Q1 2020 Earnings Call
[music].
Okay welcome to the C.P. Aside first quarter 2020 conference call Oh.
All participants will be in much tsunami marriage should you need assistance. Please take no I can print specialist by pressing the star keep all the time zero.
After today's presentation, there won't be an opportunity to ask questions. Please note. This event is being recorded.
Would know extend the conference over to Joe Anderson. Please go ahead.
Good afternoon, and welcome to the C.P.S. I first quarter 2020 earnings conference call.
During this conference call, we may make statements regarding future operating plants expectations and performance that constitute forward looking statements made per se went 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 a future results or performance actual results might differ materially from those expressed or implied by such forward looking statements as a result of no.
In a non risks uncertainties and other factors, including that as 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 cautioned investors that the forward looking information provided and this call represents our outlook only as of this date and we undertake no obligation to update or revised any forward looking statements to reflect events or developments. After the date of this call.
At this time I will now turn the call average Mr. Boyd Douglas President and Chief Executive Officer. Please go ahead Sir.
Good afternoon, everyone.
Keep your joining us today and I just finds all of you and your family safe on well.
With regard to the covered 19 pandemic from a global or National perspective, I don't believe there's anything I can add that hasn't been sad or specs divided on countless times already I.
How would you were yes, however, if I did not express our gratitude on behalf of C.P.S.R. and all of our employees to all those on the front lines. During this time, including especially from our viewpoint healthcare workers and their families.
As you would expect we're going to spend a good amount of time on this call speaking to the effect of the pandemic on our company and our customers. While there have been many negative impacts as we all know there are some positive aspects, we think on port it to bring to light as well.
From my financial perspective, we entered this period of cross is from traditional financial strength and positive growth momentum, which is unable to us to continue to execute at a high level. Despite the dramatic shifts in the operational and marker environment associated with code that 19.
Conservative approach from a fiscal standpoint has again put us on a strong position as Matt will expand on in a few minutes.
Our first quarter bookings performance was more than respectable, especially given the impact on the sales decisions. We experience in the last two weeks of the core.
Our overall piece for the quarter <unk>, 39% over the same period last year and Trubridge delivered again was significant growth, including over $3 million in bikinis for our interest offerings.
On the financials revenue showed positive movement and Q1 first 2019.
<unk> $8 million in cash them operations, and our leverage stands that less than two times <unk>.
With $8 million cash on the balance sheet and $34 million availability on our revolver, we have ample liquidity defined our operations are long term strategic initiatives and our quarterly dividend.
Nonetheless, given the uncertainty that our customers and all health care providers are facing we have decided to withdraw or 2020 gallons.
While our software and services mission critical for our customers Trubridge has exposure to customer volumes, which have become unpredictable during this pandemic.
We continue to closely monitor customer billings, and our own cash flies and stress test our position using that as numbers, but it remains to our late to accurately forecast the shape of the recovery in our markets.
From an operational perspective, I cannot say enough about how our employees have responded to the challenge.
Quickly shifting to a remote work environment in a very short time frame.
Over 97% of our staff are working remotely and we were able to accomplish this with no impact on the quality of support and services, we're providing our customers or on our part activity from a developmental and operational standpoint.
One of the cost is our reference earlier is that we have learned new ways of delivering both our services and support in a more efficient manner.
Exchanges have resulted in higher employee and customer satisfaction and we have already incorporated these changes into our delivery processors for the feature.
As one example, our clients that operate an aunt <unk> routinely right they started or some other other critical network infrastructure that equipment, just purchased through Ross and normally as part of that purchase we would have a member of R.I.T.S. thing on site at the client to do the installation and data trends.
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Circumstances necessitated that we continue to do several that is right. During the 19 related travel restrictions, we were fine several processes to run automatically and others said that we could perform number <unk> oh with clients systems.
Forward, we are confident that for the vast majority a decent still <unk>, we will be able to offer remote installation, which cost the customer less and just more efficient for us.
Yeah, I'd like to shift things to customer five.
<unk> <unk> directly done for our customers as I said before from a support and services perspective, we believe we haven't missed a beat and the feedback we get directly from our customers <unk>.
Our client services Division did an outstanding job quickly retooling our implementation processors just fully remote protocol that includes the full scope of education and training that would normally be included with an on site and still I should.
This is enabled us to move forward with scheduled installations that's point.
From a product standpoint, we have delivered to new solutions in record time to help our customers to deal with the impact it's kind of at 19.
In partnership with the Technology Innovation farm clicks off we released to cope with 19 tool kit that includes essential tools to allow clinicians to safely engage with their communities in response to the pandemic.
The tool kit includes the screening out algorithm for assessments based on C.D.C. guidelines. It also includes chat botch it used artificial intelligence and natural language processing to anticipate the needs of the patient, Jeff <unk> video chat and texting tools at this time.
More than 200 of our clients I've been set up to use the joke, yet and dire performing around 11000 visits per day for patients in their communities.
We also released to tell a helped solution talk with your dot.
This is the way some enables providers of all sizes to continue offering revenue generating healthcare services, while serving patients needs during the private 19 outbreak.
With your dog is an E.H.R. agnostic, yeah put compliant secure solution that needs to know E.H.R. integration <unk> provider to patient communication engagement and data sharing.
Given its E.H.R. agnostic nature talk with your Doc is being made available to any healthcare provider and just as important.
Being offered at no cost for the remainder of 2020 as this archive at 19 tool kit.
In addition to these two products solutions. We have also I made a concerted effort to provide an easily accessible resource for string blonde information related to dependent.
Are compliance and learning things have been continually gathering evaluating and organizing information and making it available to to our clients through 19 resource page on our client website.
Information such a C.D.C. guidelines financial assistance programs regulatory changes and more are all included and continually updated with the most recent information.
Along with this online resource we are hosting routine webinars that feature recommendations and best practices from my own experts and our clients.
Finally during the early stages that the kind of it 19 pandemic, we had planned to reschedule our annual National client conference that was originally scheduled to take place. This month to mid August. However, it it's become clear that is in the best interest of our clients and employees to cancel bit 2020 conference and looks a alternative.
Channels to educate and inform our clients this year.
This is buried disappointing for us because of all the benefits when we know about weight in our customers get on this event.
But even in the sense that there's some positive in that we will be saving you approximately $1 million that we would normally invest in this meeting.
Before I turn the server to Matt I would like spend a few months on the broader impacts being saltbox clients as a result of the pandemic and hopefully some positive outcomes as a result of those inbox.
As we all know the vast majority of health care providers are suffering severe financial and box from Kevin 19.
Outside of the hot spots those impacts are related to the massive dropping rather than days from the suspension of all elective procedures R.C.D.C. guidelines.
In our view no. One is failing does more than the rural hospitals and providers rural hospitals, and other health care providers face challenges financial and otherwise before the on site at Penn Dental and the pandemic has surf to farther magnify bucks problems.
The silver lining enough as it has been knocking process. It split the spotlight squarely on the critical need for healthcare in rural communities and better reimbursement to support those that for about it.
A number of our client C.E. So taken this crisis as an opportunity to voice those concerns at all levels of government and then the media bias locally and nationally.
The federal government through its recent actions recognizes the need for accessible health care for Rural Americans and has responded with funding to sport that's providers cares that and subsequent supplemental funding through the paycheck protection program and the healthcare enhancement Act provides a finance.
Lifeline for healthcare, including some $10 billion targeted specifically to rural hospitals and clinics.
Under the distribution plan for this $10 billion, just announced that H.H.S. yesterday, we know that rural hospitals, including critical access hospitals will receive a minimum based payment of $1 million plus an additional percentage based on their annual expenses.
Also any rural health clinics, whether independent or operated by the hospital will receive a minimum payment a $100000 again within an additional amount to account for operating expenses at it as well.
It has been estimated the average rural hospital <unk> will receive approximately $3.6 million in financial relief.
Funds or pay are being paid directly starting this week, there's no application process and no <unk>.
Redirect customer contact with virtually all of our clients, we know that over 98% of them have applied for financial relief and to date over 80% 80% of them have received funds impacted this financial assistance, our customers and other health care providers rural and otherwise.
Cannot be overstated.
We hope going forward that the federal government's acknowledgement of the financial challenges of rural Health care. During this pandemic will translate into a longer term solution to strengthen the financial position a rural for about.
What's that I'll turn the collaborative Matt.
Thanks, <unk> good afternoon, everyone on today's call I'll provide a high level overview of the quarter, including some additional detail on bookings performance and a brief walk through our first quarter of financial results. They cope with 19 pandemic had a muted impact on our operations in results for the first quarter of 2020, but we do expect that.
Impact to increase over the next couple of quarters. So I'll wrap up my prepared commentary what the discussion of how this pandemic is impacting our cash flows operational metrics and outlook for 2020.
Total bookings for the first quarter of $19.3 million decreased 29% sequentially, but improve 39% over the first quarter of 2019.
System sales in support of looking for a relatively flat year over year, but decreased $7.8 million or 44% from the fourth quarter of 2019 as the momentum gained during the back half of 2019, what's meant by headwinds from the impact the Kobe 19 pandemic on hospital purchasing decisions, which expectedly <unk>.
Created a challenging sales environment during the latter stages at the most recent quarter.
Despite this challenging environment Trubridge showed yet another impressive bookings performance with recent initiatives to aggressively market, our interest offering and expand our services footprint beyond our traditional E.H.R. base, resulting in bookings that were flat sequentially and more than twice the first quarter of 2019.
We'd like to refer you back to the tables in the earnings release for the composition and conversion time frames for quarterly bookings and the historical volumes and license mix for net news derive acute care implementation.
With regards to the near term outlook for this metric. We currently anticipate for new client facilities going live without drive solution in the second quarter of 2020 with two expected to go live in a cloud or sass environment.
Turning to the financial results for the period quarterly adjusted even <unk> decreased $700000 or 5% from the prior year, mostly as high margin in <unk> three revenues during the first quarter of 2019.
Replaced by lower margin services revenues from our Trubridge segment in the first quarter of 2020.
Despite the margin has winds from this change in revenue mix non gap net income remained flat as interest expense has benefited from beneficial rate movements on our variable rate debt combined with the substantial debt repayments, we've made over the trailing 12 months.
Over the past year, we've reduced our bank that nearly 20% to just under $103 million currently compared to just over $125 million a year ago.
Trubridge posted revenues that were up 10% over the first quarter of 2019 in down 2% sequentially.
As you May remember from the last call the fourth quarter of 2019 benefited from a surgeon non recurring revenue driven by a strong ups l. of G.R.H. is patient engagements solutions.
Excluding G.R.H. trubridge revenues increased $800000 or three per cent sequentially and $1.4 million or 5.5% year over year with both increases primarily driven by continue strength in our accounts receivable management services offering.
Trubridge gross margins were relatively flat compared to the first quarter of 2019, but decreased from 49% during the fourth quarter of 2019, 47% during the first quarter of 2020, mostly due to the margin impact of the aforementioned decrease in G.R.H. non recurring revenue.
Next system sales in support revenues were flat sequentially, but down $2.1 million from the first quarter of 2019.
Bass revenues for our acute care U.H.R. segment increased by $1.3 million euro per year, or 131%, but were more than offset by the combined effects of trailing 12 month attrition and non recurring implementation revenues, which had been negatively impacted by the shift in license mix in the near exhaustion of the M.U. three opportunity.
Now that the related deadline is well in the rear view mirror.
Year over year sash mix for news drive implementation has increased from 25 per cent in the first quarter of 2000 1989 per cent in the first quarter of 2020.
M.U. three revenues were $2.4 million in the first quarter of 2019, and only $200000 in the first quarter of 2020.
From a margin standpoint gross margins are 55% showed a slight improvement over the fourth quarter of 2019, 54% margin, but the aforementioned euro per year top line dynamic strove margins down from the first quarter of 2000, Nineteens nearly 58 per cent margins.
Moving on to operating expenses, the capitalization of $900000 of software development costs. During the first quarter of 2020 made up the entirety of both the sequential and you're over your decreases in gap product development costs, while our cash span was largely unchanged sequentially in year over year.
The capitalization of software development costs is new to C.B.S.I. for 2020 and is the direct result of gap capitalization requirements for the investment, we're making and then development of our single platform solution for all care settings, and EM vicious multi year endeavor that boy has spoken to on prior calls.
Well, we expect continued capitalization of these costs for the remainder of 2020, the quarterly amounts for the remainder of the year are expected to be slightly less than the amount capitalized during the first quarter, where the vengeful amounts depending on resource allocation among our Barry's development projects.
Sales and marketing costs increased $400000 sequentially due to an expanded sales force and decrease 7% you're over here due to the top line impact on commissions.
General and administrative costs increase $2.8 million sequentially due mostly to seasonality in our four one k. match costs legal in accounting fees and vacation utilization.
Year over year costs were flat as the 1 million dollar decrease in <unk> and other non recurring cost was mostly offset by detrimental swings an employee health costs.
Lastly on the income statement are effective tax rate during the quarter was 23% essentially flat with the prior year up from the fourth quarter of 2019, 12% rate.
Board, we continue to expect ineffective tax rate of 17% normalized for discrete items.
Operating cash flows during the first quarter were strong it $7.6 million down $300000 a year over year. That's working capital was it use a $4.3 million of cash during the first quarter of 2020 compared to only $3 million during the first quarter 2019.
Trailing 12 months operating cash flows now standing over $43 million or 88 per cent of adjusted EBITDA over the same timeframe compared to $29 million or 60% of trailing 12 month adjusted EBITDA a year ago.
Discontinued strength in cash flow has allowed for net reduction in bank that $6 million for the quarter and $23 million for the past 12 months.
Turning out to the topic that his front of mine for everyone. We were fortunate that the global Kobe's 19 pandemic had a muted impact on our results for the first quarter of 2020 bookings notwithstanding.
However, although it'd be we believe that we have a thoughtful data driven approach to monitoring in size in the impact of the pandemic on our customers and our financials.
<unk> is that an unprecedented helped an economic disruption of this scale remains unpredictable.
Given the uncertainty around when patient volumes were would cover to normal levels and when business can return to normal for our sales and implementation professionals, we have decided to withdraw our previous guidance for 2020.
Such time, when the path forward for C.B.S.I., and our customers becomes clear will share our updated expectations with you.
That said, we'd like to provide you with an update on where we've been where we are what we're currently seeing and what we generally expect for the remainder of the year.
Although there's never a good time for events like this to take place C.B.S.I. isn't in the enviable position of entering this pandemic in our strongest position in years.
Our focus on increasing the recurring revenue mix for our top line and effectively managing our cost structure have placed us on an upward trajectory of operating cash flows that has yielded positive cash flows in each of the past 15 quarters.
Mix of this strength in operating cash flows with an operating structure that is light on capital investment and you have the ingredients of a strong free cash flow generating enterprise.
We have been intentionally conservative over the past few years with how we put these excess cash flows to work employing the capital allocation strategy that prioritizes <unk> and creating the inherent flexibility that comes with lower leverage.
That conservatism now shows a true wisdom as we entered this challenging time with ample liquidity on top of the cash generation engine that we feel as well served to sustain us through this pandemic and position us for more opportunistic uses of capital in the future.
Balance sheet cash at March 31st was $4.3 million with cash on hand, increasing to approximately $8 million since.
We have not made any draws on our revolving credit facility since the onset of the pandemic so cash available under the revolver still stands at $34 million.
This revolver capacity combined with current cash on hand brings our total available liquidity to over $42 million enough to sustain nearly an entire quarter of runrate cash expenses absent any contributions from cash collections.
Well, we have seen natural decreases in travel costs in health claims we are using this financial strength today to honor our commitments to our employees vendors and customers all key stakeholders critical to our ongoing success during and after the pandemic.
We remain in constant contact with our valuable banking partners to ensure that funds currently available to us under the revolving credit facility remain available to us and they're exploring opportunities to work with them to further increase available dry powder.
Turning to what we're seeing in our operations in the market today, we have not seen any meaningful impact on our cash collections as a result of the pandemic.
Using 2019 as a benchmark, we've actually seen improvements versus benchmark from March 31st through April 30th in terms of both trailing 10 day and trailing 20 day cash collections from our customers, but these are trailing indicators.
However, our position in the health care landscape provides us with unique in valuable insights into the patient volumes of our customers, which serve as a forward looking indicator for well we can expect since roughly 80% of Trubridge revenues are related to hospital volumes.
Claims process through the insurance services Division of Trubridge first saw a notable declines during the week ending March 22nd with decreases versus benchmark in the high single digits.
Volumes have notably deteriorated from their sustaining at roughly 40% below benchmark for the past couple of weeks.
Just one naturally have a negative impact on our per claim revenue sources like most of our insurance services and medical coding divisions and eventually for our percentage of collections revenue sources, such as interest accounts receivable management and private pay services.
The Big question on everyone's mind is how deep in how why this downturn will be although it's impossible to competently predict where these volume declines will bottom out and how long the period of suppress volumes will persist. The most current data available to US suggests that further volume declines are becoming less likely as the slight.
Improvements, we're seeing in some metrics are positive indicators that we may have already reached the bottom.
Oh touch bunch with our customers, particularly those with hi, hi historical levels, an elective procedures.
Point to a gradual ramp up impatient volumes that could place us back at near historical levels by early fourth quarter.
Regarding our acute impose acute E.H.R. segments, we've been pleasantly surprised the customers or by and large opting to continue with scheduled implementations.
The desire of our customers to move forward with implementations combined with our proven ability to adapt to the times and provide remote installation and training services has minimize the risk the backlog conversion.
However, social distancing protocols travel restrictions and customers and prospects overriding focused on crisis management has created challenges in generating new sales, which we expect to persist at least in the short term.
These factors all suggested the opportunities we saw at the beginning of 2020 are likely to be pushed out to future periods.
Lastly, there are natural concerns no doubt amplified by media coverage that these volume declines however, temporary they maybe we'll place additional hardships on community hospitals, many of which are already financially distress.
We did a good job in his opening remarks of describing the unprecedented level of financial support allocated by the federal government to community hospitals through the public health and social services Emergency fund and other stimulus programs.
Although our view is that these average provide ample relief to our hospital customers. The pandemic does increase the risk of further cash flow headwinds related to our customers financial distress.
These headwinds materialize you can naturally put pressure on our ability to collect from our customers in the short term and to the extent. These impacts are permanent may result in increased write offs of receivables and related bad that expense over the next few quarters.
In response, we've mobilized our clients success managers in regulatory affairs professionals to work hand in hand, with our customers with individual touch points to ensure that they get the relief that is designed for them.
To close we're certainly an unprecedented times, but T.P.S.I. is more than prepared for this challenge.
The reward for conservatism is stability and never has that been more brilliantly underlined than today.
Are unprecedented speed to market with Tele medicine solutions in our ability to deliver uninterrupted support to assist our customers has not gone unnoticed converting already hand in hand relationships to joined at the hip alignment in our customers have never been more appreciative of our efforts than they are today.
Our commitment to our employees have solidified and already strong relationship with those we rely on the most and allow them to focus on the communities in health care workers they support.
A stable enterprise a truly appreciate of customer base in a dedicated family professionals. That's the powerful combination has us as excited as ever for the future holds and with that we'd like to open up the line for questions.
Okay.
Now begin the question unanswered questions to ask a question you May press start been one on your Touchstones. If you are using a speaker phone. Please pick up your handset before crossing the keys to withdraw your question. Please press star than two.
The first question today comes from Jeff <unk> volume Blair. He's go ahead.
Yeah, good afternoon, and things for taking the questions. Appreciate all the the commentary so are.
You're getting a little further to the outlook and it certainly understand that you're with drawing guidance for good reason, there will be or some some additional color there and I'll start with given the recent success approved bridge and the end trust businesses.
Their exposure to the client volume and collections couldn't you just detail how much of your business historically is exposed to client by <unk> and percentage of collection models.
Yeah, So Jeff as we mentioned into prepared remarks, right now roughly 80 per cent of Trubridge revenues are derived from from some function hospital patients volumes, whether it's a per claim the or a percentage of collections be and that's for the most part held constant historically, so that you're 80.
Trubridge would trubridge, making up roughly 40% of the P.N.L. Yeah comes out to about a third of the the title top line being timed it all tied to the hospital volumes.
Great and then it does that include or or not include customers that are are you a life in that and trust model.
That includes interest.
Oh excellent that helps and.
<unk> a little bit further.
Understanding that they they certainly will be some geographic variability Oh and would love to hear your comments on what shape, what shape of recovery, you're yeah, maybe modeling out different sneeringer modeling out inherently as you think about how your customers and turned the corner on the pandemic.
Hey, Jeff This is Chris so from a modeling standpoint, yeah, we are.
Sri being very specific per hospital with their data and we are as Matt said, we're monitoring that on a weekly basis. So we are seeing signals in certain areas, where hospitals are they elect of services are being turned back only got a couple of hospitals that actually shuddered for a short period of time that now reopened.
So so our model takes into account every specific hospitals revenue scenarios, specifically to them based on their previous week and to that point, yeah. We we had seen.
For a week.
<unk> number that was a within what did the variance of about 2% and this past week was the first we were we've seen a modest a uptick from that.
So not ready to call it a as friends, yet, but obviously see some opportunity of maybe that there's some some slide outside coming from the the elective services and the utilization at the hospitals.
And to add on to that Chris said, you know some hospitals have even shuttered, but but I think it's important to point out too.
Yeah, and a lot of cases, the rural hospitals are as subject to the the electives as some of the things that you're reading in the press about because you know the it is the only source of of healthcare in these communities. So the people with heart attacks or and you know a cute things that they need to get to the hospital for.
But I think it's probably I would say on average the elective stuff is not as much of an impact on a hospital as probably what you're saying in the media yeah more urban settings, just throw in that it.
No that boy that makes a lot of since then.
Partially what's.
Driving my question around the shape of the recovery. All these you know heart attacks G.I. issues other various issues underlying conditions that aren't going away for it for patients and just <unk> how how.
Do you think your clients are modeling the return of a patient volumes, knowing that's not something elective procedure that you can push out a month, but it's the underlying condition that you know it may raise itself in a in a more urgent man or later on.
But <unk> may not get someone right back in the door once the doors are open as well.
Yes, we we would agree with that.
Think it's important <unk>, Chris said it well you know you really have to look at every hospital individual basis and we've got some states in some counties were covered 19 is somewhat ramp up and then we've got others that you know there's very few cases, even in the state. So they're just dealing with the fact that you know there's no volumes to deal with so it really is.
Hard to.
Kind of generalize and and talk about our clients in general because every every case needs to be looked at it almost case by case basis.
<unk> understood and <unk> last one last weekend is isn't very positive comments around cash flow trends of the the last month, but as we think about the the rest of the year and and you.
Payment terms and how the federal aid plays in how how it should we think about Castillo and D.S., so trends as as you and your clients navigate 2020.
Yeah, so from from a pure cash flow sandpoint naturally the top line pressure from patient volumes and trubridges going to put a little bit of a crunch on cash flow in in you know kind of the the middle two quarters of the year.
You know partially because the the dollar amount of our invoices are going down because they are tied to patient volumes. You know like we said in the the prepared remarks, you know we feel like the the stimulus funds and the other relief funds at the Federal government has made available you know are sufficient to provide you know a fairly a fairly broad safety net for for the hospitals.
In in our customer base, but you know all that'd be inside there still a lot of uncertainty out there as to exactly what the impact in the rural markets are going to be compared to the urban settings. So it's something that we're all just going to have to keep an island.
Got things for taking the questions guys.
Thanks, Jeff.
The next question comes from Donald Hook up key thing. Please go ahead.
And and good afternoon, as a follow up to that previous question the.
You commented you were impressed with some of the cares that funding I think you said north of 3 million average funds were provided to hospital.
Is that is there anything that affects your revenue from that I mean is that a <unk> instead of having a collection maybe for trubridge or is that just go straight to the balance sheet of your client.
Yeah. So this is Matt and.
Think that that's that's not really a a revenue item for us is really more kind of reducing some of the balance sheet risk that we have that they're related to receivables you know, making sure that hospitals in financial distress as being being addressed by these stimulus program.
[noise] Super Okay, and then in terms of a year h. It looks like that's a nice contribution in a quarter <unk> did you comment on that bookings <unk> contribution there.
I didn't recall.
Yeah bookings from G.R.H. for the quarter were somewhere between 200000 and $300000 revenues for G.R.H. were $1.3 million this quarter compared to 2.7 million last quarter, which you may recall, we we pointed out to some significant upscale opportunities for for G.R.H. They closed in Q4 of 2019.
From an even does standpoint, they were effectively flap this quarter.
Super and then maybe I'll ask one more in terms of the Trubridge gross margins they've been very high for several quarters now.
<unk> is this like a normal for gross margins kind of in the mid to high forties, there or how do we think about that in in a normal wise men or is that I wished I always thought of trubridge margins being a little bit lower but maybe maybe there's a a reset higher here maybe from efficiencies or something.
Yeah, there's a little bit of that I think the other part is as as we continue to see success on the Trubridge R.C.M. product, which is more of a pure software play you're going to see higher margins creep in so the the larger the contribution that we have their the higher the tick is on the board inside and obviously, we continue to to work do efficiencies and.
In the more labor intensive areas of the accounts receivable manage but the early out collections and the the medical coding.
Oh, great. Thank you very much.
Based on.
The next question comes from Jamie Stockton Ah Plus Fargo. Please go ahead.
Hey, getting then thanks for taking my questions I guess, maybe the first one is about costs. You know thing Matinees said you guys are seen trubridge.
Collections down something like 40% for about 80% of the business from you know you you've obviously taken a lot of costs out over the last couple of years. So there may not be a lot incrementally you can do but you just talked about you know the extent to which some employees might be hourly and you can cut back on hours or or any libraries that can be pulled on that for huh.
Yeah. So you know only costs side, yeah, I think one of the things as important to point out here is that we have committed to to keeping everyone in that volume base side of the trubridge business on on payroll until at least a August the first and then we'll reassess from their based on you know what the the conditions like at that time with the pipeline looks.
Banquet back backlog looks like so that's the first thing we just want to to make sure gets address you know that's based on the expectation that patient volumes will begin ramping back up towards the towards the end of the second quarter, beginning in the third but reaching near normal levels by by queue for but if that suppress patient volume your level.
That we're seeing right now if they don't like they're going to persist. We certainly have letters that we component further right sized it costs structure, particularly for for the Trubridge business, you know roughly 65% of Trubridge costs structure bears some correlation to volumes. So you know that's that's somewhere up to $10 million per quarter of cost that we could look to reduce it if necessary.
And Jamie I, just want to add on to that you know we.
When we made the decision to let the employees know that through through August we planned on keeping everybody on board and I've, our allies no salary reductions anything we really feel <unk> that we're going to come out of the stronger. Then then we were strong when we entered the pandemic, but we think there's some real opportunities here and we wanted to have a all over.
Our resources available to us because we think there's there's a good chance that we're going to have a chance to execute and to do quite well on the backs out of this thing. So we wanted to be in position of strength and be able to do that as opposed to.
If that opportunity came and then trying to re onboard people one things like that so you know <unk> for the long term, we think it's the best long term decision for the company.
That's a that's a good lead into my next question Boyd, which was about bookings you know I I think understandably either the kind of system fails piece of bookings will be under some pressure.
The Trubridge had a had a had a good quarter in Q1 you know.
Just any thoughts about.
The ability to sustain that momentum for the Trubridge piece of the business over the next few quarters or is it really just going to be hey, everybody's kind of baton and down right now and when they come up for air you know, if we want to be poised to execute well.
Yeah, it or in the quarter, Jamie Good afternoon, David here, we we thought the your letter comment would would be more the case and we'd that was while we were seeing in terms of.
No every communication that we were having with our client you know which was generally speaking a check any communication. How are you what can we do to help you, but you know with anything that has been on going in that had been in the pipeline was not being discussed in and was was put on hold indefinitely and then I would say I think after the initial.
Shock of of of of Cobot in sort of the the pace at which M- between mid March in early April everything so when it came to a screeching halt our hospitals were you know like everyone else, but they were in.
Regular meetings, all day about what to do if and and preparing themselves for you know if their communities software that you know a rapid increase in patients and they saw the volume and how many would they keep in house and how many would they transfer and what if the larger facilities were overwhelmed and we're transferring patients to them. So they were planning for every scenario and then is that we're off.
In the middle towards the latter part of April activity that we.
Began to see in or seeing now both for Trubridge and for system sales were pleasantly high you know when we think about April in review and obviously, it's not very far in the rear view mirror, but we can't imagine a scenario and this is true for all of US hopefully where there would be a month that would be better set up for just.
No sales at all and we were very pleasantly surprised <unk>, what we were actually able to sign and execute in April and then where the pipeline stood at the end of April. So certainly you know we're not tracking the have a quarter like we had in the last half of last year by any means.
Well, we were seeing the mid twenties in in upper twenties in terms of a million in terms of bookings, but we we are pipeline in terms of both the 30 60 in the 90 day pipeline is personally at an all time high in terms of opportunity the ability to actually clothes on that and given the situation remains to be seen it is worth noting that.
We do have some significant dollars in the pipeline that are hospitals in particular right now to hospitals, one in Tennessee, and one in California that are reopening because of coven under community in government pressure to reopen this the the facilities as a result of code. So you know there are is as it was everything that's a big negative there are some positives that are that are.
Potential as well so that would be the overall commentary I think it's equally muted the better than expected for both through bridge and for revenue.
Okay I'm, just maybe one more quick when I appreciate that.
Activations I mean is is there anything you can't do remotely as far as getting a hospital live on your system.
Hey, Jamie No you know again, we we've been pleasantly surprised into boys point in his commentary where 97% remote we have a handful of jobs that have to be done in the office.
But but with the you know everybody's push towards the the the pill teleconferencing, whether it'd be whether exercise them or whatever and that's the new normal that that we have adapted just as the hospitals have as well obviously, we've got some demand from some some customers in some installs coming up over the next several months where there.
There is a desire to see that on site presents but the the ability for our customers and our employees to adapt to the the ability to install remote has been nothing short of amazing. So to your to your question is a yes or no no. There's nothing that that's a double negative I apologize, we can do everything from an emblem.
<unk> standpoint remotely there will be situations going board, where there is an opportunity for us to be on site and will be very reticent to that and making sure that we're putting our best foot forward to deliver the same quality of implementation that that we've come to be known for.
Okay. Thank you.
The next question comes from George Hell of data Bank. Please go ahead.
Yeah. Good afternoon, guys I I think a lot of the blocking and tackling questions. Just been picked up I guess, we'd would I'd be interested is kinda to comment is just.
From recovery can you talk about I guess from from down trying to recovery. What are you seeing and you're you're kind of your most rural hospitals versus your most suburban were closest to urban hospitals and I guess as you look at the market. After the crisis do you feel like the rural community space do they come out any better situation already worse situation from an n. market perspective after the Christ.
Okay. So on your on your first question again I'll go back to what I said earlier, it's just really on it's been on the individual basis, yes. Some of the more suburban hospitals are are hit more with more Kobe cases, and things like that but it really depends on where the hot spots offer code and then we have you know have rural sort of been hit with the cover but then we also have rules that haven't seen it.
Cases in their county, so it's kinda all over the board there. The second question and this goes back to my comments earlier about you know keeping the full Wow bold labor force available to us we feel like.
Not only we're going to come out of the stronger but one of the reasons, we do feel like we're going to be coming out stronger as because I think you're by and large our hospitals well I think this as I said my prepared comments I think this pandemic is really put a focus on how important rural health care is and how much. These facilities are needed and I think that's at all levels I think the local communities are.
<unk>, David mentioned that to hospitals that were previously close that there's a lot of pressure from the community and local politicians and state politicians to open those places back up.
And I think it's made everybody realize how important these facilities are.
Not only do their individual communities, but just to healthcare in general in the U.S. and you know pick the government's realize that and and again you know a lot of our see you guys are taking advantage of the situation and and letting their voices to be hard both within the media and but the political level. So we think it's only going to help and that's why we want to be in a position.
To take advantage of it when it does yeah, and I'll I'll add something to that George too you know from a rural versus the suburban yeah. The relationships that a population tab with the hospital.
It could be heated the bounce back there as well yeah, but part of this is going to come down to a trust standpoint, right are you as a patient willing to go into the hospital. That's the that's kinda like question that that remains unanswered. You know the hospitals are open stakes are opening services are made made available, but you know will the will to supply be there.
I think when you're thinking about you know the campaigns at the hospitals are gonna be running to to assure that patients that they're open and ready and equipped to be able to take those services Oh. Thank you could make an argument that at the rural standpoint, the trusting relationship that they have it that that hospital, maybe a key factor to bounce back there.
Okay, that's great color I appreciate the guys. Thanks.
Sure.
<unk>.
The next question comes from Sean Wheeland of Piper Jaffray Prescott how.
Hi, Thank you very much so on the average $3.6 million that your clients will get from the federal government is that money typically earmarked to make to cover payroll and to keep it doors open or is that being viewed as as funds that they could.
Then we deployed for a future initiatives.
I believe to my knowledge it can be used for anything that I want to use it for and just say you know that number came from a report from the National Rural Hospitals Association, Yeah. They they did it.
They did a report not to all go on that.
Oh for all cases, yeah, there's a there's there's there's a lump sum and then it's based on a percentage of your operating sets correct. It's out of the of the rabbit that though.
Okay, but what I understand it can be used for anything but you know I mean generally what I'm trying to what I'm trying to assess here is and.
You're in the outlook like shit I braced myself for.
Increase level of D.S. shows because clients can't afford to pay their bills, which doesn't seem like that's the case or on the other end to the extreme [noise].
Your average client got $3.6 million and now they're going to go and buy G.R.H. or investing trubridge or something like that.
Yeah. So Sean you know all we can really say on that is what we're seeing today and then later on top of that will we see as far as the the stimulus funding that's going to be layer on top that boy did mention that that we've been talking about this 3.6 million average per per hospital or rural hospitals, and I think is important to point out there you know what what we're seeing today.
In terms of cash collections and the impact of coping 19 on on our customer base right. Now we're really haven't seen it. So far we entered April flat on a trailing 10 databases compared to last year and down 7% on a <unk> trailing 20 databases compared to last year that was entering April as of today.
Cash collections are up 24%.
On a trailing 10 databases versus last year, and a 3% on a trailing 20 databases versus last year. So there's still a lot of uncertainty about exactly how how broad and widespread the impact of cobin 19 is going to be on on rural rural environment, But you know what we're seeing right now in the actual data so far has been.
Positive for us and we think that the the strength of the stimulus funds in the stimulus efforts that the federal government's taken you know really bolster in in helped minimize that that balance sheet risk and we have related to receivables.
Okay. Thanks for that and [noise] on G.R.H. is there a role that generates can play in in a in a deliverable around Kobe 19 [noise].
I'm a patient engagement standpoint, yeah, yeah, Shaun actually they already have you know we were able to ramp up talk with your dog, which is our tell a health offering you know within about from from concept to pilot within about three weeks. Yeah. It was something that was in on the road map any way, but was greatly accelerated as a result of.
Have come in 19, and as was mentioned on the call you know that's free to our and to anybody including our customer base already H.R. customer base to the remainder of of 2020 and very quickly. We've had over 150 customers that have committed to use that product is there till the hell product than that product.
It is is is based on instant P.H.R., you know patient engagement platform within G.R.H., maybe other big opportunity is you know we were in the pilot phase of our chronic care management offering with Trubridge, which uses L.E., which is a G.R.H. is chronic care management tool. This based on their c.
H. base a platform and we are now mobilizing that more quickly than we had otherwise plan to roll that out to to our entire market as a trubridge offering as well. So you know between talk with your dog and then the use of L.A. in in chronic care management, obviously because.
<unk>, we've been able to react in in our rolling those out in in a much more aggressive fashion.
Thank you very much.
Yep.
<unk>.
The next question comes from Stephanie Davis <unk> <unk> Meringue. Please go ahead.
Oh, yeah. Thank you take them on questions and a sad it's either guidance go I could just be be introduced through no fault that'd be around.
That you guys just mention rural hospitals tend to be the only source of care for many areas that in mind, what level have you seen or better yet have you ever seen any meaningful in a voluntary attrition come close game during the pirate recessions.
Yeah Stephanie.
Yeah, we.
It's been well documented over the past few years from a number of different media sources. The hospital closures kinda ramped up you know towards they've been tail end up implementation of the H.T.A. and I believe 2016 2017, we started seeing hospital closures starting to kind of trickled back down.
Like big normalize some water in the past couple of years I think it's still too early to tell you know right now we're one maybe six weeks into this kind of in 19 pandemic and it's too early to tell whether that's going to accelerate you know did the closure of some hospitals that we're kind of already on the line there, but you know it's definitely something that we've kept our I own and you know that.
<unk> small community hospitals.
<unk> has has always been something that we've closely monitored and I think to Boyds point when he pointed out earlier you know this is you know we we think one of the potential benefits of of this current climate as we get on the other side everyone's going to realize how important healthcare in community health care is and.
Value of these rural hospitals are their communities is is just going to skyrocket as far as the intangibles are concerned. So we see you know the public support is increasing from there which is only going to help you know the the the the the friction that you're mentioning day with hospital closures over the past few years.
Yeah.
Peak levels, just sorry, guys, but just the AD in there is there any sort of way we should think about it with it you know low single digit percentage mid single digits I mean Ballparking then.
[noise] I I'd say it was low single digits, I mean, you're talking about perhaps <unk> at the maximum level from the data that we've seen you know somewhere around 20 hospitals in in one single annual your closing so you're talking about you know out of what roughly 2600 community hospitals across the U.S. that are in in our.
In our bed size. This is a pretty pretty small percentage of granted they they make the front line up front page of the newspaper whenever he does happen. So it gets a lot of media coverage. So it does kind of exacerbate the issue you know and make it seem like it's it's larger than reality because to to tag on to that while it makes the headlines when they close it never get.
Any media coverage at all when it when it opens back up and frankly that happens a lot more than most people realize this at a hospital will cause but then either the community home to the eight of it or you know one of these management firms that manages small hospitals will buy it and then we'll I've done it back up and that that never gets the headlines. So all you ever see.
In the media is is the cause.
And Stephanie the two hospitals that I mentioned in response to an earlier question that are in the process actually one has already reopened in Tennessee, the as a as a result of covert 19 under dirty and political pressure. They were hospitals. This shut down because they they'd be for financial reasons both of them within the last two years.
And so I you know whether the whether they remain open long term remains to be see but I think it's an important point to know that there's some a bit a positive is coming out as well.
I understood that would be that although there are closing is not that then we should be you.
Really that much of a meditation from you guys. They offer reopened with an opportunity that <unk> things down there and he can team that anything.
Yeah.
I think that's a fair way to to characterize it but also it especially in the current environment. <unk>. This is not an incremental risk to anything that we've been seeing over the past you know 10 years.
I hear that and then one one quick style of them as you have scenes and pretty healthy booking had the kind of data.
<unk>.
When we look around at what folks are buying what they aren't.
Some of them like talk with your dog looks like it's free so how should we think about the monetizations jaggi there.
This is another good well player is there any opportunity you forgot them <unk>.
A combination of both.
It's certainly a good will play in the near term and in long term were obviously, a business and hopeful that it's a monitor in a a profitable play I'll tell you. The way we're looking at this right now and we don't know sure but based on the commitments that we have today and what we think we'll be able to charge more on.
On a per provider basis, we believe Ronald Runrate entering 2021 to have about a half a million dollars a year in recurring revenue from talk with your dog and that's pretty conservative.
<unk> Oh, it's I would say that that's more near term too you know we think longer term, it's obviously going to be a way of life in the way healthcare is delivered now and the <unk> the integration between the the H.R. and to talk with your dog <unk> talk with your dot product really well.
Give us frankly, L.I. leg up on a competition because what we will have.
Both of those solutions integrated and I think that's that's what people always looked us for in these Ah rural maybe hospitals that that integration in in the seamless workflows between the two different.
Systems, if you will.
Alright see for help them make ya.
Thanks definitely.
The next question comes from Steve Helper of Cantor Fitzgerald. Please go ahead.
Hi specific to Trubridge, how should we think about the average time lag between the patient visit and when that a cruise to revenues for you.
Hey, Steve So it's it's a little different based on the service line, but I would say all the average <unk>. If you wanted to take all the different certify that are contributing to that probably about three months with the a a fair a fair number to up to the plot that out of that.
Okay, great. Thank you.
[noise] Thanks, Dave.
The next question comes from Dave when they Jeffries. Please go ahead.
Hi, Thanks, mostly follow ups on particularly on the talk with your dog you touched on a little bit about integration I wanted to clarify so.
You did accelerate this availability is that integration in place today are that's something you're still working on.
No that's definitely something we're still working on we we have that product on the on the product road map for delivery. Later this year, we we said we rearranged some priorities enhanced.
Gave more focus on that but certainly integration. We think that's how we're going to set ourselves apart is the integration with R.E.H.R. systems understood and then you mention 150 customers I assume you're defining not as say a facility or or a <unk> customer entity as opposed to end.
The visual physicians do you have a physician number that you could offer.
Yeah. So we are defined out as non facilities and we are conservative biggest debating about 15 providers utilizing it per facility.
On it.
And then understanding your and two Stefani's question on on Monetizations strategy, you're you're offering this for free at the moment is it too early to ask.
Kind of in in broad strokes, how you would anticipate pricing this product when you do assign a price.
Yeah. We're we're we're gonna charger provider fee probably per provider per month or for some period of time.
<unk> I'm sorry go ahead, no sorry, we have a nail down exactly what that is yet.
And and and not an additional per visit see just the per provider per month type fee.
Right, Yeah, right God. Thanks for clarification, they the only opportunity where that May come up is where a David was referencing the the chronic care management.
And how that might evolve going forward from a care management standpoint that we may be able to deliver three trubridge, where there might be an opportunity for up per visit see that would come along but I think we're too early to to.
To speculate on what that might look like.
I'm sorry, since you brought it up so so you mentioned in that context.
Ellie in chronic care management I'm not totally familiar is is that an X.X. certainly sourced functionality or capability and I just wanted to clarify on on the L.A. mention there yeah. So day. So Ellie Ellie is a is that the the patient portal via get real Hell.
Oh, and we're using that right now be a trubridge to deliver chronic care management. So we are actually employing that care providers. The it trubridge and delivering that service to to a handful of hospitals right now what were in the process of doing is moving out from pilot into general availability with.
What the premise of that would be part of the interest offering. So we would be delivering additional care coordination care management for our hospitals that would.
Would or could potentially drive additional revenue for though.
Okay, great. Thanks for taking my questions. So thank you.
This concludes our question unanswered question I would like to teleconference back over to point Douglas friend and closing remarks.
Great. Thank you I I one of the thank everyone for their time today, especially want to say, thank you to our customers for your support and I want you to know that we will continue to do whatever it's needed to assist you in your mission throughout this pandemic and beyond and finally big Thank you to all of our employees your dedication in performance over the past week says <unk>.
As well as well as an inspirational appreciate every one and keep in mind, we will get through this together. Thank you.
The conference is now concluded. Thank you for attending today's presentation you may not disconnect.