Greetings and welcome to the CPSI Q1 Earnings Conference Call. At this time, all participants are in listen-only mode. A question-and-answer session will follow the formal presentation. . As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Dru Anderson. Please go ahead, ma'am.

Thank you. Good afternoon and welcome to the CPSI first quarter 2022 earnings conference call. During this conference 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 might differ materially from those expressed or implied by such forward-looking statements as a result of known and unknown risks, uncertainties and other factors, including those described in our public releases and reports filed with the Securities and Exchange Commission, including, but not limited to, our most recent annual report 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 turn the call over to Mr. Boyd Douglas, President and Chief Executive Officer. Please go ahead sir.

Thank you, Dru. Good afternoon, everyone. And thank you for joining us today. After my brief comments, I will hand the call over to Matt Chambless, our Chief Financial Officer, who will provide the detail regarding our first quarter results. Then Chris Fowler will share his opening thoughts before the three of us, along with David Dye, our Chief Growth Officer, will take your questions. I'll begin by noting how exceptionally pleased we are with the strong start to the year. Matt will go into the details, but I would like to highlight a few key takeaways from the past quarter. Total revenues of $77.9 million were impressive, but particularly encouraging is the quality of those revenues as the revenue mix increasingly leans towards recurring revenue, which now makes up roughly 92% of total revenues. Adjusted EBITDA of $16.2 million is very close to a company record. Third, a particularly strong start from our recently acquired RCM solutions business, HRG, and our RCM teams are off and running in terms of the HRG integration. Lastly, we have an all-time high sales pipeline across all business lines. Central to the notable first quarter results is the performance from TruBridge in terms of both financial performance and bookings. A key factor that led to the impressive first quarter revenue performance of $77.9 million included better-than-expected patient volumes for TruBridge hospital customers. In addition, the momentum and ease surrounding the integration of the HRG business enabled the combined talented sales teams to execute on the opportunities for growth in both cross sales into our EHR base and the net new market. While there's a lot of work remaining this year, we are very encouraged by the first quarter results and remain steadfast in our determination to deliver on our three-year plan to provide…

Thanks, Boyd. And good afternoon, everyone. On today's call, I'll provide a high level overview of the quarter, including some additional detail on bookings performance and a brief walk through our first quarter financial results. But before we dive in, I'd like to take this opportunity to say what a pleasure it's been working alongside Boyd these past several years. His clarity of focus, strategic vision, and dedication to serving the needs of all stakeholders is chief among many reasons CPSI is well positioned for success in the years ahead. Between yesterday's announcement around Boyd's retirement, our acquisition of HRG in early March, and today's announcement of the refinancing of our credit facilities, we've had a lot of headline grabbing events over the past several weeks. Not to be outdone, this quarter's stellar financial results shouldn't be crowded out from that headline. Coupled with one month of HRG activity, the resiliency of our customer base during the pandemic's last gasp continues to provide organic momentum that has TruBridge soaring to new heights, driving near record metrics across the board and furthering our excitement for the organic growth potential of TruBridge and our ability to accelerate that growth with responsible M&A execution. Speaking of M&A, this quarter's results included one month of activity for HRG with revenues of $3.8 million and adjusted EBITDA of $600,000. Full quarter pro forma results for HRG were $10.1 million of revenues and $1.1 million of adjusted EBITDA, putting HRG on track for the expected $40 million of revenues and $5.2 million of adjusted EBITDA that we stated in the press release announcing the acquisition. Our other recent acquisition, TruCode, contributed $3.4 million of revenues absent purchase accounting adjustments and adjusted EBITDA of $1.8 million, both down slightly from the first quarter of 2021's pre-acquisition amounts…

Thanks, Matt. And I'd like to start by saying thanks to both you and Boyd for the very kind comments. And also, beyond that, just a special thanks to both you, Boyd, and also David, for the relationship that we have had over the last five years, specifically as we run the company. It's been a great opportunity. And I think that it's really come through with how we continued to execute and iterate on what the company looks like today. Obviously, what we do could not have been done without the valued work and the strong work of the 2,500 strong team members that we have at CPSI here and look forward to continuing to work with each and every one of them as we grow the company going forward. While I'm giving thank yous, I'd also like to give one to Glenn Tobin, our Chairman of the Board, and also the Board of Directors for their confidence in selecting me to be at the head of the organization and continue to carry us through this transformation. Before I get started in my comments, the one last thing I like to say is, again, I know that Matt did this as well, but just an additional special thank you to Boyd and his leadership over the last 16 years. Obviously, his passion for the success of our companies, for our customers, for our employees and for our shareholders has been truly the basis of the success of our company. And we thank him for his leadership and his guidance over the last 34 years and 16 years as the CEO. I'd also like to personally thank him for his mentorship, his confidence in me and ability to see us through as we make this successful transition over the next…

. Our first question is from Jeff Garro from Piper Sandler.

First off, Boyd, congratulations on a wonderful career and best wishes for your next steps. And, Chris, congrats on the new role. So, with that, Chris, I wanted to ask you a question. You've been involved in all facets of the business, but have maybe been more focused on TruBridge of late. So, I'm curious to get your updated thoughts on – and you touched on some of this, but maybe to bring it together, on really how you see CPSI as being more valuable than just the sum of the different parts that you touched on.

I did touch on a little bit, but to expand, obviously, the growth plan for TruBridge is twofold. One, it's into the external market where we're continuing to see success. Obviously, the addition of HRG and the talent that we're seeing come in from a sales perspective and also just the scale and additional notoriety due to that deal, we're continuing to see additional momentum for TruBridge by itself. Bur over the next two or three years, our growth account for – or actually, the models that we have expects more growth from our installed customer base. So, there is a very close dependency between the success and the retention of our EHR customer base and the conversion of success for TruBridge. So, again, I think the number I shared in the prepared comments was $400 million, which is what's left from an opportunity standpoint for TruBridge inside the installed customer base, both acute and post-acute. And then, lastly, if you're thinking about the diamond in the rough, the Get Real Health, while it has some momentum in both the international and domestic market standalone, we also think that that is an opportunity, not just to help continue to satisfy our EHR customers, but also a wedge opportunity for us as we're bringing in RCM opportunities, and how we're positioning ourselves as the greater entity of CPSI. So, that's an area, obviously, that's a hot topic and a demand for most all facilities right now. And so, hopefully, that's something that we'll continue to leverage as an opportunity to bring our additional offerings, whether it's TruBridge or TruCode in behind Get Real Health.

Maybe one more from me on the TruBridge side of things and the HRG acquisition. I'm just curious what the initial feedback has been from clients and prospects. It seems like they've really hit the ground running in terms of results and demand. But just curious what clients and prospects are saying whether it's anecdotally or how that's all maybe already translating to a pipeline impact so far.

So, what I would say, first and foremost, obviously, as an organization, our maturity from a M&A integration standpoint has obviously grown tremendously since 2016 when we did the Healthland deal. We have put a lot of thought in the integration process and making sure that, specifically like an opportunity with HRG, that the people integration comes first. And I think that that's maybe one of the most important parts of this, is we're not talking about a tech asset. It really is a people asset, and that's what the HRG customer base and also those new opportunities wanted to make sure that they saw. And so, the continuity that we've been able to keep in place as we manage through the pipeline and as we manage those customers and to see the team start to come together from both the HRG and the TruBridge side operationally, I think has been the real secret in the sauce for the success there.

David here. I'd like to add a little bit to that. From a timing standpoint, closing on the acquisition on March 1, I think we were fortunate, in that the timing of that closing with the labor shortage issues that our hospitals are seeing, particularly larger health systems, resulted in some significant bookings from the HRG side of the house in March. And is part of the reason why Boyd mentioned the record pipeline that we have on the TruBridge side of the business that that exists. HRG had in place some safety net agreements with some larger hospitals and health systems that allowed for when they ran into or have run into issues with regard to labor in their business offices that they immediately turn to HRG and we've already seen benefit from that.

Just a follow-up on that last part is. How should we think about the timing related to that? Does that create a new recurring opportunity or is it a temporary boost?

The initial bookings for those safety nets – and again, just to be clear, when we hear the term safety net, that's just us being the backstop for where they may have a shortfall of work being done, whether that's insurance follow-up, whether it's medical coding, whether it's early out collections of patient balances. It is booked as a one-time opportunity, but the conversion rate of those turning to reoccurring revenue is upwards of 75%.

The next question we have is from Joy Zhang from SVB Securities.

Congrats on the great quarter. I want to echo the congratulations for Chris on the new role and also want a wish Boyd a great retirement. I'll start with a question for Chris as well. I know you have not transitioned to the seat yet, but was wondering if you can give us a preview of what your top priorities are for your first 100 days in office?

I would say, for me, the biggest thing that we're thinking about is, again, going back to the key to our success is our employees, is making sure that we are supporting our staff, again, as labor is one of the main issues. Any article that you pick up right now, it's got a chance at being in the very top section of it. So, making sure that we're doing the things to support our customers or to support our employees in the way that they need to be supported to be successful for us. And secondly, I would say, making sure that we're engaged with our customers to understand exactly what we think it is that we should be delivering, and making sure that we're hitting on that. And then, obviously, like I said last, just from a M&A – I'm sorry, from a capital allocation standpoint, making sure that Matt and I are dialed in on what those opportunities are for us to best unlock potential for the company, whether, again, that's additional investment in product or if that's M&A opportunities going forward.

As a follow-up on your labor cost comments, we heard some of your healthcare peers this week talk about the high labor cost environment for hospitals that's likely to persist for the next one to three years. When you talk to your clients in the real market, are you getting the sense that they're also anticipating this to be a more permanent headwind? And does that cause them to spring into action when it comes to outsourcing the rev cycle?

Yeah. I think David said that earlier that that's obviously a driver right now and what we're seeing. And I think it goes beyond just the revenue cycle side. I think it's an opportunity for us to set ourselves apart with the software that's being developed. And it's being an efficiency opportunity and not something that inhibits their ability to do their job. But. definitely, as people continue to move away from healthcare, it definitely is a stimulus for TruBridge. And we're obviously seeing that come through loud and clear in the pipeline today. And based on what we can see, obviously, we can't read the history better than you can, but I don't think that that's something that's going to be going away anytime soon. So, I think our approach, whether it be through the automation work that we're doing or through our offshoring initiatives, I think we'll continue to be positioned well to capture that opportunity. And we have a sales summit going on right now, actually kind of had a similar question this morning. And we still see the biggest competition for RCM is the hospital itself. More than 85% of hospitals still manage their own business offices. So, this will be a driver in unlocking that value that's actually there.

The next question we have is from George Hill from Deutsche Bank.

This is Pragya speaking on behalf of George Hill. So, a trade group class noted some steep EMR market share and footprint losses for the company in 2021. Can you talk about how you expect that figure to look exiting 2022 and whether the company expects to be in net footprint gainer in 2022 and the strategies you're going to take together?

From a revenue retention standpoint, as we've remarked previously, we were over 98% in 2021. The losses in terms of customer count that are reflected in that class report are primarily those, as we have been working with our formerly Healthland-centric clients and efforts to move them over to Thrive in advance of 2023 is generally reflected in the attempts to convert those over to Thrive. And in those efforts, we're winning a little bit – around 60% of those deals. But that's the reason that you've seen the expanded numbers in the class report and we are confident that you'll see better numbers exiting the year.

Thank you. At this stage, we have no further questions. I would now like to turn the call back to Boyd Douglas for closing remarks.

Right, thank you. Thanks, everyone, for being on the call today. As you can tell from our remarks, we're certainly excited about the great start we've got to the year. We certainly realize we've got a lot of work left to do. But we're off to a good start and we're feeling really good about where we are as a company and where we're headed. So, appreciate everybody's interest and hope you have a good rest of the day. Thank you

Thank you. That concludes today's conference. You may now disconnect your lines. Thank you for your participation.