HEALTHSTREAM INC Stock Compensation Disclosure

10. STOCK-BASED COMPENSATION

 

Stock Incentive Plan

 

The Company has outstanding stock-based awards under its 2016 Omnibus Incentive Plan and 2022 Omnibus Incentive Plan ("2022 Plan"). The 2022 Plan authorizes the grant of options, restricted share units ("RSUs"), or other forms of stock-based compensation to employees, officers, directors, and others, and such grants must be approved by the Compensation Committee of the Board of Directors. The 2022 Plan allows the Compensation Committee of the Board of Directors to determine the vesting period and parameters of each grant. The vesting period of the options and RSUs granted has historically included annual vesting over a period of up to five years, generally beginning one year after the grant date. As of December 31, 2025, 651,250 shares of common stock were available to be granted under the 2022 Plan.

 

Stock Option Activity

 

A summary of activity relative to stock options for the year ended December 31, 2025 is as follows (in thousands, except weighted-average exercise price).

 

						Weighted-
		Common				Average				Aggregate
		Shares				Exercise Price				Intrinsic Value
Outstanding at beginning of period			90			$	20.34
Granted			143				23.93
Exercised			—				—
Expired			—				—
Forfeited			—				—
Outstanding at end of period			233			$	22.54			$	246
Exercisable at end of period			90			$	20.34			$	246

 

The weighted average remaining contractual term of options outstanding at  December 31, 2025 was 8 years.

 

Restricted Share Unit Activity

 

A summary of activity relative to RSUs for the year ended  December 31, 2025 is as follows (in thousands, except weighted-average grant date fair value):

 

						Weighted-
		Number of				Average Grant Date				Aggregate
		RSU’s				Fair Value				Intrinsic Value
Outstanding at beginning of period			571			$	24.54
Granted			206				29.16
Vested			(198	)			23.77
Forfeited			(61	)			25.41
Outstanding at end of period			518			$	26.57			$	11,940

 

The aggregate fair value of RSUs that vested during the year ended December 31, 2025 and 2024, as of the respective vesting dates, was $4.7 million and $4.0 million, respectively. 

 

Stock-Based Compensation

 

Total stock-based compensation expense recorded in the Consolidated Statements of Income for the years ended December 31, is as follows (in thousands):

 

		Years Ended December 31,
		2025				2024				2023
Cost of revenues (excluding depreciation and amortization)		$	1,545			$	94			$	183
Product development			2,304				745				692
Sales and marketing			1,114				529				485
General and administrative			3,182				3,102				2,793
Total stock-based compensation expense		$	8,145			$	4,470			$	4,153

 

The Company amortizes the fair value of all stock-based awards, net of estimated forfeitures, on a straight-line basis over the requisite service period, which generally is the vesting period. As of December 31, 2025, total unrecognized compensation expense related to non-vested stock options and RSUs was $7.9 million, net of estimated forfeitures, with a weighted average expense recognition period remaining of 2.8 years. 

 

Stock Awards

 

During  December 2025, the Company’s Chief Executive Officer, Robert A. Frist, Jr., contributed 146,286 of his personally owned shares of HealthStream, Inc. common stock (valued at $3.5 million) to the Company, without any consideration paid to him, for the benefit of the Company’s employees. In connection therewith, effective  December 9, 2025 the Company approved the award of 146,286 fully vested shares of common stock to over 700 employees of the Company under the 2022 Plan. These shares were issued in  December 2025. As required by ASC 718, Compensation – Stock Compensation, the Company recognized $3.5 million of stock-based compensation expense for these stock awards during the three months ended  December 31, 2025 based on the closing fair market value of the Company’s stock on the date of the Company’s approval of these grants. Total payments related to the employees’ tax obligations to taxing authorities for these stock awards were $1.1 million and are reflected as a financing activity within the Consolidated Statement of Cash Flows for 2025. In addition, the employer taxes and expenses associated with these grants were $0.3 million and were recorded as an expense during  December 2025. Mr. Frist contributed an additional 11,492 of his personally owned shares to the Company to cover the amount of these employer taxes and expenses. The receipt of shares from Mr. Frist and in connection with the withholding of shares as set forth above are presented on the Company’s Statement of Shareholders’ Equity in a similar manner as a share repurchase (i.e., reduction of outstanding shares).