TruBridge, Inc. (TBRG) Q4 2025 Earnings Report, Transcript and Summary

Greetings, and welcome to the TruBridge Fourth Quarter Earnings Conference Call. [Operator Instructions] And please note that this conference is being recorded. And it is now my pleasure to introduce to you, Dru Anderson. Thank you. You may begin.

Thank you. Good afternoon, and welcome to the TruBridge Fourth Quarter and Year-End 2025 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 turn the call over to Mr. Chris Fowler, President and Chief Executive Officer. Please go ahead, sir.

Thank you, John, and thank you, Dru, and thank you to everyone for joining us today to discuss our Full Year and Fourth Quarter. Before discussing our results, I would like to address 2 topics. First, we filed our 10-K with the SEC in compliance with the extension period. As we disclosed earlier this month, we identified certain out-of-period adjustments during final audit procedures with our new external auditor. As a reminder, this is our first year-end audit together. These adjustments are primarily related to revenue recognition and related costs, capitalized software development costs and nonroutine transactions. I want to emphasize that these adjustments are noncash and not material to our fiscal 2025 financial statements or to our previously issued financials. While the delay was frustrating, this process reflects our commitment to strengthening our financial reporting standards and our internal controls. Secondly, as you may have read in the 10-K, over the past several months, we have been engaged in a strategic review process considering a range of alternatives to maximize shareholder value. We will provide additional information as appropriate. As a result, we are not issuing formal guidance today, but we expect to achieve modest revenue growth in 2026 and anticipate approximately 200 basis points of improvement in adjusted EBITDA margins. Turning now to an overview of the numbers for the fourth quarter and full year 2025. Total revenue for the quarter came in at $87.2 million, in line with the midpoint of the revised guidance we provided last quarter. Adjusted EBITDA of $19.2 million was at the high end of our guidance range and represented a slight expansion in margins compared to the prior year. For the full year, our total revenue was $346.8 million, a 1.4% increase over 2024. Adjusted EBITDA was $68.7 million, up 23% year-over-year. In terms of free cash flow, we generated $20 million for the year, an increase of $5 million over 2024. Bookings of $19.8 million on a total contract value basis compared to $15.5 million sequentially and $14.3 million a year ago. In Q4, our bookings were supported by growing SaaS, strategic partners, including Microsoft and our exclusive Dragon Copilot integration with TruBridge EHR and continued demand for our comprehensive revenue cycle technology and services platform. The pipeline we see today is encouraging and gives us confidence that our market is an environment of healthy demand. As a proof point, the dollar value of our overall sales pipeline is currently the highest it has been in 9 quarters and has increased 53% since the beginning of Q3. And the increase we are seeing is diversified across our business. If I compare the pipeline today to earlier last year, approximately 14% was from opportunities greater than 100-beds, and that segment is 30% of the pipeline today. At the same time, we are improving the quality of the opportunities. The percentage of recurring deals represents greater than 70% of the pipeline compared to onetime projects, a noticeable improvement from approximately 57% last summer. Additionally, our higher-margin encoder solutions continue to gain traction. During this period, encoder pipeline growth increased 74%, driven primarily by strong performance in new business and our channel partner ecosystem. We are confident that between our new leadership team and regionalized coverage model, we expect to see successful conversion of this growing pipeline and healthy demand environment. And while we may be a quarter or 2 away from consistent quarterly performance, our commercial engine is on the right trajectory, and we expect to see continued improvements down the road. I'd like to take a minute to talk about customer retention, specifically financial health and how it has acted as a headwind to us and the actions we've taken to begin to mitigate it. We started our global workforce transition in earnest in 2024. And over the course of the year, we saw a decrease in retention in our CBO customers as the onshore and offshore teams figured out how to work best together. In 2025, we took several decisive actions to strengthen the process and simplify it for the customers. One key action was bringing in the necessary experience in managing global teams and executing successful transitions. Earlier last year, we implemented a more structured transition model with stronger oversight, better visibility into performance across the full transition cycle and deeper collaboration with the customer. It is still early in the process, but we are seeing progress in the results so far and believe that the operation model is repeatable. Additionally, we opened our new Global Capacity Center, or GCC, in Chennai last month, which represents a significant milestone for our cross-shore global delivery model. With all this in mind, we will continue to monitor progress and our transition initiatives will be interlocked to our continued performance improvements. We are also focused on our comprehensive AI strategy. We are currently pursuing 4 pillars that span our entire organization: financial health, patient care, customer service and internal development. On the financial health side, we are working on a solution to predict claims denials earlier and more accurately and taking the corrective action to get the claims approved on the first path. In patient care, we are leveraging Ambient Technology through partnerships with Microsoft. In a pilot that we are running at a regional hospital, we are already seeing results with providers spending more time interacting with patients and meaningfully less time documenting the interactions. We are pleased with the response from HIMS attendees a few weeks ago and are excited to showcase this next week at our National Client Conference. In terms of customer service and satisfaction, on a previous call, I mentioned an internal AI-driven support bot, which has already demonstrated improved support consistency and faster turnaround. We are developing a customer-facing release that will enable clients to directly engage with the chatbot experience through an expanded and improved knowledge base. This enhancement is aimed at significantly increasing self-service efficiency and improving the overall customer experience. We will, however, continue to offer live customer support for those that choose that route for their customer experience. Finally, in terms of our tech stack, we are leveraging AI tools for development to modernize our underlying technology, which should lead to rapid innovations, faster delivery of applications to the customer and simplify new customer implementations and continue to drive margin expansion. In conclusion, as we continue to make the necessary changes in the business we see a positive progress and remain on the right forward trajectory. Given our targeted AI strategy, strong cash position and net leverage ratio of approximately 2x, we are well positioned to compete and we will continue evaluating all available strategies to drive shareholder value. Now I'll turn the call over to Vinay to review our financials. Vinay?

Thanks, Chris, and good afternoon, everyone. I will begin by noting that we filed the 10-K today. As Chris mentioned earlier, during the preparation of the financial statements and through our continuous process improvement efforts, we identified some material noncash misstatements primarily related to the timing of revenue for some products and associated contract costs, capitalized software and certain other nonroutine items. We have revised these prior period financials to reflect them in the appropriate period, and these adjustments can be found in the 10-K filed today. While this resulted in a slight delay in our earnings timings, we believe it was the prudent step and reflects our continued focus on strengthening our financial reporting and controls. Today, I will provide update on our 2025 strategic finance priorities, review our fourth quarter and full year financial results, provide additional insight into segment performance and profitability trends, discuss our cash flow generation and balance sheet progress. First, an update on our financial initiatives and overall progress in 2025. This year marked meaningful operational and financial improvement in the health of the business. As Chris mentioned, it was highlighted by the continued margin expansion and strong free cash flow generation in 2025 and over the last 2 years. Firstly, I'd like to highlight the investments we are making in improving our finance function. Over the past 2 years, we have been strengthening the finance team and continuing to improve our processes and controls. Further, mid last year, as part of our ongoing commitments to governance and financial rigor, we appointed our new external auditor. As a result of this partnership, we are accelerating process improvements in many areas, including progress towards remediation of the material weaknesses. As an example, we are already seeing the benefits from the investments we have made in building our in-house quote-to-cash centers of excellence team and continue to further strengthen processes with additional internal and external resources. Next, a core focus throughout the year has been improving cash flow from operations. For the full year 2025, cash flow from operations was $37 million, an increase of 19% year-over-year, driven by stronger profitability, improved working capital management and continued discipline around expenses. Further, we have also maintained a disciplined approach to capital allocation during the year. By prioritizing investments with highest returns and carefully balancing growth opportunities, we were able to reduce gross capital expenditure in 2025 while continuing to support strategic needs of the business. Free cash flow, as defined as cash flows from operations adjusted for capital expenditures was $20 million, an increase of approximately $5 million year-over-year. As a result, we ended the period with a solid liquidity position, providing additional flexibility to continue investing in the business while also supporting balance sheet objectives. Further, we also strengthened our financial position through disciplined debt reduction, lowering net debt by approximately $19.5 million year-to-date and improving our net leverage ratio to 2x. This marks the fourth consecutive quarter with net leverage below 2.5x and a significant improvement from over 2x in Q4 2023, underscoring our consistent improvement in balance sheet improvement and capital efficiency. Further, as cash generation continues to build, our approach to capital allocation remains disciplined. We are constantly evaluating the best uses of capital, including share buybacks and organic investments in order to drive value for all stakeholders. We are also very excited to announce that in November 2025, we entered into an amended and restated credit agreement with our syndicated lending partners. The new agreement includes a 5-year term that expires in 2030 with up to $250 million in credit facilities. This financing extends our maturity profile, provides very attractive overall cost of capital and provide additional liquidity to support both our ongoing operations and strategic priorities. Finally, margin expansions remain central to our long-term strategy, and we continue to see expansion of adjusted EBITDA margins in 2025 by 350 basis points, driven by cost optimization initiatives and disciplined expense management across the organization. The improvements were primarily related -- realized across IT, cloud operation, vendor optimization and patient care support, where we applied a strong return on investment framework and leverage automation to streamline workflows and improve efficiency. Over the last 2 years, the adjusted EBITDA margin has expanded by more than 650 basis points from the combination of global workforce transition, targeted cost optimization actions and efficient revenue growth. Now turning to our fourth quarter results in more detail. Bookings in the fourth quarter were $19.8 million on a TCV basis, up $6 million compared to prior year and up $4 million sequentially, providing continued commercial momentum as we head into 2026. Fourth quarter revenue was $87.2 million, a decrease of approximately 1% compared to a year ago. As a reminder, the year-over-year decline in Q4 '25 included approximately $1 million from the sunset of our Centriq product in the patient care business. Normalizing for this, total revenue growth would have been about 1% point higher with revenue roughly flat to prior year. Financial Health revenue totaled $56.2 million and approximately 65% of the total company revenue represented an increase of 2% year-over-year, primarily due to strong growth in the Encoder business. Patient Care revenue was $31 million, reflecting a 6.6% year-over-year decline, primarily due to the sunset of our Centriq. Total gross margins in the quarter were 53%, flat versus prior year and up 120 basis points sequentially. Financial Health gross margins improved to 50%, an increase of 65 basis points compared to the prior period, driven by the continued impact from our offshore transition as well as other labor efficiencies and ongoing process improvements. Patient Care gross margin was 59%, down 75 basis points compared to last year, primarily due to revenue mix and timing. Adjusted EBITDA for the quarter was $19.2 million with a margin expansion of 160 basis points from 20.4% in the fourth quarter of 2024 to 22% margin this quarter. The consistent quarter-over-quarter improvement reflects both stronger gross profit performance and continued execution against our cost optimization initiatives. As these structural improvements continue to scale, we believe there remains opportunity for additional margin expansion going forward. Now I'd like to provide a few full year highlights. Total bookings for the year was $82.9 million on TCV basis, up 1% compared to the prior year. On ACV basis, total bookings were $70.9 million. Our full year revenue of $346.8 million increased 1.4%. Financial Health revenue was $221.7 million, was up 2% compared to the prior year as growth in CBO and Encoder businesses from revenue generated from bookings was partially offset by client attrition and slower growth in other products. Patient Care revenue was $125.2 million, roughly flat versus prior year. Excluding the impact of Centriq, Patient Care revenue growth would have been about 4%, driven by SaaS booking and new customer implementations. Adjusted -- 2025 adjusted EBITDA of $68.7 million increased 23% year-over-year with margin expansion of 350 basis points, reflecting gross margin improvement through improved productivity and cost actions with disciplined cost management. Moving to the balance sheet. We ended the quarter with $24.9 million in cash, more than double the $12.3 million we exited 2024, driven by improved earnings conversion and disciplined working capital management. Net debt was reduced to approximately $139.8 million, and our net leverage improved to 2x, marking our strongest leverage position in several years. With accelerating free cash flow generation and a strengthened liquidity profile, we are well positioned to continue deleveraging and enhancing financial flexibility into 2026. As Chris mentioned, while we are not providing formal guidance due to our strategic review process, we remain confident that we can achieve modest revenue growth in 2026, along with continued adjusted EBITDA margin expansion of approximately 200 basis points. In conclusion, I'm pleased with the operational and financial progress that we have made across the organization over the past year and look forward to keeping you up to date on our continued progress. Thank you, and I will now turn the call over to John for questions.

[Operator Instructions] And the first question comes from the line of Sean Dodge with BMO Capital.

Vinay, you mentioned the outlook for the year being modest revenue growth. I guess just in context of the new bookings metric you're providing with the annual contract value, could you give us just a quick tutorial on how to use that to kind of better understand your visibility there? Do we take like recurring revenue from 2025? Is that the baseline and then we assume some type of client churn and then layer in the ACV bookings? Is that the right order? Am I missing a step or an assumption in there?

No, I think you're on the right track. Like you said, the recurring revenues and some assumption of bookings conversion because, as you know, bookings have the same -- you can apply some formulaic view of how bookings translate into revenue and attrition. I think that's the right way of doing it.

Okay. And then the comments on customer retention on the RCM, the CBO side, Chris, you mentioned making some improvements to that process. Did your retention rate in Q4, did that continue to improve? And then if you could just frame the number of renewals that you had in 2025 for the full year, how will 2026 compare? Do you have a similar number of contracts renewing this year as you did last? Or is it more or less?

It's not quite as many that we're -- that we have kind of in the target of as it relates to the transition and then where we're paying that close attention to make sure that we're not putting ourselves in a spot of bother. What I would say is that going back to your first question that it's the continuation of some of the attrition from '25 that's playing into '26 and then a modest improvement to flattish improvement over that number. And so that's where we come back to with the bookings performance and with that continued kind of muted success on the retention side, that we see that modest growth year-over-year. Again, we're focused on making sure that we've got the process right and making sure that as we continue to transition customers that we're paying attention to the metrics that matter the most, the cash in the door, the communication with the customers that we have not impaired their operations as well, not just from a cash perspective, but also the day-to-day operations and let that kind of be our guide as the throttle for the transitions going forward. Again, we feel good about the progress we're making, but we want to continue to make sure we're measuring as we go.

Okay. Great. And then on the strategic review, I know there's a lot you can't talk about with that, and I know there's a wide range of outcomes there. I guess just any indication you can give us on time lines? It sounds like it's been underway for a while. Is there a point in time or date you expect to communicate to us what you decide to do or not to do?

I'm going to do my best to not be tongue in cheek here, Sean, but you kind of answered the question at the top, very limited. And what I would say is right now, we do not have a time line on this, to your point. I think the Board is being super thoughtful about this. And again, with the focus of shareholder value as the guiding light to the process and making sure that it's more about getting to the right outcome as it is about hitting a certain deadline.

And the next question comes from the line of George Hill with Deutsche Bank.

It's Maxi on for George. So we are seeing a lot of volatility in bookings and annual contract value over the past few quarters, and you talked about more larger deals in the pipeline. How should we think about the conversion timing into revenue? And how has implementation duration or client ramp changed? Are there any capacity constraints at this point?

Thank you, Maxi. There are no capacity constraints, and we still are in a situation where our bookings were a little bit at the mercy of the customer for the timing. So the capacity is typically not on our side. We're typically looking for ways to accelerate that with the customer and making the entry into the service or the technology more efficient. So as a basis, typically, the technology that we're putting in, if it's a replacement technology, then there is a contract term that the customer is working out of that they're not going to want to double pay for something. And so we are, again, sort of at the mercy of what those contracts are. On the services aspect of things, typically, it gets down to -- sometimes it's politics at the facility of how the onboarding and offboarding of the staff that's doing the current work at the facility plays out. So we continue to be mindful of how we can do a better job of representing the bookings impact into the run rate and how we can be more thoughtful for you guys to understand how that plays out. And I would say, as we continue to work through this year, that's something that we may try to get better at.

Got it. That's very helpful. I just have a quick follow-up. Given margin expansion is primarily cost driven, how much incremental opportunity remains versus what's already been realized? Are we getting close to peak margin after achieving the 200 basis points improvement target this year?

I hate to kind of be a little bit futuristic with this. But I think that we're -- you heard me talk a little bit about AI in the prepared comments. And what I would say is we're continuing to look for opportunities for efficiency and better outcomes based on the availability of AI in the different pillars that we discussed. So from a development standpoint, us being able to accelerate our road map and be able to deliver our products faster to our customers, which drives revenue, which drives margin and also being able to use it on our RCM services side, to be able to return cash faster to our customers. And so I don't think we're at the end when we hit that 200. And I don't know where the ceiling is. We're going to continue to keep pushing and leveraging both the staff that we have and also the technology that's available, and we'll continue to keep you updated on the progress there.

And I'll just add one more thing. While cost is obviously the biggest driver, I think revenue mix is also will play as technology solutions like encoder keeps picking up, those are at very higher margins than our services business. So while the big needle mover in the past has been cost, but we keep a close eye on the revenue mix because that could be a big contributor as we keep going. And as Chris said, we still have more room to grow here.

And the next question comes from the line of Jeff Garro with Stephens.

I want to start with a strategic question and ask if you could give some comments on how you currently see the strength of the business from combining Patient Care and Financial Health and opportunities or synergies that you see from that combination beyond just having the overhead scale of having both of them under one roof.

I'll take a stab at that, Jeff. First of all, condolences on the heartbreaker with Duke. That was an unbelievable shot. But to get to your question, to me, we've talked about this in the past. I think there is such an interconnectivity between the relationship and the foundation that we have built with the rural community customer base with the EHR and how we're able to use that as really kind of the platform that we can grow from. I think as we continue to advance the technology in the EHR, we are focused on that 100-beds and under space. And I think that there's room for us to expand there. And I think there's natural expansion in that customer base for the RCM services as well. So when we look at this strategically, I think it is about how those 2 pieces together can continue to fuel the growth in the rural and community market going forward.

Excellent. I appreciate that. And I appreciate the condolences, it's going to be a multi-month mourning period here. But I want to go to the forward view and you understand the lack of formal guidance, but I want to see if there's anything that, Vinay, you would want to call out from FY '25 that won't repeat as well as ask about whether there are items from Q4 that you would call out as appropriate to annualize as we look forward into 2026. And then just lastly, to catch all, any general comments on visibility that you see for the business relative to prior years as we look ahead?

So that's a great question. I like -- I'm bound a little bit on not giving too much on the guidance and all. But what I would say is you know this business better than I do also, Jeff. We will continue to have some seasonality of some of the revenue streams and the timing of bookings. That -- that part will keep on -- might be more there. But I think as what Sean mentioned, looking at our bookings and attrition, I think modest revenue growth is what we have factored in. But I wouldn't say like there would be significant changes from the past. But yes, some seasonality will play obviously, quarter-to-quarter.

Great. I appreciate that. And one last one, if I could sneak it in. Some really helpful commentary around the pipeline and some of the metrics you gave there. Really great to see that. So I wanted to ask about your plan for pipeline to bookings conversion and specifically around the impact of your new commercial leader, given the growth in the pipeline, some of that pipeline building must predate him, but he has a great set of experience and probably has some good plans on converting that pipeline to bookings. So I wanted to ask you to dive into the weeds a little bit there.

Yes. A good question again. What I would say is the pipeline growth that we have seen really is attributable to the new team that we have in place now, right, and their new approach to the process. So the first step is really making sure that we've got that pipeline built so that we have more shots on goal to make sure that we flatten out the consistency of the bookings quarter-over-quarter. So we've done that, that we've seen the pipeline increase. And now I think over the next quarter or 2, we should start to see the size of the pipeline also smooth out through the top to the bottom of the pipeline, really, so the funnel is kind of evenly scattered so that we have the ability to make sure that we're putting up those consistent numbers quarter-over-quarter versus what you've seen over the last several years, where we have good quarters, down quarters and you kind of see that yo-yo. The goal is that we're trending up, but that we're also smoothening it out just a little bit, which allows for us to be a little bit more predictable kind of in all parts of the business. So I think that, that's the second phase from the commercial team transformation, first getting that pipeline built. Now it's about making sure that we're pushing it all the way through. I've been real pleased with how they worked through making sure that the integrity of the opportunities in the pipeline is there. And then also, and I think we called this out on the script that the quality of the pipeline has also improved so that we've got much more recurring revenue and also focused on some of those larger opportunities, we're starting to see those pops. So again, the credibility of the story that we've had from the beginning of we think that there is a tremendous market opportunity in this space for the services that we provide. Now we just need to see the pipeline pay off in the coming quarters.

And the next question comes from the line of Sarah James from Cantor Fitzgerald.

I wanted to go back to your earlier comment on the financial health products. You were talking about rolling out solutions that predict claims and claims denials earlier and more accurately than they have in the past. Can you tell us a little bit more about that? Any KPIs you can share time lines of launches of waves of the product?

Yes, absolutely. Welcome back, Sarah. Glad to have you on the call. So we are -- we have in a pilot format some of our technology in the field. I think it's important to say this is homegrown. We have built this internally. And we are experimenting, I would say. So if we're looking at it in the baseball parlance, I would say we're in the very early innings on this initiative. But the mindset is that because we have the full RCO technology suite, we have the remit information from 835s. We have the claim status information from the 276 to 277 transactions that go out for us and we have this not just for the customers we do the billing for, but for the customers that we do just the claim submissions for as well. So we have a great database of information to be able to train the models. And right now, we're in that training phase with a handful of code sets on a handful of customers. So right now, we don't have any KPIs because it's still in a learning phase. But the goal is that we continue to take the information that we have from the front-end edits from the back-end remits and continue to winnow that down so that on specific rejection codes that we receive, denial codes that we receive that we're flagging those early with an opportunity to be able to really have an impact on the number of denials that we're having to manage. That's really, I think, the opportunity. I would say, in general, probably 80%, 85% of claims are going through and getting paid once they go through our edits. So now there's an opportunity for 15% of the claims to be improved. I think that's the area that we're looking to really kind of make an impact on. And the real part about it, too, is that the work to get those corrected and then back through the system is an arduous process because it can take hours on the call with the insurance payer and then work back with the customers to get the information and the documentation right, and it just creates this vicious cycle. And we've let the claim go out the door, so it takes 30 to 45 days to find out that it was going to get denied. So it's definitely our priority from the RCM side that this is the -- it might be the most difficult, but I think it has the highest opportunity for return for us from an efficiency and satisfaction for our customers. So more to come there.

That's great. And one more. So as hospital systems are trying to manage through EAPTC expiration and what that implies for margins, are you seeing the way they purchase products change or having conversations that over the next year or 2, it might -- whether that's wanting more integrated solutions and less point solutions or if it's focusing on faster ROI versus long-term ROI? Like how are you seeing the demand change given the regulatory environment for providers?

It's a good question, Sarah. What I would say people are definitely focused on impact, right, that they definitely want that return. And I think that the world is clamoring for -- because you're now using ChatGPT or Quad personally, I think that people are expecting to see that show up and provide them relief in their work world as well. If you go back to the press release that we issued last week with our customer in New Mexico, Artesia, what you'll see is that it's generating 50% to 75% less time documenting for our providers which is a huge number, right? And it hits in a couple of places from a return standpoint. It provides provider satisfaction. It allows that provider to be more attentive to the patient and provide a better quality of care and hopefully a better outcome for that patient. And it also frees up capacity for that provider to see more patients, which ultimately drives more revenue. So I think those are the kind of -- those are the things that our customers are looking for and customers in general in health care are looking for. And so it's about how do we build and partner with more opportunities to deliver something like that.

And the next question comes from the line of Ryan Halsted with RBC Capital Markets.

I guess starting with the hospital end market and some of the regulatory changes that are impacting them. I think one of them is the rural health fund that represents a potential opportunity for you guys. I'm just curious if you've had any better visibility into what that fund could mean for some of your customer bases and if you've had any conversations about maybe even being a part of how that funding could be spent?

Absolutely, Ryan. Thank you for the question. So yes, we are 100% locked in on helping our hospitals get into that $50 billion fund and make sure that it's actually providing value for them. The way we've kind of characterized this internally is that it's a meaningful use opportunity again, yet that has a real impact to satisfaction and good outcome for the providers, for the patients and for the vendors as well. We announced -- I think you may have seen this a few weeks ago that we were selected by SAIC to be their preferred partner for the EHR and RCM technology and their alliance around the rural health care, which is really helping hospitals and states tap into those funds. I would still say this is early stages now. We're starting to see RFPs go out, but each state really has their own latitude to kind of help decide, drive what are the initiatives inside of their state that they need to fix, which I think is actually pretty elegant because the needs of Mississippi and the needs of South Dakota aren't necessarily the same. So I think giving that latitude back to the states is great. Now the challenge to some extent is that, that gives us 50 different strategies that we've got to kind of line up with and see where we can play and be helpful. The good news is there are some -- we are going to see some commonalities across that. So we are definitely, as an organization, very much focused on making sure that we are at the table with our customers, at the table with the states to be a part of shaping the use of that $50 billion and making sure that it's providing a positive impact and a good outcome.

That's great. That's helpful. And then maybe turning to AI. I think it was helpful to hear how you're deploying it both externally and internally. But I know certainly, a lot of attention is being paid to some of your competition, both across Financial Health and Patient Care. I'm just curious if you're seeing any sort of changes in terms of your competitive landscape from larger incumbents maybe becoming a bit more nimble in terms of making an entry into your markets?

We have not seen that yet. I think that companies are all trying to figure out how this plays out for them. And I think it's one of those things where you got to be pretty careful because it's expensive. And I think I said this maybe on the last call. I think sometimes people assume that AI replaces people and then that you get to drop that straight to the bottom line. I think for us, the way that we have kind of modeled out where we think AI can be an improvement is about a 20%, maybe 30% improvement from a bottom line perspective. But if you're not careful, you can really start to layer in some costs pretty quickly. And so we're trying to be mindful of making sure that we pick projects that we think have impact and that we also believe that we can bring quickly and that we're not carrying a bunch of extra cost without being able to rationalize that as we go. And so that's why when you look at the Ambient Technology, and we're seeing the sales that are being generated based on that and the pipeline continue to build based on that, there's a nice return that's associated with that. We look at what we're doing in the support area and how that's improving the experience for our customers, which is improving retention, which improves their desire to want to buy from us going forward. We're making sure that there is ROI attached to the AI projects that we're doing. And I think that, that's really the way that I think that if you're being smart about it, you got to pay attention because otherwise, you can end up with a pretty big bill without a lot to show for it. So we're happy with the progress we've made. And I guess, like others, we hope to see that kind of accelerate. But back to your initial question, we're today not seeing anything dramatically change from the competitive landscape on it other than our customers ask questions a lot more about what's happening, what we're doing with AI. So it's nice that we have a thoughtful response to be able to share back and that we're making meaningful progress on that.

Got it. That's great. And then my last question, just a clarification question. In terms of the outlook and the 200 basis points of margin opportunity, so are we to assume that, that is specifically the margin expansion opportunity you've alluded to in the past from offshoring? Or is it from something different or a combination?

It's a combination. It's the same one that I gave last time, too. Obviously, you saw the EBITDA is much better than the consensus. So we still feel 200 bps. So it will come from a variety of factors. Obviously, global offshore transition will be a key part of it, plus some other benefits of cost optimization and obviously something with the revenue mix, too.

And the final question comes from the line of Gene Mannheimer with Freedom Capital Markets.

Congrats on a good finish to the year, gentlemen. So just building off that last comment, Vinay, so the 200 bps of EBITDA margin expansion, so it will be probably most of it from the COGS line, but some SG&A too with -- maybe with some of the AI you're introducing. Is that how to think about it?

So you should think about it. It will go through all the major cost or cost of sales, product development and will be the primary contributors of this. And obviously, from sales and G&A, there might be a mix of investments needed as and when. But I think it will not just be in COGS, it will be primarily, but also from product development piece where we constantly keep on looking at ROI driven, like what Chris said, we are working on these 4 initiatives. Some of it goes through product development, some of this goes through cost of sales, but all are positive ROI projects.

Got it. Got it. Okay. And then second -- my follow-up would be just maybe talk a little bit about that partnership with RevSpring. You signed it about 3 months ago. And I'm just thinking about how you see that bringing value to your customers and if there would be anything incremental this year that could come from that.

Thanks, Gene, and thanks for the nice comment at the top as well. I don't think -- and Vinay is pulling up real quickly. I don't think there's a meaningful impact this year. Again, I do think that as the changes on the regulatory wins continue to blow and there may be some challenges with eligibility and continued increase in deductibles and co-pays. I think it's in our best interest to make sure that we have a best-in-class patient collections initiative. So we have the service where we have the call center and we're making the outbound calls, we receive inbound calls and also partnering with RevSpring to deliver the digital experience for how the patients interact with their bill pay. So I do think that it will be a -- I do think that it will have a material impact. I don't expect that to play out in this year. I think we'll start to see some traction there towards the back half of the year and then moving into 2027.

Yes. And Gene, I think Chris is right. There will be some savings on the cost part as we go through the digital piece. And obviously, they're becoming a much more strategic partner yields more benefits across the board from next year onwards.

This now concludes our question-and-answer session. And I would like to turn the floor back over to Chris Fowler for any closing comments.

Thanks, John, and thank you all for your continued support. As always, thank you to all of our TruBridge team members who wake up every day focused on delivering for our customers. Have a wonderful afternoon. Thanks, everybody.

And ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. Please disconnect your lines, and have a wonderful day.