Q3 2023 Computer Programs and Systems Inc Earnings Call

November 8, 2023

Greetings and welcome to the CPSI third quarter earnings conference call. At this time, all participants are on a list and all.

Greetings and welcome to the C. P. S. <unk> third quarter earnings Conference call. At this time all participants are in a listen only mode. A brief question and answer session will follow the formal presentation.

A brief 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. It is now my pleasure to introduce your host, Drew Anderson, investor relations. Thank you. You may begin.

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.

It is now my pleasure to introduce your host drew Anderson Investor Relations. Thank you you may begin.

Good afternoon, and welcome to the C. P. S. I third quarter 2023 earnings conference call.

Good afternoon and welcome to the CPSI third quarter, 2023 Arning's conference call.

Leading today's call are Chris Fowler, President and Chief Executive Officer and Matt Chambliss, Chief Financial Officer. This call may include statements regarding future operating plans, expectations and performance that constitute forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.

Leading today's call are Chris Fowler, President and Chief Executive Officer, and Matt Chambliss, Chief Financial Officer. This call May include statements regarding future operating plans expectations and performance that constitute forward looking statements made pursuant to the safe Harbor provisions of the private Securities litigation.

Reform Act of 1995 the.

The company cautioned you that any such forward looking statement only reflect management expectations and predictions based upon currently available information and are not guarantees a future result or performance.

The company cautions you that any such forward looking statements only reflect management expectations and predictions based upon currently available information and are not guarantees of future results or performance.

actual results may differ materially from those expressed or implied by such forward-looking statements as a result of known and unknown risks, uncertainties, and other factors, including those described in public releases and reports filed with the Security and Exchange Commission, including, but not limited to, the most recent annual report on Form 10K.

Actual results may differ materially from those expressed or implied by such forward looking statements as a result of known and unknown risks uncertainties and other factors, including those described in public releases and reports filed with the Securities and Exchange Commission, including but not limited to the most recent annual report.

On Form 10-K.

The company also cautions investors that the forward looking information provided on this call represents their outlook only as of this date. And they undertake no obligation to update or revise any forward looking statements to reflect events or developments after the date of this call.

The company also cautions investors that the forward looking information provided on this call represents their outlook only as of this date and they undertake no obligation to update or revise any forward looking statements to reflect events or developments. After the date of this call.

At this time, I will turn the call over to Mr. Chris Sauer, President and Chief Executive Officer. Please go ahead, sir.

At this time I will turn the call over to Mr. Chris Fowler, President and Chief Executive Officer. Please go ahead Sir.

Thanks, Drew, and thank you to everyone for joining us this afternoon. Unfortunately, this was another tough quarter for CPSI, with metrics around the top line, bottom line, and growth oriented bookings, all underperforming our expectations, and surely those of our shareholders.

Thanks drew.

You to everyone for joining us this afternoon.

Unfortunately, this was another tough quarter for Cps Si with metrics around the topline bottomline and growth oriented bookings all underperforming our expectations and surely those of our shareholders.

Three months ago, we acknowledged the reality of our historical tendency of allowing optimism to trump realism, and we told you those days were behind us. While our mindset and outlook have definitely shifted, it's taking time for that to flow through to our operation.

Months ago, we acknowledge the reality of our historical tendency of allowing optimism to Trump realism, and we told you those days are behind us, while our mindset and outlook have definitely shifted it's taking time for that to flow through to our operations.

Boiling this all down, what it means for the third quarter is that our results came in below our expectations on the top and bottom line as well as soft on book.

Pulling this all down what it means for the third quarter is that our results came in below our expectations on the top and bottom line as well as soft on bookings.

A revenue of $84.7 million was about $2 million short of our plan. Adjusted EBITDA of $9.7 million was light as a result of revenue mix as well as some unexpected out-of-period vendor expenses of around a half a million dollars. And bookings in the third quarter came in at $16.2 million also well below our target.

Revenue of $84 $7 million was about $2 million short of our plan adjusted EBITDA of $9 7 million was light as a result of revenue mix as well as some unexpected out of period vendor expenses of around half a million dollars in bookings in the third quarter came in at $16 2 million also.

Well below our target.

Finally, the growth of our RCM business continues to be sluggish.

Finally, the growth of our RCM business continues to be sluggish however, our seat or excuse me. However, our EHR business performed slightly better than expected and we saw continued strength in our existing customer base with retention coming in above our expectations for the quarter.

However, our ERC, excuse me, however our EHR business performed slightly better than expected, and we saw continued strength in our existing customer base with retention coming in above our expectations for the quarter. This gives us optimism around our right to win and those cross-sell opportunities for our C.

This gives us optimism around our right to win in those cross sell opportunities for RCM.

Let me start by saying that over the course of this year revenue has come in slower than we anticipated and at the same time as we discussed last quarter, we did not scale back the additional investments we have been making in our future.

Let me start by saying that over the course of this year, revenue has come in slower than we anticipated. And at the same time, as we discussed last quarter, we did not scale back the additional investments we have been making in our future.

With that backdrop, we have increased our vigor in making the operational adjustments in the core business that will serve to increase profitability once sales emerged from what has been a more elongated cycle that originally expects.

With that backdrop, we've increased our vigor in making the operational adjustments in the core business that will serve to increase profitability. Once sales emerge from what has been a more elongated cycle than originally expected.

I'll get into more of the operational initiatives in a moment, but I also want to comment on some external pressures we're facing as an organization, as we continue to shepherd ourselves opportunities to close.

I'll get into more of the operational initiatives in a moment, but I also want to comment on some external pressures, we're facing as an organization as we continue to shepherd our sales opportunities to close it.

externally, hospitals, especially the smaller ones with less than 100 beds where we have identified cross-cell opportunities. Our under-tremendous cross-pressure related to labor and many of them have simply paused-making decisions on non-clinical spending like new technology solutions in our CM service.

Externally hospitals, especially the smaller ones with less than 100 beds, where we have identified cross sell opportunities are under tremendous cross cost pressure related to labor and many of them have simply pause, making decisions on non clinical spending like new technology solutions and RCM services. While this is not a new.

Well, this is not a new pressure on our end market. We did experience an uptick in perspective deals where no decision was made this quarter.

New pressure on our end market, we did experience an uptick in prospective deals where no decision was made this quarter as.

as we strategically move upstream the large hospitals with 100 to 400 beds, the decision-making process and those institutions just takes longer due to the greater complexity and involvement of multiple decision-making.

As we strategically move upstream the large hospitals with 100 to 400 beds the decision, making process and those institutions just takes longer due to the greater complexity and evolve involvement of multiple decision makers.

We're managing the challenging environment and staying in front of these opportunities. I have spent the last few weeks meeting with existing customers and new targets.

We're managing the challenging environment and staying in front of these opportunities I have spent the last few weeks meeting with existing customers and new targets. These meetings have reinforced our belief that eventually all providers will move to an outsourced model.

These meetings have reinforced our belief that eventually all providers will move to announce our model.

As I've met with dozens of CEOs, what I have found is that they tend to fall into one of two camps.

As I've met with dozens of Ceos, what I have found is that they tend to fall into one of two camps.

either their hospitals are underperforming and they know they need help now. Are they performing okay, but could be doing a little bit better? And they typically have employees, key employees, that they just aren't ready to outsource.

Neither their hospitals are underperforming and they know they need help now are they're performing okay, but it could be doing a little bit better and they typically have employees key employees that they just arent ready to outsource yet, but the headline here is that they all agree that it's a foregone conclusion, they will ultimately need to outsource and in time.

But the headline here is that they all agree that it's a foregone conclusion. They will ultimately need to outsource and in time will become prospects for us.

We will become prospects for us.

As all of this unfolds, we will be laser focused internally improving the efficiency of our operations, which will also ensure that we'll be in a position to take advantage of future opportunities.

Operationally, we're actively working to fine tune or accelerate the following initiatives that we laid out for ourselves in the beginning of the year.

First, availability of domestic and global resources have put pressure on timely deliveries and performance in our RCM business.

First availability of domestic and global resources have put pressure on timely deliveries and performance in our RCM business. This isn't really anything new to US is the scarcity of domestic resource resources was a central motivation behind our global workforce strategy, what's incremental however over the last 90 days has been the <unk>.

This isn't really anything new to us as the scarcity of domestic resources. Resources was a central motivation behind our global workforce strategy.

What's incremental, however, over the last 90 days has been the inconsistent resourcing from our global partners, which has led to some delayed go lines for our CM service.

Inconsistent resourcing from our global partners, which has led to some delayed go lives for RCM services.

Global partners will continue to be an important contributor to our workforce strategy. However, they are now part of a broader solution for us.

Global partners will continue to be an important contributor to our workforce strategy. However, they are now part of a broader solution for us our sole reliance on partners put us at a disadvantage as we were working to scale, our global workforce with the acquisition of Hugo I am confident that we are on a better path to eliminate this bottleneck.

Our soul relies on partners, put us at a disadvantage as we were working to scale our global work.

With the acquisition of UGLE, I am confident that we are on a better path to eliminate this bottleneck. For context, we expect to have 400 global resources by the end of this year, and a total of 800 global resources by the end of 2024. And we anticipate 30% at a minimum of these global resources to be CPSI employees thanks to this acquisition.

For context, we expect to have 400 global resources by the end of this year and a total of 800 global resources by the end of 2024, and we anticipate 30% at a minimum of these global resources to be Cps I employees. Thanks to this acquisition.

This still also provides some wild factor margin expansion potential by bringing these efforts in house.

There's still also provide some wow factor margin expansion potential by bringing these efforts in house initially our offshore partners helped us lower our labor expense by 41% for each ft, but the vivo transaction will enable us to bring offshore capabilities in house, bringing the savings opportunity closer to 75.

Initially, our offshore partners helped us lower our labor expense by 41% for each FTE. But the viewglot transaction will enable us to bring offshore capabilities in-house, bringing the savings opportunity closer to 75% per FTE.

Sent per FTE.

Lastly, beyond the improved access to global resources and the margin expansion that comes with Google, it's also opening up a new market for us in ambulatory R-C-M service.

Lastly, beyond the improved access to global resources and the margin expansion that comes with Google. It's also opening up a new market for us in ambulatory RCM services.

Second, as noted in our 8K last week, we made another push towards the ramping of our enterprise-wide off-shoring initiatives by shifting 2% of our current domestic workforce to the global or outsource model. This is an additional 2 million in cost savings to the voluntary retirement program that kick-started our efforts to streamline our organization, leading to the roughly 3 million in savings this year and 6 million on an annualized basis.

Second as noted in our 8-K last week, we made another push towards the ramping of our enterprise wide offshoring initiatives by shifting 2% of our current domestic workforce to the global or outsource model. This is an additional $2 million in cost savings to the voluntary retirement program that kick started our efforts to streamline our.

Organization, leading to the roughly $3 million in savings this year and $6 million on an annualized basis.

Third, while the courters' bookings results are disappointing, the visibility we have into the pipeline gives me confidence that this team is curating an impressive set of opportunities.

Third while the quarter's bookings results are disappointing the visibility we have into the pipeline gives me confidence that this team is curating an impressive set of opportunities. There's good reason to believe that our deal flow will likely pick up and longer term, we can achieve the consistency in sales performance needed to take advantage of this finite.

There's good reason to believe that our deal flow will likely pick up and longer term. We can achieve the consistency and sales performance needed to take advantage this finite window for RC and market share game.

Indo for RCM market share gains.

Our total three months weighted pipeline has increased 20% from the third quarter of 2022, and we have also closed several significant deals in the first month of the fourth quarter, which are both promising indicates.

Make no mistake, we are bullish on the RCM opportunity ahead of us. However, there is a real nuance in how we must manage the current fluctuation in market demand. A recently reorganized sales team must balance being assertive with a stronger consultative, even educational approach with buyers. Motivating hospitals that are performing okay but could be doing better takes time and comes with a variety of complexities, especially when people's jobs are potentially impact.

Make no mistake, we are bullish on the RCM opportunity ahead of US. However, there is a real nuance in how we must manage the current fluctuation and market demand.

Our recently reorganized sales team must balance being assertive with a stronger consultative even educational approach with buyers motivating hospitals that are performing okay, but could be doing better takes time and it comes with a variety of complexities, especially when people's jobs are potentially impacted.

We've been aggressively deploying a successful land and expand strategy of pursuing short-term contracts and AR work-known opportunities.

We've been aggressively deploying a successful land and expand strategy of pursuing short term contracts and they are working on opportunities. While we are while we continue to see this as an effective foot in the door strategy. These opportunities have greater risk compared to our long term full service model, where we manage the hospital's entire net patient.

While we continue to see this as an effective foot in the door strategy, these opportunities have greater risk compared to our long-term full service model where we manage the hospitals Hustles and tire that patient revenue.

<unk>.

We're very motivated to perform well against short-term contracts and in turn convert them to long-term deals. It is never a guarantee and therefore creates risk of lumpy revenue recognition due to the potential one-time nature of these projected project-based arrangements.

While we're very motivated to perform well against short term contracts and in turn convert them to long term deals. It is never a guarantee and therefore creates risk of a lumpy revenue recognition due to the potential one time nature of these projected project based arrangements.

Lastly, while overall bookings for our encoder solution came in near expected levels, these ones were heavily weighted toward the last week of the quarter with a high-mix of sats and roughly half of the winds not expected to go live until 2025, creating real challenges versus historical bookings to revenue conversion time.

Lastly, while overall bookings for our encoder solution came in near expected levels. These wins were heavily weighted toward the last week of the quarter with a higher mix of SaaS and roughly half of the wins not expected to go live until 2025, creating real challenges versus historical bookings to revenue conversion.

Timeframes.

And finally, as our business has evolved, our pace of acquisition has picked up. Our work forces become more global and our financial infrastructure needs to be modernized. We've obviously struggled with our cost structure and budget.

And finally as our business has evolved our pace of acquisitions has picked up our workforces become more global and our financial infrastructure needs to be modernized, we've obviously struggled with our cost structure and budgeting.

We've been operating with data financial software and some mismatched skill sets that haven't served us well during our dynamic transformation over the last 12 months.

We've been operating with dated financial software and submit mismatch skill sets that haven't served us well during our dynamic transformation over the last 12 months to.

To address the former issue, we will be updating our financial operating system to Microsoft Dynamics with a plan go live of September and 2024. And on the latter point, recognizing that the skill set of our financial team needs to evolve over time, we're pleased to announce that the NAVBASI will be assuming the role of CFO effective January 1st.

To address the former issue we will be updating our financial operating system to Microsoft dynamics with a plan to go live of September in 2024, and on the latter point recognizing that the skill set of our financial team needs to evolve over time, we're pleased to announce that the ne bassi will be assuming the role of CFO.

Effective January one.

The neighbor brings much needed maturity to our FPNA function, including the experience from his tenure at Nelson that will benefit our own transformation journey and his deep experience in offshore operations that has become a key need with our acquisition of you.

The ne brings much needed maturity to our F PNA function, including the experience from his tenure at Nelson that will benefit our own transformation journey and has deep experience in offshore operations that has become a key need with our acquisition of Eagle.

We're confident, Vene's background in pet agree will bring our budgeting and financial operations to the next level, holding us accountable, not allowing us to get ahead of ourselves, and ensuring that there is a business case to support us and not work again.

We're confident then as background and threat pedigree will bring our budgeting and financial operations to the next level holding us accountable not allowing us to get ahead of ourselves and ensuring that is that there is a business cases case to support us and not work against us.

As you would expect our third quarter financial results and our booking performance is going to have an impact on our outlook for the year, we're lowering our 2023 guidance to account for these factors and now expect revenue of between 337 and $342 million and adjusted EBITDA to be between 47% and 40.

As you'd expect our third quarter financial results and our booking performance is going to have an impact on our outlook for the year. We're lowering our 2023 guidance to account for these factors and now expect revenue of between 337 and 342 million and adjusted EBITDAG to be between 47 and 49 million.

$9 million.

Before turning things back over to Matt, I want to reiterate that there's a lot for us to be excited about, but we're also realistic about the frustrations from the shareholder community around the lack of growth and what seems like a terrific RCM opportunity, and the need for greater scrutiny on the cause side of the P&L.

Before turning before turning things back over to Matt I want to reiterate that Theres a lot for us to be excited about but we're also realistic about the frustration from the shareholder community around the lack of growth in what seems like a terrific RCM opportunity and the need for greater scrutiny on the cost side of the P&L.

We believe that patients have a virtue as the RCM opportunity market for community hospitals continues to develop and we're pursuing cost strategies that are both intentional and surgical, ensuring that we have the organizational health necessary to deliver on the needs of our loyal customers.

We believe that patience is a virtue as the RCM opportunity market for community hospitals continues to develop and we're pursuing cost strategies that are both intentional and surgical ensuring that we have the organizational health necessary to deliver on the needs of our loyal customer base.

The continued execution of our voluntary early retirement program, the continued transition to a global and outsourced workforce, and the recent acquisition of UGLE, have all been with a keen focus on improving profitability in advance of any revenue gain.

The continued execution of our voluntary early retirement program. The continued transition to a global and were outsourced workforce and the recent acquisition of Yugo have all been with a keen focus on improving profitability in advance of any revenue gains.

We're evolving and adapting our leadership team to the changing needs of the organization as we continue down this path of transformation. We look forward to showing you what this team of now more than 3,000 people across multiple countries can accomplish and we thank everyone for their willingness to endure this bumpy road to success.

We're evolving and adapting our leadership team to the changing needs of the organization as we continue down this path of transformation. We look forward to showing you. What this team of now more than 3000 people across multiple countries can accomplish and we thank everyone for their willingness to endure this bumpy road to success, we bill.

We believe in the future of community health care and remain convicted that community hospitals need a robust and healthy CPSI to help them thrive in delivering care to their communities. And we're dedicated to returning to operational excellence and making the tough decisions necessary to ensure that a vibrant, healthy CPSI is here to shepherd community health care into a bright future. And with that, I'll turn it over to Matt for...

Even the future of community health care and remain convicted that community hospitals need a robust and healthy Cps II to help them thrive in delivering care to their communities and we are dedicated to returning to operational excellence and making the tough decisions necessary to ensure that a vibrant healthy Cps Si is here to shepherd.

The health care into a bright future and with that I'll turn it over to Matt for a bit more color on the financials.

Thanks Chris and thanks to everyone for joining the call. I'm gonna quickly cover the viewable transaction and then dive into the third quarter's result.

Thanks, Chris and thanks to everyone for joining the call I'm going to quickly cover the vehicle transaction and then dive into the third quarter's results.

The purchase price review will include an upfront cash consideration of $36 million using amounts available under our $160 million revolve.

Purchase price review will include an upfront cash consideration of $36 million using amounts available under our $160 million revolver. The purchase agreement includes additional earn out incentives of up to 31 $5 million based on a combination of a minimum 2020 for EBITDA contribution thresholds and view.

The purchase agreement includes additional earnout incentives of up to $31.5 million based on a combination of a minimum 2024 EBIT.com distribution threshold and viewable ability to provide offshore employees dedicated to our existing RCM services within True Bridge.

<unk> ability to provide offshore employees dedicated to our existing RCM services with insurer bridge for.

For the full year 2023, Vue Gold should ride a roughly 45% annual revenue increase to generate a top line of about $17 million and roughly $3 million in adjusted even.

For the full year of 2023, Dougal should ride of roughly 45% annual revenue increase to generate the top line of about $17 million and roughly $3 million and adjusted EBITDA with.

With that acquisition taking place in the fourth quarter, we expect our financials to see incremental revenues of around $3.9 million and $1 million of EBITDA.

With the acquisition taking place in the fourth quarter, we expect our financials to see incremental revenues of around $3 $9 million and $1 million of EBITDA for 2023 as a result of the acquisition looking forward to 2024, we believe standalone bugle should deliver at least $4 $5 million of EBITDA and that's without the <unk>.

2023 as a result of acquisition. Looking forward to 2024, we believe standalone fubals should deliver at least $4.5 million of EBITDAW. And that's without the synergies of transitioning our offshore workforce to the combined business.

These are transitioning our offshore workforce to the combined business.

Moving on to the quarter's results, Net Patient Revenue, which represents our total NPR, of just our end to end R CM customers, was just shy of $3.5 billion, an increase of 17% year over year. Total bookings in the quarter were six...

Moving on to the quarter's results net patient revenue, which represents our total NPR of just our end to end RCM customers was just shy of $3 $5 billion, an increase of 17% year over year.

Total bookings in the quarter were $16 2 million RCM bookings of $9 1 million and comprised 56% of total bookings, but underperformed versus internal expectations and year over year as a cross sell decision pace has slowed which Chris Chris touched on earlier.

RCM bookings of 9.1 million comprised 56% of total bookings but underperformed versus internal expectations in year over year as the cross-el decision pace has slowed which Chris touched on early.

Total revenue of 82.7 million was effectively flat compared to last year. But a quarter, RGM represented 56% of total revenue, EHR was 42%, and patient engagement rounded out the remaining 2%.

Total revenue of $82 7 million was effectively flat compared to last year, but the quarter RCM represented 56% of total revenue EHR was 42% and patient engagement rounded out the remaining 2%.

While revenues were flat, our cost of revenues increased by $600,000, as the RCM margin had wins, we discussed on the last call. Offset and most of the cost reductions we've achieved within our EHR business through our scaled Agile implementation and the voluntary early retirement program we announced last on the last call.

While revenues were flat our cost of revenues increased by $600000. The RCM margin headwinds we discussed on the last call offset most of the cost reductions we've achieved within our EHR business through our scaled agile implementation and the voluntary early retirement program, we announced last on the last call.

Outside of costs of revenues, we saw operating expenses increased by $9.5 million to 53.3% of total revenues compared to only 41.7% the third quarter of last year.

Outside of cost of revenues, we saw operating expenses increased by $9 5 million to 53, 3% of total revenues compared to only 41, 7% in the third quarter of last year.

Roughly 70% of that increase came from EBITDA neutral, non-recurring acquisition costs, and severance costs associated with cost-cutting efforts like the voluntary early retirement probe.

Roughly 70% of that increase came from EBITDA neutral nonrecurring acquisition costs and severance costs associated with cost cutting efforts like the voluntary early retirement program.

Other major costs increases were seen in product development. As costs associated with our Microsoft Azure Cloud migration and other workplace modernization efforts increased $1.4 million while G&A costs on combined $1.3 million increase in benefits costs and bad debt.

Other major cost increases, we're seeing in product development as cautious ODI associated with our Microsoft Azure cloud migration and other workplace modernization efforts increased $1 $4 million, while G&A costs on combined $1 $3 million increase in benefits costs and bad debt expense.

These all resulted in adjusted EBITDA of $9.7 million compared to $13.3 million a year.

This all resulted in adjusted EBITDA of $9 $7 million compared to $13 $3 million a year ago adjusted.

adjusted evadom margin of 11.8% was down 440 basis points to the growth and operating cost.

Adjusted EBITDA margin of 11, 8% was down 440 basis points due to the growth in operating costs.

Rapping up the financials, operating cash flow for the third quarter was 3.1 million.

Wrapping up the financials operating cash flow for the third quarter was $3 $1 million.

Turning to guidance, while we certainly didn't want to be in a position to adjust guidance again following the third quarter, the top line challenges that have unfolded in the back half of the year have us adjusting guidance yet again, with the details as follows.

Turning to guidance, while we certainly didn't want to be in a position to adjust guidance again following the third quarter. The topline challenges that have unfolded in the back half of the year have us adjusting guidance yet again with the details are as follows.

We're reducing our expected revenue range to a range of $337 to $342 million from the previous expectation of $348 to $350 million.

We're reducing our expected revenue range to a range of $337 million to $342 million from the previous expectation of $340 million to $350 million.

Reducing adjusted EBITDA expectations to a range of $47 million to $49 million when the previous expectation of $52.5 million to $54.5 million. And reducing our non-GAP net income to a range of $24.5 million to $26.5 million. For the previous expectation of $25.6 million to $27.6 million.

Reducing adjusted EBITDA expectations to a range of 47 million to $49 million from the previous expectation of $52 5 million to $54 $5 million.

And reducing our non-GAAP net income to a range of $24 5 million to $26 $5 million from the previous expectation of $25 6 million to $27 $6 million.

These new guidance ranges are inclusive of to the fourth course. And with that, I'll turn things back over to the Operator for questions.

These new guidance ranges are inclusive of funerals contribution to the fourth quarter.

With that I'll turn things back over to the operator for questions Maria.

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press star two if you would like.

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For participants using speaker equipment, it may be necessary to pick up your handset before pressing the start key. One moment please.

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One moment, please while we poll for question.

Our first question comes from George Hill with Joy Tupank. Please proceed with your question.

Our first question comes from George Hill with Deutsche Bank. Please proceed with your question.

Hey guys, we're going to have to take them to questions. I guess Chris, I'll probably start off with the one that's on the top of everybody's mind right now. I know you guys are not in a position to talk about 2024 guys, yes. But I guess maybe can you talk about giving you guys easy market environment right now? What might be the big puts and takes for the big moving pieces? As we think about 2024, and I know you talked about some of the new wins not going that till 2025. So there's clearly some push out, but kind of any early color you can get I think would be super helpful.

Hey, guys and good afternoon for taking the questions I guess, Chris I'll, probably start off with the one that's on the top of everybody's mind right. Now I know you guys are not in a position positioning to talk about 2020 guidance, yet, but I guess, maybe can you talk about given how you guys see the market environment right now what might be the big puts and takes of the big moving pieces as we think.

2024, and I know you talked about some of the new wins not going back to 2025. So there's clearly some push out but kind of any early color you can give I think it would be super helpful.

Yeah, and obviously we want to be really mindful as we continue to sharpen our pencil a little bit here George and thinking about 2024. Again, also not falling into some of the traps that we have up to this point. But with that said, you know, as I said in the prepared remarks, you know, we're thinking about this from a, let's make sure that we've got the business healthy as we prepare for the revenue to online.

Yeah, and obviously, we want to be really mindful as we continue to sharpen our pencil a little bit here, George and thinking about 2024 again also not fallen into some of the tracks that we have up to this point.

But with that said.

As I said in the prepared remarks, we're thinking about this from a let's make sure that we've got the business healthy as we prepare for the revenue to unlock.

We have been very intentional about the moves that we've made to prepare the business, to be ready to take on these opportunities and to address the margin compression that we've seen happen over the last 24 to 18 months. And I think that we're gonna see those come through nicely in 2024.

We have we have been very intentional about the the moves that we've made to prepare the business to be ready to take on these opportunities and to address the margin compression that we've seen happen over the last 24 to 18 months and I think that we're going to see those come through nicely in 2024.

On the revenue side, on the bookings opportunity, you know, as I said, I've been on the road the last couple of weeks I intend to continue to be on the road in front of these opportunities, where I think that I can be helpful from the CEO level to CEO at the facility to help push them a little bit over the edge of understanding that this is an eventuality. You know, I had five one-on-one meetings over the last week with CEOs, where again, the posture, the position is that this is gonna happen.

On the revenue side on the bookings opportunity as I said I've been on the road. The last couple of weeks I intend to continue to be on the road in front of these opportunities where I think that I can be helpful from the from the CEO level. The CEO at the facility to help push them a little bit over the edge of understanding that this is an eventuality.

I had five one on one meetings over the last week with Ceos or again, the posture that position is that this is going to happen, whether they are operating well today or whether they're not.

Whether they're operating well today or whether they're not, it is really kind of the throttle on how that's going to shake out. Again, we continue to look for opportunities for us to show them ease of the strain of managing this operation by themselves.

It is really kind of the throttle on how thats going to shake out.

Again, we continue to look for opportunities for us to show them ease of.

The strain of managing this operation by themselves and also areas of opportunity, where we can bring along new revenues for them.

and also areas of opportunity where we can bring along new revenues for them through either better efficiencies, better processes, or whether it's through programs that we can bring in. And so, you know, what I continue to hear more and more from these hospitals and the CEOs is that the cash collections, while it's vital to their operation, it's not their mission and it's not their focus. And it is ours.

Through through either better efficiencies better processes or whether it's through programs that we can bring in and so you know what I continue to hear more and more from these hospitals is and the Ceos is that the cash collections, while it's vital to their operation its not their mission and its not their focus and it is ours and.

And so where we're going and where they are as well, I think lines up nicely. And so as we continue to work over the last part of this year, as we on board, Vene, in January , we'll look forward to providing what 2024 looks like.

So where we're going and where they are as well I think lines up nicely and so we continue to work over the last the last part of this year as we onboard vinay.

January.

I'll look forward to providing what 2024 it looks like that.

and enjoy it. I'll just hop in, out, just hop in quick. Nope, over met. Cut.

Yeah, and George I'll just hop in.

Georgia as shown in the Hopper and quick.

Kind of.

Yeah, tack on to that just a little bit. We've been decisioning items throughout the year, really to make sure the cost structure is in order and that the decisions are being made in 2023, so that in 2024, we're not as reliant on growth to drive margin expansion. So trying to do what we can now, make the smart decisions, get lean, get fit, get in shape, so we can grow margins next year and not be so dependent on top line trajectory.

Tack onto that just a little bit you know we've been decisioning items throughout the year.

Really to make sure the cost structures in order and the decisions being made in 2023. So that in 2024, we're not as reliant on growth to drive margin expansion. So I'm trying to do what we can now make the smart decisions get lean get fit given shape. So we can grow margins next year.

<unk> be so dependent on top line trajectory.

Okay, that's helpful. I add a couple more on Hop-In on real quick. On the core RCM business, I know that you guys are disappointed by kind of the pace of new business wins. Can you talk about what's going on in that business from a same store sales basis? And kind of how should we think about what things for Billings' volume looks like and kind of your ability to achieve operating levels there?

Okay. That's helpful.

Couple more I'll hop in on real quick on the core RCM business I know that you guys are disappointed by the pace of new business wins can you talk about what's going on in that business from a same store sales basis and kind of how should we think about what seems for billings volume looks like and kind of your ability to achieve operating leverage there.

Yeah. So.

We did typically see some changes from time to time and what happens in the same store sales side of things.

We do typically see some some changes from time to time and what happens in the same store sales.

Things, sometimes what we see in our same store sales part of the business as a function of.

You know, sometimes what we see in the same store sales part of the business is a function of kind of pending attrition Which does happen from time to time. We do see real like actual like volume changes from from Period to period that hit us as well

Pending attrition.

Which does happen from time to time, we do see real like actual like volume changes from period to period that hit us as well.

We can also have same sort of declines or same sort of changes depending on the nature of the contract, so if it's a short-term contract or project-related, those can obviously have a long tail on them, but as time goes on, the revenue opportunity and the revenue profile decrease.

We can also have same store declines or same store changes depending on the nature of the contracts or if it's a short term contract or project related those can obviously have a long tail on them, but as as.

As time goes on the revenue opportunity in the revenue profile decreases.

And this same store change, you know, it's one of the dynamics that has impacted us here in the past couple of quarters And you know, we do think that part of the part of the reason for that in the lack of visibility that we've had in that It's been the prevalence of these kind of project oriented short-term nature contracts that aren't quite CPSI taking over the entire book of business for the hospital But focusing on only a small slice and that certainly increases forecast risk for us

Same store change, it's one of the dynamics that has impacted us here in the past couple of quarters, and we do think that part of the part of the reason for that and the lack of visibility that we've had and that has been the prevalence of these kind of project oriented short term nature of contracts that arent quite GPS I've taken over the entire book of business.

The hospital are focusing on only a small slice and that certainly increases forecast risk for us.

Okay, I'm two more and then I'll stop being selfish and get off the line. Any change in the competitive environment in RCM? And I guess are you seeing any new competitors show up? But you guys think it'd be elongating the sales like we're impacting your win rate?

Okay.

Two more and then I'll I'll stop being selfish and get off the line.

Any change in the competitive environment in RCM and I guess are you seeing any new competitors show up what you guys think can be elongated sales cycle or impacting your win rate.

Now again, George the dynamic here is super fascinating from that respect and that the competition still wildly remains to be the hospital themselves and the analogy for good or for bad is we're moving through two different phases here of sales cycles were doing the.

Now again, George the dynamic here is super fascinating from that respect and that the competition still wildly remains to be the hospital themselves. And the analogy for good or for bad is we're moving through two different phases here of sales cycles. We're doing the education and selling the benefit of outsourcing in the first place.

<unk> and selling the benefit of outsourcing in the first place.

And then we're selling Truebridge by itself. And, you know, the beauty of having this captive audience of customers on the EHR is that we have an open door into them to have these conversations.

And then we're selling sure bridge by itself and the beauty of having this captive audience of customers on the EHR is that we have an open door into them to have these conversations and so while it may be middle to bottom of their list of priorities, we have the ability through our.

And so while it may be middle to bottom of their list of priorities, we have the ability through our conversations, through our continued education of what we can deliver for them, moving that up to priority list. But from a competitive landscape standpoint, I would say by and large, we're still more fighting against the hospital themselves and we are competition, especially in the 400 beds and under in the space that we play.

<unk> through our continued education of what we can deliver for them moving that up the priority list, but from a competitive landscape standpoint, I would say by and large we're still we're still more fighting against the hospital themselves and we our competition, especially in the in the 400 beds and under and.

The space that we play.

helpful. And my last one is on the view goal deal. And I'll say I get the outsourcing aspect of a deal, but I was a little confused as to why you guys would target a company with such a strong ambulatory footprint as opposed to your legacy hospital hospital footprint. So I guess could you kind of talk about the ability to achieve synergies and whether or not there's a cross-cell opportunity as a result of that transaction. And then I'll hop back in the queue. Thanks guys.

Helpful.

Last one is on the vehicle deal and I'll say I get the outsourcing aspect of the deal, but I was a little confused as to why you guys would target a company with such a strong ambulatory footprint as opposed to your legacy Hospital hospital footprint.

Could you kind of talk about the ability to achieve synergies and whether or not there is a cross sell opportunity as a result of that transaction and then I'll hop back in the queue. Thanks guys.

Yeah, you know, I don't know if I look at it as so much of a cross sell opportunity. I think there is that, but, but it's really opening up a whole new market. I mean, we have been very much focused in the acute space, you know, for 40 plus.

Yeah, I don't know if I look at it as so much of a cross sell opportunity I think there is that but it's really opening up a whole new market. I mean, we have been very much focused in the acute space for 40 plus years.

We've dabbled in ambulatory. We made an, through the acquisition of Health Land. We bought our way in a post-acute. But the nature of health care seems to be moving in the direction towards outside the four walls of the hospital.

Dabbled with dabbled in ambulatory, we made it through the acquisition of health land, we bought our way in the post acute.

But but the nature of health care seems to be moving in the direction towards outside the four walls of the hospital. So this was an opportunity for us to marry up two things that we were looking to solve for one creating our own workforce globally and also how do we break into that ambulatory market, where we see opportunities.

So this was an opportunity for us to marry up two things that we were looking to solve for one.

Creating our own workforce globally, and also how do we break into that ambulatory market where we see opportunities going forward?

Going forward, where we think that there is a cross sell opportunity is some of the analytics.

Where we think that there is a cross-sell opportunity is some of the analytics, the analytics platform that Vugal developed and really started as a tech company.

Analytic platform that bugle developed and.

Really started as a tech company brings.

bringing some of those tech services opportunities into either our Trubridge only, business fund or even some of our hospitals where they may have disparate PMs for their providers that are connected to their network.

Bringing some of those tech services opportunities into either our true bridge only.

Business line or even some of our hospitals, where they may have disparate.

<unk> for their providers that are connected to their network.

And so that's where those two things start to marry up. But again, really...

And so that's where that's where those two things start to marry up but again.

As over the last 1824 months, as we've gone down this journey of the expansion of the global workforce, we very quickly realized that we needed to have our own operation where we could create the opportunity and have the rigor around the delivery of the service for our company.

As over the last 18 to 24 months as we've gone down this journey of the expansion of the global workforce, we very quickly realized that we needed to have our own operation, where we could create the opportunity and have the rigor around the delivery of the service for our customers and that.

And that was really at the forefront of this, that the ambulatory market was a very nice secondary component to how we thought about the deal.

Really at the forefront of this that the ambulatory market was it was a very nice secondary component to how we thought about the deal.

That's helpful guys. Thank you.

Thank you George.

Our next question comes from Jeff Garro with Stephens. Please proceed with your question.

Our next question comes from Jess Garrow with Stevens. Please proceed with your question.

Yeah, good afternoon. Thanks for taking the questions. I'll start on the demand side of things. Just want to get any further color from you guys on what might catalyze.

Yes, good afternoon, thanks for taking the questions.

On the demand side of things just wanted to get any further color from you guys on what.

Mike catalyze cut.

customer prospect decisions from here. And then the second part of it is, while you're trying to create some urgency with these prospects, how do you simultaneously set the appropriate expectations on the cash collection performance as one metric and your ability to deliver the resources necessary to improve their financial outlook. You just don't want to over-promise while trying to get them over the line. And you've talked about some of the...

Customer or prospect decisions from here and then the second part of it is while you're trying to create some urgency with this these prospects how do you simultaneously set the appropriate expectations on cash.

Cash collection performance as one metric and your ability to deliver the resources necessary to improve their financial outlook.

You just don't want to over promise about trying to get them over the line and I know.

You've talked about some of the.

Operation hiccups that you've seen over the last six nine months. Thanks

Operational hiccups that you you've seen over the last six to nine months.

Yeah, um, let's see, where to start with that.

Yeah.

Let's see where to start with that.

But see, I guess on the end, if I look at it from the operational standpoint, you know, obviously, we've got the bugle team in here this week talking through what the integration plan looks like and how we can rapidly on board staff inside of their operation and start delivering to the tribrate down.

Let's see I guess on the and if I if I look at it from the operational standpoint, obviously, we've got the vehicle team in here. This week talking through what the integration plan looks like and how we can rapidly onboard.

Staff inside of their operation and start delivering.

The <unk> operations. We've also expanded our our partner set from the outsourced model to where we're not reliant on not a single, but but not being quite so single thread. It on on where that delivery comes from and again continuing to push hard on exactly what our.

We've also funded our partner set from the outsource model to where we're not relying on...

not a single but not being quite so single threaded on where that delivery comes from. And again, you know, continuing to push hard on exactly what our expectations there are. And I think the entrance of our own operation is going to create some urgency from those organizations as well to deliver to make sure that they're still partners with us going forward. So that's one part of it. I guess the catalyst.

Patients there are and I think the introduction of our own operation is going to create some urgency from those organizations as well to deliver to make sure that they're still partners with us going forward. So that's one part of it I guess the catalyst.

Again, I'll go back to Jeff. From my perspective, there's a couple of pieces of this. One, you've got the hospitals that probably their houses, I would say a little bit on fire from the perspective of they're not collecting the cash that's available to go get. They're in the high 80% of that.

Again I'll go back to Jeff for my perspective, Theres, a couple of pieces of this one you've got the hospitals that probably their houses I would say a little bit on fire from the perspective of they're not collecting the cash that's available to go get there.

We're in the high 80% of net cash collections may be low ninety's and there is plenty of meat on the bone for us to jump in and immediately be able to deliver that that that return for them I think the other thing really is just the distraction of things when I think about specifically at our hospitals 400.

cast elections maybe low 90s and there is plenty of meat on the bone for us to jump in and immediately be able to deliver that return for them. I think the other thing really is just the distraction of things when I think about, you know, specifically at our hospitals, you know, 400 beds and under, if I'm the CEO there and I've got 400 priorities on my desk.

Under the if I'm the CEO, there and I've got 400 priorities. All my desk very few of those am I able to outsourcer gift to somebody else. There are things that have to be dealt with inside the facility, whether it's new providers, new nurses, new facilities, new services upgrades of facility.

Very few of those, in my able to outsource or give to somebody else. There are things that have to be dealt with inside the facility, whether it's new providers, new nurses, new facilities, new services, upgrades of facilities, going on and on and on, negotiation of contracts. A lot of that has to be...

Yes go on.

Going on and on and on negotiation contract.

Lot of that has to be done internally.

This piece of work, this RCM work on the back end is something that can be given away and can be very metric driven to make sure that we're delivering on what it is. And now with this component of us being able to get the cost structure even better related to our own workforce offshore.

This piece of work this RCM work on the backend as something that can be given away and can be very metric driven to make sure that we're delivering on what it is and now with this component of us being able to to be able to get the cost structure, even better related to our own workforce offshore.

where it's not maybe it's not quite so cost prohibitive for them to get forward with it.

Where it's not.

Maybe it's not quite so cost prohibitive for them to go forward with it. So I think those are the catalyst as we think about going forward is.

So I think those are the catalysts as we think about going forward is, you know, driving home for our providers and our facilities. What is your mission? Give yourself more bandwidth to be able to focus there. Let us focus on the things that we are great at as well. And we and we continue to expand our partnership.

Driving home for our our providers and our facilities. What is your mission give yourself more bandwidth to be able to focus there let us focus on the things that we are great at as well and we continue to expand our partnership.

Makes sense. I appreciate those comments. But one more for me. What I want to ask about the revised guidance then, just what, you know, want to get a sense of your visibility into the rest of the year. You know, you, you for usually a, a seasonally strong quarter and, and would expect quarter, over quarter increases in, in revenue and profitability. But if you talk about the civic drivers that would lead to those typical seasonal trends this year, I think it'd be helpful. Thank you.

Makes sense I appreciate those comments one more for me I wanted to ask about the revised guidance then.

Wanted to get a sense of your visibility into the rest of the year.

Q4, usually a seasonally strong quarter and would expect quarter over quarter increases in revenue and profitability, but if you could talk about specific drivers that.

Would lead to those typical seasonal trends this year I think it would be helpful.

Okay.

Yes so.

The visibility into the next 90 days is generally going to be fair.

The visibility into the next 90 days is generally going to be fairly strong. From a bookings to revenue conversion timeframe, we don't have a lot of bookings that we expect to convert to revenues. And that's sort of a period of time. So it's really the expectations with the existing book of business for the top line revenue. So that visibility, we feel like is there.

Fairly strong from a bookings to revenue conversion timeframe. We don't have a lot of bookings that we expect to convert to revenues in that short of a period of time. So it's really the expectations with the existing book of business for the topline revenue. So that visibility we feel like is there and the cost side of the P&L for reducing some subjectivity instances.

The call side of the P&L is where we do see some subjectivity and some seasonality. Jeff, most of that's going to be seen down in the benefits area, where the seasonality of people taking vacations can throw some noise into the P&L, but it's usually to the benefit. I'd say that from a seasonality standpoint, benefits primarily in GMAs, where we expect to see the most movement. Thank you.

Analogy, Jeff most of that is going to be seeing down in the benefits area, where you know the seasonality of people taking vacations.

Throw some noise into the P&L, but it's usually to the benefit so I'd say that from a seasonality standpoint benefits primarily in G&A is where we'd expect to see the most movement.

Got it I'll hop back in the queue. Thanks for taking the questions.

Okay.

There are no further questions at this time. I would now like to turn the floor back over to Chris Fowler for a moment.

There are no further questions at this time I would now like to turn the floor back over to Chris Fowler for closing comments.

Thank you Maria and thank you everyone for your time this afternoon and really quickly in closing I'd like to acknowledge the hard work and passion that the people of Cps I bring each day to our company our clients and the communities. We serve clearing the way for carriers not always a straight line, nor an easy path, but we are driven to overcome challenges said that.

Thank you, Maria, and thank you, everyone, for your time this afternoon. And real quickly in closing, I'd like to acknowledge the hard work and passion that the people of CPSI bring each day to our company, our clients, and the communities we serve. Clearing the way for care is not always a straight line nor an easy path, but we are driven to overcome challenges so that together we can make a difference. Thanks again, and I hope everyone has a wonderful weekend.

Together, we can make a difference thanks again and I hope everyone has a wonderful weekend.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

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