TruBridge Inc (TBRG) 2005 Q1 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the Computer Programs and Systems Incorporated first-quarter earnings release conference call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. (OPERATOR INSTRUCTIONS). As a reminder, this conference is being recorded Friday, April 22, 2005.

I would now like to turn the conference over to Mr. David Dye, President and Chief Executive Officer of Computer Programs and Systems Incorporated. Please go ahead, sir.

Thank you and good morning, everyone.

First, I will read our forward-looking statement. During this conference call, we may make statements regarding future operating plans, expectations and performance that constitute forward-looking statement 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 are only predictions and are not guarantees of future performance. Actual results might differ materially from those projected in the forward looking statements as a result of 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 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.

Joining me on the call is our Chief Financial Officer, Steve Walker. Steve and I will spend a couple of minutes covering some data points that are not included in the earnings release, and then we will open the call to questions.

In the first quarter, we installed our financial and patient accounting system at 12 new client hospitals. Our core critical departmental applications were also installed at 12 hospitals. Seven facilities implemented nursing point of care and three hospitals went live with ImageLink packs.

In outsourcing services, we executed two new business office outsourcing contracts, one of which was for the full business office and the other for private-pay collections only. At this time, expect to install our financial and patient accounting system at 12 facilities in the second quarter. We also anticipate ten new installations of our core critical departmental modules, six nursing point-of-care implementations and five ImageLink installs.

As a general comment, our pipeline remains strong and, as evidenced by the number and the quality of the contract signings in the first quarter, we remain confident in our competitive position.

I'm going to turn it over to Steve to go over some financial benchmarks, and then we will take questions.

Thanks, David.

I would like to highlight a few bullet points before we open the call for questions. Our DSOs were 40 days for the first quarter, down 5 days from the fourth quarter, and finished below our range of 45 to 60 days. Operating cash flow for the first quarter was 6.5 million. Free cash flow was 5.8 million for the quarter and we define free cash flow as net cash provided by operating activities, less Capital Expenditures. CapEx for the quarter was 0.7 million. Cash collections were 26.4 million for the first quarter of 2005, compared with 20.1 million in 2004. Our employee headcount at the quarter end was 779, an increase of 47 for the quarter. We anticipate an effective tax rate range of 39.5 to 40% on a go-forward basis.

Operator, we would now like to open the call to questions.

Thank you. (OPERATOR INSTRUCTIONS). Michael Baker from Raymond James.

Yes, Steve, you gave the uptick in headcount. I was wondering if you could break that down by function.

Yes, we can, Michael. The uptick in the -- well, I only have actually the last month at my disposal here. We're -- 19 were added in clinical and 11 were added in outsourcing and programming area. I'm afraid I don't have each breakdown by the entire quarter at this time.

Maybe just in general, David, given kind of the demand out there, where you expect to end the year in terms of headcount, and where you think -- how the adds would break out.

This is very general, Michael, because we don't protect headcount that far in advance. We do it more on, I'd say, maximum six months ahead, but I would, at this point, I'd say guesstimate that we will end the year with approximately 850 people, probably one-third of which would be in the outsourcing services area, another third in financial software services and then the remaining third of course in the clinical services area. We probably -- those three numbers add up to 100 percent -- if I can cheat a little bit and say that probably other 5 to 10% or so will be added to our hardware and technical support areas as well.

Finally, can you update us on any changes, if any, you're seeing on the competitive landscape?

I really can't, Michael. It remains the same -- the same core competitors that we've really been knocking heads with for the last really 20 years now in the -- especially the under 150/under 100 base (ph) space where it's primarily Meditech, HMS, some Dairyland (ph) and then over 100, 150 beds, it's primarily Meditech and very occasionally Cerner, Eclipsys, Siemens, McKesson.

So you haven't seen any pick-up in activity from Cerner or any pullback from HMS?

Absolutely not in either case.

Sean Jackson from Avondale partners.

thanks and good morning, guys. Can you comment on, of the 21 deals that you signed in the quarter, how many were over 100 beds?

Yes, four.

Also, just the upside that you had in the March quarter -- and this is even very strong versus what you guided to 3 months ago -- why was it so much greater than you originally thought three months ago? Is it just installations were quicker or what do you attribute that to?

Well, the number of contract signings wouldn't have anything to do with the quickness of speed of installations, and honestly, Sean, I don't remember what, if anything, I guided to last quarter. I may have been asked on the call, but I don't recall specifically if I was and if so, what I answered. We like to think that we will average about 11, 12 per quarter. If I had to give a reasons (sic) why I think the March quarter was so strong beyond the obvious that the demand is high would be that we had a quite a bit of maturity in our pipeline. About a year ago maybe when it didn't necessarily reflect itself in our financial numbers yet, we mentioned that the pipeline picked up quite a bit, and we maintain rather consistently that the sales cycles anywhere from minimum 6 to maximum 18 months. So if you look at it that, way we are really a year away now from when the sales cycle picked up, which is we had, in the quarter and continue to have to a degree but probably not necessarily quite as much so as we did at the end of the year, not only a strong pipeline but a very mature pipeline, a pipeline where they had done, let's say, the vast majority of their due diligence and were at the point where they were ready to make their final decision and sign a contract.

Okay, so is it fair to say that, in your business, you're seeing just the prospects becoming more serious and not necessarily an increase in prospects, but just the prospects are becoming more serious?

I would say a little bit of both. I mean, the prospects, we've seen an increase overall but it is probably more certainly the case that -- I guess you could use the word "serious" -- certainly more engaged in the process, less likely to delay the process for various reasons. You know, a year ago to two years ago, when sales were -- they are always difficult to come by but they were maybe a little bit more difficult to come by. Many times, you know, you would see folks hit what we would consider to be three-quarters of the way through the process and then it would just either come to a screeching halt or seem to lose momentum. You don't always -- they don't always say this but you feel like, in some cases, it's because of the priority doesn't match up with the availability of funds. I think what's happening now is the financial climate has improved, albeit not necessarily tremendously but it is certainly -- I think it's indisputable that the financial environment has improved. You combine with the fact that the priority has certainly improved, and I think that your -- just the word "serious" -- I think the prospects are much more serious about completing it in a timely fashion now.

Okay, thanks. I appreciate it.

Corey Tobin from William Blair.

David and Steve, good morning and very nice quarter! A couple of quick housekeeping things and then just some other questions -- Steve, what was the depreciation in the quarter?

427,000.

Thanks. Can you just -- Dave, you gave a little bit of color but can we just talk about the 21 contracts again? There's the 4 over 100. How many - -assuming the rest are under 100, were there any over 200?

No and no, if that answers your question. I mean, yes and no. The rest were over 100 -- and I'm sorry one of them was over 200. There was 1 over 200, 3 between 100 and 200 and the rest were under 100.

Any ASP deals in there?

No, there were none.

Okay. Let's see, you mentioned the pipeline was strong overall. Can you just give us a feeling? Was it -- is it up from last quarter, or is it flat or where does that -- I know you don't want to put specific numbers behind it but can you just quantify strong a little bit?

Yes, I will quantify it by saying it was flattish, which to me is still strong, remains strong.

Okay. Specifically in terms of the pipeline, can you give us some commentary on the pipeline for outsourcing deals? It seems like you've been signing up two to three per quarter here. It that something we should expect to see continue? Is there still a strong interest in that product line?

I certainly would say that we should expect it to continue. I certainly don't necessarily think it will be that consistent; there might be some where we get three to five and some where we don't get any, but we'd like to average two to three per quarter.

Then just with respect to getting back to sort of the buyer's mindset, I mean, I'm assuming that, given that most of the contracts were under 100 beds, but yet the average contracts, average deal size rather was relatively large. I'm assuming most of them at this point are taking the clinical applications upfront?

Yes, somewhere around two-thirds, Corey.

Okay, it seems to market a pretty decisive change from where we were at 18 months to a year ago. Is that safe to say?

Yes, I would say it's safe to say, again, for two reasons. The ones that we're getting the financials and patient accounting only, say 18 months, 2 years ago, we're only getting those applications more -- and we stated this at the time -- more because that was all that they could get approved through their Board process at that time with the full intention of going to the clinical applications down the road. It's been a few years now where somebody -- where the majority of our clients bought this system simply because they wanted to get our financial and patient accounting product. I'm not trying to imply that that speaks to the strength of our financial and patient accounting product. I think it's wonderful product but I really -- frankly, the clinical product is sort of driving the financial and patient account product along with it.

Okay, great. The last question, if I could, on the sales force side, can you remind us how many salespeople you have at this point?

Corey, I don't have that number directly in front of us. I don't know if you have my answer from last quarter, but it hasn't changed any. We do anticipate, between now and the end of the year, adding three more FTEs in that department, and Steve now has it in front of him. We've got 26 people on the sales force.

Okay, but you feel that there is enough opportunities (sic) out there where it makes sense to add at this point?

Well, yes. I feel like there's enough opportunities out there where it makes sense to add three people between now and the end of the year, yes.

Do you -- one last thing -- you used to publish a win-rate estimate. Do you have any thoughts on what the win rate was last quarter?

We stated, on the last call, that we are not going to do that any more for competitive reasons. You know, I will state, as I did in my prepared comments, that, based on the number of contracts, we feel very good about our competitive position. We continue to feel very good about our competitive position. That being said, I don't think that is overconfidence. We've still got a lot of work to do, always will.

Understood. Great, thank you.

(OPERATOR INSTRUCTIONS). Josh Stewart from Sidoti & Company.

I'm not sure if you said -- how many new business office outsourcing customers were signed during the quarter?

Josh, two were signed, one for the full business-office outsourcing and one was private-paid collections only.

Okay, and how many were implemented during the quarter? Was it two I think you guys said last time?

I believe that we said two, and we did what we said we did.

Okay, I think you guys said you were going to do two.

You didn't have any slides, so whatever we said we were going to do is what we did.

I was just wondering if you could just comment on the real opportunity there. I mean, I know you guys have an installed base of more than 500 hospitals. Are all of your customers possible business office outsourcing customers at some point? Can you cross-off all of them or is there a specific type of hospital, size of hospital that's more interested in this service?

Certainly, I would say that they are all possible prospects for business office outsourcing. I recall, when we started with patient statement outsourcing in late '99/early 2000, thinking that we would be doing great if we could ever get, say, 25 to 30% of our customers to utilize that service and now we've got somewhere in the 60, 65% range that do it. I don't expect to see that type of penetration with the full business-office outsourcing if ever certainly not anytime soon, but we've great potential.

The biggest hurdle that we have there, it's relatively easy, Josh, for us to show our ability to reduce AR days and improve cash flow and do a better job than what the in-house staff might be able to do at the majority of the community hospitals out there. The problem is that, when they outsource that job to us, we are displacing anywhere, say, from 5 to 15 jobs from the community, which in small towns across America is a very difficult decision for a hospital board to make.

Okay. I have 12 full full-service business-office outsourcing customers. Is that right?

Yes, I believe that's correct, 12 or so full and about 10 private-pay only.

At this time, there are no further questions. I will turn the call back to you. Please continue with your presentation or your closing remarks.

Okay, thank you, everyone, for joining us this morning. We appreciate your interest in CPSI. Have a great day and weekend.

Thank you. Ladies and gentlemen, this does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your lines. Thank you, and have a wonderful day.