HEALTHSTREAM INC

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 Form10-Q (“Form10-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 Form10‑Q and Article10 of Regulation S‑X. Accordingly, condensed consolidated financial statements donot 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 thethree andnine months ended* September 30, 2026* arenot necessarily indicative of the results that* maybe expected for the year ending December 31, 2026.*

The Condensed Consolidated Balance Sheet at* December31,* 2025 was derived from the audited Consolidated Financial Statements at that date but doesnot 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* December31,* 2025 (included in the Company's Annual Report on Form10-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 $34.9 million and $34.2 million for thenine months ended* September 30, 2026* and2025, respectively.

Non-Marketable Equity Investments

The aggregate carrying amounts of non-marketable equity investments accounted for using the measurement alternative for equity investments that donot have readily determinable fair values were $3.0 million and $1.5 million as of* September 30, 2026* and* December 31, 2025*, respectively, which the Company evaluates for impairment at each reporting period. Cumulatively, there have beenno adjustments recorded due to changes in the fair value of the non-marketable equity investments the Company held as of* September 30, 2026*. The fair value of non-marketable equity investments isnot estimated if there areno identified events or changes in circumstances that* may*have a significant adverse effect on the fair value of the investment.

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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 thethree* andnine months ended* September 30, 2026and2025,* 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 Level3 of the fair value hierarchy because the valuation relies on significant unobservable inputs. As of* September 30, 2026*, the Company's ending balance contained liabilities related toVirsys12 and MissionCare.

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 ASU2025*-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, 2026on a prospective basis and elected the practical expedient for the calculation of current expected credit losses. The adoption didnot* have a material impact on the Company’s allowance for doubtful accounts.

In* September 2025,the FASB issued ASU2025*-06, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic350*-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. ASU2025-06 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. ASU2025-06 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 ASU2025*-11, Interim Reporting (Topic270*): Narrow-Scope Improvements*, which clarifies the guidance in Topic270 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. ASU2025-11 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 ASU2025*-11.

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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 followingfive step model:

The following table represents revenues disaggregated by revenue source (in thousands). Sales taxes are excluded from revenues.

For thethree months ended* September 30, 2026and2025*, the Company recognized a reduction of $29,000 and an expense of $0.2 million in impairment losses on receivables and contract assets arising from the Company's contracts with customers, respectively. For thenine months ended* September 30, 2026and2025*, the Company recognized $0.2 million and $0.6 million in impairment losses on receivables and contract assets arising from the Company's contracts with customers, respectively.

During thethree months ended* September 30, 2026* and2025, the Company recognized revenues of $47.3 million and $45.9 million, respectively, from amounts included in deferred revenue at the beginning of the respective periods. During thenine months ended* September 30, 2026and2025*, the Company recognized revenues of $83.2 million and $81.9 million, respectively, from amounts included in deferred revenue at the beginning of the respective periods. As of* September 30, 2026*, approximately$686 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 41% of these remaining performance obligations over the next 12 months,68% over the next 24 months, and 86% 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 22% for thenine months ended* September 30, 2026and2025*, 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 thenine months ended* September 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):

Additionally, on* November 2, 2026,the Board of Directors declared a quarterly cash dividend under the Company's dividend policy of $0.035 per share, payable on November 27, 2026 to holders of record on November 16, 2026.*

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Stock Option Activity

A summary of stock option activity for thethree months ended* September 30, 2026* is as follows (in thousands, except weighted-average exercise price).

The weighted average remaining contractual term of options outstanding at* September 30, 2026* was 7.6 years.

Restricted Share Unit Activity

A summary of Restricted Share Unit ("RSU") activity for thethree months ended* September 30, 2026* is as follows (in thousands, except weighted-average grant date fair value):

The aggregate fair value of RSUs that vested during thethree months ended* September 30, 2026and2025,* as of the respective vesting dates, was $0.7 million and $0.4 million, respectively.

Stock-Based Compensation

Total stock-based compensation expense recognized in the Condensed Consolidated Statements of Income is as follows (in thousands):

As of* September 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 $14.7 million, net of estimated forfeitures, with a weighted average expense recognition period remaining of 3.3 years.

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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 Rule10b5*-1 plans, through privately negotiated transactions, or otherwise. The terms of this program provided that it would terminate on the earlier of* February 26, 2026or when the maximum dollar amount had been expended. During thenine* months ended* September 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 of2022). This share repurchase program terminated in* January 2026*when the maximum dollar amount under this program was expended.

On* March 13, 2026,the Company announced the adoption of a new share repurchase program approved by the Board under which the Company 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 Rule10b5*-1 plans, through privately negotiated transactions, or otherwise. The terms of this program provided that it would terminate on the earlier of* September 12, 2026or when the maximum dollar amount had been expended. During thethree* months ended* September 30, 2026*, the Company didnot repurchase any shares of common stock. During thenine months ended* September 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 the1% share repurchase excise tax imposed by the Inflation Reduction Act of2022). This share repurchase program terminated on* September 12, 2026*upon the expiration of its term.

In the aggregate during thenine months ended* September 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 the1% share repurchase excise tax imposed by the Inflation Reduction Act of2022).

Private Placement of Common Stock

In* September 2026,*the Company issued 1,355,932 shares of its common stock to WJRJJ Ventures, LLC (“WJRJJ”) in a private placement for an aggregate cash purchase price of approximately $40.0 million, reflecting a price of $29.50 per share, and Robert A. Frist, Jr., the Company's Chief Executive Officer and Chairman of the Board of Directors, sold 144,068 shares of the Company's common stock to WJRJJ for approximately $4.25 million, reflecting a price of $29.50 per share. In connection with this transaction, the Company entered into a Registration Rights Agreement with WJRJJ providing for certain registration rights with respect to the resale of the shares issued and sold to WJRJJ as provided above.

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 562,000 and 224,000 for thethree months ended* September 30, 2026and2025*, respectively, and 450,000 and 171,000 for thenine months ended* September 30, 2026and2025*, respectively.

The following table sets forth the computation of basic and diluted earnings per share (in thousands, except per share data):

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7. MARKETABLE SECURITIES

The fair value of marketable securities, which were all classified as available for sale and which the Company doesnot intend to sell nor will the Company be required to sell prior to recovery of their amortized cost basis, included the following (in thousands):

The carrying amounts reported in the Condensed Consolidated Balance Sheets approximate fair value based on quoted market prices or alternative pricing sources and models utilizing market observable inputs. As of* September 30, 2026and December 31, 2025*, the Company didnot 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 withinone year from the balance sheet date.

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8. DEBT

Revolving Credit Facility

On* September 10, 2026,the Company entered into the Second Amendment to Amended and Restated Revolving Credit Agreement (the “Second Amendment”) by and among the Company, as Borrower, its domestic subsidiaries as Guarantors, certain lenders party thereto from time to time, and Truist Bank, as Administrative Agent, Issuing Bank, and Swingline Lender. The Second Amendment amends that certain Amended and Restated Revolving Credit Agreement dated October 6, 2023,as amended by that certain First Amendment to Amended and Restated Revolving Credit Agreement, dated as of March 13, 2026 (*the “Prior Credit Agreement”; the Prior Credit Agreement, as amended by the Second Amendment, the “Amended Credit Agreement”).

The Amended Credit Agreement provides for revolving loans in the maximum principal amount of $50.0 million, with a $5.0 million sublimit for swingline loans and a $5.0 million sublimit for the issuance of standby letters of credit (collectively, the “Revolving Commitments”). In addition, the Amended Credit Agreement includes an accordion feature that allows the Company to increase the Revolving Commitments by a total of up to $25.0 million, subject to securing additional commitments from existing lenders or new lending institutions. The Amended Credit Agreement has a maturity date of* September 10, 2031.*

The Company's obligations under the Amended Credit Agreement are unsecured. In addition, if the Company forms or acquires any domestic subsidiaries, the loans and other obligations under the Amended Credit Agreement will be guaranteed by such domestic subsidiaries.

At the Company’s election, the borrowings under the Amended Credit Agreement, 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, (b) the Federal Funds Rate, plus 0.50%, (c) term secured overnight financing rate (“SOFR”) for an interest period ofone month plus 1.00%, and (d) zero, plus, in each case, an applicable margin that varies with the Company's net funded debt leverage ratio; or (2) SOFR defined as the greater of (a) the forward-looking term rate based on SOFR determined for a tenor comparable to the applicable interest rate period and (b) zero, plus, in each case, an applicable margin that varies with the Company’s net funded debt 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 for SOFR loans is 1.50%. The applicable margins will be adjusted quarterly, in each casetwo (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 varies with the Company's net funded debt leverage ratio and 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* September 10, 2031,and there areno* 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 thanthree months, on each day which occurs everythree months after the initial date of such interest period.

The purpose of the Amended Credit Agreement is for anticipated working capital needs, new product development, permitted acquisitions (as defined in the Amended Credit Agreement), quarterly dividends, any share repurchases we* may*elect to make under any future share repurchase program, and capital expenditures.

The Amended Credit Agreement contains certain customary affirmative and negative covenants.

In addition, the Amended Credit Agreement requires the Company to meet certain financial tests, including, without limitation:

As of* September 30, 2026*, the Company was in compliance with all covenants of the Amended Credit Agreement. There wereno balances outstanding on the Amended Credit Agreement as of or during thethree andnine months ended* September 30, 2026*.

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9. BUSINESS COMBINATIONS

Virsys12

On* October 8, 2025,the Company acquired all of the outstanding equity ofVirsys12,* 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 forVirsys12 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* maybe paid over athree*-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 ASC805. The results of operations forVirsys12 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):

The following table summarizes the fair value of the assets acquired and liabilities assumed as of the date of acquisition (in thousands):

The excess of purchase price over the fair values of net tangible and intangible assets is recorded as goodwill. The fair values of tangible and identifiable intangible assets and liabilities are based on management’s estimates and assumptions. The Company recorded a measurement period adjustment for the valuation of an indemnification asset and liability related to sales tax attributes, which was valued at $0.4 million and was updated to $0.3 million during thenine months ended* September 30, 2026,which updated valuation didnot* have any impact on goodwill. 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 offeringVirsys12 products, and expected synergies from integratingVirsys12 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 components of identifiable intangible assets and their estimated useful lives as of the acquisition date (in thousands):

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The following unaudited pro forma financial information summarizes the results of operations of the Company andVirsys12 as though the companies were combined as of* January 1, 2024 (*in thousands, except per share data):

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 toVirsys12's previously outstanding debt. The unaudited pro forma combined results of operations is for informational purposes only and isnot 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 maybe paid over athree*-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 ASC805. 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):

The following table summarizes the preliminary fair value of the assets acquired and liabilities assumed as of the date of acquisition (in thousands):

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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 toone year from the acquisition date) as the Company finalizes the valuation of these items. The primary area of the preliminary purchase price allocation that isnot finalized includes the valuation of an indemnification asset and liability related to sales tax attributes, which was preliminarily valued at $1.0 million and was updated to $0.7 million during thenine months ended* September 30, 2026,which updated valuation didnot* have any impact on goodwill. 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):

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):

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 isnot 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* maybe subject to significant complexities and uncertainties, some of which are beyond the Company’s control, and mayallege substantial or indeterminate monetary damages. Based on current information, management doesnot* 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 inone 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.

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Wage and Hour Litigation

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. Theplaintiff alleges that certain employees in Solution Executive sales roles were misclassified as exempt employees and werenot* 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. During the quarter ended September 30, 2026,*the parties exchanged discovery requests, and discovery is ongoing. Taking into account the fact that this matter remains at an early phase, 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.

Data Privacy Litigation

On* September 24, 2026,a putative class action complaint was filed against the Company in the Chancery Court for the Twentieth Judicial District, Davidson County, Tennessee, captionedShonda Venson v. HealthStream, Inc.* On* September 26, 2026,an additional putative class action complaint was filed in the same court captionedSteve Iraklianos v. HealthStream, Inc.* The complaints relate to the cybersecurity incident disclosed by the Company on a Current Report on Form8-K on* July 29, 2026,*as discussed below, and generally assert claims relating to the alleged compromise of personally identifiable information in connection with such incident, including claims for negligence and other common law causes of action, on behalf of putative classes of individuals whose information was allegedly affected by the incident.

Because the litigation remains at an early stage, the operative allegations and claims havenot yet been established through consolidated complaint,no class has been certified, and the amount of damages sought hasnot been specified. Accordingly, the Company cannot reasonably estimate the possible loss or range of loss, if any. The Company denies the allegations and intends to vigorously defend these matters.

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