Greetings, and welcome to the TruBridge Quarter Three Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce Dru Anderson. Thank you. You may begin.

Thank you. Good morning, and welcome to the TruBridge third quarter 2024 earnings conference call. Leading today’s call are Chris Fowler, President and Chief Executive Officer; and Vinay Bassi, Chief Financial Officer. This call may include statements regarding future operating plans, expectations and performance that constitute forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The company cautions 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 public releases and reports filed with the Securities and Exchange Commission, including, but not limited to, the most recent annual report on Form 10-K. The company also cautions investors that the forward-looking information provided in this call represents their outlook only as of this date. And they undertake no obligation to update or revise any forward-looking statements to reflect events or developments after the date of this call. At this time, I will now turn the call over to Mr. Chris Fowler, President and Chief Executive Officer. Please go ahead, sir.

Thank you, Dru, and thank you to everyone joining us this morning. As many of you know, we’re on a journey. Today, I’m pleased to report that we’ve reached some of those first milestones we’ve hoped to achieve. We feel really good about the progress we’ve made so far in our trajectory, as we head into the final months of the year. Before I jump in, I’d like to highlight that going forward, we will now refer to our RCM business as financial health and our EHR and patient engagement business as patient care. Bookings in the third quarter remained strong, building on the trends from the first half of the year and marking our fourth consecutive quarter with more than $20 million in total bookings. Our financial health revenue growth is solid. On an organic basis, excluding Viewgol, financial health revenue grew 5% and our core CBO business is up by double-digits in the quarter. Adjusted EBITDA also increased and margins continued to expand sequentially, coming in at 16.5% this quarter. And finally, our cash flow from operations is roughly $22 million year-to-date, an improvement of almost $9 million compared to last year. As I reflect on what we’ve accomplished in the third quarter, I’ll highlight progress on our integration of Viewgol, momentum and interest for our nTrust solution and updates to our analytics offering. We’ve made steady progress on our integration of the Viewgol acquisition and as of the end of the quarter, we have more than 30% of our CBO and EBO customers now supported by our team in India. Through the end of the year, we will monitor and adjust the operations around this first wave of customers. By the end of 2025, we expect to double the number of customers that are supported by our…

Thank you, Chris, and thank you all for joining our call this morning. Today, I’m going to update you on the financial initiatives we have been working on, run through the third quarter results and close by discussing guidance for the rest of the year. Our third quarter financial results continue to demonstrate the strength of our underlying business and the progress we are making against our financial objectives. Our first priority was to improve cash flows and working capital management. We continue to make progress in this area in the third quarter. In Q3, we generated $10.1 million of cash flow from operations, an improvement of $7 million versus the prior year. This brings our year-to-date total to $21.8 million versus $13.3 million in the first three quarters of last year. Our accounts receivable balance is down 5% sequentially and DSOs continue to improve consistently and are down approximately eight days from quarter one. Second, we are optimizing the business and expanding profitability. We made meaningful progress on this front. We successfully completed the cost rationalization actions identified in Q2 2024 with a reduction of expenses by $5 million this year, beginning in April, which equates to approximately $8 million of savings on a full year basis. Further, we continue to focus on expense management, including labor and vendors. This step – this includes steps in transitioning the RCM offshore services balancing the savings and customer satisfaction. As a result, our adjusted EBITDA margin has increased to 16.5% this quarter, an improvement of approximately 470 basis points compared to the prior year and 165 basis points sequentially. Third, we are increasing the quality of our reported earnings. The percent of capitalized software in the quarter was 5.2%, down 190 basis points compared to prior year and 63 basis points…

Thank you. We’ll now be conducting a question-and-answer session. [Operator Instructions] And our first question comes from Sean Dodge, RBC Capital Markets.

Yes, thanks, and congratulations on the great results this quarter. On the bookings, you’re making impressive progress in Financial Health on both new clients and the cross-sell. Maybe just on the net new, Chris, is there any kind of characterization you can provide around what these net new clients look like? Are these predominantly smaller hospitals? Are you starting to get traction moving up into larger institutions? And then just any kind of broadly, any change you’re seeing in just kind of the macro demand backdrop on the revenue cycle side?

Yes. First of all, thanks, Sean, and thanks for the kind words at the top. Yes, it’s a great question. And to be honest, I was actually at a hospital earlier this week in Kansas that we recently signed and are going live with the first of the year. It’s a 150-bed hospital, not running our EHR. And so we are starting to see some momentum into that 100 to 400 bed space. And that’s really, I think, where obviously, our name is well known in the critical access or in that more and more rural size. But I think our big opportunity is really seeing that traction take off in that 100 to 400 bed space. From a macro perspective, I would say, we’re just continuing to see the same trends that we’ve seen over the past few quarters and that there is continued pressure on the labor from whether it’s the talent that knows how to do the billing or just the pressure on the wages that they’re having to pay. And then secondly, the continued complexity in the billing as we continue to see a bigger move towards that Medicare Advantage, which is creating a little more complexity, a little more challenge in making sure that the dollars are coming in, one, on time and, two, as they should be. So I think that those will continue and continue to kind of push the demand that we’re seeing.

Okay. That’s great. And then, Vinay, the progress Chris mentioned on the offshoring, if we think about how the savings from that flows through. There’s some duplicity initially when you make those transitions in terms of cost. You mentioned starting to see some net savings there in this recent quarter, but just any kind of update on how we should think about when we start to see those savings flow through more meaningfully? And just kind of any quantification you can provide there?

Yes. So I would say we are – we have started seeing, I would say, a smaller net savings coming from Q3. I expect the larger ones in Q4. Reason I’m hesitant to give an absolute number right now, Sean, I hope you appreciate it, is because I want to see more predictability and stabilization. So you are absolutely right, as we have recently moved a lot of customers to India, the double barrel is now getting tighter. We are seeing the uptick of stabilization of their revenues of cash collections. So I would say, Q4 will be a little more is what I’m expecting. But I think in our guidance, in next year is where I would be in a better position to give a more robust number. But I expect 2025 to be significantly better – significantly higher, at least in the high single-digit millions on a run rate is what I’m expecting by 2025.

Yes. And just to add a little extra color there. So we’re obviously laser-focused on making sure that the experience for our customer is not impacted in this transition. And so there is that double barrel from a staffing impact and making sure that the transition is as smooth as it can be. Now with that said, every time that we do another tranche of customers that we move over, we’ve learned from our previous one. And so to the point of the expectations going into 2025, we think that, that – it’s only going to improve. We’re going to see the stabilization of the customers that we’ve moved over and also our ability to expedite that transition as we go forward.

Okay, that’s a helpful color. Thanks and congrats again.

Thanks.

Thank you. Our next question comes from Jeff Garro, Stephens.

Yes, good morning and thanks for taking the questions. I think, first of all, congrats to David on a well deserved retirement and I really appreciate all of the insights that we’ve gathered from David on the industry over the years. And on my first question, maybe just to kind of follow up where you guys and Sean left off, it looks like great progress on financial health gross margins with even more to come. I was hoping you could help us think about resourcing versus client transitions to the offshore model. You spoke about doubling clients on the offshore model by the end of next year. But by our math, it looks like you’re planning on resources growing by only about 40%. So could you help us think through how much you’re resourcing ahead of further transitions versus leverage you’re achieving on incremental resources. Thanks.

So yes, so think about it in two ways. You’re right from where we are to the customer base. So there is – as you look at, we have to help get the customer experience better, there is an over indexing of some of the people. Double Barrel is another one that we are carrying. As things stabilize next year, so that extra – the incremental high end of higher resources that we will level out as we go to the next 30%.

Yes, yes. That helps. And maybe to transition topics, I want to ask about the competitive environment. Some of your peers have either announced new products that will come to market eventually or have announced general availability of some new products, also a recent class report focus on your market segment. So I think timely to get an update on how you’re seeing the competitive environment? I guess, that’s a little more focused on patient care, but we certainly welcome your remarks on the financial health segment as well.

Yes. And again, let me first say thank you for the nice comments to David. I tried to drag him onto the call, and he said he enjoyed really being a bystander here. So I’ll pass on the nice words that you shared. I’m sure he’s listened to. Yes, I would say on the patient care side, yes, we’ve seen the announcements from some of our competition about the new EHR. Again, we continue to be focused on how we’re making incremental improvements on the EHR as well, how we are taking advantage of like the analytics offering that we’re talking about. And really focusing on driving the outcomes and driving to efficiency, I think that like what we’re seeing is, again, the same pressure that our customers are seeing in the financial health space with the labor market, the same challenges there in the patient care side. And so for us, the focus is on how do we make the software work more for them so that they’re allowed to not spend as much time in the software and more time with their patients. And I think that, that’s resonating with our customer base. And as you’ve seen our success over this year from a patient care standpoint on the bookings front, I think we’re on the right track there. We continue to differentiate in our implementation and our support models as well. And again, feel confident about what the future looks like there. On the financial health side, similar to that, we think about the leveraging of that technology to really drive the service that we deliver. And so making sure that our efforts are focused on the technology supporting the work that we do, so that we’re able to be more efficient and provide scale to our customers, too.

So maybe one follow-up on the patient care side and to tie in the prepared remarks around the success and traction with nTrust and specifically about the remark that each contract is not equal. I guess, maybe help us parse out whether that comment is more geared towards our modeling of converting bookings to revenue? Or should we be thinking about that as related to your go-to-market approach to try to capture incremental market share?

I think the call out there is really more to say that because we’re pricing on a percentage of collections and that’s based on the volume at the facility, we have – in our market, we obviously have a pretty wide range that we can offer to. So I would say our garden variety hospital may run somewhere in the $10 million to $12 million of net patient revenue, but obviously, there’s variance to that. And so it’s just to call out that while we’re obviously very keen on the revenue, we’re as focused on just capturing market share. And bringing them into the fold and that may be a $5 million net patient revenue hospital compared to $15 million. And we – what we don’t have visibility into is how they’re going to come through in the pipeline and transition. And so there is volatility there, and that was the reason for that call out in the prepared remarks.

Excellent. That helps. And last one for me. I certainly recognize that it’s early, but I was hoping you could discuss some headwinds and tailwinds for 2025 and maybe more specifically, why not the organic revenue growth rates that you referenced and to the extent that their recurring organic revenue growth rates are good run rates to think about on a go-forward basis? Thanks.

That’s a great question, Jeff. That’s what I’ve been working for a couple of months, and we will give you guys a full view by obviously in our guidance thing. But this is – I can share that the rational view where we are thinking. We are at least directionally looking – trying to look at mid to high single digits revenue growth and a few hundred bps – a few hundred basis points increase in EBITDA margin with a goal to touch at least a 20% EBITDA margin in third or fourth quarter of next year because this is built on the momentum that we want to exit. So Q4 becomes an important quarter. Obviously some of these short-term upticks of expense will go away, but that’s what we expect with the bookings momentum translating laser focus on our internal processes as well as the operational rigor that we have put in and with the offshore margins and success kicking in. That’s our current line of thinking and obviously we are refining, working through our planning cycle right now and we’ll share more in the next call.

Appreciate those insights. Thanks again for taking the questions.

Thanks, Jeff.

Thank you. Our next question comes from Stephanie Davis, Barclays.

Hey guys, thank you for taking my question and I echo the congrats to David. Hope he’s going to enjoy some time off. I was hoping to dig in more to your revenue cycle cross sales. Just given it sounds like that’s really taking off. So can we hear more about insights into the process, what’s getting clients excited and over the finish line since I know sometimes those are more emotional deals to close given how you have to go and change your staff? And maybe how you’re orienting the sales team to properly get your arms around this opportunity?

Yes. Thanks for the kind words for David. And I know the time off, but remember, we’re going to keep him pretty busy on the Board as well, so don’t get too excited for him. But going to the cross-sell, yes, we continue to see the momentum. I think first it speaks to the belief in our customers, in our continued focus and delivery on the patient care side on the EHR part of the business for them to want to look to us as the solution on the RCM side. I do think that we have also done a good job of bringing in additional partnerships. I’ll reference i2i as we think about delivering solutions for our customers around value-based care so that they can take advantage of those programs that are out there. But again, for what we see, it’s about just the day in, day out delivery of that RCM process, the cash collections that need to come in on a consistent basis day after day. And as we’ve talked about, the stress that’s placed on our facilities, both from a labor constraint and also the continued complexities of the billing, knowing that there is somebody like TruBridge that’s singularly focused on this end of the market that’s been doing this for 20 plus years and has shown consistent delivery and results over that period is a confidence for our customers. And again, I do think it helps that it is a connection to the EHR that not only are they getting a highly qualified staff on the collection side, but that partnership with the EHR and the technology gives another level of transparency that they may not be able to find and other solutions that are out there.

And how does the kind of impact your end market impact some of their buying decisions? Just given you’re going to have – the election probably changes the insured mix of your hospital clients. There’s a bit of an M&A friendlier environment. And also let’s throw in, we’ve had some weird weather too, right? It could also cause a little bit more disruption considering your client base.

I didn’t hear the last part. What was that, Stephanie?

The weather and IV shortages, all the disruptions that you could be seeing if you’re a critical access hospital.

Yes. I will say this. I mean, we obviously keep an ear to the ground of what’s going on in Washington. And I don’t want to get too far on a limb here, but our customers have been insulated for the most part and I don’t foresee a lot of impact to them negatively based on the election. There may be a little bit of additional emphasis that is applied to the Medicare Advantage plan, so that change to more that commercial process and the value-based care model. I honestly think that gives us even more of an opportunity than the traditional fee-for-service model that we’re in today. Again, when you’re looking at the facilities that we’re doing this for, they’re constrained from a resource standpoint and are focused on the task at hand day to day. Sometimes don’t have the opportunity to lift their heads up and kind of see the bigger field and what’s coming around the corner. And I think that’s where we can really step in and make sure that based on our size, our scale, that we’re able to deliver that for them. So, I think the changes that are coming or that will continue to come I think will only benefit our ability to be able to capture the market from an RCM standpoint.

Well, I’m glad you can give them a helping hand. And last one out of me, I can’t let Vinay feel left out. Are there any other rationalization opportunities next year? I mean you’re moving a lot of your client service offshore. Is this a near-term cost opportunity? Are you planning on maintaining more of this hybrid model as you go forward?

So I think it will be – there will be majority of our customers will move to offshore, but it will be – we will have a mix of domestic as well as offshore, if that was your question. But increasingly I think our focus will be to moving the customers more to offshore resources. And now on the cost rationalization, I would say, I would always in my seat, I would be wrong to say I always feel there will be more opportunities. But I want to be realistic, I want to cross the second hurdle, get it under the bag, get the process and the DNA in the company, go to the next level after that. But I would say we continuously evaluate other areas where things would be. But I just want to make sure we make this a global successful for us.

Yes. And just to add on to that, I mean it is a journey. But we have to remind ourselves that we want to continue to grow the business and we want to deliver to our customers. And so we’ve got to be mindful against short-term gains for the long-term success. And so to Vinay’s point, I think what we’ve laid out this year and what we’ve accomplished shows the new discipline in the organization to continue to, to look for those incremental adjustments and improvements and that we’re not done. We’re going to continue to turn over the rocks and make sure that we’re operating as efficiently as we can with a mindset on that client delight at the very top of the house.

Super helpful. Thank you, guys.

Thank you, Stephanie.

Thank you. And our last question comes from George Hill, Deutsche Bank.

Hi, good morning. It’s [indiscernible] for George. Thanks for taking the question. So we are hearing a lot about increases in claim denials from MCOs. Are you guys seeing similar trends? And is it impacting RCM business at all? And how can TruBridge help clients with that denial and appeal process? Thank you.

Yes, thank you very much. Yes, I mean, it’s something that we’ve always seen. And again, as we see that proliferation of the Medicare Advantage plans and that continue to grow, obviously that challenge is only going to increase. And as I said earlier, I think that provides an opportunity for us to be able to help our customers even more. I think what differentiates us again is the fact that we manage and run and invest in our own technology and use that for our customers. And so as we identify process opportunity to have that root cause impact on where those denials are starting and being able to implement new technology to be able to stop the problem where it starts, so that when the claims are submitted that we have a higher rate of acceptance and payment. And so we’ll continue to drive that for our customers.

Thanks. That’s very helpful. And just a quick follow-up on Stephanie’s question. Could you give us an update on how much of your EHR customer base is currently also using our RCM solutions? Just want to assess how much white space is like for cross-sales. Thank you.

Yes, so we currently have 78 customers that are running our nTrust solution where that’s the combination of both the EHR and the RCM services.

Got it.

Thank you.

Okay, looks like there are no further questions at this time. I would like to turn the floor back to Chris Fowler for closing remarks.

Thanks Julian. And thanks everybody for waking up with us this morning. We appreciate your interest in TruBridge and hope everybody has a wonderful weekend. Thank you all.

Thank you. This does conclude today’s teleconference. You may disconnect your lines at this time.