TruBridge Q4 2023 Earnings Call Transcript

Quartr
Provided by Quartr
February 29, 2024

Key Takeaways

  • We will provide Q1 2024 guidance with revenue of $82–84 M and adjusted EBITDA of $8.5–9.5 M, and full-year revenue guidance of $340–350 M with adjusted EBITDA of $45–50 M.
  • The guidance assumes only 15 days of revenue from the divested AHT unit and a full-year contribution from ViewBuild, which generated ~$16 M in revenue and ~$2 M in EBITDA in 2023.
  • Excluding acquisitions, bookings are expected to be flat year-over-year with the midpoint implying ~6.5% organic revenue growth, with Q1 as the lowest quarter before ramping through the year.
  • EBITDA margins are projected at ~11% in Q1 due to workforce transition and duplicative costs, but are expected to improve in H2 as vendor savings and offshore leverage materialize.
  • Cost rationalization efforts across vendor spend, G&A, real estate, and CapEx are underway and could deliver additional savings in the second half, though these are not yet included in guidance.
AI Generated. May Contain Errors.
Earnings Conference Call
TruBridge Q4 2023
00:00 / 00:00

There are 8 speakers on the call.

Operator

Ladies and gentlemen, we thank you for your patience. Our event will now resume.

Speaker 1

Yes, this is Chris. We're going to go back to Vinay starting at the beginning of guidance. So we just wanted to make sure that we went ahead and put him straight into the fire. So here we go.

Speaker 2

Thank you. Moving to our guidance. 1st, in an effort to improve our transparency, we will begin providing guidance for the upcoming quarter starting today. For the Q1, we expect revenue to be in the range of $82,000,000 to $84,000,000 adjusted EBITDA to be between $8,500,000 $9,500,000 And for the full year 2024, we expect revenue of $340,000,000 to $350,000,000 adjusted EBITDA to be $45,000,000 to $50,000,000 I want to give you a little insight into our thought process and assumptions that went into this year's guidance. Firstly, we have assumed impact of AHC in the guidance.

Speaker 2

In other words, the guidance assumes only 15 days of AHT in Q1. As a point of reference, AXT accounted for approximately $16,000,000 in revenue in 2023 with approximately $2,000,000 a contribution to adjusted EBITDA. Secondly, a full year of viewable is included in these numbers. For 2024, we expect revenue of less than $20,000,000 with an approximately 4 dollars contribution to adjusted EBITDA. Starting with bookings, we took a conservative approach for the full year and assume 2024 will be relatively flat compared to last year, excluding AST and Viewb.

Speaker 2

In terms of quarterly cadence, we expect the Q1 to be the lowest of the year and then build as the year progresses. That said, please keep in mind that bookings are lumpy. The midpoint of our annual revenue ranges implies 6.5% growth excluding ASP from 2023 and that will be primarily driven by organic growth in RCM business and the full year contribution from ViewBuild. Last year RCM including ViewBuild in Q4 accounted for 57% of our total revenue and this year we think could be about 2 thirds of total revenue. We are forecasting our EHR business to be relatively flat excluding the impact from some setting of our Centric platform.

Speaker 2

I also want to provide further detail on how we anticipate EBITDA margins to progress over the year. The Q1 will be our lowest EBITDA margin in 2024 at approximately 11% based on the midpoint of our quarterly guidance range. This is because we have just begun ramping our global workforce and therefore have some duplicative costs during the initial transition to ensure continuity for our existing customers. We expect the second half to have higher EBITDA margins to reflect the benefits from already negotiated vendor savings, savings from ramping the offshore workforce and expected first half bookings converting to revenue. I have been conservative to not include any other future cost savings book initiatives in our guidance that we have initiated as part of cost rationalization and capital allocation strategy.

Speaker 2

These initiatives are in the preliminary stages, but include a review of overall cost structure relating to vendor spend, G and A, including real estate and CapEx spend. We could see benefits in the second half, but there are too many moving parts as it relates to the contribution from the offshore transition along with other factors to count them in the financials for now. I'd like to close out my first call by thanking Chris and the rest of the CPSI team for a warm welcome to the company and a great first couple of months. I'm excited to help CPSI successfully capitalize on the many opportunities that lie ahead of us, and I look forward to getting to know many of you in the coming weeks months and keeping you updated on our progress as the year unfolds. With that, I will open the call up to questions.

Speaker 3

Thank you. We will now be conducting a question and answer session. Our first question comes from Jeff Garro with Stephens Inc. Please proceed with your question.

Speaker 4

Yes, good afternoon. Thanks for taking the questions and welcome to the call, Vinay. I want to ask about margins in 2024. Would expect Viewgle and further offshore leverage as well as potentially some reduced R and D following the post acute divestiture to be accretive to margins. So could you discuss those in some more detail?

Speaker 4

And also any potential offsets that have you landing at those roughly flat EBITDA margins at the midpoint of the guidance year over year? Thanks.

Speaker 2

Thank you, Jeff. First of all, I'm excited and looking forward to building this relationship with all of you. You're absolutely right. It looks like a flat margin and all the reasons you outlined are also factored in. But there are a big couple of big offsets that I would highlight.

Speaker 2

One is budget for 2024 will be based at full bonus. So compensation related expense adds a significant portion and this compensation is bonus accrual as well as merit increase that offsets most of these gains right now. And barring that then, obviously, we had smaller increases from the full time impact of the hirings that we had done in the second half of twenty twenty three, full year impact is felt in twenty twenty four. So these are investments in support, technology and sales and marketing. Got it.

Speaker 2

That helps.

Speaker 4

And maybe step back a bit and throw one out there for Chris. You've done the VUGO acquisition, you've divested the post acute business. Curious if we should think about potential for additional strategic moves to come? Or do you now have the platform that you want to grow and drive leverage across?

Speaker 1

I think it's a super fair question. And I would say right now for 2024, we've got a full plate and we're looking to execute. And so we were excited about, obviously, getting the bugle deal done at the end of last year, excited about the AHT divestiture, creating the additional focus there. And right now top of mind for us is continuing to drive sales and revenue growth and really capturing the value of the bugle workforce transformation over the course of this year. And going back to that margin question, you can look at I'm excited about the fact that we're providing the quarterly look ahead guidance, which allows a bit more visibility for you guys as we're continuing to march through this transformation.

Speaker 1

But you can also tell just from the bridge of looking at Q1 over the course of the year, there's a pretty steady ramp as that margin grows as we continue to execute on the offshore workforce.

Speaker 4

Excellent. I appreciate that. One last one for me before I jump back in the queue, but I want to make sure we hit bookings and saw the nice finish to the year. Could you help us think about the pipeline from here and where our expectations should be for bookings in 2024?

Speaker 1

Yes. We were definitely thrilled to see the rebound that we had in Q4 over Q3. We continue to remain cautiously throughout the year of how quickly this

Speaker 3

market was

Speaker 2

going to unlock.

Speaker 1

Okay. And then just throughout the year of how quickly this market was going to unlock. So if you look at our guidance, I think that we've With that said, the pipeline continues to be strong. We're continuing to have the same great conversations with customers and seeing those pick up both in our existing customer base and with our outside of the EHR.

Speaker 4

Great. Thanks again for taking the questions. I'll hop back in the queue.

Speaker 3

Our next question comes from Sarah James with Cantor Fitzgerald. Please proceed with your question.

Speaker 5

Thank you. I was hoping you could unpack the seasonality a little bit more. So the year looks like, especially on the EBITDA side, a little bit more back end loaded. Are there any one timers in there we should think about? Is the cost of rebranding in 1Q 2024 and how sizable is that?

Speaker 2

Yes. So that's a great question. Sarah, nice to meet you again. Sarah, the margins I give is adjusted EBITDA margins and rebranding and all our one time items that are taken out. We have rebranding costs for this year, but it's not included in the adjusted EBITDA margin.

Speaker 2

You're right, the margin is back end loaded for two reasons. The ramping that ViewBuild has is on a month to month basis. So if I have something in the 1st month, I get in the last quarter all the benefits. So it's ramping up of month by month so that my Q4 will be the maximum benefit. That's one.

Speaker 2

Secondly, my vendor savings that we have negotiated is it kicks in from Q2 onwards. So that's the second aspect of it. And obviously, the bookings and the revenue that you expect is the benefits that we will see is also back end loaded. So it's a mix of all three. The good advantage part of it is vendor savings has already been negotiated.

Speaker 2

And the bookings first half will decide will give us a great color for the second half of revenues.

Speaker 5

Great. Thank you, Vinay. And maybe you could give us a little bit of insight into your process there, how you've been going through the review of the business units And how you think about guidance philosophy, whether it's conservative or optimistic?

Speaker 2

That's a great question that you say. I've always been told future will tell me whether I was optimistic or conservative, but I'll tell you how I have thought through these. As you know, Sarah, there are a lot of moving pieces, a lot of pieces that could change. But how I have thought through is looking at the past to be my looking at history and then looking at future and breaking it to 2 parts like what Chris said, 1, being a little conservative on making sure what we learned on optimism of 23 is not baked into 2024. So a flat bookings number excluding Viogold and EHT was good, especially despite it coming good on the Q4, that was 1.

Speaker 2

2nd aspect on margins, some of it is my history and my background, laser focused on the controllable and making sure the rigor that we need we have started putting on these expenses and everyone to fight to stay on that on the P and L has, I would say, some of it which are fully baked is already captured like the vendor saving. But the other that I mentioned in my prepared remarks are work that I'm trying to do and have an ROI focused and more near term focused. So CapEx, product development expenses that we are spending, Looking at it from a project by project and the ROI of not having too long term and near term is the cadence that we I have just instituted started. It's still early, but I would say that's the mindset I have. So to answer your question, I feel at least 60 days in, it looks like a balanced budget to the best of my ability of understanding.

Speaker 2

But there I feel more like a lot more work to be done in the coming months. Chris, what would you?

Speaker 1

No, I think you nailed it. And again, Sarah, I would say definitely between the optimistic and conservative, I would say realistic is over the 1st 60 days is the way that I would categorize Vinay and appreciate that approach. Also again, I'm going to say this for the second time. I love the fact that we're giving the quarterly guidance, which I think helps everybody kind of keep track of our progress as we go, as we do know that it's not quite a straight line on this transformation.

Speaker 3

Our next question comes from Jesse Davis with Barclays. Please proceed with your question.

Speaker 6

Hey, guys. It's Stephanie Davis from Barclays. But it's okay because I can have a new name as you guys have a new name too. Congrats on the resounding. Now I was hoping to hear, Chris, you just came from a customer conference week on heels of that rebrand.

Speaker 6

So tell me, what's the feedback? What are folks looking for? And what was the big area of demand that everyone talked about?

Speaker 3

Hello, Chris. Are you there?

Speaker 1

Maria?

Speaker 3

We're welcoming back our speaker now to answer Jesse Davis from Barclays. Correct.

Speaker 1

We'll call her Stephanie. So Stephanie, thanks for the question. Like I was saying, we have been thrilled with the response to the rebrand on all fronts. And granted it is early days, but obviously you shared your email and obviously you've been bugging us about this for quite a while. I think the sentiment from the street has been finally make it easier to tell the story.

Speaker 1

Our customers and our employees all seem to get it as well and appreciate the consolidation and the ease of how we talk about who we are. Going to the conference to VIVE, what I would say that we saw kind of more than anything, is that people are looking for insights. Insights on where there are opportunities for there to for them to improve efficiencies, which lined up really nicely with we had a little soft launch for an analytics platform that we're driving out. And so our thought is that step 1 is the technology that's available to find the areas for improvement on the RCM side. And then obviously with the opportunity for us to back that up with some services that come in, which I think is as much of top of mind to the customers, as identifying what those problems are.

Speaker 1

Once you've identified them, then it's about how do you solve them.

Speaker 6

When I think about a legacy industry that does a lot of insights work, I think in Nielsen and we've got Vinay coming from there. Vinay, is there anything you're seeing in that opportunity where you can kind of get some learnings from your past?

Speaker 2

I would say, Stephanie, past, not just Nielsen helps, but Avaya, my banking, everything has I'm learning from those experiences and utilizing it here. And the key one I would say is focus a lot on my controllable, which is cost structure and CapEx because that's an influence I can make. And having lived through 2 private equity learnings and they have been amazing teachers to me, so bringing that cadence of an ROI mindset has helped me a lot, 1. Secondly, in my Nielsen on having focused on revenue and all, it's building that partnership with the business where accountability is an ownership share and that translation of bookings into revenue in the right from a forecasting is the second one. And the third, which is not Nielsen, not Avaya, just who I am, cash is the only truth I'm going after.

Speaker 2

So improving my free cash flow is being the mantra that I'm committed to. So it's a journey that I'm I know might be longer, but every day, every month is where I'm looking to make a difference.

Speaker 6

Love hearing that. On the rent cycle side, I want to dig in a little bit. It looks like your cross sales motion is a little bit softer for the past few quarters. Is there any color on this? And then last one is a quick housekeeping one.

Speaker 6

I didn't see an NPR metric. Is that going to be disclosed or is there anything you can share on that?

Speaker 1

Yes, I'll take the first and then let Vinnae talk a little bit about the NPR and kind of the approach there. As it relates to the bookings and just kind of from a macro view, I would say we're still very confident as it relates to the cross We continue to see that end of the market continue to have some momentum. I think it's still we still have the same challenges to an extent while we're seeing them turn down a little bit. It's the economic impact of the jobs in the community and it is the concept of outsourcing in general. Remember, we're still talking about a market that 70%, 80% of it's still being done in house and there's not a regulatory push to drive to this model.

Speaker 1

And so we're still selling the idea of outsourcing before we're selling TruBridge as the provider for that service. And so we're making great strides. That sales force has now been intact for a full year. So they definitely have their feet under them. 1, on the value proposition of what it is that we're selling and 2, building that relationship with their customers.

Speaker 1

And so we're expecting to see that as the year unfolds, continue to make progress there. And I'll let Vinay talk a little bit about the NPR.

Speaker 2

Yes. So Stephanie, I feel bookings is a great metric because it is effort and reward of our own that we are reflecting. NPR, I just wanted to take a little more time to do the homework of understanding the ins and outs because like everyone else, a portion of our NPR data is relied on 3rd party inputs. And when it's not in our control, knowing how the out inputs come in, what's the cadence, I just want to do that homework a little bit longer to just make sure I understand what are the ins and outs and how is that a leading indicator for me. So that's the reason why you didn't see it in this, but bookings, which is obviously deals closed, is a great indicator for us for the time being.

Speaker 6

These are helpful. Looking forward to seeing the metrics. And thank you, guys.

Speaker 1

Thanks, Stephanie or Jesse, whichever it is.

Speaker 3

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

Speaker 7

Yes. Hi. It's Maxima on for George. Thanks for taking the question. Can you talk a little bit about what has changed in outsourcing conversations lately with prospective clients just given the recent macro environment?

Speaker 7

Thanks.

Speaker 1

Yes. I'm sorry, I didn't catch your name. So but I'll answer the question. I did hear most of that. What I would say is definitely we're seeing the increased interest and that is based on as I said in the prepared remarks, the pressure on the labor market specific to the communities that we're serving.

Speaker 1

And secondly, as the reimbursements to continue to get complex, more complex, the need for the specialized skills and continuing to stay on top of that continues to ratchet up. And to give an example of that, if you go back 5 years ago, the vast majority of these hospitals were their payments were on the backs of traditional Medicare, Medicaid and probably a Blue Cross was going to make up the vast majority of their payments and a pretty straightforward payment model that they were getting reimbursed on and also getting paid within 14 to 17 days. While it may not be the dollars that they want to get, they knew the money that they were going to get, they knew in the time that they would get it and they could budget for that. What's happened is you've seen this kind of proliferation of the move to the Medicare Advantage or the value based care model, it's created more complexity and making a little not quite so straightforward in getting that money in. So it's about again having the resources, one that are available just the bodies and the chairs.

Speaker 1

And then secondly making sure that they're able bodies and that they're on top of the changing landscape of how that reimbursement is. So that's really where the vast majority of the conversation is shifted to. And again, as we have this is what we do. We live and breathe by this, specifically with more than half of our business. And so we're able to sell the success that we've had with our 20 plus years of experience to be able to bring that consistency and success into the delivery for those opportunities.

Speaker 3

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

Speaker 1

Well, thanks everybody for joining us. Also thank you for the patience with our technical difficulties. Hopefully that'll be a one time and only. And obviously thank you to the new co pilot that we've got sitting with us, I'm looking forward to go and finishing this transformation and continuing the progress that we've started here at CPSI soon to be TruBridge on Monday. But hope everybody has a wonderful rest of your day and good weekend.

Speaker 1

And thank you again for your support in our company. Bye bye. Thank you.

Speaker 3

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

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