Good day, and welcome to the MTBC Third Quarter 2019 Earnings Conference Call and Webcast. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, this event is being recorded.I would now like to turn the conference over to Shruti Patel, General Counsel. Please go ahead.

Thank you and good morning, everyone. Welcome to the MTBC 2019 third quarter conference call. On today's call are Mahmud Haq, our Founder and Executive Chairman; Stephen Snyder, our Chief Executive Officer and a Director; A. Hadi Chaudhry, our President and a Director; and Bill Korn, our Chief Financial Officer.Before we begin, I would like to remind you that certain statements made during this conference call are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 as amended and Section 21E of the Securities Exchange Act of 1934 as amended.All statements other than statements of historical facts made during this conference call are forward-looking statements, including, without limitation, statements regarding our expectations and guidance for future financial and operational performance, expected growth, business outlook and potential organic growth and acquisitions.Forward-looking statements may sometimes be identified with words such as will, may, expect, plan, anticipate, upcoming, believe, estimate or similar terminology and the negative of these terms. Forward-looking statements are not promises or guarantees of future performance and are subject to a variety of risks and uncertainties, many of which are beyond our control, which could cause actual results to differ materially from those contemplated in these forward-looking statements.These statements reflect our opinions only as of the date of this presentation, and we undertake no obligation to revise these forward-looking statements in light of new information or future events. Please refer to our press release and our reports filed with the Securities and Exchange Commission, where you will find a more comprehensive discussion of our performance and factors that could cause actual results to differ materially from these forward-looking statements.For those dialed into the call by telephone, you may download our second quarter 2019 earnings presentation. Please visit our Investor Relations site, ir.mtbc.com, click on Events and download the earnings presentation.Finally, on today's call, we may refer to certain non-GAAP financial measures. Please refer to today's press release announcing our second quarter 2019 results for a reconciliation of these non-GAAP performance measures to our GAAP financial results.With that said, I'll now turn the call over to the Chief Executive Officer of MTBC, Stephen Snyder. Steve?

Thank you, Shruti. And thank you everyone for joining us on our third quarter 2019 earnings call. We are very pleased to report that the first nine months of 2019 marked another period of strong growth. In fact, we increased our year-to-date revenues by 43%, in fact we increased our year-to-date revenues by 43% year-over-year to $48.7 million validating the strength of our unique integrated offering and growth strategy.If you're an investor who has been following MTBC since we went public, you know that a high rate of growth is not a new phenomenon for us. In fact, our CAGR for the period of 2013 through 2018 was approximately 37%. We've been able to achieve this growth through our parallel growth strategy that focuses on acquiring customers through traditional organic growth, together with purchasing them from our competitors.Over the last few years, we've acquired customers from three distressed groups of companies, each of which lacked the technology, team and experience needed to meet their customers’ needs. We were able to acquire these companies at very attractive average multiples of approximately one half times revenue. These acquisitions, like the prior transactions before them, played an important role in helping us grow our revenue and expand margins.Today, we're better position than ever to move forward as and when we have the right buying opportunities. During this year, we're pleased to report that our inflow of transaction opportunities is moving at an accelerated pace, as we now review an average of one new opportunity per week. We’ve broadened our network of bankers and intermediaries to nearly 20, who have identified and provided us with acquisition leads year-to-date.In fact, these inbound leads now represent approximately three quarters of our new leads. This heightened volume of leads increases our likelihood of acquiring the very best…

Thank you, Steve. And thank you everyone for joining us on our third quarter 2019 call. Since our last call, we have made significant progress on the integration of our acquisition of Etransmedia in April. We have reduced overall expenses by more than 71% and over 30% of Etransmedia clients are leveraging MTBC technology platform, ultimately helping us outperform our client retention goals.We believe that the steps we have taken have positioned us to achieve our full year revenue and adjusted EBITDA guidance. We are also pleased to state that we are on track to launch the first phase of our new telemedicine solution during the fourth quarter. We have reached out to a subset of 500 providers from our existing client base to gauge their interest in our telehealth solutions and have received interest from 150 providers.We have also received interest from 65 providers who have opted to be beta testers and used the beta version of the product. This overwhelming response from our existing client base reassures the direction of the telemedicine industry. We look forward to providing more details regarding next phases of our telemedicine solution, as we announce the full launch next month.I will now turn the floor over to our Chief Financial Officer, Bill Korn. Bill?

Thank you, Hadi. As Stephen and Hadi said we had a great quarter, and I'm pleased to give you some details. Our revenue for the first nine months of 2019 was $48.7 million, an increase of 43% or $14.7 million, compared to $34 million in the last -- in the same period last year.Revenues for the first nine months of 2019 were almost equal to our full year revenue of $50.5 million in 2018. Our revenues grew at a compounded annual growth rate of 37% from 2013 to 2018. And our 43% year-over-year growth demonstrates that our business is continuing to grow at a rate that far outpaces the rest of the industry.Our GAAP net loss for the first nine months 2019 was $1.2 million, an improvement of $358,000 from the first nine months of 2018. GAAP net loss includes non-cash amortization and depreciation expense of $2.4 million, stock-based compensation expense of $2.3 million, and transaction and integration costs of $1.4 million. GAAP net loss per share of $0.48 is calculated using the net loss attributable to common shareholders, which takes into account the preferred stock dividends declared during the quarter divided by the weighted average number of common shares outstanding.Our non-GAAP adjusted net income for the first nine months of 2019 was $4.3 million, an increase of $1.8 million, or 75%, compared to adjusted net income of $2.5 billion in the same period of last year. Non-GAAP adjusted net income with $0.35 per share, calculated using the end of period common shares outstanding.Adjusted EBITDA for the first nine months of 2019 was $5.3 million or 11% of revenue, compared to adjusted EBITDA of $3.4 million in the same period last year. Year-to-date, adjusted EBITDA increased by $1.9 million, or 57% compared to the corresponding period in 2018 and already…

Thank you, Bill. 2019 will be another year of record breaking growth and profitability. We thank our investors, customers, employees for their support.We will now open the call to questions. Operator?

We will now begin the question-and-answer session. [Operator Instructions] The first question comes from the line of Eugene Mannheimer with Dougherty. Please go ahead.

Thank you, gentlemen. Good morning. Congrats on all the great progress this quarter. Steve or Bill I wanted to ask -- or Hadi, I wanted to ask the question on your new strategy to partner with customers. What are the economics look like under those circumstances? Maybe you can share with us how you get paid there, is that you collect a percent of a percent of their charges? And is the partner strategy, is this to suggest that the pace of -- or the pipeline line of deals is perhaps slowing in the market? Thank you.

Absolutely. Thank you, Eugene, and thank you for your questions. So maybe first of all addressing the overall strategy and the rationale behind it, from the perspective of the opportunities that we see in the market, we've seen the market in 2019, which candidly are not dissimilar from what we've seen in prior periods. But there's a pretty significant percentage, roughly two-thirds of those opportunities in terms of -- from the acquisition of RCM companies that relate to companies that have revenues below $10 million.From the perspective of the dynamics and everything that's involved in acquiring a company, we believe that the most beneficial way to be able to add value to MTBC and our shareholders with regard to the smaller companies, unless the valuation is a rock bottom valuation, like Etransmedia, but absent that scenario is really through partnerships.These companies typically will be leveraging two things that we have either technology or leveraging offshore team members to assist their onshore team members. So there are really two different prongs to this model, and two different motivating factors that are drawing these billing companies that seek a partner like MTBC. One would be the labor component. So from the perspective of being able to assist billing companies, what we're providing them and offering is an FTE based cost structure where billing companies with a minimum of 10 FTEs and employees -- full time employees per month can be leveraging.Our experienced team members offshore who are acting as support for their onshore operations, helping to perform things like charge entry and payment posting and follow up and the like. And then we're charging a monthly fee for each one of those individuals. The second, again, rationale or reason why some of these companies would be seeking out a partner like MTBC…

Hey, Steve very good explanation. Thank you. Very helpful.

Thank you.

The next question comes from the line of Matthew Galinko with National Securities. Please go ahead.

Hey, thanks for taking my question. I guess the follow up to that sort of new strategy for the smaller RCM participants. Do you see -- I guess competitors that you bring you’re your platform either with labor, technology or both sort of a qualified mechanism. So if you sort of fast forward a couple of years, do you see those as sort of being -- sort of lower cost of entry to roll them into your P&L entirely?

We definitely see that as a possibility long term. There's absolutely -- it's much easier to go ahead and to complete an acquisition when we're already very well acquainted with a company and already actively managing their operations. So for sure that's an option. And candidly, the companies that we're speaking with actually have an interest, at least two out of three of those in exactly that scenario. So without a doubt, there's a possibility for that long term.And candidly, as we give them the tools that they need in terms of the personnel and the technology, we're really equipping them to grow; growth in this space is really heavily driven by leveraging existing relationships. One professional referring his or her colleague to the company so that this really enables us to assist local billing companies to be able to grow. And for sure down the road acquisitions of those companies is a possibility.

Great and one follow up from me. With respect to the 500 providers in your network that you're engaging with for your telemedicine platform, I'm curious how you selected that initial group? And if you're finding that any patterns and the sorts of customers that return with an interest that could help you with follow up targeting with the telemedicine platform, whether it's in network or sort of beyond your network?

Thank you for the question. So it's the one subset out of the 5,000 providers that we have. So we picked up a certain subset there. They were using MTBC's technology at a certain percent level. So there was a more probability from their perspective quickly going through and adaptive to that workflow, to that change and start using the telemedicine.So this 500 provider was a subset of over 5,000 provider base that we have more focused between the -- in terms of the primary care and the psychiatry practices. So, there will be the aptitude, they show their interest in using the products either today in the beta testing phase or when the full product will be launched. So, we will be -- we already have started conducting the demonstrations, the webinars have been conducted and 60 plus 65 providers who already have in the process of getting on board from the beta testing perspective. So they will be helping us out in the beta test and there are certain providers who already started to use those out of those 65 beta testers.So, from the in network perspective, these are our existing RCM clients who are using some part of MTBC product today.

Great, thank you

The next question comes from the line of Kevin Dede with H.C. Wainwright. Please go ahead.

Good morning, guys. Kevin Dede. Just on this telemedicine, could you go through the rollout you expect you've got 65 on beta now and 500 ultimately targeted at some level at some point. You mentioned something about rolling it out next month. I just was hoping you could drill in a little bit on the timeline.

Absolutely and thank you, Kevin, and thank you for your question. So, this 5,000 out of the entire, so we will launch it we will push it to the entire MTBC client base. We picked it up from two perspectives; one is to find out and to understand the overall interest how the existing client base will respond to it and the second purpose was to find the right initial beta testers who can help us fix the issues and improve the product.So we are working at the same time for both of those two things. And we have not stopped here just by sending it out to the 500 providers, along with of the launch it will be communicated to the entire -- the rest of the client base, which we expect before the end of the year, we will do a full launch of this first phase of telemedicine products.And in this first phase this is primarily the SaaS based product, the SaaS based model, which is being integrated into the existing platform. It will be part of the scheduling process that will be part of the practice management the part and the EHR. On the patient side, they can continue to use the current, the existing EHR through the app or the desktop version, and it's one of an additional feature into the existing EHR portal and the app.So when it comes to then toward the next phase, which we will communicate the details along with the launch at the end of this year, in the first quarter next year, we are planning to launch it even beyond the U.S. perspective in the developing world, and in countries like even Pakistan, India and Sri Lanka. And we believe that we are very uniquely situated in this -- in order to succeed in this launch because of our existing presence in these countries. And also, we already have the 5,000 providers in the primary care and the psychiatry using one of the solutions.So, this is a very high level timeline. I hope this answered some of your questions.

Okay. Just to summarize, Hadi, make sure I have it through my fixed goal [ph]. You've got 65 beta running now but 500 of your 5,000 total client base have been introduced to it and then by the end of the year, you're expecting to have it rolled out to the entire 5,000 client base that you have, is that the way to look at it?

Yes, it will be a communication in some shape or form along with the official announcement to all the 5,000 providers. And when I say all the 5,000 providers, some of those due to the nature of the specialty or the hospital settings may not be the right population to use it. But it will be a communications as a different subset of the 5,000 provider base.

Very good. Okay. And you're saying SaaS based model, my understanding was it was just an adjunct of a full RCM service quotient that you already offered. Am I not thinking about that correctly, either?

Kevin, I'm sorry, can you repeat that, please?

Yes, sorry, Hadi. Sorry, I apologize. You mentioned a SaaS based model, but my thought was and course I probably had it wrong. My thinking was that this was just an adjunct to the full RCM service quotient that you are offering your clients and that there were an additional fees involved, am I not looking at that correctly?

Yes, very right. Kevin, you're looking at it correctly. When I say this is SaaS based model so it is becoming the part of the existing SaaS based Practice Management System or the EHR system, so it's being added in the existing workflow. And yes, to your point, they will be paying their same contract percent in the current, let's say, if they are paying a certain for the RCM services. So they will be -- they will continue to pay the same fees to us and there could be some additional credit card processing fees for the sell phase and like.

Perfect. Thanks, Hadi. Steve, before I go one -- two quick little things. Number one in your partnership scenario, I get the first one where you're sort of assisting folks on an FTE basis, right. I get that. The second model on tech pricing, what's to prevent you MTBC from just taking those customers from your billing clients? I mean once they're sucked into your tech platform, there's really no difference. And you can cut -- easily cut out a middleman and they'd probably be happy to go along with that.

Good question, Kevin. And probably that same risk exists really in both scenarios whether we're simply providing the human capital that's really making the revenue cycle management actually function and work or whether they're on our technology platform. We're certainly in a position where we are essential to the day to day operations of the billing company and also were a key part of the engine that will enable their future growth.So the way that we're making sure that we do the right thing and protect the billing companies is we're having standard non-solicitation provisions in the agreements to ensure that we're not ever in a position where we could be perceived as a risk in terms of poaching those accounts. Needless to say, in an acquisition context that would – there’d be a natural transition whether we're handling this from human capital perspective or technology puts us all in a great position to be able to take the next step with regard to a transaction. But absent that scenario, we have a contractual commitment that we're making that we're not going to solicit those clients.

All right. One quick last thing for, Bill. So Bill at skies you only need to hit $16 million this quarter right to hit the high end of your guidance. It just seems you're -- I think you're okay on the EBITDA side. But I think you're being ultraconservative on the top-line. I just wanted to hear your thinking behind that.

We like to be ultra-conservative. We like our people to know that we are totally confident that we're going to hit our numbers.

Yes, well -- yes, I think that's my point, though. You're not going to hit them, you're going to you're going to beat them.

Let's hope.

Okay. I guess it's all perception, right? I get it. Thank you very much for entertaining all my questions gentlemen.

Thank you, Kevin.

Agreed. Agreed. Thank you.

The next question comes from my line of Marc Wiesenberger with B. Riley. Please go ahead.

Thank you. Good morning. Earlier this year, you talked about you're in the process of on-boarding your first facility billing hospital client. I'm wondering, if you could update us on that and if that's potentially leading to maybe some additional opportunities in the hospital space?

With regard to the -- when we kind of think about the overall opportunities, frankly, with regard to the facility billing, that probably is not going to be part of our long-term strategy. We've actually begun assistant another existing practice with some of their facility billing from a follow up perspective. But in terms of the technology platform in terms of that existing relationship, we’re into the process of actually winding that down. Again, we didn't build any revenue into our model for the year relative to that relationship that you're referencing. And we're really testing it out on a beta basis.And frankly, as we look at all the other opportunities telemedicine, RCN, GPO the other opportunities from an acquisition perspective, our belief is that that is one that is -- doesn't have a favorable return on the investment.

Understood, fair enough. And maybe if you could update or provide a little more inside into where you're seeing some of the best cross selling results coming from?

Certainly. We're really seeing the best cross selling results right now coming from GPO perspective. But overall, I would say our team is just doing a phenomenal job laying the foundation for that cross selling great deal of activity in terms of getting everything up and running. And the results will follow, I think across the board from a cross selling perspective, with the variety of solutions that we have today that many of which we frankly didn't have the ability to extend just a few years ago. And we look forward to providing additional insight in terms of how we're making out when we provide our year-end results.But really what that team has been doing is really working on developing collateral, training all of our client facing team members on our solutions. They've been working on doing things like collecting and filtering internal data in order to create customer profiles. Things like the specialty and size and workflow patterns and the like. That in turn enable our team to target the appropriate customers within our existing base for cross selling.So things along those lines have laid the foundation and already the outbound communications are occurring. There's messaging in places, for instance, like within the internal platform, our proprietary platform that's being leveraged, for instance, by our EHR clients now is messaging regarding the GPO.And that same sort of dynamic is really rippling throughout our entire ecosystem of applications and is finding its way into the various communications that we have with our clients on a day to day basis.

That's very helpful. Thank you. One final one for me, with regards to telemedicine you’ve talked about the international opportunities and maybe early next year in Pakistan, Sri Lankan and India, I'm wondering, could you tell us what you're kind of doing now to get ready for that launch next year. And what will that look like in those international markets?

Okay, sure. And thank you, Marc for the question. Two things from the technology platform perspective, we don't have to go through a lot of technological changes, because it's going to be the same or the product with some modifications that will be needed. So the first and the most critical and an important part for us was to get that product ready, start put in place to the providers in the U.S. start using it, and then in order to go and launch it to these developing world and in different countries like Pakistan, India, Sri Lanka.We will communicate more details as we get to this launch of the first phase we may end up creating an entity and from the revenue or the bookkeeping perspective, it could even be considered as a VIE model. So we can leverage all those 5,000 providers on the U.S. side, and the patient layer in those countries can connect to the U.S. physician using that app to get those services.So that's the kind of the initial thought process or the idea because there are many instances where the patients in those countries look for an expert opinion or the second opinion from a U.S. or similar other countries, the providers or adopters of similar other countries. So we believe since we already have a presence there, we already understand the cultural and the different moving parts there. So this will put us in a very unique situation to have a success in that implementation.

Great, thank you very much.

Next question comes from the line of Brian Marckx with Zacks. Please go ahead.

Good morning guys and congrats on the quarter. One question on revenue, Bill, revenue was about $800,000 stronger than we were expecting, just kind of wondering if there was any new acquisitions or tuck-in deals that contributed in the quarter. And can you give us what Etransmedia’s contribution was in Q3?

Well, thanks. Thanks, Brian. So in answer to the first part of the question, there were no new acquisitions, no new tuck-ins. So this is a combination of additional revenue from existing clients. A little bit stronger revenue on the practice management side. So this was just business as usual, our largest client continues to grow and set new records for revenue each month.And, in terms of the Etransmedia, we try not to break out a lot of the details. There will be some information that comes out in the 10-Q. But I'll say that we've been -- we've actually been really pleased that the retention of that business is a lot better than what we had initially anticipated.We understood their history from before we bought them. And I'd say we've kept far more of the business than we originally thought we turned around a couple clients who were thinking about canceling. So we had sort of modeled that that was going to going to be shrinking and it's actually pretty much stabilized, so we're really happy about that.

Okay. That's great to hear. One question on the partnership strategy, I wonder if we can kind of help frame for us what your expectations are for upfront costs to set up a new client? And then do you have kind of an idea of -- kind of payback period to cover those upfront costs? And then the second part of the question relates to capacity and whether you might have to add capacity offshore to take on a partnership point?

Absolutely. Thanks for the question, Brian. So from a capacity perspective, we have the capacity today to handle all three of those opportunities, assuming they go live that I’ve mentioned. And we're in the process right now, we have a team member who's spending roughly 70%, 80% of his time focused solely on outreach to billing companies pitching this model that we're talking about, together with the possibility of acquisitions. So there are 1,500 plus billing companies, and we would estimate that out of those 1,500 plus at least 1,000 would fall into this category and would be prospects for this sort of solution.From an upfront cost perspective, really, the upfront costs are very de minimis in the context of providing FTEs, it simply providing the training to the extent that they're not leveraging our platform, but leveraging in other platform. We already have individuals who are working on close to 30 other unique platforms, which covers the overwhelming majority of the scenarios that will see with regard to these billing companies.So we already have the experienced team members, who we can deploy on most of these sorts of relationships. So the upfront costs are negligible from a software perspective. Again, with our business model, it puts us in a very unique position. We have more than 300 IT R&D team members offshore. And for us, there's very little involved in terms of white labeling, the software itself and the software scenario with a kind of a 1 to 10 labor cost arbitrage when we look at Pakistan versus the U.S. the costs associated with that are de minimis.So that is one advantage too in the context of, especially the smaller acquisitions. Unlike the acquisition of a smaller revenue cycle management company where there will still be some legal costs, there will still be some accounting costs. There will still be due-diligence efforts that have to go into it. There'll be costs associated with redundancy as we're rolling their operations into ours. And all those sorts of things that that go into the -- any acquisition, but in relative terms place even more stress on the smaller acquisitions, because of their size. Those don't exist in this particular scenario.

Okay. One more related to that and it has to do with the due-diligence period and how much access you might get. If a competitor is going to work with you and you see that as a potential area of risk, if you couldn't get enough depth of due-diligence to look at one of these opportunities?

We really don't see any material risk associated with that scenario. We have the ability going into the relationship and of course, we'll make sure that we ensure that any partner we're working with we feel comfortable with their overall business practices going into that relationship. And typically, in these relationships either party has the ability to terminate that relationship upon a relatively short period of notice.Of course, that becomes a little bit more difficult for a customer of ours because they have to find a new group of individuals who can take over the operations. It can be more difficult from their end or from a software end. They'd have to be able to migrate the data. But from our end, it's relatively straightforward being able to terminate those relationships.So as we go into these relationships, we're ensuring we're choosing the right partners to work with much like in the acquisition scenarios. We're making sure that we feel comfortable from a business ethics perspective. And that we have a partner who is going to pay our invoice on a timely basis. more incorporating going forward. Things like automatic payment ACH as a key part of that relationship. So there's very limited downside candidly in terms of these relationships.

Okay, great. Thanks a lot, guys. Appreciate it.

Thank you.

In the interest of time, we will now conclude our question-and-answer session. I would now like to turn the conference back over to Mr. Shruti Patel for any closing remarks.Thank you.

Thank you. We’d like to thank everyone for joining today and your continued support. We look forward to speaking again in the near future. Thank you.

Thank you, everyone.

Bye-bye.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.