Q2 2019 Earnings Call
Greetings and welcome to the Cps I second quarter 2019 earnings Conference call.
During the presentation, all participants will be in a listen only mode.
Afterwards, we will conduct a question and answer session.
At that time you. Other question. Please press the one followed by the board and telephone.
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As a reminder, this pump is being recorded Tuesday August six 2019.
I would now like to turn the conference over to drew Anderson. Please go ahead.
Thank you good afternoon, and welcome to the CPFL <unk> second quarter 2019 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.
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 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 our public releases and reports filed with the Securities and Exchange Commission, including but not limited to our most recent annual report on Form 10-K .
We also 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.
Thank you Gerry good afternoon, everyone and thank you for joining us.
Joining me on the call today will be Matt Chambliss, our Chief Financial officer at the conclusion of our prepared comments the two of US along with David dye, our Chief growth Officer, and Chris Fowler, Our Chief operating officer will be available to take any questions you may have.
Once again, our Q2 revenue and earnings were relatively in line with expectations based on our near term installation schedule heading into the quarter.
Bookings continued to be challenged by extended decision, making time frames and a lack of urgency among new and existing customers.
From a services perspective relative to our Trubridge business for the second quarter in a row, we have experienced a couple of hurdles on the sales process first smaller hospitals have personal connections at play when making the decision to outsource business office.
Many times the hospital employees friends neighbors and family within their business office and therefore, the decision to outsource that function creates uncertainty in terms of community impact and perception.
To aid in the community hospitals goal of keeping jobs local trubridge has the flexibility to permanently place those existing resources on site.
We have clients, where we manage 100% remote.
On site and also hybrids, where we hire our subcontract local employees and supplement them remotely.
An important component to this hiring program is the training we provide to the existing on site employees to help develop their skills.
The second hurdle is specific to larger hospitals that are outside the Cps our client base.
Their greatest challenge typically revolves around the proceeds pain in changing vendors.
To combat this dynamic and perceived fear, we target hospitals that are experiencing significant financial struggles because for them the idea of changing RCM vendors becomes more palatable.
Trubridge with its broad range of services is also able to address the challenges many hospital space of managing more than one vendor across their RCM lifecycle.
Trubridge can be that one stop end due in RCM partner, we have confidence in the traction we are seeing with this strategy based on the strength of the Trubridge pipeline, having more than doubled in the last three months and the recent closing of a greater than 2 million dollar contract in the third quarter that we've been working since the first part of this year.
Do you keep the HR system sales within the community market. As you. All are keenly aware is one that has slowed with government stimulus program no longer driving buying decisions.
This market reality was also the catalyst behind our focus of improving our client experience in order to maintain strong retention rates and create additional cross sales opportunity through our services businesses Trubridge.
Turnover from other competitive vendors continues to build our pipeline as these hospitals are simply looking for a partner that can deliver a proven DHR. They know will work and that will provide them with the support needed as a small community hospital.
The decision to switch vendors is never an easy one for community hospitals as they balance tight margins along with the pressure of keeping healthcare local in their community.
To address this challenge we believe it's imperative to provide flexible ownership models to accommodate the community hospitals preferences and balance sheets, including our interest subscription model that pace for the system support and maintenance or percentage of collections that come from our business office outsourcing services with Trubridge.
Once that decision is made our win rate continues to be strong and our pipeline also remains at a healthy level.
Two weeks ago, we announced three hospitals for Montana that chose to move to CVSR.
One of which was a returning client.
In addition, just last week, we welcome the fourth hospital from Montana, and we also closed a larger up market deal for our Trubridge accounts receivable services that together have helped bring our Q3 bookings today to more than $9 million with an additional sales activity still in play for the third quarter.
Examples such as these reinforce our position that our greatest competitor at this time is the elongated decision timeframe, especially for acute HR systems, which has more than doubled since 2016.
Finally from a bookings perspective, while representing a small percentage of our topline quarterly results. We saw a decent increase in our post acute bookings, which we believe is the first sign of positive results coming from our continued focus and delivery of an improved user experience and workflow in our post acute product with American healthtech.
This progress also represents an important part of our long term strategy to provide an integrated solution across care settings, including post acute facilities.
In May we hosted our National client conference in San Antonio, where we welcome more than 1000 clients from across our family of companies. This was an opportunity to not only provide quality education for our attendees, but we also shared our product vision and strategy across the CVSR family of companies, which included our newest patient engagement solutions, which are result of our recent acquisition of get real help.
Before I turn this over to Matt I'd like to provide an update and more insight around get real help get real help was a strategic acquisition that enhances our ability to address the growing trends and demands for solutions that help improve patient engagement management of chronic health disease, and Trish transition into the outcomes based reimbursement model of value based care.
Get real help as a small company that packs a big punch in terms of their proven patient engagement products that have delivered value to their clients. They have established a presence in both the domestic and international healthcare markets.
Outside of the U.S. get real help deliver solutions to government and private organizations in Europe , Canada and Australia.
That collaborated with organizations like tell US help the University Hospital, South Hampton, NHS Trust and the Keystone Health information exchange.
Our go to market strategy is built around three areas of focus first with the get real health portal being superior solution to our existing portals, we will migrate clients to the new portal, which will deliver additional value for our clients and in addition, we expect to save $1 million in cost synergies, which is part of our previously identified cost savings.
The second area of focus stems from a chronic care management tool to get real help has developed.
With the Trubridge services wrapped around the chronic care management tool. This offering will be sold under our Trubridge line of business into our acute DHR base as well as directly to net news non CBS on clients.
This new Trubridge services will help providers setup their chronic care management program.
Enroll patients and then maintain the program for the long term.
We will cross sell this new chronic care management service into our acute client base under the umbrella of the subscription model interest.
The additional value that this new chronic care management service brings to our interest model May also help accelerate a healthy pipeline of interesting deals that come from our acute client base.
We are pleased to announced last month that we had our first two clients on a chronic care management service contract from Trubridge.
And finally, our third area of focus and our go to market strategy will be geared toward larger hospitals that already had the scale and resources needed demand manage their own chronic care management program.
Because those hospitals may not need Trubridge services, we will sell the krona chronic care management tool separately without the accompanying service.
With the significant presence to get real health has outside of the U.S.. We believe there are ongoing sales and marketing efforts will also help open the door to additional opportunities in other English speaking countries for our HR system.
In closing, our new patient engagement suite creates a means to combine all healthcare information direct from patients tracking devices, such as fitbit and monitors for myself and mobile apps with existing clinical data from an DHR.
These tools helped to make health care information easy to understand and actionable for both the provider and the patient.
Delivered in real time to mobile applications with this strategic acquisition of get real health Cpss, delivering innovation to our client base, helping them to stay in front of change coming their way.
We understand the importance of being behind a full service partner to our clients and making the right solutions available at the right time, so that they do not have the burden of searching them out from different unknown sources.
With that I will turn the call over to Matt for look at the financials.
Thanks, Boyd and good afternoon, everyone on today's call I'll cover some high level themes for the quarter that we want to be sure to highlight including some additional color around our acquisition of get real helper GR age followed by some additional detail on bookings performance major non financial metrics and walk through the periods financial results.
As we shared on the conference call last quarter, our first quarter bookings performance in the timing of our National client conference made for a challenging second quarter as expected.
And while the slow pace of decision, making has continued we remain excited about our future growth prospects based on the strength of our pipeline as Boyd as pointed out.
In the meantime, we've made strides towards improved profitability by identifying $10 million of cost savings during 2018 and $3 million during 2019.
All $13 million have been decisions and are flowing through our income statement, which has allowed us to not only preserve led to increased profitability in the base of revenue fluctuations.
Expense categories included in our measure of adjusted EBITDA have decreased $4 million or 7% compared to the second quarter of 2018 and are down $5.6 million or 5% on a year to date basis.
Despite a nearly 3% decrease in revenues from the second quarter of 2018, adjusted EBITDA has increased 28% while non-GAAP net income has increased 48%.
From a year to date perspective revenues are similarly down 3%, while adjusted EBITDA has increased 10% and non-GAAP net income has increased 21%.
This higher profitability, coupled with abating headwinds from financing receivables had led has led to significant improvements in our cash flow.
With financing receivables contributing a net two and a half million dollars tailwind to cash flow in the second quarter of 2019, So operating cash flows of $9.6 million, marking our second highest levels since the acquisition of Healthland in January of 2016, and more than doubling the $4.7 million in operating cash flows during the second quarter of 2018.
On a trailing 12 month basis, we'd now boast roughly $33.6 million of operating cash flows compared to $15.6 million on a trailing 12 month basis at this time last year.
This improved strength in cash flows has allowed us to reduce our bank debt by over $9 million from June 32018, Despite funding the $11 million purchase price for GR ranged from this facility.
Speaking of GR Rage, we're excited about the opportunities the acquisition has created.
Gee, our agents products technologies and relationships in the growing patient engagement market contribute directly to three of Cps size strategic focuses strengthening the HR platform, expanding trubridges capabilities and opening international markets, particularly Canada.
Financially GR reach pre acquisition was a small and frankly subscale business with a mix of revenues from licenses subscriptions and services with approximately 40% recurring it makes for a lumpy results.
We expect that to continue while we integrate the business and build its technologies into new products like Trubridges chronic care management service.
Since the date of acquisition GL rates contributed an adjusted EBITDA loss of $600000 to our second quarter results on revenues of $200000, which were effectively cut in half by the application of ASV six of six the new accounting standard for revenue recognition.
Inclusive of pre acquisition results GL rates year to date has produced revenues of $1.8 million and an EBITDA loss of half a million dollars prior to any adjustments related to six an assay six of six.
Because of the lumpy nonrecurring revenues in the range of potential outcomes for GL rates in 2019 is fairly wide with some large deals in the pipeline that could fall into the fourth quarter of 2019 or the first quarter of 2020.
2018 revenues were four and a half million dollars and depending on deal timing, we could see 2019 amounts that ranged from something similar to easily double that number.
As a result, GR reaches EBITDA contribution for the full year could reasonably be slightly negative to moderately positive.
That said, we currently expect GR reach to contribute positive adjusted EBITDA before synergies for the full fiscal 2019 with opportunities to significantly increase that contribution depending on the timing and performance of the existing pipeline.
We continue to look for tuck in acquisitions like GR rates and other opportunities such as the partnership but Sunnybrook Health Sciences Center announced in May that advance our strategic initiatives.
Turning to bookings performance total bookings of $14.7 million rebounded slightly from the first quarter's result, posting an overall, 5% sequential increase but below the 23 and a half million dollars of total bookings in the second quarter of 2018.
The software side of our business saw a 19% sequential increase due mostly to improved deal flow for new acute care, each our business and strong bookings from our post acute segment.
That said extended decision time frames and lack of urgency mentioned earlier about Boyd continued to apply pressure to our system sales and support bookings, resulting in a 32% decrease from the second quarter of 2018 with new acute care each our business serving as the primary culprit.
Trubridge bookings continued to feel the pinch from the hurdles that Boyd mentioned, resulting in declines of 27% sequentially and 51% year over year.
GR rates, which joined our family of companies on May 3rd contributed $200000 of bookings for the quarter, which are included in our reported trubridge bookings.
Of the $11.6 million in system sales and support bookings roughly $1 million is included in our second quarter revenues.
$9.3 million represents non subscription sales that should trickle into revenue over the next 12 months with an average lag between booking and install a five to six months.
$1.3 million represents each our subscription revenue to be recorded or over a weighted average period of five years with the start date in the next 12 months and similar to our non subscription sales and average lag between booking and install a 5% to six months.
Our $3.1 million of bookings from Trubridge are nearly all comprised of recurring revenues to be recorded over a one year period, starting in the next four to six months.
As for key non financial metrics six customer sites went live with our thrive acute care products compared to four in the previous quarter and three in the second quarter of 2018.
As for licensing mix three of this periods go lives were under a cloud or subscription model compared to one each in the first quarter of 2019, and the second quarter of 2018.
The six thrive go lives during the second quarter marked one less than we had anticipated as a startup facility previously scheduled for the second quarter as shifted to the third quarter of 2019.
At this time, we expect six new client facilities to go live with our thrive solution in the third quarter with one expected to go live in a cloud environment.
Our employee head count as of June Thirtyth was roughly 1951.
A roughly 3% decrease from March 30 Onest.
Turning to the financial results for the period Trubridge posted results that were up 2% sequentially and 5% over the second quarter of 2018.
Strong volumes for our accounts receivable management services drove the sequential increase with GR raged contributing $200000 in trubridge revenues during the quarter.
Compared to the second quarter of 2018, our accounts receivable management services increased $600000 or 7%, while the strong bookings performance throughout the trailing 12 months for our Trubridge RCM solution resulted in another strong showing by our insurance services division with revenues, increasing $400000 or 5% and continued demand for our hosting services drove it managed services revenues to $300000 or 10% increase.
As we noted last quarter. The trailing 12 months have seen some operational decisions made by a few of our larger customers that decreased their related patient volumes and consequently had a negative impact on trubridge revenues for the quarter.
These operational decisions were primarily related to curtailment of lab services and the closure of certain underperforming locations, creating $1 million headwinds against Trubridge revenue growth for the quarter, particularly for our accounts receivable management medical coding services.
Without these headwinds Trubridge would have posted 9% organic growth for the second quarter of 2018.
These customer decisions and the related volume declines aren't it's expected to fully anniversary until the fourth quarter. So we expect these headwinds against prior year results to continue next quarter.
Sequentially Trubridge gross margins remained flat at 45 or 47% while margins improved moderately from the 46% reported for the second quarter of 2018.
As a side note GR rates contributed $100000 trubridge cost of sales for the period.
Next system sales and support revenues decreased $3.6 million sequentially as in Q3 related revenues decreased $1.5 million from $2.4 million in the first quarter to $900000 in the second quarter.
Non IMMU three add ons decreased $2.4 million as the first quarter was an exceptionally strong quarter posting $7 million in additional revenue and add on revenues compared to a $5 million average over the previous eight quarters.
Year over year quarterly revenues were down $3.1 million, mostly as in Q3 related revenues decreased $2.7 million as we naturally work down as nonrecurring opportunity.
Our cost of system sales and support we're down $700000 and 4% sequentially as cost of savings and it's cost savings initiatives, coupled with lower incentive compensation expense resulted in improved payroll costs, while improved sales mix resulted in lower heart lower hardware costs.
Year over year cost decreased $1.9 million or 9.5% as the aforementioned cost savings initiatives have yielded improvements in payroll and third party software costs.
Gross margins for the second quarter of 2019 were 55% compared to 58% in the first quarter as revenue declines outpaced cost improvements while year over year margins improved from 54% to 55%. Despite the decrease in revenues.
Product development costs were essentially flat sequentially and year over year GR rates product development costs of $300000 were largely offset by decreasing set of compensation expense in this area.
Sales and marketing costs decreased $500000 sequentially and year over year as decreased commission marketing program costs and payroll costs more than offset the $200000 increase in sales and marketing from GE on rate.
General and administrative costs increased $300000 sequentially with GR reach making up only a $100000 of the quarter's expenses.
As Boyd mentioned previously in May we hosted our annual National client conference in San Antonio, which resulted in a $900000 sequential increase and related costs.
Our national client conferences held each year and therefore with the planned expense.
As a note we anticipate hosting our 2020 national client conference in the second quarter of 2020.
Offsets to these increases were a $700000 decrease in legal and accounting fees.
Year over year costs have decreased $1.1 million, despite a $1.2 million increase in severance and other nonrecurring charges as employee health costs decreased $2.1 million or 53% due to plan design changes intended to drive down costs, while still providing competitive benefits to our employees.
Lastly on the income statement, our effective tax rate during the first quarter was during the second quarter was 22.2% relatively in line with the 23.3% effective tax rate during the first quarter of 2019.
Discrete items, such as state tax state notices from prior years tax shortfalls from stock based compensation and non deductible costs associated with the GR reach acquisition increased the effective rate by 8% collectively while R&D tax credit estimates benefited the effective tax rate by 12% during the quarter.
In closing, we obviously have some work to do in this slow decision, making environment to reach our long term growth targets.
Nonetheless, we feel optimistic about our pipeline, particularly for cross sell opportunities within our loyal and sticky customer base and about the progress we've made in the quarter towards increased profitability and cash flows and stronger more diverse topline growth prospects. We continue to focus on leveraging the stability of our core business, taking advantage of our growth opportunities and helping our clients and their communities thrive and with that we'd like to open the lineup for questions.
Thank you if you would like to just a question. Please press the one followed by the four on a telephone.
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One moment please for the first question.
The first question comes from the line of Jeff Garro with William Blair and company. Please go ahead.
Yes, good afternoon, and thanks for taking the question maybe you started off with one on the end market was hoping that you could help us think about how much weight regulatory changes and really related deadlines are having on decision, making and then maybe the other side of it what's within your control the key prospects moving through the pipeline.
Yes, Jeff David here, the first part of your question.
Really with the exception to the post acute market there isn't anything regulatory that's driving any decisions or lack thereof, right now except for the fact that.
As we've mentioned that Nauseum that we no longer have an immune environment.
So in the post acute world of course.
There are some changes effective October onest this year.
Home that are driving some to go to market if they feel like they have a solution that might not meet their needs from a reimbursement perspective, but thats been relatively minimal because HP and the other major players are certainly addressing those concerns.
The second part of your question what was the second part of your question or do we have anything under our control to help with the timeline essentially that the the summary answer that question is no.
You know.
In in decades of doing this.
You know, it's our job as a sales and marketing organization too.
Two two to be in contact with our customer base and potential customer base in such a way that when they are ready to make a decision that we are at the forefront of their minds.
Based on their awareness of what our company can can do and deliver for them.
It's proven to be an effective to try and push people to make decisions sooner.
Understood.
And maybe trying to boil that down into.
A little bit of quantifiable expectation you guys have talked about 25 to 30 facility as being an appropriate number of of installed on an annual basis is that still a good expectation for a number of new facilities to install during the year.
Yes, we still feel good maybe more closer to the 25 level, we still feel good about that range.
We're going to do around that number this year on a lot of that of course is based on the success that we had last year.
But based on what we see in the pipeline right now we still feel it's very realistic to achieve that next year as well.
Great.
Switch gears to the Trubridge side, you talked about some client operating decisions, creating a bit of a headwind. There maybe you can discuss whether those were kind of discrete issues or.
Or maybe representative of the customer base as a whole that there there could be more client operating decisions that that could impact.
The Trubridge business.
Yes, Jeff this is Matt.
I wouldn't say that it's indicative of.
Potential decisions that are out there throughout our population of customers, it's more and I think Chris had hinted at this on the last earnings call, but a bit of the growing pains that come along with which with pushing trubridge services somewhat upstream in the larger facilities, where when these ones and twos the operational decisions do take place. They can have kind of an exponential impact on ARPU analogist given our size.
So I wouldn't say, it's symptomatic and would would view it as being somewhat isolated.
Great that helps and last one from me following up on Trubridge and you mentioned the.
Excitement within the company about cross selling opportunity I have to assume that that really refers to trubridge. So maybe an update on have overall penetration within the client base and the the need from your existing clients to adopt more of your Trubridge business management services.
Hey, Jeff This is Chris.
So from a from a trubridge RCM standpoint, we're.
We are rapidly moving.
Our customer base from our.
Legacy electronic billing platform clearing house.
On to Trubridge RCM.
And.
I would say virtually every deal every new hospital deal that we get into those 25 this year.
We are getting some portion of Trubridge RCM that goes along with that so that's a that's kind of a no brainer tag along there.
As it relates to the opportunities.
When you look down into the medical coding the private pay service early out service and then the full.
Accounts receivable management, we still have huge opportunities to convert those customers onto those services.
Obviously, a big initiative that we've got going right now is the interest.
And I think both Boyd and Matt referenced that.
That it feels like there's a little bit of a tag along with the with the hangover from.
The HR decisions kind of Elongating I think that now that there is not that regulatory driver to to add to for somebody to do something they're enjoying the opportunity to be able to to take a break.
I do think that we are getting better and scenarios are situations like the chronic care management service.
Oh allows us to bring in value adds.
Through and tries to to not just replace apples to apples. So right now hospital has a billing office so they're seeing it is just.
Bottom line, what am I paying right now to collect on dollar compared to what I would be paying you so bringing in opportunities like the chronic care management service to where we would bring additional revenue as well I think we're going to see.
Some continued momentum around that but obviously were early there.
But but excited to see how that continues to grow.
Great that helps thanks, guys I'll hop back in the queue.
Thanks, Jeff.
The next question comes line of Jamie Stockton with Wells Fargo. Please go ahead.
Hey, good evening, Thanks for taking my questions, maybe just a couple I'm. The first one on the competitive environment.
Athena, obviously, a you know a things that changed over there you know can you just give us any insight into what you guys are seeing from them in the marketplace. I mean, you know what's your understanding.
Of what a you know private equity plans to do that business. If we could start there that'd be great.
Yes.
I'd, probably rather hear from you on that second part there Jamie but.
You may know better than us but.
As you know and it probably heard they're definitely not active in any new sales opportunities.
If it's a hospital on any other system. They are not active in trying to pursue that opportunity. It's continues to be us versus cerner and meditech et cetera.
They are making an effort to retain their current customers.
We have seen increased activity among their current customers I think a little bit of skittishness as to what the future might hold.
But.
That would be my summary of the situation.
Okay. That's great and then maybe just one other one on maybe for Matt or the 3 million of cost saves that you guys talked about on the Q1 call.
You know it sounds like a million of that was synergies that you expect from get real house.
If you know the quarter costs were pretty tight is it is it fair for us to assume that basically the other kind of 2 million of annualized cost saves or reflected in the Q2 numbers or you know outside of the get real number is there is there still some cost saves to go from here.
Yeah, So Jamie we're nearly there on on having a $13 million at the total identify cost savings flowing through the few now we still have about $600000 a quarterly run rate. So.
$2.4 million annualized this should start benefiting the PNM in Q3.
I mentioned in my opening remarks that year to date EBITDA expenses are down $5.6 million. So if you annualize that and at 2.4 million annual run rate that starts benefiting the personnel in the third quarter that gets you to 13.6, which.
Pulls the math home for $13 million.
All right Thats great. Thank you.
Yes, Thanks, Jim.
[laughter] whenever question from the line of Stephanie BAMKO with Citi. Please go ahead.
Hi, guys. Thanks for taking my question just a given the tough bookings environment, how should we think about the mix of recurring revenue and there's a baseline business is looking not come through for the rest of the year just thinking about 2020 2021.
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Yes, so Stephanie naturally most of the bookings, particularly on the system sales side of the house.
Does Tom.
Does tend to come in the form of nonrecurring.
Revenue opportunities for us so as nonrecurring comes down the other recurring revenue mix as a percentage of overall will go up.
So this past quarter recurring revenues were $57 million.
The gradual growth curve on that makes us think that your Q4 and Q1 of next year wouldn't expect dramatic increase there.
So with that staying relatively stable.
The movements around in nonrecurring bookings can can certainly.
Certainly shift overall sales mix towards higher.
Recurring.
Understood understood. So how could we think about.
Well as you look at the out years.
Is it going to be more challenging just given where the bookings are do you think there is an opportunity to backfill in the second half the year.
Yes.
Obviously, it's challenging given the way we performed in the first half of the year Stephanie from a bookings perspective.
Boyd mentioned the quarter to date 9 million plus that we are where we are with our bookings. So far this quarter. Obviously, we've got a lot of work left to do but.
Based on the fact that.
Our overall pipeline as of the end of the first quarter end of that as of the end of the second quarter of this year increased rather significantly more than the shortfall from what we book compared to what we would think that we would have booked and what our target was internally. So the opportunities. There. It's just up to you know obviously, we have to perform to close it and then we hope that the.
You know the lag in time frame that we've experienced.
I mean, some of these deals are ready to close and it appears they are so it really.
Our growth to answer your question.
You know our growth that we hope to achieve in 2000 Twentys is now in large part dependent on on how we perform from a sales perspective for the rest of this year.
Okay, you're closing as a timing issue and then one last one for me just.
Seems like demand, we I think we're patient portals and Onboarding solutions when they get real health acquisition I was hoping you could walk us through any forthcoming innovation and the consolidation play alike.
Payments solution kind of Onboarding anything like that.
I think this is Chris.
Oh boy.
No you go ahead.
So so we are we are continuing to to look to add into the get real health solution set whether that be from a strategic partnership or internal development. Obviously I'm. The current offering from get real health offers a very complete solution.
With with some ads that we did not have a in our current set from a from an innovation standpoint.
Theres still some things that were looking im very excited about bringing in not just to the HR base, but also from a trubridge services standpoint, so when we're thinking about being able to go into the to the up market. Obviously, there's some there's some opportunity for us to be able to to capitalize there.
You know it does it seem like to us that there is anybody that's really put that together from a technology and services side from that patient engagement. So.
It's just a matter of.
Coupling all those pieces together to where we can bring that to market, which we're not there today, but that hopefully very soon or expect to see something that with the way that get real help to set set up.
That we should be able to action relatively quickly.
Okay and I have for now thank you guys for taking my question.
Thanks Devin.
Your next question comes line that Mike <unk> from Oppenheimer. Please go ahead.
Good afternoon. Thanks for taking my question I appreciate all the color on Trubridge today, just curious if you're still expecting upper single digit revenue growth from them. This year.
Matt you want to start that one and I'll I'll call I'll finish him.
Yeah, So naturally you there.
Yeah, So two quarters in a row does make for a.
A steep steep hill to climb to get to the upper single digits.
We're thinking.
Trubridge this year realistically somewhere between five to seven.
It's something to add in there Mike Yeah, I think it was in a voyage remarks towards the $9 million quarter. Today. There is a 2 million dollar bookings opportunity that we closed two weeks ago, a that is a clean up project similar to one that I think we announced last year that we expect to recognize all of that in the second half of this year. We also are very excited about the the way the trubridge upsell the Trubridge standalone market. The pipeline is growing so I'm not not any big one time deals like the one that we just signed but some nice incremental growth that we should see coming through.
Great very helpful. Chris Matt. Thank you and then wondering if you could also expand on what you hope to get from GE or H.'s recent integration with Microsoft helpful.
Well I think from a from from that standpoint, you know it's it's.
It's more about just continuing the conversation and making the the product in the portable the portal available for the patient population. So it's just one more way for.
Patients to interact with with our services and our system. So.
As the Microsoft brand.
You know is there as they are changing their business and giving us the opportunity to to capitalize on that I think what we'll see is that it's a another way for patients to separate from their hospital market as they're thinking about their personal health and be able to make that portable.
Okay very helpful. Thanks very much.
[laughter].
[laughter] How's it amounted to about just a quick question just as the one called by the war and telephone keypad Onefour.
We now have a question from the line of Donald Hooker with Keybanc. Please go ahead.
Great. Good afternoon, Hey, just I understand the headwind I'm from the M.U. three sales being down is there another leg up there just so we don't so we just make sure we're aligned with.
Properly with the timing of these license sales.
I thought I understood the third quarter might be a a big step out there for M.U. three revenue is and is that sort of then it for that.
Software revenue line.
Yeah. So so Don just to kind of recap where we are on him you three to date, we've recognized about 31 and a half million dollars of IMMU three related revenue out of life to date bookings of just over $32 million. So obviously, we're nearing the end of that incremental opportunity, we do see perhaps.
Somewhere close to maybe $3 million or so of opportunity remaining but obviously, that's nearly all steel sales dependent.
Bookings this past quarter were roughly 1.4 million, so doubling Q1 amount.
But as far as the timing of the Rev. Rec on that remaining potential opportunity, we see and we expect the overwhelming majority of that fall in Q3.
Just knowing what the regulatory time frames are to the extent that that those remaining bookings opportunities to materialize. So we're still optimistic that a good portion of that 3 million could convert to revenue in Q3.
Because as far as the delivery time frame for us, it's a very compressed timeframe between bookings to potential Rev. Rec on that.
Gotcha.
And then in terms of the free cash flow obviously strong.
Financing receivables for word.
Down you still have a fair amount of those financing receivables left.
Would love to hear if there's an opportunity for that receivable financing receivable balance. The continued it could go down or can you can you talk to us about that.
As a lot of cash being held up there on the on the balance sheet that could be released can is there anything you do to.
Cause that to happen.
Yes, Don so so the good news is there that that there is not really.
Not really any.
Positive action on our part, but just the natural cycle with these immune related sales, we still have a lot of IMMU three revenue over the past 12 months that has largely been parked on the balance sheet and these 12 month payment plans that show up in the current portion of financing receivables. So we do expect for the remainder of the year, finding some receivables to contribute cash.
And once we work out this kind of onetime opportunity on in Q3.
Going forward, we should be relatively neutral on that item.
Okay, and maybe one last question for me the get real Health I think you mentioned there were $4.5 million of revenue in 2018.
And I know, it's lumpy was that is that pre asics so six.
Hey that 4.5, so what is that there's other a bogey to think about kind of it will move up and down and.
2019, and 20, but I assume there is some general upward trajectory in growth there.
But does that 4.5 assay six if I ever assay six effects.
Asset that was under AMC six so five GR rates was a private company. So.
Six or six became effective for them beginning 2019 and.
We havent really undertaken the effort to reach date.
To recap 2018 numbers.
Okay, that's fair.
Thank you.
Thanks, Don.
The next question comes line of David Windley with Jefferies. Please go ahead.
Hi, Good afternoon. Thanks for taking my question <unk>. My question is around kind of customer profile as you.
Talked earlier in your prepared remarks about.
In the context of get real health.
Population management and value based care I'm I'm interested in because of the typical profile or the cut point at which your clients.
Become.
You know sensitive to that or or interested are motivated by that figure it's not all of them.
And just wondering if there is a typical profile or a side of the bed size or or something that you could describe that that kind of.
Dictates, where they get interested in that.
We need to be interested in that.
I don't know that Theres any hate takeover profile for that.
You know as far as the bed size or anything you know some of them. Obviously the ones that are moving more quickly to award that are the ones that are more progressive hospitals, obviously, if we've got a lot of customers that they are progressive and progressive with us with the system of the adoption of the system and Trubridge service and everything else and also forward looking and ready to dive into new things.
Like value based care and then obviously the majority probably lag behind and I think in general, it's certainly safe to say that the smaller our customer base the smaller hospitals typically.
Are not near.
As penetrated with value based care as the larger facilities.
Okay. Thank you for that.
David just a little bit to add there that this is Chris so.
The other thing too is that of note.
As you are thinking about from is Eric.
And our National Conference, where we had roughly 35% of our customers there.
Whether it was our largest.
5% of the customer base from a volume size or some of the smaller hospitals that we have.
And the feedback that we got around get real health and that acquisition was amazingly positive and what we found out was that there were there were a lot of conversations happening in all of our organizations regarding what they were doing from a patient engagement standpoint, So I think the timing of us doing this while still.
A little bit early on seeing it across the board I think it's right on time for whether it's they were thinking about it and they were looking to make a decision or its something that we can bundle up as a service and deliver to them to help them over that line, which I think is why we've seen trubridge be so successful is our ability to do that to to look forward, a little bit and take something that that needs to happen or pulling them forward and using a service to do that.
I think that we're going to see no real cut line and.
The demand for that where I think the cut becomes is whether it's something that they can stand up the operations to do it themselves or if they're going to need assistance via trubridge to deliver those solutions to their customer base.
Got it I appreciate that that elaboration, so as a follow up to that triggers.
I know Gary will have not all not not that big and you mentioned in the prepared remarks kind of three different things patient engagement management of chronic disease kind of outcomes based or chronic disease and kind of full episode of care type stuff and then.
Outcomes based reimbursement can can those things be engaged individually and if so is there one of those that that is kind of leading the way and then the rest follow.
That's an interesting question.
Yeah, we're looking at the chronic care management in the existing customer base to be more of a driver for the interest again. So you go back to the example, where currently a hospital has a business office in place and we're we're presenting an option outsource that first step is to look at apples to apples and just what their costs today compared to cost going forward chronic care management offers us the ability to bring in of that value add too.
To that to that dynamic to change the math, just a little bit.
Chronic care management may not be the thing four or five years from now, but it's obvious to us that the direction that the that the government is going is pushing the care out of the organizations and so this is a good first step for us to help engage the patient through the hospital through these additional services and start that process. So I think thats a big driver internally I think when we look on the outside market I think the the portal itself in the the patient engagement platform.
For the larger facilities that were competing for business, which I think is a great wedge for us to bring in additional services that we can stand up so using the using the patient engagement other portal as as a tool that allows us to be more successful in delivering early out solutions to where we look at it holistically versus.
A hospital, having to manage seven relationships for their portal for an online payment system for.
The patient payments for.
Other other various operations that they would put in there. So I think it depends on the slice of the market of of what we would say the driver is but we're equally excited about all of them.
Got it very good thank you for the answers appreciate it.
Absolutely. Thank you David.
There are no further questions at this time I'll now turn the call back to you. Please continue with the presentation and or closing remarks.
Yes, I want to thank everyone for being on the call today. We appreciate your interest in CVSR have a great rest of your week.
That does conclude the copper copper today, we thank you for your participation and as such you. Please disconnect your line.