Greetings, and welcome to the CPSI 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. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, [Dru Anderson] (ph), Investor Relations. Thank you. You may begin.

Good afternoon, and welcome to the CPSI third quarter 2023 earnings conference call. Leading today's call are Chris Fowler, President and Chief Executive Officer; and Matt Chambless, 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 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 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. At this time, I will turn the call over to Mr. Chris Fowler, President and Chief Executive Officer. Please go ahead, sir.

Thanks, Dru, 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. 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 operations. 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. Our 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 $0.5 million. And 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. However, our -- 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 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. 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 emerge…

Thanks, Chris, and thanks to everyone for joining the call. I'm going to quickly cover the Viewgol transaction and then dive into the third quarter's results. The purchase price for Viewgol included 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 2024 EBITDA contribution threshold and Viewgol's ability to provide offshore employees dedicated to our existing RCM services within TruBridge. For the full-year 2023, Viewgol should ride a roughly 45% annual revenue increase to generate a top-line of about $17 million and roughly $3 million in adjusted EBITDA. With 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 acquisition. Looking forward to 2024, we believe stand-alone Viewgol should deliver at least $4.5 million of EBITDA, and that's without the synergies of 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 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 comprised 56% of total bookings, but underperformed versus internal expectations and year-over-year as the cross-sell decision pace has slowed, which Chris touched on earlier. Total revenue of $82.7 million was effectively flat compared to last year. For 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 headwinds we discussed on the last call offset most of the…

Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] Our first question comes from George Hill with Deutsche Bank. Please proceed with your question.

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 to talk about 2024 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 or the big moving pieces as we think about 2024? And I know you talked about some of the new wins not going until 2025. So, there's clearly some push out. But kind of any early color you can give, I think will 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, 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 going to see those come through nicely in 2024. 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 CEO level to 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 where again, the posture, the position is that this is going to happen. Whether they're operating well today or whether they're not, 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 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, 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. 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 onboard Vinay in January, we'll look forward to providing what 2024 looks like then.

Yes. And then George, I'll just hop...

Okay...

George, I was just going to hop in quickly...

No. Go for it, Matt.

Yes, 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 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.

Okay. That's helpful. I had a couple of more, I'll 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 same-store billings volume looks like and kind of your ability to achieve operating leverage there?

Yeah. So, we do typically see some changes from time to time and what happens in the same-store sales side of things. 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 actual like volume changes from period to period that hit us as well. We can also have same-store declines or same-store changes depending on the nature of the contracts. 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 revenue profile decreases. And the 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 reason for that and the lack of visibility that we've had in that has been the prevalence of these kind of project-oriented, short-term major 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.

Okay. 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 what you guys think could be elongating the sales cycle or impacting your win rate?

No. Again, George, the dynamic here is super fascinating from that respect and that the competition still widely 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. And then, we're selling TruBridge by itself. 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 conversations, 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 more fighting against the hospital themselves and we are competition especially in the 400 beds and under in the space that we play.

Helpful. And my last one is on the Viewgol 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 footprint. So I guess, could you kind of talk about the ability to achieve synergies and whether or not there's a cross-sell opportunity as a result of that transaction? And then I'll hop back in the queue. Thanks, guys.

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 through the acquisition of Healthland. We bought our way into post-acute. But the nature of healthcare 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 going forward. Where we think that there is a cross-sell opportunity is some of the analytics platform that Viewgol developed, and really started as a tech company, bringing some of those tech services opportunities into either our TruBridge-only business line or even some of our hospitals where they may have disparate PMs for their providers that are connected to their network. And so, that's where those two things start to marry up. But again, really as over the last 18, 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 was really at the forefront of this. The ambulatory market 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.

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 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, so you just don't want to overpromise while trying to get them over the line, and you've talked about some of the operational hiccups that you've seen over the last six to nine months? Thanks.

Yeah. Let's see where to start with that. Let's see, I guess, on the end, if I look at it from the operational standpoint, obviously, we've got the Viewgol 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 to the TruBridge operations. We've also expanded our partner set from the outsourced model to where we're not reliant on. Not a single, but not being quite so single threaded on where that delivery comes from, and again, continuing to push hard on exactly what our expectations there are. And I think the interest 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 house is, 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 net cash collections, maybe low 90%s, 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 specifically at our hospitals, 400 beds and under, if I'm the CEO there, and I've got 400 priorities on my desk, very few of those am I able to do 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 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 -- 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 go forward with it. So, I think those are the catalysts as we think about going forward is 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 continue to expand our partnership.

Makes sense. I appreciate those comments. One more for me. I want to ask about the revised guidance then. Just want 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 talk about specific drivers that would lead to those typical seasonal trends this year, I think, it would be helpful.

Yeah. So, 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 in that 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. And the cost side of the P&L 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. So I'd say that from a seasonality standpoint, benefits primarily in G&A, where we expect to see the most movement.

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

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 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.

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