Q4 2020 Computer Programs and Systems Inc Earnings Call
Greetings and welcome to the C. P. S. I Q4, 'twenty and 'twenty earnings Conference call. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad as a reminder, this conference is being recorded.
I would now like to turn the conference over to your host drew Anderson.
Thank you good afternoon, and welcome to the C. P. S. I fourth quarter 2020 earnings conference call.
During this call we may make statements regarding future operating plans expectations and performance that constitute forward looking statements made pursuant to the safe Harbor provisions of the private Securities Litigation Reform Act of 1995 weeks.
We caution you that any such forward looking statements only reflect management expectations and predictions based upon currently available information and are not guarantees of future results or performance.
Actual results might differ materially from those expressed or implied by such forward looking statements as a result of known and unknown risks uncertainties and other factors, including those described in our public releases and reports filed with the Securities and Exchange Commission, including but not limited to our most recent annual report.
And on form 10-K.
We also caution investors that the forward looking information provided in this call represents our outlook only as of this date and we undertake no obligation to update or revise any forward looking statements to reflect events or developments. After the date of this call.
At this time I will now turn the call over to Mr. Boyd Douglas President and Chief Executive Officer. Please go ahead Sir.
Thanks good.
Good afternoon, everyone and thank you for joining us.
After my comments I will hand, the call over to Matt <unk>, Our Chief Financial Officer, who will provide additional color regarding our fourth quarter and year end numbers and discuss our expectations for 2021 and beyond.
The conclusion of our prepared comments the two of us along with David.
Our chief growth Officer, and Kris Bauer, our Chief operating officer will be available to take your questions.
Before I begin I would like to acknowledge our sincere appreciation for the never ending efforts of our hospital nursing home and clinic customers as they continue to aggressively and tirelessly fight the pandemic and their communities and recent checking and cost with hospital leadership I've heard descriptions of overflow asking you beds and Hollywood.
Along with nursing shortages and overwork clinicians all while simultaneously executing and vaccination rollout efforts for essential workers and elderly community residents were beyond proud to be partnered with these heroic health care providers and their communities.
We and 2020 with pride and our execution during a challenging year and enter the new year looking forward to what the future holds in 2021 and beyond to that and this afternoon I'm going to spend some time, Brian <unk>, What's next for Cps and.
And our strength and focus to increase total shareholder return.
Although it may style and crochet, we have taken the never waste a crisis mantra to heart using destruction of the past year as an opportunity to reassess our company growth strategy.
During the past several months, we have partnered with a premium consulting firm to review, our business and growth opportunities and to assist us and identifying the best path to increase value for our shareholders. While also safe guarding the interest of other critical stakeholders, such as our clients and employees.
Most of this assessment was to more clearly define our strategy that will drive long term sustainability and stewardship gross EPS SaaS footprint and maximize our success and a post COVID-19 world.
Our assessment confirmed and identified several compelling opportunities to grow our core business, while investing in new technologies and improving overall profitability.
The outcome is and aggressive yet attainable plan that is intended to provide significant shareholder returns over the next three to four years, culminating in an end goal of $80 million and adjusted EBITDA in 2024.
There are three equally important components to this plan that we will pursue simultaneously core growth margin optimization and tangible upside growth through innovation.
The core growth component of our plan is concentrated around our current markets and along with margin optimization will help drive our targeted 2020 for adjusted EBITDA.
The initiatives for core growth utilize our 41 years of success and the health care market and our most valuable asset the client base that we have acquired along the way.
The core growth component includes three initiatives intended to drive higher demand penetration and share and our current fields of play.
First we will continue expanding our establish sales relationships by cross selling true bridge services into our substantial acute and post acute EHR basis. While this initiative is not new to Cps, we look to improve our execution on this opportunity turning the page from good.
Great.
With a total market opportunity of $400 million and <unk>.
Annual revenues, we have confidence and a target of $60 million and incremental annual true bridge revenues through cross sell efforts by the end of 2024.
And.
Second and estimated 85% of our hospitals are still managing their RCM operations and house with hospitals facing increasing financial pressure due to fluctuating patient volumes, increasing self pay accounts and the impact of COVID-19, we expect to see a continued shift.
To outsourcing and we remain confident and our ability to continue expanding true bridge from market share of those providers that use competitor Ehr's <unk>.
Including upmarket into larger hospitals and health systems.
With a total addressable market outside of more than $1 billion and annual revenues, our target of $25 million and incremental annual true bridge revenue from outside of our EHR base by the end of 2024 is attainable.
Total 2020 true bridge bookings from this segment totaled $10 5 million up 33% over 2019, setting us on a solid course to continue to execute and achieve the skull.
The third initiative of our core growth plan is to maintain a healthy retention rate across our EHR base and pursue conservative growth of new EHR clients as they are critical to driving cross sales with true bridge.
Our relationship driven approach along with the continued delivery of a single solution gives us confidence that we will maintain or improve on our current retention levels with our acute EHR segment closing 2020, with a 95% retention rate.
Based on historical win rates and continued confidence that the recent abatement of pricing pressures will support average selling prices consistent with what we experienced in 2020, we see a clear line of sight to maintain our consistent track record of net new EHR client wins.
Supporting these core growth efforts, we will routinely seek find and execute on initiatives that modern Assam business increase our efficiency and resulting in cost savings that we can then use to invest and additional growth.
Our operational initiatives over the next three years, we will seek to optimize margins further supporting our 2024 adjusted EBITDA target of $80 million as we execute towards targeted cost savings of $25 million by 2024.
The first facet and our margin optimization efforts is an organizational realignment and tended to help create a more nimble and dynamic organization that will spur faster decision, making by flattening our organization to bring our leadership closer to our customers and frontline employees.
The 8-K that we filed today reflects our efforts to date with this optimization initiatives with 1% of our employee base impacted by today's position eliminations.
These were certainly difficult decisions they were essential to fostering the transformation necessary for Cps to reach our long term goals.
All told the actions announced in todays 8-K filing will result in annualized cost savings of $3 $9 million with a $3 $3 million impact to 2021 and financial results.
By realigning our organization, we have the framework in place to begin improving how we work.
We are establishing efficiencies by defining and standardizing processes and activities Bob function aligning incentives to ensure productivity and desired outcomes and reassessing vendor partnerships that may present expanded automation and offshoring opportunities and the future.
Successful execution on our core growth and margin optimization components of our strategy provides us with a clear roadmap to achieving our targeted 2024, adjusted EBITDA of $80 million.
Running parallel to these components will be the upside and future growth component of our plan representing new adjacent opportunities.
These growth levers are dependent on further analysis and would lead to additional uplift to our core growth and margin optimization efforts and the market drivers that fueled the pursuit of new innovation and include an increased appetite for patient engagement industry insights reporting and analytics.
And as one example, the traction of new business and partnerships that have helped our expansion into Canada. Other English speaking countries and most recently the middle East creates a window of opportunity for continued investment and get real health and new and expanded patient experience solutions.
In order to hold ourselves accountable along the way support the governance of our efforts and to drive long term transformation. We are excited to announce the formation of a transformation management office within Cps sie.
This team will help orchestrate our plan and ensure company wide transparency and visibility to our progress along with any associated risk.
Drive change and ensure we take time to celebrate our successes along the way.
Of course, we will also share our progress against key Kpis with our quarterly with you quarterly set of Youtube and hold us accountable for our goals.
Specifically, we will provide and metrics regarding true bridge cross sell bookings.
Upmarket wins comprised of true bridge net new bookings.
HR customer retention as we strive to protect and expand our base.
And margin expansion as we execute our cost optimization efforts.
Our commitment to the future growth of CBS.
And that will ensure continued long term success has been and reenergize, while the core growth plan has not drastically changed we are emboldened by this go forward strategy that crystallizes, the promising expansion of opportunity within our wheelhouse and more clearly defines the path to capturing growth and identifies key.
Jason and sees that have the potential to fuel even more outsized shareholder returns through 2024 and beyond two.
To achieve this vision will require true business transformation, including the rapid evolution of how we service our customers and accelerating the culture of innovation necessary to thrive and the dynamic markets that we serve.
We're excited to embark on this journey and look forward to bringing you along as we report our progress going forward.
And now I'll turn the call over to Matt for a deeper look at the financials.
Thanks, Boyd and good afternoon, everyone.
We're pleased with the way we concluded the challenging year that was 2020, recognizing that the lingering impact of the pandemic and the continued shift towards a higher mix of SaaS arrangements had a muting effect on this past quarter's results on.
On today's call I'll provide a high level overview of this quarter, including some additional details on bookings performance a brief walk through our fourth quarter financial results and our outlook for 2021 and beyond.
Starting with bookings total bookings for the quarter of $21 $2 million were flat sequentially and marked a 22% decrease from a tough comp against the fourth quarter of 2019.
System sales and support bookings were down 19% sequentially due to a slow pace for net new acute care EHR decisions driving acute care EHR bookings down $1 5 million or 13%.
Our post acute segment saw bookings normalize somewhat after posting its highest bookings quarter of the past four years during the third quarter with the fourth quarter, showing a $1 1 million or 50% sequential decline.
Compared to the fourth quarter of 2019 systems sales and support bookings were down $6 5 million or 37% as the fourth quarter of 2019 saw bookings that were at near record levels adjusted for IMMU, three making for a particularly tough comp.
Looking back at full year bookings 2020, total system sales and support bookings of $48 8 million Mark to 7% annual decline with declining bookings for our acute care EHR add on sales masking, what we see as promising trends for 2021 and beyond.
Particularly net new acute care EHR bookings increased 4% despite the headwinds posed by the pandemic, while our post acute segment had its best bookings year since 2016, showing a 25% improvement over 2019 annual results.
We see both of these trends the improvement in net new acute care EHR bookings and the gaining momentum for our post acute segment is tangible proof that our markets recognize and appreciate the investments we've made and our EHR products serving to protect our EHR customer base that is so vital to our core growth initiatives.
Net Boyd touched on earlier.
Including add on sales subscription arrangements made up 29% of the fourth quarter's total EHR bookings as we continue to execute on our strategy to drive long term recurring revenues by emphasizing our SaaS offerings throughout the sales process with half of our net new acute care EHR contract signings.
During the quarter and 57% of contract signings during all of 2020 being under a SaaS arrangement.
Moving over to true bridge bookings of $10 $1 million were up $2 3 million or 30% sequentially as non <unk> cross sell bookings increased $700000 or 16%, while bookings from outside our EHR base increased $700000 or 23%.
And <unk> bookings of $1 4 million or three times, the related bookings and the third quarter.
Compared to the fourth quarter of 2019 true bridge bookings increased $400000 or 4% as the $1 $2 million, 47% increase in bookings from outside our EHR base more than offset slight declines and bookings for <unk> and cross sell opportunities.
Looking back at full year bookings 2000, Twenty's true bridge bookings of $33 $2 million Mark the highest in company history, surpassing 2019 by 22% and eclipsing the previous record set in 2017 by 6%.
Cross sell bookings finished the year at $23 million and 19% increase over 2019 amount while bookings from outside our EHR base finished the year at $10 5 million or 33% increase.
And as Boyd mentioned earlier driving true bridge revenue growth through cross sell efforts and increasing our footprint outside of our EHR base are both critical components of our overall growth strategy and this impressive full year growth has cps side as confident as ever about our ability to execute on our stated goals.
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Turning to the financial results for the period decreased implementation and volumes and shifting license mix created headwinds for non recurring revenues that outpaced true bridge revenue gains, resulting in a $1 $5 million, a 2% sequential decrease in revenues and a $3 8 million or five.
5% decrease and revenues from the fourth quarter of 2019.
On the profitability front seasonal cost dynamics outpaced sequential revenue declines results, resulting in a $500000 or 4% sequential improvement and adjusted EBITDA, while an increase and the fourth quarter's effective tax rate was the primary driver behind a $1 6 million or <unk>.
17% sequential decrease in non-GAAP net income.
Compared to the fourth quarter of 2019, the aforementioned decrease in non recurring revenues drove a $2 5 million or 17% decrease and adjusted EBITDA and a $2 9 million or 27% decrease and non-GAAP EPS.
On the margin front, the fourth quarter saw and adjusted EBITDA margin of 18, 4% and improvement over the third quarter's 17, 3%, but behind the fourth quarter of 2019 and 21% margin.
For the full year, the pandemic put pressure on non strategic purchases by our hospital customers, creating headwinds for our non recurring add on sales to existing EHR customers that were exacerbated by the work down of IMMU three opportunities and prior years.
And result was a $12 $4 million decrease in systems sales and support revenues that eclipsed modest revenue growth for true bridge, which itself was suppressed by the pandemic impact on hospital patient volumes, resulting in total revenues decreasing $10 1 million or 4% from 2019.
This decrease and annual revenues translated into lower profitability with adjusted EBITDA, decreasing $6 6 million or 13%.
And non-GAAP net income decreasing $3 8 million or 11%.
From a margin perspective, adjusted EBITDA margins decreased from 18, 2% in 2019 to 16, 4% during 2020.
Despite considerable margin improvement and the second half of 2020, the weight of the pandemic impact on our profitability could not be fully overcome particularly and the second quarter, where adjusted EBITDA margins came in at 12, 4%.
Recurring revenues made up roughly 88% of total revenues during the quarter, increasing 3% sequentially on the heels of continued improvement and patient volumes and up 2% compared to the fourth quarter 2019 for.
For the full year recurring revenues made up roughly 85% of revenues compared to 83% during 2019 with total recurring revenue decreasing slightly by $2 6 million or around 1%.
Looking deeper at our segments true bridge revenues increased 8% sequentially on continued improvement and patient volumes and our client hospitals with the related margins improving to a record 51% from 45, 3% a quarter ago.
Revenues increased $1 million or three 5% from the fourth quarter of 2019 as the revenue contributions from new true bridge client wins over the trailing 12 months were partly offset by Lumpiness and <unk> revenues and the pandemic lingering impact on patient volumes.
Although patient volumes have continued to improve we exited 2020 with patient volumes roughly 10% below pre COVID-19 levels.
Despite the pandemic pressure on patient volumes true bridge revenues, excluding Gi range increased nearly 7% compared to the fourth quarter of 2019.
True bridge gross margins improved 230 basis points from the fourth quarter of 2000 1948, 7% margin.
As a reminder, we didn't institute any COVID-19 induced head count reductions during 2020, making the fourth quarter's margin expansion all the more impressive.
Next systems sales and support revenues decreased $3 7 million or 9% sequentially as lowered installation volume and 100% SaaS mix for net new acute care installations during.
During the fourth quarter drove a $4 5 million or 50% reduction and non recurring revenues from our acute care segment.
Similarly, nonrecurring revenues from our acute care segment were down $4 million or 47% from the fourth quarter of 2019, driving the total $4 $8 million 12 per cent decrease and total system sales and support revenues.
The sequential and year over year overall revenue decreases mask a couple of promising trends that are key to our long term growth strategy.
First acute care SaaS revenues increased 10% sequentially and 36% from the fourth quarter of 2019, a testament to our focus on prioritizing our SaaS offerings, and new customer conversations and successful attempts to convert existing customers to SaaS.
For the full year acute care SaaS revenues were just shy of $10 million or 69% increase from 2019 amounts.
Second our post acute segment posted a modest two 2% sequential increase and recurring revenues its second consecutive quarter of recurring revenue growth following a period in which 11 and that the previous 12 quarters posted sequential declines.
We view this as evidence that our efforts to revitalize our post acute offerings are being recognized and appreciated by the post acute market.
From a margin standpoint decreased nonrecurring revenues cost systems sales and support gross margins to decrease to 52, 4% during the fourth quarter compared to 56, 4% and the third quarter of 2020, and 53, 9% for the fourth quarter of 2019.
We currently anticipate seven new client facilities going live with our thrive solution and the first quarter of 2021 with four expected to go live and a cloud or SaaS environment.
Moving onto operating expenses.
Other development costs were relatively flat sequentially, but were down $900000 or 10%.
From the fourth quarter of 2019 due to the capitalization of software development costs.
As a reminder, the capitalization of software development costs was neutral EPS side for 2020 and is the direct result of GAAP capitalization requirements for the investment, we're making and the development of our single platform solution for all care settings, and multiyear endeavor that we've discussed on previous calls.
Sales and marketing costs were down $700000 or 11% sequentially as the decrease in non recurring system sales and support revenue drove commission expenses lower.
Costs were down $1 million or 14% from the fourth quarter of 2019 due to decreased travel cost and lower spend on general marketing programs.
General and administrative costs increased $400000 or 4% sequentially, mostly due to increased nonrecurring costs associated with our strategic transformation project that Bob discussed.
Cost increased $2 9 million or 32% from the fourth quarter of 2019, driven by transformation project costs and increased levels of bad debt.
Closing out the income statement, our effective tax rate during the quarter was 43% compared to 12% during the fourth quarter of 2019, due mostly to year end tax true ups, including provision to return adjustments and lowered expectations on qualified research expenditures eligible for the R&D tax credit.
For 2021, we expect and effective tax rate of 18% to 19% normalized for discrete items.
From a cash flow standpoint, operating cash flows of $16 $2 million were nearly double that of the third quarter, but $1 9 million or 11% below the fourth quarter of 2019 record $18 1 million.
The significant sequential improvement and cash flows is mostly timing related coupled with the work down of existing financing receivables balances.
Dsos were relatively flat sequentially at 45, compared to <unk> 51, and a year ago.
For the full year operating cash flows increased $5 5 million or 13% to $49 million or 113% of annual adjusted EBITDA compared to 87% of adjusted EBITDA and a year ago.
Net of capitalized software development cost operating cash flows were up $2 2 million or 5% from 2019 amounts.
This continued strength and cash flows that allow for a net reduction and bank debt of $31 million. During the past 12 months with balance sheet cash increasing by over $5 million over the same timeframe.
Our successful execution on cash flow priorities. During 2020 marked a continuation of 2019 to momentum when operating cash flow is nearly doubled from their 2018 levels.
A little over three years ago, we set a capital allocation priority of right sizing our leverage profile setting a target leverage ratio of two five times debt to EBITDA that was achieved during 2019 and since surpassed.
With the improved health of our balance sheet, coupled with robust cash generating capabilities, we're now poised to confidently deploy capital and opportunistic ways and enhance shareholder value and support our growth strategy.
As we highlighted on the last earnings call, we announced in early September that our board of directors have authorized a share repurchase program, providing from a maximum of $30 million of share repurchases to be executed over two year timeframe at.
At the same time, our board suspended our quarterly dividend and definitely all with the goal of optimizing flexibility as we pursue a multifaceted capital allocation strategy.
And this strategy includes using value based stock repurchases, while maintaining abundant capital to continue to invest and our business and pursue attractive acquisitions that strengthened and broadened our market position using a disciplined approach to M&A debt will be additive to the organic growth plan that Boyd discussed at length.
During the fourth quarter, we began executing on our newly formed share repurchase program with a first shares repurchased on November the sixth.
In total for the fourth quarter, we repurchased 47000 shares for a total of $1 3 million.
I primary rationale is to capture value from undervalued shares using the program as a flexible tool to enhance shareholder value and return capital and prudent.
The cadence and volume of our repurchases will be influenced by a number of factors with valuation being chief, but also considering capital needs and availability and potential M&A.
Cost of replacement capital and other capital allocation and alternatives.
Capital allocation alternatives and priorities may evolve over time, so a lack of repurchase activity in any given quarter may not reflect our views on the intrinsic value of our stock.
Lastly, as Boyd mentioned and the last earnings call 2021 brings with it the return to guidance for EPS.
A year ago, we introduced guidance for the first time since 2016 later, joining and with a host of other companies and retracting 'twenty and 'twenty guidance amidst the uncertainty of the pandemic.
And some ways that uncertainty has naturally abated with hospital volumes inching closer to historical levels and the Pandemics and insight behind the bold actions of state and federal governments and successful private sector efforts towards vaccine research production and distribution.
In the meantime, we've continued our efforts to minimize the risk of uncertainty by further stabilizing our EHR base and increasing the prevalence of recurring revenues and our total top line mix.
This coupled with the efforts <unk> discussed around our long term strategy gives us confidence and achieving the targets we set for ourselves for 2021 and beyond.
Our long term outlook calls for average annual organic growth and recurring revenues of 5% to 8% driven by continued growth and true bridge and a continued shift towards SaaS EHR arrangements.
For 2021, we expect recurring revenue growth to be towards the high end of that range and anticipate total revenues of 270 million to $280 million with the midpoint of this range, representing 4% revenue growth over 2020.
And as a reminder, our focus on increasing SaaS mix for our EHR arrangements brings tremendous long term benefits, but does place incremental pressure on near term nonrecurring and total revenues.
This near term pressure on total revenues will limit our ability from margin expansion during 2021.
On adjusted EBITDA margins, we envision 2021 margins to land within a range of 16, 5% to 17, 5% with a long term target of achieving adjusted EBITDA margins in excess of 20% by 2023.
Compared to 2020, the midpoint of this range represents a 60 basis point expansion and adjusted EBITDA margins.
In terms of cash generation, we expect 2021 operating cash flows to represent roughly 80% to 85% of adjusted EBITDA.
And lastly, although we won't be providing quarterly guidance, we expect next quarter to show a meaningful mismatch and revenue and expense recognition that will ship more profit to the remainder of the year spin.
Specifically, we expect elective procedure volumes for the first quarter to be slightly below last quarter, yielding internal expectations of overall revenues that are relatively flat sequentially and.
Incremental pressure on profitability metrics.
And with that we'd like to open up the line for questions.
At this time, we will be conducting a question and answer session.
If you would like to ask a question. Please press star one on your telephone keypad.
And tone will indicate your line is and the question queue. You May Press Star two if you would like to remove your question from the queue for participants using speaker equipment and may be necessary to pick up your handset before pressing and saki.
Our first question is from Steve Halper of Cantor Fitzgerald.
Yeah, Hi, just.
Point of clarification on the EBITDA.
Guidance for 2021 does that include the costs related to the head count reduction as well as the benefit I guess.
Yes, Steve So yes, the anticipated costs from the 8-K that was announced today and the head count reductions that Boyd spoke up they are included in that guidance number.
Great So in theory.
You should be able to get most of the benefit in 2022 correct.
That's right.
And basis and.
And then.
You talked about procedure volume and increased inching closer.
To historical levels.
With regard to your 2021 profitability expectations you.
Have you made assumptions.
Around that topic.
Yeah, Hi, Steve This is Chris.
As it relates to the model that we've put out for 2021, we're making assumptions based on 90% of historical volumes.
And Thats, just based on that day and Flatlined over the last several months.
And also with the.
With the dollar debt volume may not return just based on trends over that last six to 12 months, where it may be going to telehealth urgent care or some other form of service versus back into the historical setting and the hospital.
And then last question is a follow up.
Did your customer base C.
A decline and utilization say in November December January.
As Covid cases started to increase again in some markets.
Not from the elective services I would definitely say again.
We're seeing that flat line is and the ER, which I think long term is probably a positive for the hospitals, it's just a matter of making up that utilization and the interim.
But elective procedures.
Hanging in pretty good pretty well from.
Our hospitals, what we're seeing yes, great. That's very helpful. Thank you. Thank you.
Our next question is from Donald Hooker of Keybanc capital markets.
Great good afternoon.
Great. Good afternoon, and thank you I just wanted to make sure I understand the math and you kind of threw out a bunch of numbers here.
And would like by my quick back of the envelope map from math here Youre growing true growth, you're at about $111 million and 2020.
I think you want Youre, saying you want to add.
About $85 million on top of that.
By 2024, so we're.
We're kind of talking about a kind of a 15% Roe.
Revenue CAGR to get to that incremental revenue both within the client base and without outside of the client base and again my numbers, there right or am I missing something.
Yes.
You are right.
And I don't have the math in front of me, but the starting point 2000, 22020, ending revenue number and we do expect the incremental $60 million from cross sell $25 million from.
From from outside the EHR base, so, yes, youre thinking about it right.
Okay. So that's it.
And that's a hefty that's a good growth rate.
And I'm thinking about any.
<unk>.
Kind of investments near term just to yes.
And I know you kind of throw out and $80 million EBITDA EBITDA target, which is admirable goal as well are there any kind of upfront cost and just thinking about to grow that and we have a 51% gross margin and true bridge.
I would from the outside looking in and I would look like you're running pretty lean there.
How do I think about that and how do I interpret that gross margin of 51% does that need to come down significantly they bring and staff that grow that 15%.
Yes, Steve one other ways that we're thinking about increase and net margin and specifically on the turbine side is <unk>.
Through automation and looking for opportunities for efficiencies there right now we are still very.
Human capital heavy on delivering the true grid services.
One of the one of the initiatives inside of our transformation management office is a focus towards that automation and process efficiency.
Okay Super and then maybe one last one from me.
Kind of outside of the talking points around this quarter would you still have these long term financing.
Receivables on the balance sheet, they seem like they've been coming down just as you've told us they would.
And you still have a fair number a fair amount of receivables there left I'm, hoping that comes in.
How do we think and can take 11, five long term and $10 eight short term and I think a lot of that I thought was related to the meaningful use program to.
$22 million of receivables financing receivable when would we expect that to be collected.
That would be a nice lift to cash flow.
So you pick up on a nice.
A nice pickup and in cash flow for this year I think it was worth about $6 million of cash contribution from financing receivables, which right now are at their lowest point that they've been in the past three years, which makes sense given the high SaaS mix that we've seen in the past couple of years and then our collection on these meaningful use stage three balances which were mostly.
Financing over these 12 month terms so in short the past financing decisions coupled with this shift and license mix towards more SaaS has created a bit of a now a favorable disconnect between current period revenues and cash flows. So all that to say going forward. We may see some 90 day windows, where financing receivables dragged down cash flows but.
And we generally expect them to be cash flow positive next year somewhere and say a $5 million to $6 million range.
Okay Super Thank you I'll jump again thanks.
Our next question is from Joy Zhang SBB Leerink. Please state your question.
Good afternoon.
From here and thanks for taking my question.
Certainly.
Circle back on your comment and Bob.
And and automation and recognized.
To me that's going to be acquisition.
And help us as well and.
As a follow up to that Kevin.
And sort of the battles.
That would be your area of focus with and M&A.
And that's sort of get real health or other areas.
Yes.
Hey, Joe This is Chris.
I don't know if I would necessarily assume that that's going to be the lean for us from an M&A standpoint, and I think we're looking at it much like we do.
The other development and innovation throughout the company, it's a mix of what we can deliver and house, who we can partner with to.
Achieve that goal or is there anything opportunistically that we can find.
You're thinking about automation.
Artificial intelligence, John and throw it.
A handful of other buzzwords there.
The multiples go Sky high. So there is there is probably leaning a little more towards the partnership aspect of it but we're not ruling anything out there.
Thanks, Paul.
And as a follow up.
Given the prepared remarks line strategically targeting new work within the HR markets, one and just just asked about the competitive environment and.
And that's changed over this past year, I know a lot and <unk>.
Last year and types of Athena health and wealth.
And that is being up next year and along perhaps share and are being that it's quite focused on that market.
Still opportunities going forward and what are some others.
Hey, Joe Hey, David dye here.
I haven't seen any significant change over the course of the last year I mean, we still have.
Athena health is still supporting their acute care customers, but not doing any further.
And further sales efforts or or development on that product. So we have seen some of those hospitals enter the market. We expect that more will do so over the course of 2021.
There are still approximately 150 or so.
Acute care hospitals under 100 beds that are on what we call volume vulnerable vendors.
Some some are are not enhancing the product and others are.
Continue to enhance the product, but we feel like.
From a physician and clinician satisfaction standpoint.
Their scores are incredibly low so a lot of those hospitals.
Either currently or will be entering the market and the near future. We do continue to see cerner.
On a somewhat regular basis.
I would say that they don't have a.
Intense focus on the small hospital marketplace right now, but it continues to be an area, where they play and selectively and we continue to see meditech.
As we have for decades as well on a somewhat regular basis, but there is no significant change.
That's helpful. Thank you very much.
Sure.
Our next.
Question is from Andy Draper of true Securities. Please state your question.
Hey, guys at Sandy I guess that drop and I asked.
We were wondering.
Yeah.
So a couple of questions first on the.
And I think I heard you right, saying it was a 100% SaaS sales and the quarter I know this bounces around a lot, but do you are you seeing anything and it may be related to the pandemic related to financial situations that suggest.
Debt, we're leaning more towards those type of deals and you would expect high preponderance of SaaS, but I kind of recall there was several quarters ago, where it's very heavy SaaS and like the next quarter. It was like literally in versus traditional license and you just flip back and I'm just trying to see if there's anything you guys are seeing that suggest.
We're likely to stay more towards SaaS.
And so same day. This is Matt just a point of clarification, so 50% of the contracts that were signed during the quarter for net new EHR on the acute side, we're SaaS, but 100% of the installations. So just a bit of a client okay.
So I guess.
Maybe then if I take the last two quarters, then trends I guess the question is the same I heard some of them I misheard you.
But are there trends that suggests we're leaning more towards SaaS or do you expect it to still be.
Really lumpy quarter to quarter.
Hey, David dye.
And I'm picking up here sandy so from that but.
And it'll it will of course be somewhat lumpy, but we are definitely seeing a trend more to SaaS and I'd say that's for two reasons. One is frankly, because we're pushing and in that direction as much as we possibly can and but too.
The customers continue to be just more receptive from a marketplace and endpoints to assess environment a lot of that has to do with.
The connectivity and bandwidth availability and rural areas continues to improve.
Quickly.
And so.
It is helping us as well, but we're currently projecting that 75% of our net new business sales and 2021 will be SaaS based on the pipeline that we have today.
Okay great.
And helpful clarification, sorry about the Miss here on that.
Matt.
And so on.
Second question is on the RCM side of true bridge. When you think about there's been some some sales and the space. When you think about going outside of your customer base.
What are the key things that you think can differentiate you what are people looking for and is it really a referenced sale and Theyre just wanted to talk to five other people and they say you guys do a great job do they want to see specific metrics capabilities, what is it because they're changing but theres still a lot of players out there what is it.
I think you had.
Think can be make you successful outside of the true.
<unk> got a core software relationship.
Hi, Sandy this is Chris.
So a lot there to unpack I guess I'll start by say and for us and what we've really been focused on over the last say 18 months is just the brand awareness is making sure that we're in the game when somebody is making a decision.
And if you look to the other side on the on the EHR front I don't think there is a.
Community Hospital EHR decision that CSI is not a part in and so aspirational and we'd like to be there from an RCM standpoint.
When we're thinking about metrics and referenced of all and we feel like our product.
And against anybody else and we've got the.
We've got some the awards, whether it be HMA peer reviewed.
Or other Credentialing to show that the product stands up it's just a matter of getting the at bats.
We had some significant wins last year that we look to capitalize on and obviously use those as a reference to catapult going forward.
Great. That's helpful. Thanks Yep. Thank you.
Okay.
Ladies and gentlemen, we have reached the end of the question and answer session and I would like to turn the call back to Boyd Douglas for closing remarks.
I want to thank everyone for your time. This afternoon I hope that you were able to sense, our genuine enthusiasm around the transformation that we have begun at CBS.
We believe the time and effort that is going into this plan some of which we highlighted today, we'll have a very positive impact on our effectiveness efficiency and value delivered to our shareholders clients and employees, we look forward to providing updates on our progress each quarter as you join us on our mission to deliver.
Accessible and transformative products and services to the global healthcare marketplace. Thanks, everyone and have a good evening.
This concludes today's conference you may disconnect your lines at this time. Thank you for your participation.
Okay.
Okay.
Yes.
[music].
And.
John.
John.