Q3 2020 MTBC Inc Earnings Call

Greetings and welcome to the MTBC third quarter.

20 results conference call.

At this time all participants are in a listen only mode.

Brief question and answer session will follow the formal presentation.

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It's now my pleasure to introduce your host came Blatche General counsel. Thank you you may begin.

Thank you and good morning, everyone welcome to the MTBC third quarter 2020 conference call.

On today's call are not <unk>, our founder and executive Chairman Steve.

Stephen Snyder, our Chief Executive Officer, and a director.

Hey, hearty Chaudhry, our president and a director and Bill Korn, our Chief Financial Officer.

Before we begin I'd like to remind you that certain statements made during this conference call are forward looking statements within the meaning of section 27, a of the Securities Act of 1933 as amended and section 21 E of the Securities Exchange Act of 934 as amended.

All statements other than statements of historical facts made during this conference call are forward looking statements, including without limitation statements regarding our expectations and guidance for future financial and operational performance.

Expected group business.

Business outlook and potential organic growth and acquisition.

Forward looking statements may sometimes be identified with words, such as will May expect plan anticipate upcoming believe.

Estimate or similar terminology and the negative of these terms.

Forward looking statements are not promises or guarantees of future performance and are subject to a variety of risks and uncertainties may.

Many of which are beyond our control.

Which could cause actual results could differ materially from those contemplated in these forward looking statements.

These statements reflect our opinions only as of the date of this presentation and we undertake no obligation to revise these forward looking statements in light of new information or future events.

Please refer to our press release and our reports filed with the Securities and Exchange Commission, where you will find a more comprehensive discussion of our performance and factors that could cause actual results could differ materially from these forward looking statements.

For anyone who dialed into the call by telephone you may want to download our third quarter 2020 earnings presentation. Please.

Please visit our Investor Relations site IR Dot MTBC dotcom quick.

Click on events and download the earnings presentation.

And finally on today's call, we may refer to certain non-GAAP financial measures. Please.

Please refer to today's press release announcing our third quarter Twentytwenty result.

A reconciliation of these non-GAAP performance measures to our GAAP financial results.

And with that said I'll now turn the call over to the Chief Executive Officer of MTBC, Stephen Snyder Steve.

Steve.

Thank you Ken.

Thank you everyone for joining us on our third quarter 2020 earnings call.

It's our privileged today to review Mtbcs year to date financial and business performance.

We have an opportunity to discuss our full year outlook.

We were very pleased to report another record breaking quarter.

We have continued to accelerate our growth as we have remained focused on empowering health care providers and health systems with our tech enabled solutions.

For the third quarter, we are pleased to report revenue of $31.6 million.

This is a new record and represents an increase of 88%.

Over the third quarter of last year.

As we have continued to accelerate the velocity of our revenue growth. We have also increased our quarterly adjusted EBITDA to a record $4.2 million, 68% higher than last year.

Likewise Mtbcs adjusted net income for the third quarter was a record $3.5 million a year over year increase of 58%.

Turning to our performance for the first nine months of 2020.

Mtbcs revenue was a record $73.1 million compared to 48.7 million in the first nine months of 29 cheap.

We expect ultimately exit the year with annualized revenues of more than $130 million.

Our adjusted EBITDA for the first three quarters of this year was $5.2 million in total we expect the fourth quarter alone to handily exceed our entire year to date adjusted EBITDA, resulting in they're not in another new record high.

Before turning our focus back to our year to date business performance I'd be remiss, if I Didnt again express our sincerest appreciation to our clients for their exceptionally heroic efforts during the last nine months.

More than 1000 frontline U.S. health care workers have lost their lives to cope in my cheat not to mention the many others, serving and health care administrative and executive support roles.

Made the same sacrifice.

And beyond the ultimate sacrifice virtually every health care provider serving on the front lines of this pandemic has risk his or her life, while investing more time and more energy than ever before to sure his or her patients.

We've seen these sacrifices made by health care providers first hand within our own client base.

We truly feel privileged to be able to provide some very small measure of support to the heroic professionals, who are serving during this crisis.

As we previously mentioned, whether it's providing our cloud based clinical tools empowering patients with seamless touchless scheduling check in and access to clinical charts, enabling tele health and ensuring it is appropriately reimbursed providing revenue cycle and analytic support.

Or any one of the other many ways we support our customers. We are truly energized by our mission of enabling physicians to devote the entirety of their focus to care delivery. During this pressing time, all trusting us to support the day to day needs of their practices.

As health care providers are being called upon to support our nation through this wave of cold infections. We believe that we have never been better positioned from an operational tax financial perspective to support them as they serve on the front lines truly each of these health care providers deserves our most sincere appreciation.

And we are grateful for the privilege of supporting their <unk> that are very meaningful work.

Now, let's turn to a discussion for a few minutes to the segment of our growth that involves our wholesale customer acquisition strategy.

Which focuses on acquiring synergistic businesses with exceptional genes and great customers.

During the first quarter.

May recall, we acquired pure cloud, which we described in time as our largest acquisition to date.

During the second quarter, we were pleased to announce an even larger acquisition that of Meridian medical management and its affiliated entities.

We believe that we have acquired more businesses in our space than any other company and our experience has enabled us to hone a successful model yield strong an increasingly predictable outcomes.

To move forward with an acquisition, we need to have a compelling case to support a one plus one equals three thesis and we believe that both care cloud and meridian exemplified this principle.

Both acquisitions have enabled us to add strong digital assets, including highly scalable electronic health records timely patient experience management solutions enterprise level business analytics robotic process automation or our P.A.

As a result of these transactions we have also onboarded. Some additional team members, who are passionate experienced and talented really great folks. Many of these new individuals are contributing to our growth I'd say play important roles in operations R&D organic growth patient support customer success.

And countless other areas they have helped make us even stronger and more capable of achieving our objectives.

Hi, he will provide a more detailed update shortly about our teams work on executing against our integration playbook in strategy and I'm pleased to say that you can already begin to see the proof of success in our numbers reported today.

And as we report the fourth quarter, we believe it'll become even more profound and compelling.

Let's now turn to organic growth.

As we discussed during our last earnings call, we have significantly increased the size and the scope of our sales and marketing team as we've continued to invest in organic growth.

Year to date, we've already closed more than twice as much new organic business as compared to all of 2019 and you may recall that 2019 was one of our strongest years.

Additionally, our bookings are more diversified today, our approach is more systematic more repeatable and more scalable.

Our expanded solution set has allowed us to offer compelling tech enabled solutions to a wired wider variety of practices than ever before.

Moreover, our business model allows us to do far more were far less positioning us to better meet the needs of our existing and prospective clients with a high degree of solution optionality and pricing flexibility.

As we continue to increase our investment in organic growth, we are managing to an internal target <unk> average customer acquisition cost or CAC, a 50% or less of anticipated annual recurring revenues as we continue to scale, our sales and marketing organization.

Since joining the year ahead, we believe that we will be able to continue to accelerate the velocity of our growth in the context of that low cap rate environment.

That is enabled by our unique global T. model and tech centered approach to organic growth.

Just as we've made strides in our organic and acquisitive growth. During 2020, so to our platform has evolved in significant ways as hobby will describe shortly in more detail. Our solution set is broader more capable today than ever before.

Components of our platform are supporting tens of thousands of health care providers across the country.

It's helping drive clinical excellence small facilitating patient centric relationships and ensuring that our clients receive appropriate reimbursement for their services.

As we as we turn to discuss our outlook for 2020, we continue to believe that we are positioned to grow revenues by greater than 60% year over year.

While at the same time, increasing our adjusted EBITDA by nearly 50% or more year over year.

We expect to exit 2020 at a historic annualized revenue run rate of $130 million with greater together with a run rate adjusted EBITDA of more than 24 million.

We expect that 2021 will be another exciting year of record growth and margin expansion.

I'll now turn the floor over the hottie.

I'd.

Thank you Steve.

And thank everyone for joining us on other third quarter any 20 earnings call I wish to Echo Steve's sentiment, we do indeed continue to be encouraged with other performance. So far this year.

Well I mean go up on Steve's comments, we believe that through disciplined innovation and our robust acquisition strategy. We now more than ever have what we believe to be went up the industry's most comprehensive suite of cloud based solutions and business services.

Today, we now go to market with other practice management systems Electronic Medical Records solutions other patient experience management platform and other revenue cycle management offerings.

It isn't only the these core kit called cloud based software and services that make us unique, but it's the depth and the bed off the end denying apps, we have in our product portfolio, such as our deep analytics capabilities that decision be <unk> and other robotic process automation boards that drive a highly competitive value.

Question for the market.

Desegregated technologies, coupled with other expenses additional business services, we believe set us up for continued success.

Oh, it's it solutions today, providing that the success and strongly contributing two other men could you upped old many folks have asked us all over product and solutions portfolio map across the different segments, we serve.

But we won't get into specific detail here, we wanted to give you a flavor of our expenses offering.

Hi level of products and services to the complementary go to market, while others are more suited to different segments in specialties in both ambulatory and health system space.

For example, other talk each our solution is mostly geared towards the small medical practice for lighter, but I've got kids love thought expenses largely market segments across multiple specialties animal work stoppage delusion is more suitable to handle single specialties such as anesthesia.

Reis, a patient experience management platform spans across market segments, and we are excited about the future road map for this product something I will discuss in a minute.

This segmentation view allows us to synthesize a product and services portfolio and build the appropriate sales and marketing messaging for each segment and ultimately the lights, a greater level of flexibility for our customers and meet their needs. There they are.

As I discussed last quarter. In addition to our core software technology enabled services Meridian Medical management has expanded the specialties and markets. We can now serve we continue to be excited about the opportunities. We now have with enterprise grade business intelligence platform decision be.

We will discuss in just a few moments the work we have been performing to bring this to the market more broadly and integrate this to do our solutions.

Additionally, we continue to believe there is opportunity to enable our current customer base and this tool potentially upto. This starting within our installed base and effectively go to market often larger enterprise accounts.

In addition off our Micropulse antibiotic process automation boards, we have been actively working on integrating this into our system and leverage these capabilities to drive additional gains in efficiency and productivity, while reducing our overall cost.

Over the past couple of quarters, I product and engineering teams globally have been hard at work exhaust the mediator different exciting initiatives.

We have been focused extending on integrating our technology to drive additional customer stickiness cross sell opportunity the new sales pipeline.

Have been hard at work integrating position be eye to our internal systems that will provide even more visibility for us operationally, but also taking core components of precision VI and leveraging back within our talk each our platform.

This is already proven incredibly valuable and as an example, one of our large larger customers is currently testing precision VI and it related but its capabilities.

Along the same trade we are working to deploy additional ARPU, Mike the March with our internal systems as though the thesis that this would also drive incremental operational efficiencies of scale.

We had all saying early stages of extending our award winning patient experience management platform Breeze to our talk each our users and working on unifying all of our patient experience apps under this one solution. This lays the groundwork for a broader breed strategy into the future.

There's still more work to be done here, but we are excited about the early trends.

We continue to be excited about our product and service portfolio and our continued continued innovation on behalf of our customers. We look forward to keeping you updated on our progress and sharing with you. Some exciting innovation, we have on the horizon and providing specific details about that overall charting strategy during the month.

Ahead.

Now shifting gears, we wanted to provide you a transition update on our latest acquisitions. We continue to be excited by the continued expansion of our product and services portfolio and are delighted with the incredibly talented team members across the company we.

We continue to see huge gains in how our unified teams of working closely together across functional areas like operations.

It's excess professional services and R&D.

We look forward to seeing how this will continue to strengthen our overall carbon footprint as we continue to scale into the future.

As to our most recent acquisitions gets out in Meridian Medical management, we continued to made great progress executing on our proven integration strategy with regards to capital we have already reduced operating cost by more than 46% and it is not like three days.

In terms of Mediterranean, we have virtually completed our transition off of third party offshore business process outsourcing onto them TBC large scale operations team.

This shift will continue to help us expand margins in accordance with our plan.

As such we have abuse meridians operating expenses by 16% from pre acquisition levels one year ago.

I'm excited to share that radian is already accretive to earnings during its first full quarter as part of MTBC.

My daughter company integration work, and it's continuing and growing though efforts in risk mitigating issues related to going to be 19 has also proven successful aside from the fact that our volumes are mostly back to.

Two prequalified levels, we have work, even further and ensuring that our competitive advantage to be able to strategically deploy other global workforce. Both here in the U.S. to what the monkey as needed and oversee the crossover radius campuses is even further strengthened.

We believe that our global distributed workforce allowed us to mitigate many strong headwinds produced by the fed by this pandemic.

This strategic advantage allowed us to continue operationally without the level of disruption. We have heard that was experienced by many industry peers that were heavily reliant on third party vendors to manage their back office.

I would like to again personally thank all the employees worldwide for their dedication and smart work.

I will now turn the floor over to our Chief Financial Officer Bill corn.

Bill.

Thank you Heidi.

Revenue for the first nine months of 2020 with $73.1 million, an increase of 50% as compared to $48.7 million in the first nine months of 2019.

This is an exciting new record for us our revenues during the first nine months of this year exceeded any full year of revenues Mtbcs history.

The three drivers of our growth with the acquisitions of care cloud.

Radian I.

Our two largest deals ever and the increased velocity of organic growth.

Our additional investment in sales and marketing, which grew from 2.2% of revenue during the first nine months of 2019.

Just 6.5% of revenue during the first nine months of 2020 is paying off.

Revenue for the third quarter of 2020 was $31.6 million, an increase of $14.8 million or 88%.

Third quarter 2019.

This sets a new record for MTBC.

Our third quarter 2020, GAAP net loss was $1.7 million as compared to a net loss of $138000 in the same period last year.

The GAAP net loss reflects $3.2 million of noncash depreciation and amortization expenses.

$1.8 million of stock based compensation and $609000 of integration and transaction costs related to recent acquisitions.

Our GAAP net loss was 46 cents per share based on the net loss attributable to common shareholders, which takes into account the preferred stock dividends declared during the quarter.

Non-GAAP adjusted net income for third quarter, 2020 was a record $3.5 million, an increase of 1.3 million or 58% compared to adjusted net income of $2.2 million in the same period last year.

Non-GAAP adjusted earnings per share was 27 cents per share.

An increase of nine cents compared to 18 cents per share during third quarter of 2019.

Our non-GAAP adjusted diluted earnings per share was 19 cents.

Adjusted earnings per share are computed using the end of period shares outstanding.

Adjusted diluted earnings per share also includes common shares issuable upon the exercise of in the money warrants investing of outstanding restricted stock units.

We now have a significant number of outstanding stock warrants, which are exercisable and in the money, but are excluded under gap from earnings per share calculations. The shares are considered anti dilutive.

To assist in evaluating the effect of these prospective shares we've introduced a new non-GAAP measure adjusted diluted earnings per share.

Sellers at Meridian care cloud, we're grabbing a total of 4.25 million warrants to purchase shares of Mtbcs common stock at prices between 750 and $10 per share with a two year life for the 750 warrant and a three year life for the 10 dollar wants.

All of these warrants were exercised we would receive approximately $34 million of cash proceeds rocks.

Approximately equal to the total cash we paid for these two acquisitions.

Adjusted EBITDA for the third quarter, a 20 $24.2 million.

A new record.

He was an increase of 62% and represent 13% of revenue compared to $2.6 million in the same period last year.

This is our 14th consecutive quarter of positive adjusted EBITDA.

The increase in our adjusted EBITDA to record levels. During the first full quarter. After a major acquisition is a huge accomplishment.

It reflects the combined cost savings from care cloud, which was purchased in January and Meridian, which was purchased in June as well as the return of patient visits in your pre COVID-19 levels.

I'd like to give you an update on our cost reductions after our two most recent acquisitions.

Veteran MTBC followers know that we follow a standard met methodology, which is proceeding nicely for both care cloud and meridian.

We replaced offshore subcontractors and some onshore employees with Mtbcs global team.

Use mtbcs technology to streamline workflows and reduce the administrative burden of the U.S. team. So they can focus on the client experience.

Adherence to our normal routine is what allowed us to go from essentially break even adjusted EBITDA during the second quarter to record adjusted EBITDA and adjusted net income during third quarter.

It also allowed us to reduce our GAAP operating loss by 73% from second quarter to third quarter.

A sign that the positive GAAP operating income that we reported in the third and fourth quarters of 2019, maybe you maybe returning to us in the not too distant future.

In the first half of 2020, we wound down the subcontractors care clad used for both revenue cycle management and product development transition.

Transitioning to work to our own offshore employees.

During the third quarter, we did the same from meridian as we wound down most of their contractors.

The actions we've already taken care cloud was accretive to earnings during the third quarter and so it was worthy and it's.

Maybe the first time that a major acquisition was accretive during the first full quarter after our purchase.

The fact that you see a smaller percent decrease in meridians expenses. After one quarter reflects the fact that they started in a position which was closer to breakeven and our other recent acquisitions.

The purpose of this slide we're measuring from meridians expense structure, one year ago before they begin cost reductions.

During fourth quarter, we're looking at ways to deploy additional experienced global MTBC employees.

Who can help us add even more value to our relationships and achieve our margin goals.

As we continue to reduce expenses gain the benefit of a full quarter of the reductions which occurred in July August and September.

You should expect to see another significant increase in our adjusted EBITDA during the fourth quarter.

Investors often ask me what type of margins they should expect MTBC to generate.

Looking at our annual results isn't very helpful. Because we regularly by additional businesses and these businesses typically depress profits for up to four quarters.

The better way is to look at our quarterly results until.

So look in the segment note of our 10-K or 10-Q. So you can focus on the health care REIT tea segment, which excludes about $12 million to $13 million practice management business.

You'll see that we've reported gross margins of up to 50% several times.

But each time, we do a major acquisition our margins take a hit until we wring out duplicative and unnecessary costs.

But you should expect to see our gross margins return to 45% to 50% over the next few quarters, unless we got to wait another large acquisition.

That's because more than half of our revenue is either pure software as a service or a bundled fee, including hsas as well as revenue cycle management.

Our adjusted EBITDA margin is a good estimate of our overall profitability adjust.

Adjusted EBITDA for our health care I T business was 25% in Q4 of 2019 before our acquisitions of care Clattered Bridion this year.

You'll see that it returned to 17% during Q3 and as I previously mentioned, we've already taken many steps, which will increase our margins in Q4 and 2021.

So from my perspective, returning to 25% or more during 2021, it's very realistic.

As of September Thirtyth 2020, we had approximately $22.8 million of cash with nothing drawn on our Silicon Valley Bank line of credit.

In addition to our common stock. We also have a series a preferred stock which trades on the NASDAQ global market under the ticker MTBC P.

Our preferred stock pays monthly cash dividends at the rate of 11% per year.

While it is perpetual it can be redeemed at our option at $25 per share.

We have now paid 60 consecutive monthly dividends.

I'd like to close by reaffirming our forward looking guidance for the fiscal year ending December 31st 2020.

In July we raised our guidance for full year 2020 revenue to $105 million to $107 million, which represents year over year growth of approximately 65%.

With $73 million of revenue year to date.

And $31.8 million of revenue in Q3, we are comfortable that we will achieve our 105 to 107 million dollar guidance.

EBITDA most conservative assumption calls for revenue growth of at least 63% this year.

This leaves us running.

At a 130 135 million dollar run rate going into 2020.

We expect our adjusted EBITDA to be $12 million to $13 million for full year 2020, representing growth of 48% to 60% over 2019, adjusted EBITDA as we integrate the meridian care clot acquisitions.

Our adjusted EBITDA grew by $4 million from Q2 to Q3, and we anticipate additional margin expansion as we continue integrating meridian.

We will end the year with adjusted EBITDA running at an annual rate of $24 million or more.

Of course, if we completed another major acquisition next year it would most likely reduced our adjusted EBITDA temporarily, but we would be benefiting from our increasing scale.

Investors should continue to expect increasing margins along with revenue growth.

I'll now turn the floor over to our chairman Mahmood for his concluding comments.

Thank you Bill White Twentytwenty has been a challenging year for the word we are fortunate to be in a very strong position as we generate another year of record breaking growth and increasing profitability.

We thank our investors customers and employees for their continued support.

We will now open the call to question operator.

Thank you we will now be conducting a question and answer session.

I'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue.

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We ask that you please limit yourself to one question and one follow up question.

One moment, please while we poll for your questions.

Our first question will come from the line of Jeffrey Cohen with Ladenburg. Please proceed with your questions.

Good morning, gentlemen, how are you.

Good morning, Jeff doing well how are you just for and so.

I guess I wanted to drill into a little bit on the the guidance on the top line. Steve you made some commentary around in their call talking about some 60% year over year I'm, assuming that's somewhat of an aspiration that number but when we look at the top line. So firstly.

I guess for the year.

And the midpoint of your guidance, you've got a relatively flat call. It plus 4.1% for Q4, which gets you to the Warner six boot as we're looking out to 2021.

Our estimate of a color 145, it assumes a topline growth of about 37.4 to do you tend to talk about top line are going up 60% and if I were to be the case on a on an annualized run rate, though it would be about five.

42, and a half billion for fourth quarter next year, which would be a you know a good portion higher than what we currently have so any commentary there in the New York flavor thoughts for us. Thanks.

For sure Yeah, good question and and a good clarification as we're talking about the year over year revenue growth. We're talking about 2020 as compared to 2019 with regard to 2021, we look forward to providing guidance for the full year of 2021 sometime.

During Q1 of.

Next year prior to our next earnings call and they build maybe you want to just provide some additional commentary in terms of a year to date performance and what were anticipating relative to guidance for this year compared to last.

Sure, Steve and good a good question, Jeff I guess I'd say, we don't have a crystal ball and you know there's a lot of things that are that we can control. There's a lot of things we can't control <unk> as you know, we're always looking for exciting acquisition opportunities and.

When we find those which are compelling we we tend to add to move pretty quickly on them.

But there is no way do I had to predict those upfront. So I think it's hard for us at this point in time to out to give you a a youre really precise number for for 2021 you know.

And to just go look at the the last several years and say you know how have we grown the other business and.

And I think we mentioned our organic growth has been stronger this year than it's ever been before so we expect that to be a a continuing feature that a that in the past candidly, we weren't investing as much and so that's going to give us some some good a good upside so.

Stay tuned and ER and watch the a watch the story unfold okay.

Okay. Thank you and one more quick question for me what I have in the line on the depreciation and amortization loan to 3.2 for Q3 I'm assuming that both includes a character and meridian. So.

Should recall that the new baseline on the DNA barring any future acquisitions.

Yes. It definitely includes both the Aberdeen and Ah and care cloud. So I think it is a a good estimate at least at the baseline or all the numbers for care cloud have been finalized with our auditor's. This third party valuation firm is still love working with the with us to write to finalize the the numbers.

Still meridians numbers may change, a little bit, but I, but I think you can use the third quarter numbers as it is a good estimate going forward.

Okay perfect that does for me thanks for taking the questions.

Thank you.

Thank you. Our next question comes from the line of Mark Weisenburger with B. Riley. Please proceed with your questions.

Thank you good morning, now that the business is on track to top that hundred million dollar revenue Mark can you talk about your priorities in terms of kind of optimizing the current business and demonstrating earnings power versus looking for another major transaction.

Absolutely Mark that thanks for the question and Bill maybe you can walk us through that.

Sure I mean, we we consider both of those to be to be really important or aspects of managing our business.

And at one level I'd say, we're you know we're always looking at every time, we acquire a business how do we wring out the other cros and we've got a pretty good track record of doing that.

But candidly even a year after we bought a a business. We still look at is there a way due out to optimize things. So so were going to continue to to push the the earnings are a component which.

Does approximate our our cash flow. So I think as we showed you could expect to see 25, even 30% or adjusted EBITDA margins as we move into at the 2021.

And you know.

The organic growth that we that were doing wont really change that director that trajectory at all about whenever we find that next big acquisition. I think you can assume that will that we are going to continue to work on growing the top line I mean after all it's it's nice to be at $130 million revenue rate right now.

I can't tell you, where we'll be next year, but it but I think we'll we'll all feel good about a a number that's much bigger than that 130.

Understood. Thanks, and then just a follow up if you could talk about how the the customer base has changed following the care cloud and maybe to a larger extent after the meridian deal and is there anything that needs to be put in place for you to keep and compete for this new cohort. Thank you.

Thanks for the question Mark and how do you can give us a little bit more detail from a customer base perspective, but if we step back for a minute and think big picture today as a result of the acquisitions that we've completed during this year and that our core additional organic growth, we're working with rough.

At least 40000 providers across the country or.

In terms of that overall client base or roughly a added that overall base somewhere in the neighborhood of 12 or 13000 are leveraging us for and and RCM and then the variety. The remaining are leveraging one of the <unk> of our variety of solutions the technology solution sales.

Solutions GPR the like.

And Ah we've continued that trend this year that we've seen and we've been driving over the last few years, which is increasingly going up market and developing relationships both through the acquisitions and organic growth where medium to larger groups with a move us.

We get into 2021 that continues in that direction with a real focus from an organic sales perspective in 2021.

On enterprise solutions, but over the body to provide a little bit more color on that.

Thank you Steve did.

Did that and thank you for the question.

As Steve mentioned, so, but some of the changes that we can season now we have a much more involvement on the bigger hospitality space based site, so which give us a much more opportunity in terms of not only just the cross selling but dealing with with many other speciality that at the same time, so our multi specialty group has signal.

If they can see increase in our relationship into the hospital enterprise level clients have significantly improved so which is also giving us an opportunity while working with the a the b I tools, such as precision B. I and and then some of those hospital based groups and there is a tremendous opportunity for us to.

To utilize the RP bought snippy half that became part of as as as the most recent acquisition.

Thank you. Our next question does come from the line of Richard Baldry Roth Capital. Please proceed with your question.

Thanks, when I think about organic growth given some of the metrics you talked about from a very high level. You know if you can do 50% plus or minus gross margins on incremental revenue in the CAC is coming around that 50% level.

Sort of basic says it's about breakeven in your first year.

With that backdrop, how do you think about how to and how much up to.

Spend on organic growth because it feels like if you started relatively early in the year with you know.

Pretty free spending.

You could still be breakeven on that spend in the year and pretty highly accretive in year. Two so what what really gates that spend and how do you think about that strategy to four capacity long term.

Thanks for the question rich as we think about growth going forward. We continue to see as we move forward. The majority of the growth coming through wholesale acquisition of customer relationships through acquisitions. If we look at our the totality of what we'd anticipate our growth to look like.

During 2021 and beyond as it gives us the ability to to grow at a much faster rate and we think there are significant opportunities to acquire competitors in our space, who lack the competitive advantages that we have in terms of our global team and our technology platform and add value. So.

We continue to believe that the majority of our growth for the foreseeable future will really be driven by these creative acquisitions, having said that you're quite right.

If we can continue we believe we can if we can continue to acquire custom.

Customers through traditional organic growth.

Hi, the CAC of you know in the neighborhood of 50% or where you know if it ends up being 60% as we continue to expand its.

It's a really cost effective way to grow, especially when we think about the competition that doesn't have our global T. model.

And some of the tech enabled components that we use for growing.

Well, we think about their cost of customer acquisition generally speaking, it's closer to one times, that's our belief so.

So as we think about how much to invest a this year, we have achieved our target of true up to this point in time during this year of closing $4 million to $5 million per quarter roughly in terms of.

Bookings not from an organic growth perspective, we hope to be able to take those numbers and good double then during 2021, achieving a on a quarterly basis twice as much in terms of bookings in order to accomplish that we anticipate will have to invest that.

Twice as much in terms of sales and marketing expense all things being equal to achieve that we still think that would be a good investment and to your point of view of what is the gating item or to what extent can we continue.

Continue to ramp that up or we think we can continue to scale that we think we're really candidly at the early stages of this and if you think about.

Our team today, roughly 10 times larger today than it was the same time five or six quarters ago from a sales and marketing perspective as I'm talking about the team. So we think we're in the early days of this this ramp up of organic growth team and we're excited about what we believe we can continue to occur.

Push as we get into 2021, and even candidly now our focus is increasingly on a ramping up additional team members, who can help us focus on larger groups and enterprise customers a longer sales cycle, but a a much bigger return on that investment all things being equal.

So we continue to believe that will be an important part of our overall growth strategy going forward.

Hey turned back to the acquisition strategy, then given the severe challenges at the macro market do you feel like that's you know create it maybe more acquisition opportunities because owners may be stressed by the external or is there any possibility maybe slowed at or stalled it because they feel that near term results.

Really not reflective of what the entity should be worth.

I'm just sort of curious your overall thoughts on that backdrop. Thanks.

From our vantage point since the IPO since our IPO six years ago. The opportunities have continued to increase and we continue to see that trend in spite of coated and you're right with regard to cope with it increases the impetus some.

Amongst some investors to look for an exit.

And exacerbate some of the challenges in the business models of our competitors like giving us a greater opportunity to be able to acquire company at a favorable valuation and in a way that allows us to add value through our technology and our team and our scale. So it increases those opportunities.

Thirtys by the same token you're right Cove. It also for some investors causes them to to reflect more in terms of whether or not this is the right timing, having said that we see it as a net positive and only time will tell as we move forward, but our trend is only going one direction in terms of an expansion of the universe of opportunities for.

From a acquisitive perspective over the last six years, and obviously, we can't tell the future, but if if the past in what we see today is any indication we believe that the opportunities will continue to increase rather than the other way around.

Thanks, and congrats on the breakthrough corner.

Thanks, so much.

Thank you. Our next question is come from the line of gene Mannheimer with Darting Cope. Please proceed with your questions.

Thanks, Good morning, Congrats on the good progress I just to follow up.

On the Oh, the other questions on sales and marketing <unk> tell us how many sales and marketing people do you have today, the head count versus a year ago.

And what did your customer acquisition costs look like a year ago. This time before the before your two largest acquisitions. Thanks.

Good morning, and thanks for your question. So today, we have more than 40 sales and marketing team members focused on helping us grow a with a an out of that team is relatively evenly split between our onshore and offshore resources focused on organic growth.

If we go back a five or six quarters or we had roughly 314 members Ah F. T. He is focused on growth. So I would be hard pressed to be able to say that.

Using as a reference point the CAC.

Four or five six quarters ago would really provide much of a baseline just because candidly at the time, our focus was almost exclusively on acquisitive growth and the closings that are that we were moving forward with in terms of organic growth, we're really all in balance.

So it's a very different strategy, it's a different cost structure.

I would suspect that if we go back in time or our cost candidly probably wasn't very different but still having said that I don't think that that can do it provides much as a baseline because our strategy and approach investment was very different at that point in time. It was more handling inbound leads today, it's a combination of it'll be in.

Im leads but also a aggressive cross selling and up selling a with regard to our customer base together with hunting or new opportunities in the market across a wide variety of practice sizes groups and specialties.

Sure makes sense, Steve So [laughter].

Three sales and marketing people six quarters ago to roughly 40 today, Okay correct.

Big Big jump there and for your for your Q4 implied guidance and even if I could.

Into next year, what are your assumptions around how patient volumes will recover from coated.

There was a gene right now we're seeing patient volumes roughly 5% below the pre covert peaks. So many of our providers are essentially running back at a at the exact same level. They were before some of them are running a little bit down and.

Yeah, we we take it as a a a sort of a a baseline that numbers will stay roughly where they are here knowing that month by month geography by geography, there are gonna be differences. So yeah. We we we'd love to see everything returned to exactly 100% of where it was before we.

Think that seeing that happen pervasively through the country you know that.

That's probably not in the cards for this year, but maybe it is so but but we've started taking that a the assumption that it stays at the current levels on average for 2021, okay.

Okay. It makes sense to me, thanks, and last question on precision VI.

What what type of contribution you think that can make a from a revenue perspective as you integrate that with the rest of your portfolio and.

More generally is it is it sold as a SaaS model or what's what's the business model there. Thanks.

Sure and thanks for the question and then let me start and then I'd say, if one has anything to add here. So.

The move to the precision be Ais, a pure business analytical tool and the way the Contv go to market is either trying to sell it to the other vendors who did the cutting does soften Florida. They business does not offer any analytical do do we MTBC all.

Before decision VI, we didnt have a one analytical tools integrated with our practice management, but that was not that robust as disposition VI tools. So that's why we started working on the integration on our site and have just recently rolled out on a test basis for one of our largest client as well.

They already have been they have been in the viewing and working with a couple of other precision VI.

He did the.

Business analytical tool and be able to see make a very good feedback from that client about different features can offer so from a go to market standpoint to one will be the other software platforms to vendors the billing solutions, which do not have cut into you have a a solution available and the second thing is up.

Hospitals for example, or the or that.

The small and medium size practices, but their system, we can integrate and provide the solution. It can just literally can data feed we can take them both the data, which can keep on dumping on a periodic levels.

Levels and then the lid off this up and running analytical tools comes in and provide to the business intelligence reporting.

One is if you want to add anything beyond that.

No I think Thats right and I think gene what it does is that as he was mentioning really at the end of the day at a high level. What it does is that it unlocks in additional kind of vertical that we can go after right and and it expands our value proposition even further so I think hardie.

Oh really talk through the different the different kinds of ways that we're thinking about it from a product perspective, and a go to market perspective.

Right. Thank you appreciate it.

Thank you.

Thank you. Our next question is coming along that Bill Sutherland with the benchmark company. Please proceed with your questions.

Thanks, and good morning, everybody I'm most have been asked wanted to get maybe some sense.

And when you look at your organic growth going forward.

Do you think a significant portion of it will be the cross.

Cross selling up selling potential with kirkland's meridian in particular.

And.

How do you think that traction could could ER.

You know take place here.

Yeah. Thanks, Thanks, a lot for the question Bill. So if we think about performance year to date, roughly 20% to 25% of our bookings have come from that upsell Cross sell campaign, we think that will continue to increase.

As an overall share, but we're getting great traction today and that as we move forward, we think that the opportunity really exists. There exists is on the cross all the platforms. If we think about the P.B. I platform, many larger groups and enterprise groups, who are using that platform. So it's an opportunity.

To be able to upsell, we think in terms of RCM. We continue to have the other opportunities even beyond the care cloud and meridian bases in GTL and the like so.

We believe that the Upselling cross selling campaign will continue to get traction continue to be an important component of upper overall growth strategies as we move forward.

Okay.

And Steve maybe an update on M. TPC force. However, however, you want to characterize it just a sense of how that's impacting.

We'll be happy to thanks. Thanks for the question. So just a delay of baseline for anyone who is new to MTBC force. If we step back for a moment and we think about or overall.

Growth strategy. There are three primary products, we have the traditional organic growth, we have acquisitive growth and then struggling to to a hybrid between those two is the MTBC force Ah. So MTBC force represents our effort to partner with companies that could if they were large.

Sure or at different points in time in their lifecycle could have been potentially a opportunities for acquisitions, but really don't aren't the right fit in terms of acquisitions either from the prospective seller side or from our side as a buyer, but nevertheless, we see an opportunity to be able to partner with them to go to provide workforce extension.

And solution. So we can augment their existing team the capabilities.

And also through white labeling at a variety of other ways that we can partner with them and again, if we think about the growth year to date, roughly 20% of that growth has come from MTBC force today, we work with seven to 10.

Customers through MTBC force, we see a lot of traction on that we believe that will continue to be a an increasingly large share of our overall when as we move forward.

And back to the question was asked before about Cove. It I think that Cogent has has actually opened doors from the perspective of force vendors, who realize that from the perspective, there overall capabilities and capacity to be able to to operate in times where their resource.

Restrained that makes lot of sense to have a partnership with that some of the KMCC, who can help them augment their existing team.

Hi, Steve and just to put a circle back to go just for a second on his commentary on the.

The.

The patient.

Patient levels here with most recently anything you're hearing from customers related to this this really very recent surge in coated that's been so significant last couple of weeks.

Yeah, we certainly haven't seen any change in the a and the volumes of the of patient visits and we yeah. We look at the the value of the the claims that are submitted for visits each day. So not just looking at what gets paid but but what the what the doctors are seeing I don't know how.

I'd, if you've heard anything specifically from from any clients and on the subject.

I noticed it as bill to your point the numbers they'd be looking and we have not seen yet any change in the walliams. So it's it's it's bill Bill said some of the people that level. These then submit it on down only by 5% and its been consistent at least over the last 60 days roughly 30 to 60 days.

Okay. Thanks, everybody.

Thank you. Thank you.

I still.

Thank you. Our next question it's come from the line of Allen Klee with National Securities. Please proceed with your questions.

Hello can you give us an update on your RP, a offering and cross selling opportunities. So if it. Thank you.

Okay, Jodie actually in Q4.

How many please okay.

Okay, So sorry, and thank you for for the question.

I'll start and then again as Juan me that wants to add a few things here for the RFP. It just to give you a bag go into games, especially for the people who were not part of the the Aneel calls.

And so these are the micro boards that was primarily designed by the the meridian teams. The acquisition that we have done there's a whole suite of different the micromarkers that can perform different main main tasks for.

So far in any office in an all in the office setting and some of the example can be if there was a medical documentation that needs to be pulled and somebody needs to send that out. So whenever a denial is received that Michael Mark and look at the denial. It already knows from here to pull the the the medical documentation can pull it from there.

In either fax at Doe that can put it into Q for someone to to work on it. The next day. So there's a whole set of catalog for the micro boards that can perform these mundane task and take it over instead of instead of doing it in a manual way the integration is either the meridian already have an integration to an EBITDA.

Hi, based set up at many platforms. Today. In addition to that if the vendor doesn't offer in AI based solution we.

We can always also work on the screen scraping technology.

In addition to the revenue that was already drive and we already have started selling it as part of the rest of the technology that we are selling.

We have started to integrate and have successfully integrated number of those micro Boston to mtbcs existing platform to improve the efficiency of to Mtbcs internal workforce as well.

But from the <unk> from the market standpoint, maybe Steve if you have anything else if you would like to add here.

No I think you covered it hobby, that's great and I think in terms of go to market. So hotties point, we continue to see opportunity there in traditional organic growth and also the opens doors from an MTBC force perspective, so for other vendors who are looking for a way to extend their capability.

Ladies and augment their workforce, we now have the ability to both provide.

Human capital with the level of expertise that can help them achieve what they're attempting to achieve but also the ability now to provide a robotic processing, which automates. Many of the mundane tasks are that a individuals who would otherwise handle so this this.

A two pronged approach has enabled us to start conversations.

And ER and also is something that increasingly we're including in our proposals on the MTBC fore sight.

Thank you very much.

Thank you Alan.

Thank you. Our next question comes from the line of Kevin Didi with H.C. Wainwright. Please proceed with your questions.

Good morning, gentlemen, thank you for fitting me in appreciate it.

Steve there's been lots of discussion on the call regarding go to market.

Especially with regard to the specific tools, you're offering but you haven't really offer your perspective on branding given that you're coming to the market with so many big brands.

Hot can you talk about how you're looking at that and how you're incentivizing your sales force.

To address larger clients, and which brands in which tools, you're asking him to go with.

Thanks for the question Kevin in terms of the overall, if we think about.

Brandon merger, if we think about overall product strategy and guidance and the like are we anticipate a and we're excited to be able to do so we think you'll be excited to hear more about the granular level details our plan and our vision.

Maybe later in Q4, but I think more realistically it'll probably be a in the early part of Q1, but we look forward to talking about that in detail.

Managing the integration.

These are two acquisitions again, the two largest in our history and supporting our clients through coded.

You know were really Marshall an offer efforts to try to make sure. We do our absolute best to to end the year strong a record year with significant revenue growth and adjusted EBITDA. We think we're on track to do that but we look forward to talking about these other things that you're right going forward were really play an important.

Roland continuing to continue to ensure that we have good momentum as we move forward from the perspective of the overall incentives I'm. So our team is really focused on depending upon the different groups of our team at segmented. So there are members of our team who are really exclusively focus.

Based on these medium and larger size groups and as we're in the process of continuing to ramp up additional resources on the U.S. side are those resources are increasingly focused on the enterprise opportunities and that's really that's really our one of our core focus is right now.

The overall incentive structure, maybe you probably won't get into too much detail in terms of that relative to the teams, but obviously the incentive structure is designed to align their interests with ours in terms of being able to identify and adds to sign a businesses and customers who really help us.

Continue to grow at the high rates, we have been able to grow out up to this point.

One last quick one fit in here before the Bell rings, Steve. Please you mentioned MTV force and working with seven to 10 customers. They're now could you just briefly describe the lifecycle.

I mean, what you seen granted the experience hasn't been long I'd say, what three or four quarters at this point, but maybe you could just talk a little bit about what you've experienced collectively as those relationships have been short how much more have those clients slash customers off.

For or suggest that MTBC assume in terms of their operating profile.

Well, thanks for the questions and Kevin generally speaking for the MTBC force opportunities they start small and our partner or customer in the MTBC forced scenario first of all generally speaking wants to be able to ascertain whether or not.

We can really do what we say we're going to do so generally speaking if we're thinking about workforce augmentation that will start with a relatively small group of team members with the built in opportunity to be able to grow that and to be able to overtime to display.

Other third parties that that vendors working with or overtime to be able to help with regard to new business or or to otherwise take on responsibility that are being handled by their core team and you're right. We're about three or four quarters into this overall official launch but.

Right now we're we're excited where we continue to see growth in MTBC force, we continue to invest.

Invest additional resources and growing that and and are ramping up our team or offshore to be able to handle a that work ER. So we ensure that we have the excess capacity in place to be able to handle those opportunities as they come.

Great. Thanks, Thanks for caring my load a little later than normally expected Steve I appreciate it and congrats to you and the team for the nice quarter.

No. Thanks, so much for your questions. We appreciate it.

There are no further questions at this time I would like to hand, the call back over to Kim glance for any closing remarks.

We'd like to extend our thanks to everyone who has joined US today, we look forward to speaking to you again on our fourth quarter 2020 call. Thank you and have a great day.

This does conclude today's conference you may disconnect. Your lines at this time. Thank you for your participation have a great day.