TruBridge Inc (TBRG) 2015 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by.

Welcome to the CPSI fourth-quarter and year-end 2015 earnings conference call.

(Operator Instructions).

As a reminder, this conference is being recorded Thursday, January 28, 2016.

I would now like to turn the conference over to Boyd Douglas, President and Chief Executive Officer of Computer Programs and Systems.

Please go ahead.

Thank you, Edison.

Good afternoon, 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 expectations and predictions based upon currently available information and are not guarantees of future results or performance.

Actual results might differ materially from those expressed or implied by such forward-looking statements as a result of known and unknown risks, uncertainties, and other factors, including those described in our public releases and reports filed with the Securities and Exchange Commission, including, but not limited to, our most recent annual report on Form 10-K.

We also caution investors that the forward-looking information provided in this call represents our outlook only as of this date, and we undertake no obligation to update or revise any forward-looking statements to reflect events or developments after the date of this call.

As many of you may recall, in conjunction with the announcement of our Healthland acquisition we also announced changes and additions to our executive team at CPSI.

As a result, we have increased the number of CPSI executives who will be participating in our calls from this point forward.

David Dye has been a participant in these calls for a number of years, but has transitioned from his prior position as Chief Financial Officer to a new role we have established in our organization, which is Chief Growth Officer.

His focus and therefore his comments on our calls will be directed towards sales and revenue growth opportunities.

Matt Chambless has been promoted to Chief Financial Officer and will be providing commentary on financial matters.

In addition to his role as President of TruBridge, Chris Fowler has also assumed the role of Chief Operating Officer for CPSI.

His comments will cover corporate operations, with a particular emphasis for the time being of the progress of the integration of Healthland, American HealthTech, and Rycan into our Company.

At the conclusion of our prepared comments, we will all be available to take any questions you may have.

As we announced in our press release on January 8, our acquisition of Healthland and its subsidiaries, American HealthTech and Rycan, is now complete.

While we were conducting some level of integration planning prior to the closing of the transaction, our activities were limited to some degree, due to regulatory requirements.

With that barrier now removed, we are now fully immersed in the integration effort.

We are still early in the process, but have some encouraging news already.

First, we are much more similar as companies in our culture, our approaches, and our thinking than we are different, which in and of itself makes the job that much easier.

It allows us to focus on more productive activities without having to waste time tackling philosophical differences between our organizations.

Second, it goes without saying we were very confident that the value of the acquisition to CPSI justified our investment.

I am pleased to tell you that as we have gotten deeper into the evaluation of the solutions, services, and client bases through our integration work, the substantial value each company provides to us is even more apparent.

We are committed to maximizing the value of all of those assets through significant ongoing investment, including the Centriq EHR.

I mention Centriq specifically because it has a loyal client base that has put a good deal of capital and effort into the implementation of the Centriq EHR.

Without getting too much into David's area, the Centriq base offers great potential for the services we currently offer from our other companies and for new applications solutions that overlay both of our acute EHR platforms.

It only makes sense that we would continue to invest extensively in Centriq to maintain the satisfaction of those hospitals.

Before I turn the call over to Matt, I do want to take just a minute to tell you how extremely positive we are about 2016 and beyond and why that is.

CPSI is the only vendor that provides integrated solutions across the continuum of care.

Our ability to address all three primary care settings -- ambulatory, inpatient, and post-acute care -- with our systems and services enables us to better meet today's needs of community health care organizations than any other vendor.

And just as importantly for the future, because we can now readily aggregate patient and clinical data across all those settings, we are ideally positioned to provide the analytics, patient engagement, and population health tools that will be an absolute necessity in a value-based reimbursement world.

We are already investing heavily in those areas and will continue to do so.

There is no doubt that the future is bright for our organization and for our clients.

With that, I'm going to turn it over to Matt for his commentary on our financial results, and then Chris and David will get into more detail around the growth opportunities we see ahead of us, along with the integration process.

Thanks, Boyd, and good afternoon, everyone.

In the fourth quarter, we installed the Thrive financial and patient accounting systems in four hospitals, three of which were installed in a cloud environment.

We installed our core clinical departmental applications at four facilities.

Four hospitals implemented Thrive point of care, six installed our Thrive emergency department information system, and eight customers went live with physician applications.

Thrive provider EHR was installed in 14 facilities.

At this time, we expect to install Thrive financial and patient accounting systems in seven new client facilities in the first quarter of 2016, one of which will be installed on a subscription basis, with revenue recognition patterns similar to our cloud EHR arrangements.

We anticipate five installations of our core clinical departmental applications, five installations of Thrive point of care, eight installations of our Thrive emergency department information system, and four installations of physician applications.

Thrive provider EHR is expected to be installed in nine facilities.

And on the Healthland front, we are currently slated for one net new install in the first quarter of 2016 and three migrations from Classic to Centriq.

Our employee headcount as of December 31 was 1,471, an increase of 49.

That is wholly attributable to the personnel investment in current and future TruBridge growth.

System sales revenues were relatively flat sequentially, but were down 31% versus the fourth quarter of 2014 as we continue to confront the challenges of a nearly fully penetrated market for new system installations and customers lack motivation for significant add-ons with Stage 2 MU behind us and Stage 3 yet to materialize.

A further drag on system sales has been the continuing trend towards SaaS, cloud, or other non-perpetual license arrangements, which made up all but one of the four new system installations during the fourth quarter of 2015 and eight of the 16 new system installations for year-to-date 2015.

Comparatively, these non-perpetual license arrangements made up only two of the 24 new system installations in all of 2014.

On the cost side of system sales, we saw slight margin improvement over the third quarter of 2015 as travel costs decreased.

Although travel costs were similarly down versus the fourth quarter of 2014 and year-to-date 2014 and we have taken measures to manage headcount, we still saw significant margin compression against those periods.

Support and maintenance revenues are up slightly versus all comparable periods, as expected.

The aforementioned trend towards SaaS or cloud EHR arrangements resulted in growth in the related revenues, up approximately $400,000 or 24% over year-to-date 2014 totals, a trend that we expect to continue going forward.

On the cost side, support and maintenance has benefited from our efforts to manage headcount, resulting in improved margins versus all comps.

TruBridge revenues saw a modest drop sequentially, mostly due to volatility introduced by our risk-sharing arrangements with a few of the customers in our Accounts Receivable management service, as well as expected declines in billings for ICD-10 related consulting projects as the compliance deadline is behind us.

Despite the sequential decline, TruBridge posted 10% growth versus the fourth quarter of 2014 and 14% growth over year-to-date 2014, with Accounts Receivable management and coding services leading the charge.

TruBridge costs remained relatively steady from the third quarter, resulting in slight margin compression due to the aforementioned revenue decrease.

Headcount increases during the trailing 12 months have driven TruBridge costs higher versus the fourth quarter of 2014, resulting in margin compression.

These headcount increases have been in response to both current and anticipated demand, which had caused an increase in our temporary labor cost that should now ratchet down in future periods.

These payroll costs are somewhat muted in our year-to-date numbers, so year to date saw a slight margin improvement.

Our sales and marketing costs were mostly driven by commissions on system sales revenues, resulting in a relatively flat sequential movement with large decreases versus Q4 of last year and year-to-date last year.

General and administrative expenses appeared relatively flat sequentially as the $3 million in Healthland transaction costs that we incurred during the fourth quarter of 2015 were largely offset by a $2 million decrease in severance costs, as our voluntary severance program was completed as of September 30.

We also saw a $900,000 decrease in bad debt expense as we had a couple of unusually severe write-offs during the third quarter of 2015.

The $3 million in Healthland transaction costs were the key driver in the increase over fourth quarter of 2014.

On a year-to-date basis, the nearly $7 million increase was mostly due to the $3 million in Healthland transaction costs incurred during the fourth quarter of 2015, the $2 million of severance costs during the third quarter of 2015, and a $1.8 million annual increase in health insurance costs as health claims continue to rise behind increased volumes and severity.

As mentioned on previous calls, we have implemented changes to our health insurance plans for 2016 that should help us contain costs, including a spousal carveout and increased employee premiums.

On the tax front, our effective tax rate increased to 27.4% from 19.5% in the third quarter as the third quarter benefited from provision return adjustments and adjustments for uncertain tax positions to the tune of $629,000, with no such benefit in the fourth quarter.

From a year-to-date perspective, the big drop in our effective tax rate to 28% from 33.8% was mostly driven by $1.2 million of beneficial adjustments related to previous reserves for uncertain tax positions.

For 2016, we anticipate our effective tax rate to be between 34% and 35%, absent the impact of any discrete items or transaction-related adjustments.

While the numbers we have been describing so far reflect historical performance, the recent acquisition of Healthland represents a major shakeup in the future composition of our financial statements and ongoing capital structure.

Since year-end and as a result of the transaction, the Company has incurred $150 million of debt to finance the transaction, issued nearly 2 million shares of common stock, and added approximately 490 employees to the CPSI family.

Such big changes have forced us to rethink how management views the business and assesses ongoing performance, resulting in a change in guidance metrics that you no doubt saw on the earnings release.

The revenue guidance of $307 million to $322 million includes anticipated organic growth within Evident and TruBridge, along with the revenue contributions from Healthland, AHT, and Rycan.

The adjusted EBITDA guidance of $86 million to $91 million and non-GAAP EPS guidance of $3.47 to $3.64 per share are inclusive the anticipated synergies in excess of $10 million and overall adjusted EBITDA contribution from the acquisition in excess of $30 million.

It is worth noting that our projection for adjusted EBITDA includes anticipated benefits from the utilization of net operating losses acquired in the Healthland acquisition, whereas our projection for non-GAAP EPS does not include any anticipated NOL benefit.

The rationale behind including the NOLs in adjusted EBITDA and excluding the NOLs from non-GAAP EPS is to have the adjusted EPS reflect more of a cash gain or loss for the period, while non-GAAP EPS will reflect more of the continuing operations of the business, stripping out the nonrecurring long-term impact of the acquisition.

Lastly, beginning with our first-quarter 2000 earnings release, we will be including a quarterly bookings number in our earnings releases that will cover the entire entity.

And with that, I will now turn things over to Chris Fowler, our Chief Operating Officer, to discuss where we are with the Healthland integration.

Thanks, Matt.

We are progressing nicely from an integration standpoint.

The planning prior to acquisition is paying off in the early stages and we are working aggressively to move beyond integration and into business as usual.

I would like to spend the next few moments discussing some noteworthy points in some of our business units as we progress through the integration.

One of the main goals of our integration project is customer retention.

In order to protect the Healthland customer EHR investments, we made some modifications to our original synergy plans with a focus on ensuring protection of the development staff allocated to both Centriq and Classic.

We remain committed to delivering both Phase 2 of notes, as well as a new lab order manager application to the Centriq platform later this year, and are also beginning to evaluate shared platform development opportunities for both Evident and Healthland customers, such as analytics, interoperability, and a pharmacist-focused environment.

We are aggressively working towards a centralized finance and human resources department, along with marketing and IT.

We anticipate this being completed by the end of the second quarter.

From a support and implementation standpoint, we are finding benefits that can be applied to all business units.

Our Evident client service teams are working with their counterparts to deliver our like-mind support model to the Healthland customer base beginning in the second half of the year.

There is also great excitement about the learning management system currently being used by Healthland.

This will allow Evident customers an opportunity to stay more engaged with system updates and be trained on best practices.

Beyond the integration of the two acute-care EHR platforms, we're also working with Rycan and American HealthTech to continue the effort started by Healthland in the previous years.

In our early evaluations, there is additional functionality and technology in Rycan's suite of offerings that will bring new opportunities and enhance current services being offered by TruBridge.

Two solutions we are particularly optimistic about are patient liability estimates and denial management.

As the payer reimbursement model continues to shift towards high-deductible plans and value-based reimbursement, these solutions will be crucial in delivering high-quality revenue cycle management solutions.

David and I were in Jackson yesterday with the sales team from American HealthTech and we're optimistic on the early returns from that particular customer base regarding the acquisition.

There is obviously crossover in these customer bases and the ability to bring interoperability between the two platforms will be a huge win for them.

Lastly, we are aggressively evaluating the revenue synergies and are actively working with the sales groups from all business units to make sure we are not only identifying all cross-sell opportunities, but, more importantly, enabling our sales team to deliver products and services that points to our corporate strategy of advancing community healthcare.

With that, I will turn it over to David to talk about our sales efforts.

Thanks, Chris, and good afternoon, everyone.

As you might imagine, the last few months have been a whirlwind of activity for most of us at CPSI.

But since the closing of the Healthland transaction on January 8, my focus, along with that of the Healthland, Evident, and TruBridge sales management teams, has been centered on the growth prospects presented by the significant cross-selling opportunities available within and between our newly merged products and services.

Chris mentioned earlier that he and I met this week in Jackson, Mississippi, with the AHT sales team, along with Chris Bauleke, Healthland's CEO, and the Healthland sales and marketing leadership.

The focus of the meetings was to determine the best approach and strategy to market TruBridge's revenue cycle management solutions alongside Rycan's claims management products to the 3,000-plus post-acute care clients of AHT.

We believe the potential to provide TruBridge's revenue cycle management solutions to the post-acute care market is significant, primarily due to lack of competitors with a nationwide presence and increasingly cumbersome billing rules and regulations.

In addition, we are beginning to collaborate on the sale of the AHT clinical and financial software solutions to nursing homes that are owned or managed by hospitals that are running the Thrive or Centriq acute-care EHR products.

Two weeks ago, the Healthland, TruBridge, and Evident sales leadership teams met to begin the collaboration efforts around the sales opportunities within our combined acute-care customer base.

Those conversations focused on three primary objectives.

First, upgrading the existing Healthland acute-care Classic customers to either Centriq or Thrive.

Although the Classic product is still supported and will be for a minimum of two years from any potential sunset announcement, Classic will not be Stage 3 certified, and as such the approximately 25 Healthland Classic acute-care hospital customers that wish to continue to participate in the MU program will need to upgrade to either the Centriq or Thrive solutions.

Second, as Chris discussed earlier, we believe there is significant opportunity to sell Rycan's best-of-breed claims management solutions to TruBridge's 600-plus acute-care hospital customers, particularly in the area of liability estimates and denial management.

And third is the substantial potential to penetrate the Healthland Classic and Centriq EHR customer base with the TruBridge suite of revenue cycle management, consulting, and IT managed services solutions.

The takeaway from these two meetings has been the immediate empowerment of our collective sales organizations to collaborate on these cross-sell opportunities, and we have seen immediate results.

We believe that we will begin realizing measurable financial benefit from the result of these converted efforts in the second half of 2016.

Before turning the call over to questions, I would like to speak about the improved sales environment and our corresponding improved results with new hospital customer Thrive contracts in the most recent two quarters.

In the fourth quarter, we signed eight new client Thrive contracts, giving us 15 Thrive EHR contracts in the second half of 2016.

We currently have 13 hospitals slotted for Thrive implementations in 2016, which compares to four that were on the schedule to be installed in 2015 at this point a year ago.

Based on the current pipeline of hospital prospects in the under 75 bed market, we expect this positive trend to continue.

And finally, we continue to be extremely pleased with the efforts of our Evident sales team in Canada.

As we mentioned previously, we believe the Canadian EHR market is about five years behind the United States and that there will be significant replacement of incumbent vendors, especially in the smaller facilities, as these hospitals look to implement advanced clinical functionality such as CPOE and physician documentation as they migrate to integrated IT solutions in the near future.

And Edison, if you could now please open the call for questions.

(Operator Instructions).

Mohan Naidu, Oppenheimer.

Thanks for taking my questions.

David, maybe I will start with you, one question around your new contract strength that you are seeing.

Can you remind us what is driving the new resurgence in the new contracts?

And number two, are these clients already certified in Stage 1 or Stage 2 and they are coming back, looking at Stage 3 or Stage 2 in particular?

I think that the driver is -- now that we are for a hospital that has pursued Stage 2, and in answer to the second part of your question, I would say that the vast majority have been Stage 2 certified; certainly not all, but the vast majority -- is that now that we are coming up on at least two years of utilization from their medical staff of CPOE and physician documentation and the full use of an EHR, for those vendors that are -- have a smaller number of facilities and are perhaps struggling with the integration and the functionality, that with the physician dissatisfaction that that is driving the sales process for them to look at one of the more established vendors, such as Evident.

So I would say that's the primary driver.

I think secondarily to that is a look forward to Stage 3 and concern that the current vendor either won't be -- either will not be Stage 3 certified or will struggle to be Stage 3 certified.

I would say that would be the number two reason that we have seen the resurgence.

All right, and maybe a second question around the Classic.

You said 25 Healthland Classic customers need to upgrade to Centriq or Thrive to get to Stage 3?

I thought there were more than 25 customers on Classic.

Are (multiple speakers)

There are.

We are being conservative.

That is the number that are Stage 2 certified that we believe will want to achieve a solution for Stage 3. As we discussed on the last call, there are approximately 70 or so of the Classic customers that are long-term acute-care clients that are not participating in the meaningful use program.

All right, all right.

Maybe one quick question for Matt.

Matt, historically you guys provided backlog number.

Can you provide that for CPSI and also maybe an equivalent number for Healthland, if possible?

As we mentioned in the prepared comments, we're going to -- beginning in the first quarter of 2016, we will begin providing a backlog number for -- or a bookings number for the entire entity.

The fact just is we closed on this 20 days ago, and so until we can get our arms around the process for determining backlog at Healthland, we are naturally hesitant to give that number.

Good enough.

Thank you very much for taking my questions.

Jeff Garro, William Blair.

Good afternoon, guys, and thanks for taking my questions.

I want to ask about the 2016 guidance, and just looking back, you guys have fallen a little bit short of the guidance for the last two years and the 2016 outlook has this background of system sales results being lower in the last year.

I know the pipeline is looking better, but also some acquisition integration risk, given the first transaction for the Company.

So I want to see what gives you guys more confidence in the outlook for this year than what we have seen the last two years.

And any more details on what is driving visibility into the 2016 forecast?

I think the first part of that answer is what I said in my prepared comments is that we have got 13 hospitals on the install schedule for new installs in 2016, which compares to four at the same point last year, and that doesn't include the four Centriq installs that are happening in the first quarter in addition to that.

The number of active prospects that are in the pipeline, obviously we feel good about our position competitively, especially at the smaller end of the -- as I mentioned, the under 75 bed space.

There just simply aren't as many vendors focused on this as there are a year ago.

A lot of the ones that popped up because of MU have at least gone -- they may still be supporting their customers, but they are not actively seeking new ones.

There are some others that have moved upstream to focus on the larger hospitals.

Certainly, as we have talked about on previous calls, we have got Cerner that has come downstream more so than ever before, and [Athena] is active, but the number of total overall competitors is significantly less than it was a year ago.

I would say that's the primary reason, and then, of course, we have got a lot of confidence around TruBridge.

There is still a significant amount of greenfield opportunity there.

Obviously, the acquisition gives us even more.

Great, that's very helpful, and maybe if I could elicit a little more commentary on the expense side of things.

The guidance is implying a pretty strong rebound in adjusted EBITDA margins and I realize there are lots of pieces to that.

You've already had some expense cuts in Q3.

You have some cost synergies you have identified going forward.

If you could provide any more detail on how we get to 28% adjusted EBITDA margins.

How much has already been accomplished from those Q3 cuts?

How much is from future synergies?

And how much is simply from adding Healthland to the mix and maybe that having an incremental benefit to the profit structure?

Yes, as we said previously, I don't remember if it was with the announcement of the Healthland transaction or the last quarterly call, but we anticipated entering 2016 between the severance adjustments, the headcount decrease, the changes in our insurance -- health insurance policies, and just other cost-cutting measures with a go-forward $6 million run rate lower cost structure just on the CPSI side alone.

And then on the Healthland announcement call, we detailed that we expected more than $10 million -- in excess of $10 million in cost synergies along with that transaction, and now that we have gotten deep into that, that's a number that we are now 100% confident in exceeding.

So those are the primary reasons for the confidence there on the expense side.

Great.

Thanks for taking the questions, guys.

Jamie Stockton, Wells Fargo.

Thanks for taking my questions.

I guess maybe to begin with the revenue that you're going to incrementally get from the acquisition, can you give us some sense of how that is going to break down or how you think at this point it might break down between the three revenue categories that you are reporting?

Maybe any feel for whether there is a material difference in the gross margin profile, just so we have some guiding post as we're trying to model this.

Yes, as far as the contribution, the revenue contribution from Evident system sales, we are projecting a slight increase there.

I can give you where we are shooting there.

It is in the low 50s on the revenue number there.

Evident support is going to come in a little bit south of 80.

TruBridge is going to come in a little bit south -- or a little bit north of 70, and then Healthland consolidated is going to come in pretty much in line with what we had previously announced when we announced the deal back in late November.

So, that's the revenue shake-up there.

On the gross margin front, we will see some margin improvement in system sales just due to combined factors of the revenue increasing with kind of a fixed-cost structure after these headcount management measures.

It is also going to slightly benefit our support and maintenance margins, and then TruBridge margin should remain steady where there have been historically.

Matt, do you guys plan on just essentially keeping the acquired businesses in a separate revenue segment that you're going to report distinct from system sales, support, and maintenance in TruBridge?

No, I guess when we start thinking about in the future on how we're going to report that, it's -- the further we get from the closing date of the transaction, the harder it is to really distinguish between the activities of the two organizations that existed before close.

So going forward, the further we get away from close, the less meaningful, I think, showing separate numbers for those entities are, but just for purposes of forecasting for 2016, that was the approach that we took.

Okay, that's great.

I don't think I had any more financial questions, but I guess maybe, and I think maybe Mohan touched on this in the beginning, but originally my perception was that 2016 you guys thought would be a year where maybe it was a little slower in the first half of the year, but then things would start to pick up in the second half.

From David's comments, it sounds like the year is starting off a lot faster than maybe you would have thought three or six months ago.

Do we think that there is still going to be an incremental pickup in the second half of the year?

Maybe as an add-on to that, has any of this noise around the end of meaningful use had any impact on the conversations that you guys are having?

And I will leave it there.

Thanks.

Jamie, this is Boyd.

I still think we will see somewhat of a pickup in the second half, to answer the first part of your question, but I do think it would be somewhat muted by this noise around the MU3.

All of that seems to be quieting down, maybe, a little bit now.

So I think it will have somewhat of an impact.

On the flipside, the good news, as you pointed out, is certainly we are starting off a whole lot faster than we anticipated.

Some of that is just the pent-up demand and we have talked now for the last several quarters about the pipeline and the number of prospects and suspects picking up, and clearly that is coming to fruition now and resulting in some signed contracts.

So, can't say we didn't totally see that coming, but obviously that's a surprise on the good side.

So, to sum it up, I think we will see some back-half pickup because of MU3, but it might be somewhat muted because of the noise surrounding it.

The other thing, to start -- starting this year, the pickup being a little bit quicker than we anticipated, one, I think it is the demand that I just talked about, but two, there is a lot of excitement about the transaction and we are already seeing some benefit from that from some of our existing customer base, as well as prospects that are real excited about the opportunities and are probably moving faster than we anticipated.

So we think that's another factor that 2016 is starting off better than we had originally anticipated say six months ago.

All right, that's great.

Thank you.

David Larsen, Leerink Partners.

Can you talk a little bit more about the cross-selling opportunity basically with TruBridge into the Healthland base or any potential sales of the Thrive platform into the Healthland base and vice versa?

Thanks.

So, I think we talked about this on the announcement call.

This is Chris, and good afternoon, David.

So we are excited about the opportunity for TruBridge into the Healthland base, much like we were with TruBridge into Evident, and the fact that we have developed that relationship and the trust based on the delivery of the EHR that they are going to believe in the services that we back it with with TruBridge.

So that's a natural cross-sell into that.

In my comments, I also spoke to the enhancement of the Rycan products.

I think there is a huge opportunity for us to bolster that product as well and to create additional efficiencies and opportunities for the TruBridge services.

So, we are excited about that.

And when you look at the Thrive going back in what we have got a deep amount of saturation from the TruBridge standpoint, the Rycan again is an additional opportunity to invest deeper in TruBridge from the Thrive platform.

Okay, and then, can you just remind us of what the price point is for Rycan?

I am just trying to size the overall opportunity.

And Rycan is more of a -- it is an RCM SaaS type of solution that can be, I think, used pretty much in any IDN?

Is that correct?

It is.

It is a best-of-breed clearinghouse product with eligibility and other services inside of it, and mostly it is transactional, so it is depending on the size of the facility.

So, it's a scalable model.

Okay, appreciate it.

Thanks very much.

Dave Francis, RBC Capital Markets.

David and Matt, can you talk a little bit more about the -- any thicker transition in the revenue model relative to how customers are looking to buy product from you, particularly on the traditional EHR side?

It sounds, if I heard right, that most of the new contracts are on more of a subscription or SaaS-based revenue model.

Is it your anticipation that a lot more of the bigger contracts are going to be going in that direction?

And if so, how does that change the overall demand dynamic for you guys?

Does it open up another subsegment of the market that may not have been there otherwise or are there any other dynamics that are worth commenting on?

Dave, it is kind of interesting on that front.

For the longest time, we were wondering when this whole cloud or SaaS movement was really going to hit in our space and stick, and our results in 2015 have indicated to us so far that trend was here to stay.

But as we stated in our prepared comments, those seven contracts that we have slated for installation in the first quarter of 2016, none of those are under a cloud.

One of them is under a subscription model, so it will be a lower monthly fee so it won't be that big bump in the one quarter, but the first quarter of 2016 so far looks like it is the oddball out there when compared to the last four or five quarters.

And to add to that, Dave, I think maybe to answer your question about being able to penetrate hospitals or markets that we maybe hadn't been able to before or it was difficult at least because of their financial condition, and as we talked about at least on the last couple of calls, we are working with a new model where we go in combined with Thrive and TruBridge and discharge a percentage of net collections and that includes the implementation of the EHR, along with the TruBridge services platform.

We have seen some hits there to the tune of about five hospitals over the last six to eight months, and there is a lot in the pipeline that are very interested in that model.

Okay, and if I misheard at the front end of the prepared comments, I apologize.

My quick follow-up would be is you haven't had a tremendous amount of time, but I imagine some, to get out as a combined entity and talk to some of the larger Healthland clients or the more significant or leadership healthcare -- or Healthland clients.

Where do you guys see the opportunities and what do you think the mindset of those customers is relative to the combined entity and potentially the ability to cross-sell additional technology or services through to those folks?

Thanks.

I think the most exciting thing that we've been able to talk to them about, obviously, is TruBridge, which we have talked a great deal about already, but then also we're going to be able to provide them with some tools, namely data analytics and interoperability, that they would have -- they're both going to be able to provide that much more quickly than they were going to get otherwise as Healthland standalone, and they understand that.

And I think the other thing that has been crucial for them to hear from the combined management team now is obviously there has been a lot of misinformation that has been spread by the competition.

We understand that everybody that is on Centriq has spent hundreds of thousands of dollars or up to $1 million on that product within the last two to four years and they have no interest in -- to buying a new product anytime in the near future.

And so, our message has been to them that we get that and that we're going to continue to not just support, but to invest heavily in the improvement of the Centriq platform for the next seven years.

Thank you.

George Hill, Deutsche Bank.

Good evening, guys, and thanks for taking the questions.

I guess I just want to walk through the 2016 guidance real quick again and make sure I understand it in broad strokes.

So if I look at what you guys delivered this year, it looks like you do $30 million-ish in change in EBIT next year, plus the $30 million from Healthland -- or I guess plus $10 million in synergies, plus the change in the cost structure, and the balance is the NOL?

Am I thinking about in broad swaths?

Because that puts the NOL in the $15 million to $20 million range.

I want to make sure I am thinking about it right.

No, the NOL is not in that range.

Those are the right buckets, but the NOL impact that we are expecting is going to be somewhere in the $5 million range as far as the utilization, so (multiple speakers) somewhere you are a little bit out of whack in the rest of the places.

Okay, then I guess then the expectation then is that one of the -- either between the presentation that you guys gave around the Healthland acquisition -- I guess either Healthland is going to tremendously outperform what you guys told us at the time of the deal or CPSI core is likely going to outperform what it has done in recent history, which brings me to my question on it sounds like you have great visibility into Q1.

I guess, can you talk a little bit about the visibility beyond Q1 and what gives you comfort in the rest of the year?

And if you guys don't hit the guidance, what will it be that went wrong?

We do expect some improvement in CPSI, in the organic improvement in CPSI, just based off of the cost-containment measures that we've taken during 2015 and the improved revenue numbers.

So there will be some improvement there.

On the adjusted EBITDA front, there will also be some transaction costs that will be added back, so our projections right now are including around $4.5 million there, which, give or take, that may move some, but if it moves a bit, it will be neutral to EBITDA.

Stock-based comp addback of $5.4 million, so that -- all that, combined with the improvement in operating income just for managing costs and increasing revenue, is how we have gotten to improved CPSI numbers.

Yes.

I guess, can you tell me what is the CPSI EBITDA number for 2015?

Because I guess my math would be the $28 million in OP, X the charges in Q3, plus the D&A that runs through the cash flow statement, plus the stock comp, which is going to get me to a number in the very low 30s.

I am trying to get the build up to that $90 million range and I'm trying to make sure I have the parts right.

It seems a stretch to get to.

If you're trying to get to 2015, I don't have that number in front of me, but you can calculate that from the base of the financials that are in the press release.

Okay.

Okay, all right, I will put pen to paper.

Thanks.

Steve Halper, FBR.

Two housekeeping questions for 2016.

What is the absolute level of D&A that you are expecting, as well as the level of CapEx?

I don't have those numbers in front of me right now.

I would be more than happy to follow up afterwards.

Right, so what we are trying to do, and just to follow up on -- just cutting it a little bit differently from George's question, is to bridge the gap, right?

So our models are built on GAAP and now we are guiding to non-GAAP, so we're trying to figure out those adjustments.

It is easy to figure out what the CPSI depreciation and amortization is, right, what it was in 2015, but we have no clue what the amortization related to the acquisition is going to be.

That's something that there is no way for us to estimate that.

Yes, so depreciation on the -- for the combined entity for 2016 is probably going to be somewhere between $4.5 million to $5 million.

And then on the CapEx front, probably looking at somewhere just north of $2 million.

Combined?

Combined, yes.

Okay, so for the $4.5 million to $5 million, is that depreciation and amortization or just depreciation?

Sorry, that was just depreciation on the $4.5 million to $5 million.

The amortization, I know, granted this number can move around depending on what happens with the purchase price allocation and how that all shakes up, but right now we are projecting that to land somewhere around $12 million.

$12 million, okay, so, again, we understand that the -- that number could move around, but we are looking at roughly $16 million, $17 million?

Yes, that's the math.

That's what we needed to know.

Thank you.

Matthew Gillmor, Robert Baird.

Good afternoon and thanks for taking the question.

I just wanted to understand the pacing of the synergies and the cost reduction that you outlined.

So Boyd or Matt, can you give us a sense for how that will progress over the course of the year?

And it sounds like you're getting at a lot of this right at the beginning of the year with the deal close, but I just wanted to get a sense for how we should model the cost improvement as the year progresses.

I don't have the exact numbers in front of me, but for the most part the first quarter is going to be pretty low on the synergies, but then second quarter and third quarter, we are going to start building up, and then most of the synergies for 2016 should be captured by the end of the third year.

And that being said, as we go into 2017 we're going to have a much improved exit rate on costs and there will be some additional synergies to grab in 2017, but that's a little bit too far out right now for us to try to guide to.

And then, one more follow-up on the adjusted EBITDA and EPS.

I didn't quite understand the treatment of the NOL between the two.

It sounds like the tax benefit will be included in the EBITDA, but then not the EPS.

Is that correct or am I thinking about it incorrectly?

No, you are thinking about it right, and we were trying to -- we were batting it around about whether or not to include that in both places and we decided to just go one route, but just be transparent as possible about it.

And when we look at adjusted EBITDA, what we are really trying to prove there is the cash-generating ability of Company, so really getting to more of a cash gain, cash loss -- hopefully not a cash loss -- position for the Company in a given period.

But in adjusted EPS, what we're really trying to reflect there is what did the Company organically do during the period, so stripping out any of the nonrecurring impact of the deal there.

And while we do expect to have multiple years that are going to benefit from the NOL utilization, simply because we are capped in a given period due to certain IRS regulations as to how much of that we can use in a given year, we don't foresee that stretching out into beyond the medium term.

Okay, thanks very much.

(Operator Instructions).

Frank Sparacino, First Analysis.

Maybe just one question for me, for Chris, perhaps, on the TruBridge side of things.

So if I look at the earlier commentary around revenue in 2016, it looks like the growth rate there is probably a little bit slower than what I expected in the mid-teens.

I am not sure if that is a fair assessment, but if so, just curious on what would be the factors behind that.

So I thought we were -- and Matt is pulling it up right now, but I was thinking that we were in the 13%, 14% increase into 2016 for TruBridge.

So we were at $63 million final for 2015 and $75 million for 2016?

12%.

12%?

Roughly 12%, 13%, Frank.

I think, as someone pointed out earlier on the call, we have struggled with the last couple years with guidance, so obviously we are trying to put a good number out there and there is a lot of potential with TruBridge.

We did see the growth slow down a little bit in the fourth quarter, but at the same time we have picked up an awful lot of prospects with this transaction, so we are trying to balance all those factors and that's where we came up with the 12% to 13%.

Okay, that's helpful.

And just maybe one follow-up there, could you just give a little bit more detail on the risk-sharing arrangements that you talked about as it relates to AR and what's happening there?

So the model for that is we're doing an analysis with the prospects.

As we are finding barriers into doing the full business office management, the cost constraints of the traditional contingency model is sometimes a little much for the hospitals, so what we have done is look at their current performance compared to their expenses to run their business office, and fix the expense, fix the revenue over a quarterly period, and then based on our performance put ourselves in a position for a bonus.

So how we produce on a cash net basis determines what that risk model looks like.

And I assume there are very few contracts today that operate in that manner?

Is that true?

Yes, less than five right now.

Okay.

Thank you, guys.

Mr. Douglas, there are no further questions.

I will turn the call back over to you for any closing remarks.

Great.

Thank you, Edison.

I want to thank everyone for being on the call today.

We appreciate your time and your interest in CPSI, and I hope everyone has a great Friday and a great weekend.

Thank you.

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

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