constantine Davides
Great. And then, Tom, just a follow-up I guess to Richard's question around metrics, have you or can you talk about just how many extreme IDs have been claimed at this point isn't something we provide. It's interesting. It's over $1 million. But we've got a lot of work to do as a lot of and we've been building tools for a long time.
Bobby Frist
Now the doping tools we've been building tools to let people know if they're if they're if they work at one health system, they can claim their records another and combine them. So you have this unified transcript as an individual. So it is really exciting, but it's kind of still nascent. I mean, there's several steps in the process. Firstly, asset, why are the application? We have dozens of applications to the extreme architecture using. So it uses the extreme ID and then we have to get the professionals to kind of claim any other uses like we call it, putting keys on keychain. So once you have an extreme idea, you're able to then go and say, oh, I also use this application and so kind of merge that information almost away to a Google or you get universal access all their apps, but trust is a limited set of apps now. So we have over $1 million, what I'll call reconciled IDs and there's going to be millions more over time, but that is going to take time and that's until we can get to that pure subscriber count. We've historically you think of us as a B2B software, three separate tech stack. But increasingly, the tech stacks are interrelated through the extreme platform and the extreme ID. And we're kind of or mid stages maybe deploying both the technology and the reconciliation of IDs to over $1 million unique Xtreme IDs have been issued, which is really exciting, but there's millions more to go and we expect steady quarterly progress on that. And of course, when we get to some place, we're excited where we have enough momentum that can become a metric and that that could be the basis for some kind of RPU. But there are two things that the other one more of our applications have to connect to it. And then more of the users have to reconcile and we've been building. This is a very complex topic, but and we've been working on it for years. You have to have the reconciliation tools, the account joining tools, the keys on key chains, the management tool sets in and we're actually getting very good at those mature and the HealthStream ID deployment models, we're getting very good at all that. And so we expect it to kind of continue to spool up.
Constantine Davides
And I guess just last question, along those lines, where do you think you are in the journey, Bobby, is that you know whether it's in baseball terms or some other our language, but just, you know, having all the apps on the platform, common architecture, making them all interoperable and seamless, just how far along do you think you're going to have all?
Bobby Frist
Well, in the baseball analogue, and I'm not a huge baseball person, but I'd say third inning, you know, it's but it's going faster. So it's one of those things is not linear like each year, give them the same length. I think it's the kind of thing that can kind of be maybe geometric or maybe maybe maybe exponential, but definitely geometric where it should go faster than linear. And so lower end, maybe three out of nine innings. The fourth should be faster than the third and so on. So I think I think it can continue to spool up.
Constantine Davides
Thank you.
Operator
Thank you. Our next question comes from Vincent Colicchio with Barrington Research. Your line is open.
Vincent Colicchio
Yes, good morning, Bobby. Most of my questions have been answered, but just curious on the credential stream side, with the success you're having, has there been any competitive response in terms of trying to match your differentiation there?
Bobby Frist
Well, no, we have lots of things to do in our roadmap to continue to differentiate. But right now, I think we've got a really exciting product. And in fact, to the point where, as I mentioned, organizations like work, there are thinking of us as a best of breed and bring us into their deals. So I'm excited by what is now where it's short is and we've talked about this is some of it the enterprise feature sets, particularly around data management reporting like if you're a large organization with 50 60 70 hospitals. You have different demand with how you distribute information and you're solving labor issues across markets and and across the regional deployments and so we're going to get more sophisticated on that this year. But because of the advantages that we have now, the true differentiators are still yet to come. So we're beginning to incorporate and some of the technologies of our platform, for example, the license service. And I hope that by the end of the year, for example, we'll be using the license service that was built in credential stream to verify versus license before we schedule them. And so we have that capability, as you know, in our platform to check licenses. And so it will be a further differentiation as we connect shift wizard to services like the license verification service. That is a function of our H. train platform. So that's an example of a differentiation yet to come that I hope is this year that will continue to distinguish us from our competitors and there, of course, the road map, all of those ideas as well events.
Scott Roberts
Are you asking about the credential strain on it? Your question?
Bobby Frist
I think it was actually I just got a note from someone. So I have I guess the same holds true for credential stream as it takes advantage of connectivity to the learning center. For example, we're in the middle of going back to customers that have both our learning system and our credentialing system and showing them the interoperability of the early stages of interoperability between those, for example, how logical is it. But if you earn a credential and the learning networking should auto populate as a credential and your credentialing system. And so the same kind of answer holds is that there are plenty of differentiations to come this year that show interoperability and several that are in place now that we're beginning to market actively. So Bobby, will you just still respond to my question because I got cut off, I think in both cases, I tried to give examples of both ship wizard and Prudential stream that are going to be increasingly competitively differentiated by how they access services of the extreme platform, whether it's the age dream ID to create interoperability, for example, your data following you from one system into the other the example I just gave was a learning credential earned in the Learning System following you into the credentialing system and maintaining its primary source verification status for our scheduling system that relies on the platform technology that check a license before your scheduled and sort of verify your license is active before we schedule you. And so those are two examples of interoperability that are one is actively being marketed and the other is to come this year. But increasingly, the differentiation will come from how these applications inter-operate or operate together and how data moves between them and how services built in the platform.
Powerup distinguished features in the applications. This is true in learning, scheduling and credentialing. In all cases, we hope to further differentiate it. I think there's also kind of a broader value proposition of getting these applications interoperable, I think it's more appealing to a COICTOCFO. when they see a suite of software working together instead of individual separately implemented tech stacks. And so we're looking for operational synergy implementation synergy over the coming months and years.
Vincent Colicchio
And one last one. How would you characterize pricing in the acquisition market as rich as it improves, what would you say?
Bobby Frist
Well, let's see. We didn't do a deal in the last 13 months. And during that I guess I would say in the last quarter or two, I think a little bit of softening and some excitement maybe deal pipelines can can pick back up, but the private companies always hold on as long as they can to the past and how and so, you know, maybe one of the concerning factors was that in the first half of the year, but I don't know how to say it. And I know you have a hot company that's a SaaS model and it's emerging and growing fast. You're going to be able to demand a premium for your business when you sell it. And so that I think that is almost always true. It may be fewer companies meet that criterion and they're also burning cash. I think those companies there's going to be some deals out there, I think as companies trying to recap at lower market caps in the next year or so.
Vincent Colicchio
Thank you.
Operator
Thank you. And no further questions at this time, I'd like to turn the call back over to Robert Frist, CEO for any closing remarks.
Bobby Frist
Thank you to our analysts for following our story and helping us tell a thank you to our 1,100 employees for making all this happen, and we'll look forward to continue reporting and growth as a company.
Thanks for going on the journey, all you shareholders will see on the next earnings call.
Operator
Thank you for your participation, and this does conclude the program, and you may now disconnect. And everyone have a great day.
