TruBridge Inc (TBRG) 2013 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by.

Welcome to the Computer Programs and Systems fourth-quarter and year-end 2013 earnings 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, January 31, 2014.

I would now like to turn over to Boyd Douglas, President and Chief Executive Officer.

Please go ahead, sir.

Thank you, Suzy.

Good morning, everyone, and thank you for joining us.

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's 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 the 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.

Joining me today on the call this morning is David Dye, our Chief Financial Officer.

David and I have a few minutes of prepared comments, and then we will be happy to take your questions.

In the fourth quarter, we installed our financial and patient accounting system in eight hospitals and our core clinical departmental applications at 10 facilities.

Additionally, 10 hospitals implemented nursing point of care and 37 customers went live with the physicians' applications, which consists of ChartLink, CPOE, and physician documentation.

Add-on sales to existing clients were $11.9 million, or 23% of total revenue, for the quarter.

At this time, we expect to install our financial and patient accounting system at eight facilities in the first quarter.

We anticipate 12 new installations of our core clinical departmental modules, 12 nursing point-of-care implementations, and 45 installations of physicians' applications.

Our most recent software release, version 19, has now been successfully installed in over 525 sites.

Version 19 is our Stage 2 certified software release, and its quick adoption by over 80% of our clients means those who have to attest for Stage 2 in 2014 are prepared to move forward with their attestation.

Additionally, this version of our software provides our client hospitals with the software needed to satisfy all ICD-10 billing and reporting requirements scheduled to go into effect this fall.

We were proud to announce earlier this month that our medical practice EMR system has received ONC certification for meaningful-use Stage 2 2014.

If you saw our press release, you know that CPSI is the only vendor in the rural and community EHR sector to offer its own internally developed, fully integrated, and ONC 2014 certified hospital and ambulatory products.

Since many of our hospitals own or manage their provider practices, we believe our ability to offer a certified solution from the same vendor across the continuum of care is very much a competitive advantage for us.

From a new development perspective, we are on track for release of our emergency department application.

Alpha testing and on-site usability studies are proceeding well, and we continue to anticipate release of this application late in the first quarter.

Anticipation surrounding this application within our customer base has been high, even among those who already have a third-party ED system installed.

The appeal of a solution that is truly integrated with the rest of their EHR system is a major factor for these hospitals, and therefore we believe this application will have wide appeal and acceptance when it is generally available in the third quarter of this year.

Now I would like to update you on progress from our services subsidiary, TruBridge.

During the quarter, TruBridge executed 11 new accounts receivable management contracts, two of which were for full services and nine for private-pay and insurance follow-up services.

Both of the full-services contracts were for non-CPSI EMR customers and one of the private-pay contracts is with a hospital that does not utilize CPSI as their EMR vendor.

On that front, we continue to be excited about the pipeline of non-CPSI EHR prospects for TruBridge AR-related services.

We are well ahead of where we anticipated in this endeavor and, based on our current prospects, we are looking forward to a strong 2014 in this area of our business.

With that, I am going to turn the call over to David for his comments.

Thank you, Boyd, and good morning, everyone.

I have a few prepared comments, and then we will take questions.

Our employee headcount as of December 31 was 1,390, down 30 sequentially and 53 year over year.

We expect our total number of employees to remain around 1,400 for the duration of 2014.

The accumulated unrecognized revenue related to first-generation meaningful-use contracts as of December 31 was $2.7 million.

This $2.7 million is comprised of unrecognized revenue from three hospitals.

One facility was a startup in 2013 and will submit a full-year Medicare cost report in midyear 2014 in order to be eligible to receive maximum Medicare MU funds.

The second is a critical access facility that recently submitted cost report data to their CMS intermediary, prior to final Stage 1 MU payment.

And a third is awaiting their year-two Stage 1 MU payment to fund the remainder of their balance from installation that was not covered with their year-one Stage 1 payment.

All three hospitals are making monthly payments and are in good standing.

The recognition of this $2.7 million in revenue is included in our 2014 guidance.

Five of the eight new client installs we performed in the fourth quarter were generation-two contracts and three were standard.

Of the eight scheduled first-quarter 2014 installations, three are gen-two contracts, one is SaaS, and four are standard payment term contracts.

Our fourth-quarter cash collections were a record $56.2 million, and we expect better-than-average cash collections in the first quarter of 2014 as a result of our continued receipt of payments from hospitals recently installed under gen-two MU contracts.

As Boyd mentioned, we remain pleased with the performance of TruBridge, both within the CPSI customer base and among non-CPSI EHR facilities.

In 2013, we executed a total of 12 contracts for services at non-CPSI hospitals.

These services include private pay collections, full business office outsourcing, medical records coding, and the placement of a revenue cycle director.

We are confident TruBridge will play a significant role in CPSI's overall growth in 2014 and the years to come.

As stated in the earnings release, our guidance for the full year of 2014 is for gross revenues of $205 million to $215 million and net income of $36 million to $38 million, or $3.25 to $3.40 per share.

Finally, we are thrilled to announce a 12% increase in our quarterly dividend, from $0.51 to $0.56 per share.

This increase reflects our continued commitment to provide consistent value to our long-term shareholders.

Suzy, please open the call for questions.

(Operator Instructions.) Ryan Daniels, William Blair.

Let me start, David, with one for you.

In the fourth quarter, very good profitability on the gross margin front, in particular on the systems sales line.

I think it's the first time we have seen it go above 50%.

So can you -- I guess a twofold question.

Number one, talk a little bit about what drove that up to such a high level.

And then, number two, I think for the full year it was about 40%.

Do you think that's sustainable into 2014?

Good morning, Ryan.

The primary reason is the mix leaning more towards add-on sales, specifically, of course, the position applications that a lot of our clients are installing right now to prepare for Stage 2 meaningful-use attestation.

Of course, that will continue into 2014, certainly into the first half of 2014.

We have no guidance around what that gross margin is going to be, but I do think, overall, it will continue to trend upward.

And I will take this opportunity to make a correction while I am speaking here.

My comments were incorrect; our dividend increase was from $0.51 to $0.57 per share, and I said $0.56.

Sure.

Okay, thank you.

You think, just to get your comment there a little more clear, margins can increase from the level in the fourth quarter or from the full-year levels?

No.

No.

Full-year 2013.

Thanks for clearing that up.

Okay, okay.

Thank you.

That's important.

And then, backlog had a nice jump in nonrecurring, and I think your systems sales, the way we calculate it, it looked like they had probably the biggest growth we have seen in quite some time.

Is that, again, just more of the add-on sales as people prep for meaningful-use Stage 2?

The increase is definitely more add-on sales.

The new systems sales remain steady and strong, but the increase is due to add-on sales, specifically, again, the Stage 2 meaningful use.

Okay.

And then, maybe just one more on the EDIS, it sounds like that's progressing as planned and you've got some pretty good early feedback.

Is your sales force actually out actively marketing that to clients yet ahead of the full launch in the third quarter, or is that just kind of resonating through the marketplace?

I am just trying to get a better feel for how quickly that could ramp and maybe fill in some of the air pocket in the back half of the year.

They are definitely out marketing that with the general availability target for the third quarter for everybody.

Okay, great.

Thanks, guys.

Thanks, Boyd.

George Hill, Deutsche Bank.

A couple of quick questions.

The first one is kind of an accounting question.

The $2.7 million that you guys are looking to recognize in 2014 from the contingent revenue deals, will there be any meaningful costs associated with that revenue?

Or should that mostly flow through down to the bottom line?

Somewhere between 85% and 90% of it should flow through to the bottom line.

Okay.

Alright, that's helpful.

So that looks a little bit like a one-time contribution in calendar 2014, I guess, is the right way to think about that.

I suppose.

We certainly had some contributions from gen-one sales in 2013, as well.

But we no longer offer those payment terms, so beginning in 2015, we won't see it anymore.

Okay.

That's helpful.

On kind of the details on the sales of the products during the quarter, it sounds like you guys are starting to bundle the CPOE -- the physician documentation, the ED, and the ImageLink from a reporting it to us perspective.

I guess what I wanted to figure out is, are you going to continue to break out those numbers to us?

And then, is that part of the go-to-market strategy, too, is to bundle those products?

So does the change in reporting kind of reflect a change in the sales process on your end?

I have been reporting it that way for several quarters now and really that's a function of the people that install it.

It's the same group of people and that's how we schedule it.

Certainly, it can be a bundled package if hospitals are interested in that.

But with CPOE adoption where it is now, most hospitals already have that.

So it's the other piece, but again, that's more from an organizational perspective.

The people that install those systems is the same teams of people, and that's just how we think about it from an installation perspective, which is why I report it to you that way.

Okay.

That is helpful, too.

Then just one last housekeeping item, can you update us on what the core clinicals penetration is on the core financials customer base?

Thanks.

I don't have it in front of me, but it's around 90%.

Jamie Stockton, Wells Fargo.

I guess maybe the first one, David, on gross margin, which is obviously a pretty big focus.

Is there any change we should be thinking about in the way that you guys are doing some of the training around implementing some of these solutions that would cause stuff like travel to be a lower percentage of costs going forward?

Maybe not just a near-term impact, but a permanent impact?

Good morning, Jamie, and absolutely not.

As we have been for three decades now, we are committed to our approach of utilizing our own team of employees to do the training on site, regardless of the travel cost, and we remain committed to that.

This goes back to our decision in 2009 to hire several hundred people so that we would be ready for this in 2014.

We remain committed, even during this -- what is going to be a reasonably tight timeframe with everybody trying to get ready for Stage 2 meaningful use.

I mean, we are ready for it.

Certainly, it will occasionally put some stress on our folks from a travel standpoint to be able to accomplish all that we are going to need to accomplish around Stage 2, but we are prepared for it.

That is not reasons for improvement.

Certainly it is, generally speaking, less intensive as a percentage of systems sales revenue for add-on sales as it is for new systems sales, but that's always been the case.

Okay.

That's great.

And then, just on your comment about it being pretty tight as far as all the activity that's going on, let's say, ahead of the July deadline for Stage 1 and Stage 2. You are seeing a pretty good uptick in the number of physicians' solutions that you are implementing in the March quarter.

But it also seems like there are still a lot of hospitals that need to get physdoc in, that attested in 2011 or 2012, ahead of the July deadline.

Are we looking at -- and I know you guys aren't looking to give second-quarter guidance here, but are we looking at a situation where activity is probably going to be more intense in the second quarter than it is in the first quarter, just because of all the physdoc and maybe, secondarily, CPOE activity that is going to be going on?

You are right.

We are not going to give second-quarter guidance and I appreciate the fact that you are not asking us to, but we have, I think, stated publicly that the last couple years -- I believe it was two years ago, in particular -- that the second quarter was very intense.

We don't know exactly to what level that will be the case again this year, but certainly it is trending similarly, for the reasons you stated in your question.

What is the capacity relative to that 45 number that you guys could do at the max, you think, in the second quarter?

That is kind of a difficult question.

45 certainly isn't the max, but it is nearing it.

Again, that kind of speaks to what David said earlier as far as it's how much we want to really travel our people.

We've got the people to do it; it's just a matter of how much they can be on the road.

So, that can fluctuate as well, and that kind of speaks back to my earlier question of the same people that installed the ED will install the physdoc and CPOEs.

It's the people that are familiar with the physicians.

So we do have some flexibility there, but more directly to your question, that number is the 45 from 38 or whatever historically it was.

I think you will see that trend continue throughout 2014, just because of the numbers and the number of people that have to meet meaningful-use Stage 2.

My last question, David, cash flow, very back-half weighted in 2013.

It seems like you guys are seeing a little bit of an uptick in the mix of standard deals that you are now starting to find versus gen two.

Should we be thinking about 2014 still being a very back-half weighted year from a cash flow standpoint, or (multiple speakers)

I don't think (multiple speakers) -- I think -- traditionally, we were back-half weighted a little bit, anyway, certainly not to the extent that we have been the last two years.

I think it will be less back-half weighted this year than it has been the last two, because of the reasons that you mentioned.

That's great.

Thank you.

Sean Wieland, Piper Jaffray.

What is the thoughts on the timing for the ED and the EHR applications going into general release?

Right now, like I said in my comments, we've got it in alpha testing now.

It will be entering beta testing soon, and we really expect to have a full slate of ED installing certainly by -- we are hopeful that it will be May, certainly June.

My comments around third quarter was that would be the first time we will have a full quarter with full ED installations with the full schedule.

Like I said in my comments, we are pleased with it.

It's going well.

We are obviously still tweaking some things while we are in alpha testing.

Again conservatively, certainly, starting with July 1, we should be full bore, if not before then.

For both products?

That's correct.

Okay, alright.

And then, I want to go back to this gen-one revenue moving into 2014.

As recently as December, you guys had been talking about this still coming in, that revenue also coming in in the December quarter.

In my view, it's no big deal that it moved to 2014.

My question is, though, you have set a plan for the fourth quarter assuming that that revenue would come in.

You gave guidance based on that.

You still came in at the upper end of the guidance, despite that highly profitable revenue slipping into 2014.

My question is, what changed in your business relative to your initial guidance to allow you to really outperform on the margins line and still hit the upper end of your guidance, even without that gen-one revenue?

Yes, and of course, I know you know this, but we gave the guidance in January.

We didn't update any guidance at any point later in the year, certainly not again at the beginning of the fourth quarter.

I will point to two things.

Add-on sales being at the strong -- at the top end or maybe even a little bit above where we thought they might be when we originally gave the guidance at the beginning of 2013, and then good cost control would primarily be the two things I would point to.

(multiple speakers).

I'm sorry, just kind of saying the same thing, I think it's just the utilization of our resources, kind of going back to David's comments earlier.

We hired these extra employees back in 2009 and we are just fortunate that the sales are supporting the levels of staffing that we have, and we are just utilizing our resources better than we thought we would.

Super, and squeeze one more quick one in.

Are you seeing any more new market entrants into the revenue cycle business for that under 100-bed market?

Not yet.

We expect to at some point, but not yet.

Bret Jones, Oppenheimer.

I just wanted to hit the margin profile again, especially as it relates to the guidance.

I was just hoping, David, if you could help us understand where the leverage is coming from.

Because if I look at -- is this a mix shift going on, because if I look at the gross margin, the meaningful-use gen-one deals are going to contribute less.

It looks like it's about an $0.08 headwind to EPS.

Obviously, there is going to be a drag to systems margin on there.

Where are you making that up from?

Of course, we are expecting that support and maintenance will continue to grow.

We will retain our customers.

They are continuing to buy applications, and the support and maintenance will continue to increase as a result of that.

Again, heavy on add-on business, but we've got new business coming in, as well.

Certainly, we expect TruBridge to continue to grow, which is recurring revenue and it's profitable.

And we're maintaining our headcount.

I think it is as simple as that.

Okay.

And then, just in terms of the add-on sales and just trying to help me understand exactly where the incremental margin benefit comes from.

I can understand maybe less implementation time, but where do those bodies go?

You have these people that are hired, so if you require less implementation time, is that where we are seeing the 30-headcount reduction hitting in the systems sales margin?

I am not sure I understand the question.

You have -- let's say you have 100 people staffed to do implementations, and you get add-on sales instead of new implementations, and it takes less time.

In theory, there would be extra margin if you didn't need those people.

But you are not letting those people go, right?

Absolutely not.

They are traveling less, which is obviously very expensive, if you saw our bill with Delta Air Lines every month.

I think that's a good piece of it.

It has been the case now for a long time, generally speaking, add-on sales are more profitable than new systems sales, anyway.

Okay.

And then, just lastly, I just wanted to hit on the financing receivable tick down.

It sounded like you were talking earlier to an earlier question, talking about getting more standard financing terms where they are paying up front, I guess.

I think you talked about four in this next quarter.

Is that something you expect to continue, or -- when I think of the remaining hospitals out there, I tend to think they would be smaller hospitals, less well funded, and more likely to opt for the financing terms.

I don't know if I -- the ratio that we have here for the installs in the first quarter, where half of them are standard terms -- of course, this is just speculation on my part in an attempt to answer your question.

I would think that will be about the percentage on average going forward over any meaningful period of time.

Just sort of based on the prospects that are out there right now and how they're looking to do this, that remains to be seen.

With Stage 1 meaningful use -- I don't want to say behind us, but it's getting there, that offered the best opportunity from a reimbursement standpoint for a hospital to be able to buy the whole system with their meaningful-use funds.

I would guess, again, that it's going to be about half standard and half either some combination of SaaS or in some way related to Stage 2 meaningful-use payments going forward, at least for the next year or so.

Mohan Naidu, Stephens Inc.

Congrats on a good quarter here.

A couple of questions.

On the delay in Stage 2, can you talk to us about how is that impacting you?

Obviously, your customers seem to be continuing to upgrade, irrespective of what the deadline is.

What is driving that?

Is it ICD-10, which is part of the version 19 that is driving -- at least pulling up the upgrade process out here?

That was -- and we've talked about this on the last several calls, there is a number of hospitals out there that the solution they got Stage 1 with is not a good fit for them, whether it was hard to implement or they are worried about Stage 2 or, as you pointed out, ICD-10 certainly is driving some of that.

There are a lot of factors that are driving these hospitals to the market.

We consistently said way back to when Stage 1 was being adopted, a lot of these hospitals were taking the less expensive route of bolting on, and now, as we say, the proof is in the pudding.

They are really realizing that that is not a good long-term solution for their hospital to have a best-of-breed type set-up in their hospital.

So that's driving it, ICD-10 is driving it, a little bit of everything.

Okay.

On the replacement customers who are coming in, they cannot use gen-two financing, can they?

Because they probably already used up the Stage 1 stimulus funds already?

Of course, they still have money available with year-two Stage 1 and year-one Stage 2, and so forth.

The numbers, generally speaking, that they receive from Medicare, from CMS, for those payments are less, typically about half of what they got with their year-one payments.

So there is some possibilities that all or, in some cases, part of the system can be based on the receipt of MU payments.

How that occurs going forward remains to be seen.

Another point to your first question, the way we are looking at this, Stage 2 wasn't delayed in terms of the deadline for hospitals attesting for Stage 2; it was delayed on the back end of the year.

The way we view it, Stage 3 was delayed.

So in terms of our hospital's requirements, those that attested Stage 1 in 2011 and 2012 still have to attest Stage 2 in 2014.

Those that did it in 2013 are going to have to do it in 2015; that hasn't changed.

Okay.

Last question, do you have a number in mind on the number of installs you guys are targeting, new installs for 2014?

This is loose when coming up with the guidance budget for 2014, but around 28.

Donald Hooker, KeyBanc.

I just wanted to follow up on that last comment.

You mentioned you were looking at, I think you said, 28 core installs in 2014.

In your thinking there, is that coming from other competitors, I assume?

Is that fair?

Definitely more than half, yes.

Yes, yes, I would assume that, just to be clear.

And then, in terms of a more mundane question, just because a lot of questions have been asked, the G&A line obviously has been coming down through the years.

I think you talked about earlier some of the insurance costs have come down.

Are we at a normal level now here in the fourth quarter as we think about your 2014 P&L?

Yes.

We certainly hope so.

As we've stated before, we are self-insured.

That can vary.

We do have deductibles to meet at the beginning of the year that we don't have in the back half of the year.

We certainly are not expecting what occurred in the first quarter of last year to happen again in the first quarter of this year.

That was an all-time anomaly in the history of our two decades of being self-insured.

That remains to be seen, but yes, to answer your question (multiple speakers)

(multiple speakers).

Yes, one last one here.

Somebody earlier asked about new entrants in revenue cycle management, kind of going back to your core installs next year.

Last quarter, I think you mentioned some new vendors coming into the small hospital space and some larger vendors.

Is that still the case or not so, like maybe with larger public companies?

We specifically mentioned Cerner on the last call and they are still around.

We didn't notice an increase in that in the last quarter, so that remains to be seen.

But it's still the same folks we have been knocking heads with now for quite a while.

(multiple speakers) that's fair.

Actually, let me squeeze one last one in.

The deferred revenue is also -- I just want to understand that because that's obviously been increasing pretty much every quarter for a couple of years and dipped a little bit.

How should we think about that?

(multiple speakers).

If the mix of new contracts heads back towards standard contracts, that should trend down a little bit because with the gen-two contracts, of course, we defer some of the support maintenance revenue.

So if that mix continues to come down, that should come down a little bit.

Richard Close, Avondale Partners.

Not to beat this gross margin on the systems sales, but I'm just curious whether certain products that are add-on sales maybe have, I guess, higher margins than other products, just because the 23% level for add-on sales, I don't think, is really that abnormal versus in past years or the last two years.

So, just trying to understand really what that gross -- what is juicing the gross margin.

The physician applications do have a better gross margin as opposed to, certainly, nursing point of care and the clinical departmental modules.

As those become -- those being point of care and clinical become close to 100% penetrated and their systems sales levels stay the same, they are made up of more of the physician applications than that contributes to the benefit there.

There's less hardware, of course.

Nursing point of care is a little bit more hardware intensive with all the mobile devices.

Okay.

That helps, definitely.

And then, with respect to TruBridge, if you can just go over that a little bit.

I wasn't sure if you said the two full contracts, service contracts, that you signed in the quarter, were those both non-CPSI hospitals?

Is that correct?

Yes, that's correct.

And then, one of the private pays.

Okay.

And then, can you talk a little bit about the TruBridge margin or the outsourcing margin?

That seemed to tick down from year over year.

And the third quarter, anything happening on that front?

We are investing in the business.

We like the way it looks, specifically in the non-CPSI hospitals, which we both mentioned on the call, we are sort of pleased where that stands.

We feel like we are going to have success there long term, so primarily that's investing in the business, looking ahead.

And should that continue, based on that longer-term outlook?

No.

In other words, I think the gross margins for a full year going forward -- this is rough -- but get back to around the 40% range.

Okay, okay.

I think that's all I have.

Thanks, guys.

Steve Halper, FBR.

Relative to the $2.7 million that you expect to recognize in 2014, is there anything that we need to know about the cadence of that recognition relative to the quarters?

I'm not asking for quarterly guidance, but is it first-half weighted, is it second-half weighted, or you don't know at this point?

I have been wrong for the last year, so I will just say sometime during 2014.

When I say I've been wrong, I am talking about with regard to gen-one contract revenue recognition.

We fully expect it in 2014, but I understand the question, but I can't provide any specific guidance as to when it will hit.

Okay.

Fair enough, thanks.

Leo Carpio, HM Global.

I hate to say this, but it's [partially] pretty much beaten to a pulp right now.

Just two quick questions.

In terms of the competitive environment, are you seeing any changes in terms of new entrants or not?

Especially -- and the reason I ask it is because seeing your guidance for 2014 indicates that you are going to be making some competitive inroads.

It's got to be of a little more importance.

The second question is, looking at your bookings and looking at guidance, it sounds like the whole changes in the MU deadlines and the pushing out of the Phase III hasn't impacted your sales activity.

With that, also, the critical-access hospital markets you've talked about in the past, have they started to ramp and buy systems or are they still in a waiting mode?

Let's see.

You've got three questions there; I will try to answer them in the order.

One, we haven't seen any new entrants to the market at all, even though we've talked about previously.

What was your second question?

You had too many there.

The second question was regarding the competitive environment.

Have seen any new entrants this year, and how do you see yourself versus the competitive landscape into 2014 in terms of your ability to gain share from competitors (multiple speakers)

We spoke to that a little bit earlier.

Certainly, there are hospitals out there, a number of hospitals, that aren't satisfied with their solution.

Obviously at this point, they are on one of our competitors, whether it's a top-tier competitor, one of the big four, or some of the entrants to the market that entered the market two or three years ago when the meaningful use came along.

Clearly, there's a number of hospitals that are not satisfied with their current solution, so we are certainly making some inroads there.

And then, in terms of the critical access hospital market, have you seen activity there?

I think I recall in the past your comments that because their timeline or incentives was different, they technically could wait a little longer before they began to ramp?

Yes, that is true.

I don't know that we have seen any more.

I would classify those as steady.

I don't know that it's certainly been a significant change either way.

But it's been consistent.

And then, just one add-on.

In terms of -- the other question is -- in terms of the market, in terms of your staffing, and the question I think was asked before, in terms of staffing, do you think you are able to meet any surgeon demand, should it come in 2014, [pre-own] with the staff you have on hand?

Absolutely.

Okay.

Great.

And congratulations on the quarter.

David Larsen, Leerink Partners.

Congratulations on a good quarter (multiple speakers).

Sure.

Can you talk about the ED module?

How do you disclose what the pricing is for that?

And any sense for the number of units you expect to actually install in 2014?

We haven't -- as far as the number of units to install, we really haven't gotten there.

That's somewhat going to be dependent -- as I mentioned earlier in this call, the resources that we have got to do that are also doing physdoc and the new MP, EMR, and CPOE.

So that will somewhat depend on the demand for those, as well.

And ASP for ED, we are expecting something in the [125] range.

Okay.

Are there any components of Stage 2 or 3 that might require or perhaps encourage the deployment of the ED module?

Do you expect demand to be pretty high?

There is nothing specifically in the requirements.

Certainly we feel having a fully integrated system, and ED being part of that, will help you comply with some of the requirements, but I think it would be hard to classify it as you've actually got to have an ED system from CPSI in order to meet the requirements.

I do think your hospital is going to run more efficiently, you are going to give better care to your patients.

The information is going to be more readily available if you've got the CPSI ED.

I think we've said before, we feel like over the next several years if we can get 50% penetration, then ED will have been a success.

Okay.

Great.

And then, in terms of the rewrite of the EMR code, you have deployed version 19.

Are you going to rewrite some of the code for the EMR within version 19, or will there be a version 20?

And then, is there an incremental revenue opportunity with that new code?

First of all, there is no incremental opportunity, and the majority of the rewrite is on 19.

And that really just -- to clear the air, that rewrite is specifically the ambulatory piece of it.

Okay, okay, the doc piece.

Okay (multiple speakers) great.

Dave, did I hear you correctly the gross margin for 2014 should be in the 40% range?

I was talking about TruBridge.

Okay, okay.

Great.

Thanks very much.

Appreciate it.

Gene Mannheimer, B. Riley.

Nice quarter in guidance, gentlemen.

Question one just really relates to the prior questions on the ED systems.

How much of that emergency department module is built into your backlog currently?

It appears that your systems sales backlog as a percent of total is higher than a year ago, and I'm just trying to discern how much of that is physician apps versus ED versus some of your other products?

Thanks.

A lot of it is physician apps.

The contribution from ED at this point is negligible.

Okay.

Yes, good.

And then, with respect to your outlook for 2014, very strong, obviously, notably on the profitability side.

Are you seeing your customers' ICD challenges as a headwind to you or potentially something that you can benefit from, going forward?

I know that your new v. 19 is ICD-10 ready, so do you see any impact from some of their education and transitions in your business?

I would say it's neutral to a slight tailwind, especially from a tailwind perspective with TruBridge in that it will help us a bit with some ICD-10 readiness engagement contracts, and then with some medical records coding contracts as well, we expect, and we have already seen a little bit of that.

Also, traditionally when there has been a change of this magnitude in the regulatory environment just on the pure software side, it has benefited us because we've only got one system, one version of the system.

It's completely integrated.

We have written all the code ourselves, so it's easier for us to adapt to something like ICD-10 than it is to some vendors that are more acquisitive and best-of-breed oriented.

So hopefully, that will be the case again this time.

Very good.

Thanks and congratulations.

Jamie Stockton, Wells Fargo.

Hey, David, real quick.

Tax rate for 2014, are we looking at 35% or 36%?

They haven't renewed the R&D tax credit yet, so if they do, we are looking at probably low 36%, and if they don't, low 37%.

Frank Sparacino, First Analysis.

Real quick, Boyd, David, as you look to 2014 on TruBridge, are there any new services you plan to roll out as part of that?

And then, secondly, is there any change in terms of your thinking about the market size and opportunity there?

I would assume that the 12 non-CPSI customers we had this year will grow materially next year, but any thoughts there would be helpful.

We do expect it to grow for the full year of 2014.

I have no specific numbers that I want to give out.

In terms of new service offerings with TruBridge, we are always looking at new stuff, as you can tell from all the new stuff we have been rolling out over the course of the last couple of years, and we continue to do so.

There will be some new offerings that we roll out in 2014.

I would say none that we expect at this point to be significant contributors to revenue in 2014.

I don't want to specifically mention anything right now, but just some things that we think will help incrementally.

Thank you.

Mr. Douglas, there are no further questions at this time.

I will now turn the call back to you.

Great.

Thank you, Suzy.

I appreciate everyone's time this morning.

I appreciate your interest in CPSI and I hope everyone has a great weekend.

Ladies and gentlemen, that does conclude the conference for today.

We thank you for your participation and ask that you please disconnect your lines.

Have a great day.