Earnings Labs

TruBridge, Inc. (TBRG)

Q1 2017 Earnings Call· Thu, May 4, 2017

$25.71

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Transcript

Operator

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the CPSI First Quarter 2017 Earnings Conference Call. During the presentation all participants will be in a listen-only mode. Afterwards we will conduct a question-and-answer session. As a reminder, this conference is being recorded, Thursday, May 4, 2017. I will now turn the conference over to Boyd Douglas, President and Chief Executive Officer. Please go ahead, sir. John Boyd Douglas - Computer Programs & Systems, Inc.: Thank you, George. Good afternoon, everyone, and thank you for joining us. During this conference call, we may make statements regarding future operating plans, expectation and performance that constitute forward-looking statements made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. We caution you that any such forward-looking statements only reflect management expectations and predictions based upon currently available information and are not guarantees of future results or performance. Actual results might differ materially from those expressed or implied by such forward-looking statements as a result of known and unknown risks, uncertainties, and other factors, including those described in our public releases and reports filed with the Securities and Exchange Commission including, but not limited to, our most recent Annual Report on Form 10-K. We also caution investors that the forward-looking information provided in this call represents our outlook only as of this date and we undertake no obligation to update or revise any forward-looking statements to reflect events or developments after the date of this call. Joining me on the call today will be Matt Chambless, Chief Financial Officer; Chris Fowler, Chief Operating Officer; and David Dye, Chief Growth Officer. At the conclusion of our prepared comments, we will be available to take any questions that you may have. Our first quarter of 2017 was one of…

Operator

Operator

[Operating Instructions] Our first question comes from the line of Rob Munnings with William Blair. Please proceed with your question. Robert Munnings - William Blair & Co. LLC: Hey guys thanks for taking the questions. I wanted to ask about retention and customer satisfaction. Is there any chance to retention expectations in the quarter? And have you seen any tangible impact from the high-touch client communication strategy you discussed last quarter? John Boyd Douglas - Computer Programs & Systems, Inc.: Our retention rates remain stable. Not that we've seen any notable impact from our – from the efforts that we've made here recently. They continue to remain in the 97%, 98% range, and we're pleased with that. And part of our efforts to do that was to keep that retention rate in that range. So we're pleased with where that is. Robert Munnings - William Blair & Co. LLC: All right. Great. Thank you. And then could you talk a little bit more about the competitive environment this quarter? What's the differentiating factor that has led to some wins in the quarter versus some of your bigger competitors? David A. Dye - Computer Programs & Systems, Inc.: Yes, well, I think if you're talking about the first quarter, I mentioned that we were actually coming off a fourth quarter that was the best that we've had in years, where we signed 16 new customers; we only signed three net new clients in the quarter. There weren't a whole lot of deals that were actually decided, so it wasn't as if we had a terrible win-loss rate. It's just several decisions got delayed that we thought would have done in the quarter. And I mentioned in the comments that we feel like we'll get approximately 6 to 8 new clients in the existing quarter, in the second quarter of this year. You may be referring to – we did, and I mentioned this in my prepared comments, we have in the last couple of quarters, and in particular, in the first quarter, had some hospitals that had been our customers, whether that be Healthland or Evident, that had signed with competitive vendors and that that have since had failed implementation of those- from those – from their attempts to go to another vendor, again, either because of frustration with delays of the implementation or failed implementations and the net result of a reduction in cash flow that have come back to us. So that's something that we're particularly pleased with that happened in the quarter. Robert Munnings - William Blair & Co. LLC: All right. Great. Thanks. All I will stop there. That's all from me. Thanks a lot, guys. David A. Dye - Computer Programs & Systems, Inc.: You bet. Thank you.

Operator

Operator

Our next question comes from the line of Nina Deka with Piper Jaffray. Please proceed with your question. Nina D. Deka - Piper Jaffray & Co.: Congrats on the big win April with TruBridge. David A. Dye - Computer Programs & Systems, Inc.: Thank you. Nina D. Deka - Piper Jaffray & Co.: So you mentioned that you closing Rycan deals in areas in particular where you weren't previously doing business. Can you describe the nature of those deals? Were they competitive bids? Was it displacing something? And are they currently using a competitor's EHR when they selected your Rycan software? David A. Dye - Computer Programs & Systems, Inc.: Yes. I don't know what we said about in places where we haven't competed before. I mean, essentially, 100% of the Rycan business that we did in the first quarter was within inpatient facilities, in the community hospital marketplace. We are – we do believe, with the success that we've had with Rycan and the customer satisfaction that we have there and I did mention that bookings in the quarter were up 191% year-over-year, that we've kind of been on the steady rate there and we look for that to continue. We do think that Rycan has the ability to move upmarket and can compete with the vendors that traditionally play in the accounts receivable management space in that mid to larger tier hospital space. So that is an effort that we're currently undertaking. That is something that we just began. And Chris and I both mentioned the fact that we spend a lot of time with our larger group, post-acute customers with AHT to understand what changes we need to make with Rycan with the integration there, so we can penetrate that market. And the integration that we're working…

Operator

Operator

Our next question comes from the line of Sean McBride with Robert W. Baird. Please proceed with your question. Sean P. McBride - Robert W. Baird & Co., Inc.: Hey, David. I'd like to start with the 10 hospitals that have switched from and recently come back to CPSI. So are those long-term contracts that they've returned to? David A. Dye - Computer Programs & Systems, Inc.: Yes. Sean P. McBride - Robert W. Baird & Co., Inc.: Okay, great. And then... David A. Dye - Computer Programs & Systems, Inc.: ...five-year contracts. Sean P. McBride - Robert W. Baird & Co., Inc.: Okay, great. And then, Matt, on topic 66, based on disclosures, I do understand it, it's in the early stages, but I was wondering if there is any preparations that ultimately will have an impact on the P&L in 2017 related to that. Matt J. Chambless - Computer Programs & Systems, Inc.: Yeah. So Sean, we're still working through that. I think you're probably seeing some of the other players in our space and their disclosures on this, what they – and that there's been some discussion about some – the advanced recognition of some subscription revenues. We're still working through that, but historically subscription fees haven't (34:56) that major component of our business. So I wouldn't expect that right now to be a game-changer on that front. And also I want to remind you that there is also on the cost side, there's also going to be a cost impact from 606, with the deferral of – most companies are going to end up deferring some level of commission. So we're still working through that stuff. Sean P. McBride - Robert W. Baird & Co., Inc.: Okay. But in terms of like extra cost related to bringing in consultants or things like that, nothing major? Matt J. Chambless - Computer Programs & Systems, Inc.: No, no. Sean P. McBride - Robert W. Baird & Co., Inc.: Okay. And then just wanted to confirm that the two scheduled implementations in 1Q that got pushed to 2Q, those are both license software? Matt J. Chambless - Computer Programs & Systems, Inc.: That's right. Neither of those were under a subscription model. Sean P. McBride - Robert W. Baird & Co., Inc.: Okay. Perfect. Thank you. David A. Dye - Computer Programs & Systems, Inc.: Thank you.

Operator

Operator

Our next question comes from the line of Mike Ott with Oppenheimer. Please proceed with your question. Mike Ott - Oppenheimer & Co., Inc. (Broker): Yeah. Good afternoon. Thanks for taking my questions. I wonder if you could tell us a little more about what led to that big $3.1 million TruBridge contract? And do you expect more (36:06) like it in your pipeline here? David A. Dye - Computer Programs & Systems, Inc.: Yeah. I'd like to say what led to it is good old-fashioned sales work. We don't want to name the specific customer. It's a hospital-based customer that also has some associated outpatient facilities. And we do, in fact, have some more discussions around contracts, maybe not quite as big as that, but we do have the potential to close a couple of more that are larger in size, not necessarily in this quarter, but we had one that was not as big, but was similar in the fourth quarter of last year, too, that helped drive the bookings that we've achieved in the fourth quarter. I don't know that we have expectations that we'll get a handful more of $3.1 million contracts over the course of the next 9 months and 12 months, but there are several ones that are larger than what we've traditionally been competing for that are out there right now that we're excited about potential. Mike Ott - Oppenheimer & Co., Inc. (Broker): All right. Thanks, David. And then maybe one for Matt, with the cash from operations up strongly year-over-year, I know the release mentioned the balance sheet normalizing in mid-2016, but do you see more opportunities to increase or – the cash flows from here? Matt J. Chambless - Computer Programs & Systems, Inc.: Yes, I mean, in the very short-term, that's all going to be driven for the most part by revenues because as we see the back half of 2017 and the recurring revenues resuming substantial growth for TruBridge, that should translate into operating cash flow performance. We should also see – hopefully, see some improvement on the cost side, but that's a little bit still in the works with some of the programs we have in place. Mike Ott - Oppenheimer & Co., Inc. (Broker): All right. If I could one last one, with the AHCA passed in the house this afternoon, wondering if you guys see or have you seen an impact on deals realizing that some of your clients are certainly in non-expansion states, but wondering if you had an impact there? David A. Dye - Computer Programs & Systems, Inc.: No, and that's not surprising. Typically, unless the legislation directly affects the incentives for EHR use or something surrounding that, it typically does not have effect – a large effect on our market. Mike Ott - Oppenheimer & Co., Inc. (Broker): All right. Thanks very much, guys. David A. Dye - Computer Programs & Systems, Inc.: Thanks, Mike.

Operator

Operator

Our next question comes from the line of Matt Dellelo with Leerink Partners. Please proceed with your question.

Matt Dellelo - Leerink Partners LLC

Management

Hi, guys. Thanks for the questions. Just following up on that last one, to be clear, so in Q1, you didn't see any sort of budget hesitation due to uncertainty in Washington. And a couple of deals got pushed quarter-to-quarter. Was that just timing? Or was there any sort of like hesitation or pausing from customers? David A. Dye - Computer Programs & Systems, Inc.: No hesitation or pausing that has anything to do with Washington, D.C. Delayed board meetings, board approvals, you know, that type of thing is more traditionally when we see delays and that's what happened in these cases. John Boyd Douglas - Computer Programs & Systems, Inc.: And as far as the two you referred to the two installations that got pushed, one of those installations is a new facility, new construction, so (39:35) construction issues and didn't open when they expected. They are on track to open in the second quarter. And the other one was the client elected – had some internal financial issues they had to deal with, and they elected to postpone the installation until the second quarter. And, again, they're on track to install this quarter as well. So it had nothing to do with D.C.

Matt Dellelo - Leerink Partners LLC

Management

Okay. That's good. And then on the competitive front, is there anything different versus the last couple of quarters? Are you seeing any intensified competition from Athena or others? David A. Dye - Computer Programs & Systems, Inc.: I wouldn't say there's anything different, Matt. I mean the competition has been pretty intense now for quite some time, not just with Athena, but with everybody else that's out and that's nothing we haven't experienced over the past several decades. But some of the names have changed, but the competition's stiff from – certainly from Athena, but from everybody else that's in our market.

Matt Dellelo - Leerink Partners LLC

Management

Okay, great. Thanks a lot. David A. Dye - Computer Programs & Systems, Inc.: Thanks, Matt.

Operator

Operator

[Operating Instructions] Our next question comes on the line of Gene Mannheimer with Dougherty & Company. Please proceed with your question. Eugene Mannheimer - Dougherty & Co. LLC: Thanks, guys, good afternoon. There was a question earlier around the analytics market, the size, so I'm just trying to get a handle if we could quantify that a little more. I know if you price – you share the pricing on that, but let's say, it's – if it's $40,000 a module and all 1,000 of your hospitals bought it, I mean, are we talking about a $40 million addressable opportunity there? Is that in the ballpark? Christopher L. Fowler - Computer Programs & Systems, Inc.: Yes. I think you're pretty close. We're looking at potentially $30,000 to $50,000 upfront, with the subscription around $2,000 a month. And, again, as we continue to build that out, we'll see more value going toward that, Gene. Eugene Mannheimer - Dougherty & Co. LLC: Okay. That's great. Thanks for that color. And I wanted to get a little bit of a cadence around the bookings. You say you have 19 new contracts over the last couple of quarters, obviously, skewed to the fourth quarter of last year, but when would that – when would we expect to see that – those bookings convert to revenue? Would the overwhelming majority of it be in 2017? David A. Dye - Computer Programs & Systems, Inc.: Yes, the overwhelming majority in 2017. From the new install perspective from those bookings, we've mentioned we've got 11 going live, scheduled to go live in second quarter and right now eight in the third quarter. From a TruBridge standpoint, we've tried to explain that maybe a little bit more than we traditionally have in the past. We've got some from those strong bookings quarters that are going in the second quarter, but the majority of that really starts in the third quarter. Eugene Mannheimer - Dougherty & Co. LLC: Okay. All right very good. Thank you. David A. Dye - Computer Programs & Systems, Inc.: Thanks, Gene.

Operator

Operator

There are no further questions at this time. I'll now turn the call back to the presenters. John Boyd Douglas - Computer Programs & Systems, Inc.: Great. I just want to thank everyone for being on the call today. Thanks for your interest and support in CPSI, and hope everyone has a great Friday and a great weekend. Thank you.

Operator

Operator

Ladies and gentlemen, that does conclude the conference call for today. We thank you for your participation, and ask that you please disconnect your lines.