TruBridge Inc (TBRG) 2016 Q2 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the CPSI second-quarter 2016 earnings conference call. (Operator Instructions). As a reminder, this conference is being recorded today, Thursday, August 4, 2016.

I will now turn the conference over to Boyd Douglas, President and Chief Executive Officer of CPSI. Please go ahead, sir.

Thank you, George. 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 expectation 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.

Joining me on the call today will be Matt Chambless, our Chief Financial Officer; David Dye, Chief Growth Officer; and Chris Fowler, our Chief Operating Officer. At the conclusion of our prepared comments, we will be available to take any questions you may have.

Clearly, we are not satisfied with this quarter's performance and with 2016 thus far. While the net new sales pipeline is as robust as it has been in a number of years, we're also seeing a longer sales process, which has delayed some signings. I will say that overall we view this extended decision process as a positive competitive development.

Simply put, the more due diligence a hospital does, the better off we are. We want hospitals to look at us and our competitors hard, to look at the track record of delivering proven solutions, especially during transitional times, to look for a vendor who has a commitment to community health care as a long-term partner, not a stepping stone.

If they will take the time and make the effort to fully vet out all the factors and not get caught up in industry buzz or hype, we feel very good about our chances. In fact, while the deals are taking longer to close, our win rate remains at an all-time high, which is currently greater than 50%.

We continue to experience a high level of new sales activity and we estimate within the next six to 18 months that over 150 community hospitals will be evaluating whether or not they have the right healthcare IT partner for the long term. We cannot be more positive about our position and prospects in this environment.

Our add-on sales activity is particularly weak right now and we attribute that to the changing market drivers currently underway. The MU3 mandatory deadlines do not take effect until 2018. In addition, many community hospitals and providers are trying to determine how they can be successful delivering healthcare in the new world of value-based reimbursement.

We believe the uncertainty created by these factors is adversely affecting add-on sales to existing clients. We expect this trend to reverse itself as we get closer to MU3 deadlines and the new reimbursement rules that our clients are facing. We are particularly excited about the prospects for our data analytics and population health solutions that our clients will undoubtedly require as this new reimbursement model begins to take effect.

There are some other aspects about why we strongly believe in our position for the future that I would like to highlight. In addition to the healthy pipeline and new system sales picking up with the five sales in Q2, we have a customer base of 4,500 healthcare organizations and providers that rely on one or more of our solutions today.

And to dispel a myth propagated in the current competitive environment, we enjoy a client retention rate of 97% with our Evident base and 92% with our Healthland base. For Evident, this client retention rate tracks back historically for a number of years.

Taking care of our current customers first has always been a primary priority for us, a statement that I have made many times over the years to our customers, our employees, and the investment community. We know the success of this approach is reflected in our current and historical numbers for Evident, and we are putting a great deal of effort in our Healthland clients based on the same premise. We expect those efforts to translate into a retention rate for our Healthland base comparable to that of our Evident base in the near future.

Our continued strong sales of our business management, consulting, and IT services with TruBridge is another good indication of our client retention and growth opportunity. In fact, $1.3 million of our TruBridge bookings was into our Healthland client base.

Our community hospital EHR is the foundation that we will build upon with new and complementary solutions. Our data analytics solution, currently in beta; our new chronic care management consulting service, in pilot right now; and our patient portal are the type of solutions that will work with our EHR to improve the health of communities we serve by focusing on preventative care.

We have also aligned our pricing and packaging offerings to align with market demand, and going forward, we expect more than 50% of our new EHR sales to be subscription based or through our new [Entrust] offering.

Considering that we are in a replacement market, this shift in purchasing behavior is not unexpected. This change in our business is leading to increased long-term profitability and recurring revenue growth. As we account for the many changes occurring not only in this market, but across our entire business, our $200 million annual run rate of recurring revenue puts us in a very stable position while we ride out the bumpiness of prolonged purchasing decisions and the temporary lull in the add-on market.

With another quarter behind us following the acquisition, we are also pleased with the impact our combined and new leadership team is having across our entire business. Our product development efforts across all of the CPSI companies, led by John Peterson, who came from Healthland, is already making headway in improving our efficiencies, quality output, and ensuring we leverage the strengths of all of our technologies.

The American HealthTech and Healthland client bases have also had more time now to get to know those of us who are new to them from CPSI. At the same time, they have seen commitment demonstrated and representation of their voice with key executives staying on board with CPSI, including Julie Weber-Kramer, who continues as Senior VP of Client Experience for Healthland, and Teresa Chase, President of American HealthTech.

Before I turn this over to Matt, I have a couple of other items I want to address. I am sure you all noticed the change to our long-standing dividend policy. Implementing a conservative dividend strategy, as compared to what many deemed an aggressive approach in our former dividend policy, is a change that takes our current business, changing times, and the variations to the balance sheet postacquisition into consideration.

As a much larger company now, we felt that it was the right time to adopt this new dividend strategy to ensure long-term success and allow us to stay focused on long-term results and not be distracted by possible fluctuations in cash flows and the corresponding impact on dividends.

As stated in the press release, we are implementing a variable dividend structure. Moving forward, we will pay 70% of the trailing quarter non-GAAP EPS to our shareholders. This dividend strategy not only gives us the flexibility to pay off debt more quickly, it also allows us to increase our investment in new and revenue-generating services and product development.

As I mentioned previously, we are making real headway in this area, and an incremental investment will only help us to stay ahead of those market drivers coming with the value-based care and new growth opportunities, including integration across all of our platforms to support the needed coordination and continuity of care across the continuum; continued development and enhancement of our analytics solutions; development of new and enhanced postacute solutions for American HealthTech to ensure we have the right solutions as more and more care is provided outside the hospital; and to expedite our efforts in the localization of our products for use in Canada.

In regards to our earnings and revenue guidance moving forward, it is no secret that it has become increasingly difficult to forecast revenue and earnings amid the changing market conditions and volatility in revenue recognition that comes with the different payment and pricing structures of our EHR products. With the current complexities in providing reliable and consistent guidance, we do not believe it provides a benefit to our shareholders at this time.

As an example, out of the 12 installations that we performed in the first half of this year, only one of them was sold on a subscription basis, meaning that we recognize most of the revenue for 11 of these contracts upon installation. In contrast, of the six installations currently slotted for the third quarter, half of those are license sales and half our subscription based, meaning virtually no revenue will be recognized upon installation.

We have no preference as to which licensing model our customers prefer and are only interested in structuring a contract that best meets the customers' needs. We intend to maintain this customer-centric approach and not be influenced by the potential effect on short-term earnings. In fact, in most cases these days we present the customer both options so that they can make the decision that is best for their hospital. It is not unusual for the final decision to be made at the Board level just prior to contract signing.

Secondly, there is no doubt that the Healthland transaction is positioning us to drive long-term growth and value for CPSI. However, it has proven challenging for us to accurately forecast the impact of Healthland on our revenue and earnings in the short term.

In light of these two significant changes, we will expand our efforts to engage our shareholders and analysts about our business and important initiatives and will consider appropriate opportunities to do so on a periodic basis.

In short, these two decisions will allow us to stay focused on running our business in such a way that we can continue to do what is right for our customers and driving long-term value for our shareholders. From a competitive perspective, our operations and comprehensive infrastructure are not easily replicated by other vendors. It took us years to develop the right approach to effectively and efficiently support the needs of community hospitals that count on us, particularly in light of their limited resources.

It also took years of delivering positive results in products, services, and support to build the trust in relationships we currently have with thousands of community health care providers. Consequently, our track record of successfully serving this market stands alone among our competitors.

In closing, we see very compelling reasons why we are in a better position than ever to address the evolving needs of community health care. Whether it is coordinating care, engaging patients in preventative care, or managing chronic disease, just to name a few, we have proven solutions for the community hospital, as well as their providers in clinics, long-term care facilities, and assisted living facilities.

With that, I will turn the call over to Matt.

Thanks, Boyd, and good afternoon, everyone.

As Boyd alluded to during to the early portion of his prepared remarks, the second quarter of 2016 certainly didn't land where we had aimed. Although we are continuing to execute on our cost-containment strategies and the Healthland integration efforts are yielding exactly the synergies we have been expecting, the story of this past quarter has been stubborn revenue growth, particularly within nonrecurring system sales.

Given our cost structure, the relative pluses and minuses on the topline fall heavily to the bottom line, resulting in revenues, adjusted EBITDA, and non-GAAP EPS all falling below our expectations for the quarter.

The confidence that we displayed in our expectations regarding costs on the last earnings call appear to have been well founded as our non-EBITDA costs are falling directly in line with our expectations. Obviously, the revenue side of the earnings equation has been a different story, as we are still acclimatizing to the current dynamics within the community and rural healthcare marketplace and sifting through the noise of the acquisition.

Now onto some nonfinancial metrics. In the second quarter, we installed a Thrive financial and patient accounting system in five hospitals, none of which were installed in a cloud environment. We installed our core clinical departmental applications at seven facilities; six hospitals implemented Thrive point of care; five installed our Thrive emergency department information system; and six customers went live with physician applications. Thrive provider EHR was installed in 10 facilities.

At this time, we expect to install Thrive financial and patient accounting systems in six new client facilities in the third quarter of 2016. We anticipate five installations of our core clinical departmental applications, five installations of Thrive point of care, four installations of our Thrive emergency department information system, and seven installations of physician applications. Thrive provider EHR is expected to be installed in 11 facilities.

On the Healthland front, we had no new installs and three migrations from classic to centric in the second quarter, with one net new install and two migrations expected for the third quarter. Our employee headcount as of June 30 was 1,960, a decrease of 36 from March 31 that is the direct result of the execution of our integration plan with respect to the Healthland acquisition.

Now onto our systems and support revenues, revenue from the Healthland entities remained relatively flat sequentially, coming in at $22.2 million in the second quarter versus $22.3 million for the first quarter. However, CPSI legacy operations saw a $1.7 million or 6% sequential decline and a $2.4 million or 8% year-over-year decline in system sales and support, as the elongated sales process and weakness in add-on sales that Boyd alluded to have worked their way into our topline.

On the cost side, margins of 54% overall were sequentially in line with the first quarter, but does show a slight compression from the 55% in the second quarter of last year, primarily due to the lower margins within the Healthland revenue streams, which had standalone margins of 51% during the second quarter. CPSI legacy margins were 56% during the second quarter, a slight decrease from the first quarter's 58% because of the interplay of the aforementioned revenue declines with our somewhat fixed cost structure.

Year over year, CPSI legacy margins improved from 55% to 56% as our efforts to manage headcount over the trailing 12 months benefited our margins, muting the margin impact of the aforementioned year-over-year decline in CPSI legacy system sales and support revenues.

Our business management consulting and managed IT services revenues experienced a 3% sequential increase and a 10% increase year over year. The largest contributors to these gains continue to be our Accounts Receivable management services, which again experienced nice gains as the service offering continues to expand upstream in the hospitals posing larger revenue opportunities than our historical averages and medical coding services, as the added complexity within the coding environment since the effective date of ICD-10 has resulted in increased demand, as we have expected.

Overall, margins for our business management consulting and managed IT services remained sequentially flat at 45%, but were down versus the 48% margin in the second quarter of 2015, as our efforts to expand personnel to accommodate demand were a slight drag on margins year over year.

Our product development cost increased sequentially by $1 million or 14%, nearly all of which is driven by the Healthland entities. Approximately half of that increase is related to the first quarter's consolidation, excluding the first week of 2016's Healthland activity due to the timing of the acquisition, with the remainder mostly due to headcount reallocations based on departmental shifts that have occurred during the integration process.

Year-over-year product development costs are up $4.6 million, an increase that is wholly attributable to the incremental costs associated with the Healthland technologies, with CPSI legacy spend on product development remaining relatively flat.

Our sales and marketing costs were essentially flat from the first quarter and up $2 million or 42% year over year, with Healthland entities contributing $1.8 million to these increases.

CPSI legacy operations saw a $200,000 or 3% year-over-year increase, due to increased payroll and travel costs. Our general and administrative costs decreased $6.9 million sequentially, primarily as transaction-related costs have decreased from $7.6 million in the first quarter to $0.5 million in the second quarter. Year over year, costs have increased $4.3 million, with $3.7 million of that increase directly attributable to the Healthland entities, including the $0.5 million of transaction costs experienced during the quarter. The remainder of the year-over-year increase in general and administrative was caused by a $0.5 million increase in bad debt expense, due mostly to an expansion in our receivables base.

The amortization of intangibles increased by $300,000 from the first quarter, primarily as we made upward adjustments to the estimated fair values of the Healthland-related intangible assets. With our purchase price allocation near finalized, we don't expect any further changes in these values going forward. As a reminder, we had no intangible assets in the second quarter of 2015, and as a result no such amortization during the prior-year period.

Our interest expense increased $200,000 from the first quarter, mostly due to the debt related to the Healthland transaction being outstanding for the entirety of the second quarter, whereas the first quarter was missing a week of expense because of the timing of the acquisition on January 8. Again, with no debt prior to the Healthland acquisition, there was no such expense in the prior year.

And finally, on the tax front, the impact of nondeductible transaction facilitative costs continues to inject some oversized influence on our effective tax rate, which, when combined with a slight change in our assumptions on effective state tax rates, resulted in an effective tax rate of 45.9% for the quarter.

And with that, I will now turn things over to David Dye, our Chief Growth Officer.

Thanks, Matt.

As Boyd mentioned, we are extremely disappointed in our poor revenue performance in the first half of 2016. However, there is justification for optimism for solid growth to resume at the end of this year and into full-year 2017.

First, TruBridge bookings for the quarter established a new record high of $5.7 million. This included $1.3 million in TruBridge sales into the Healthland customer base, proving that the potential for revenue synergies of the combined companies is real.

In addition, we expect TruBridge bookings to continue to grow in future periods as more of our new Thrive customers sign Entrust agreements that include the utilization of TruBridge for their Accounts Receivable management. Accordingly, we look for upper teen to 20% year-over-year TruBridge growth in 2017.

We continue to be excited about the potential for growth via Rycan, as our demonstrations of the Rycan product to the Evident customer base have been well received. Rycan bookings were nearly $400,000 for the quarter and we expect double that figure in Rycan bookings for the third quarter 2016.

AHT bookings are up 18% year over year thus far in 2016 at $5.3 million versus $4.5 million a year ago. As Boyd mentioned, we are investing significantly in additional AHT development resources as we believe the postacute-care EHR market is ripe for growth in the years ahead.

Sales of add-on software modules to the existing Evident and Healthland customer base continues to be difficult, due to the saturation of our market. We do expect add-on sales to increase later this year and into 2017, primarily from license sales of our analytics dashboard solutions and in late 2017 and early 2018 as a result of pending Stage 3 MU requirements.

On the new business front, in the second quarter we executed five new hospital EHR contracts, one for Centric and four for Thrive. Thus far in Q3, we have signed four new Evident/Thrive EHR agreements.

At this time, we have installed or are currently slotted to install 25 new hospitals in 2016. The number of prospects in our pipeline remains at a five-year high and we're optimistic regarding our potential for new EHR client sales growth in 2017.

I want to close by talking about the competitive environment in the community hospital EHR market. Our traditional competitors, the companies we have competed against for the last 30-plus years, have largely abandoned the market. In addition, the new entrants to the market corresponding with the meaningful-use boom have failed to remain competitive and either no longer exist, have been acquired, or are losing their customers as Stage 3 MU approaches.

Therefore, in new business competitive deals we are occasionally seeing MEDITECH, MEDHOST, Allscripts, and Epic, and more frequently competing against Cerner and athena. In new business competitive deals this year, we are above 50% win rate head to head against both vendors, and we have displaced Cerner once and athena three times. While both vendors have displaced us as well, we have an above 97% retention rate among Evident clients and 92% among Healthland customers.

We are working hard to improve the retention rate for the Healthland acute-care base through our demonstrated investment in the Centric product and favorable terms for classic clients to migrate to either Centric or Thrive.

We are aware of athena's claims of displacement of Evident, Healthland, and other incumbent vendors in the community hospital market. Obviously, there is a discrepancy in their characterization of their success versus our comments on both new client wins and customer retention. The crux of the discrepancy is this. In each competitive situation that we have encountered with athena, athena is offering the hospital an agreement that includes a no-cause, 90-day out clause that can be exercised by either party at any time, along with no deposit or down payment due with contract execution.

In fact, several hospitals have told us that athena points to the existence of this 90-day out clause, along with no deposit due, in an effort to convince the hospital to sign, as there is no risk to the hospital should they later decide not to implement. In essence, in our view athena is selling sign here; give it a shot; you have nothing to lose.

By contrast upon execution of an Evident contract, the hospital makes a financial commitment to purchase and our commitment is to have the complete system live, typically within 90 to 120 days. In addition, while we have always viewed our EHR solution as cost competitive, in our head-to-head deals with athena the price they are proposing for the initial term is typically less than our cost.

With regard to client retention, we only know of one Evident customer that has discontinued live operations of our patient accounting applications to run athena software.

By contrast, in the last two months we have installed Thrive as a replacement financial and clinical solution at two athena client facilities. Furthermore, by review of publicly available CMS MU at the station data of the original 23 RazorInsights client hospitals that we can locate in the CMS MU database that have been tested to any stage of meaningful use, three are now on our system and a fourth signed a contract with us this week.

Three more have closed their doors and another three have either moved or are in the process of converting from athena to competitive vendor replacements other than Evident.

We acknowledge that athena's entry into the acute-care EHR marketplace could create a formidable challenge to our Company, along with our competitors, now and in the years ahead. And as we have always done over the 35-year-plus existence of our Company, we welcome the competition.

George, if you could please open the call for questions.

(Operator Instructions). Mohan Naidu, Oppenheimer.

Thank you so much for taking my questions. Dave, on your -- the comments that you just made around athena's no-commitment deals, are you seeing any pressure from prospects asking you guys to do something similar?

Mohan, no. That's a great question. I can't say we have. I think there is an understanding that our system exists now and that what we are selling is something that we have in the field in hundreds and hundreds of hospitals, and essentially our take is that what they are selling is sign here and you get an installation, you get in line for an installation shot -- slot in the future, should you decide that at that point you do want to implement based on what you are seeing with our success or lack thereof with the ones we have installed prior to that.

So I think the answer to that question is no.

Okay. And maybe -- because you are seeing more subscription deals, can you help us understand the pricing or the revenue recognition comparison between license model versus the subscription model?

The majority of our subscription models now, Mohan, are -- we are proposing are Entrust agreement, which is a percentage of net revenue, in other words, a percentage of the cash that we collect, and with that, that's inclusive with what the hospital pays us with that percentage is inclusive of the system itself and payment to us for those services that we provide via both Evident and TruBridge. So that's the most common subscription agreement that we are seeing.

The license agreement typically is a hospital that wants to -- at this point, they don't want to -- they want to keep their business office in house and they are just interested in the software that we provide.

Okay, maybe one last question. Matt, on the revenue miss in Q2, can you help us understand what portion of the miss came from weaker add-on sales versus weaker new software installations or like Healthland in the quarter?

For the most part, Mohan, the revenue miss in the second quarter versus what our expectations were showing were primarily within the add-on sales. There was a slight miss on the top with the new customer installations, but the largest chunk of that is within add-on sales and the weakness that we have seen in that area.

Okay, maybe I will sneak one last one in. Are you guys still sticking with your targets around the revenue from Healthland for the full year? I thought you guys had about $120 million target from Healthland contribution.

I think we made it clear we are backing off on guidance altogether. That would include getting disaggregated on the revenue lines. I would say that Healthland's performance during the second quarter was not materially different from what we thought it would be.

Okay, thank you so much for taking my questions.

Jamie Stockton, Wells Fargo.

Thanks for taking my questions. I guess maybe the first one, Boyd, I didn't catch the numbers around the number of hospitals -- I think you may have said 150 -- that you think will make decisions in some period of time. Could you just repeat that for me, please?

Yes, I said within the next six to 18 months, and it was 150 hospitals that are not on a good long-term solution that's -- either they don't have confidence. It is usually one of three things. Either they don't have confidence that it is going to -- the system they are on or systems they are on, which is usually the case, will be able to get them to meaningful use 3. Or they're not going to be able to help them with the new value-based reimbursement methodologies that are coming.

Or, thirdly, and this is probably all equal, but probably most importantly is physician satisfaction, end-user satisfaction. Frankly, they put in systems that weren't long-term good solutions. Yes, it was good enough to get them meaningful-use money, but the physicians and other caregivers aren't particularly happy with the functionality.

Okay, that's great. You answered my follow-up on that one. As far as the retention rate you guys have quoted, what is the period of time you are looking at, the 97% for Evident and the 92% for Healthland?

The beginning of 2015, Jamie.

Okay, and then, I understand retracting guidance, given the volatility in the system sales right now. Are there any kind of long-term goals that you would like us to keep in mind that you guys have still as far as growth or profitability are concerned?

Our goal, long-term goal, would be to grow the Company 10%. That has been the case for some time. Obviously, we have not achieved that over the last couple years and that's what we want to get back to.

Obviously inclusive in that and inclusive in shareholder value is going to be, as we grow profitability, is generating cash and paying the dividend. But the goal from a topline perspective is to grow the overall Company 10% long term.

Okay, that's great, and maybe just one more. Matt, I saw that there was, I think, $1.7 million or so of deferred revenue adjustment during the quarter. Can you help us understand how we should be bucketing that between the system sales and TruBridge segments?

Yes, so that -- Jamie, that deferred revenue adjustment, so that's all falling out of the purchase price accounting and the fair value adjustment that we had to take on, the significant deferred revenue balances that came over in the Healthland acquisition, so none of those are related to any TruBridge revenues. They all fall into the system sales and support line.

Okay, so there is -- all right, all right, that's great. Yes, that makes perfect sense. Okay, thank you.

Donald Hooker, KeyBanc Capital Markets.

So, I missed it. Do you -- there was a range of numbers you guys provided. The bookings from Healthland, did you mention that?

The TruBridge number that we gave that was a result from Healthland. The booking, TruBridge bookings that came from the Healthland base in the quarter was $1.3 million.

Got you. I am just trying to think the total -- it looks like the total bookings for the quarter was 24.2. So I was just curious what portion of that -- if I think about it, what number in there is Healthland?

So, Healthland -- this is Matt. Healthland came in at $2.9 million worth of bookings for system sales and support, which was a pretty healthy jump from the first quarter, mostly because we had a completely new -- what we would term a net new install win during the second quarter for Healthland.

Got you, okay. And then, I guess you guys mentioned seeing a little bit more Cerner in your space, which is -- I always think of them as tending to target some of the larger institutions, whereas you guys have a tailored solution for smaller hospitals. Is there a -- when we think about competition with Cerner and even Epic, at what point do you -- do they fade off as you move down the curve of hospitals in terms of size? Do they tend to -- you see them more 100-bed-plus or are you seeing them more down in the 50-bed area?

With regard to Epic first, which was the secondary part of your question, but we rarely see them at all, unless it is involving a smaller hospital potentially tying in with a larger hospital that is geographically nearby. And that happens -- we compete against that scenario a handful of times per year.

At this point, we are seeing Cerner competitively in any size hospital. With their CommunityWorks product and in terms of some pricing reductions that, in our view, they have done recently, they've become -- although they are still significantly more than us, they've become more price competitive in smaller hospitals and we are seeing that they have increased their sales effort in all size hospitals, including the smallest of hospitals.

Got you. Okay, and then maybe one last one for me. I think you guys have emphasized well that for the postacute-care market, it is an interesting area for you guys for expansion with Healthland and some of the cross-sell opportunities. Maybe, my last question, can you help us think about how nursing homes think about IT systems? I guess there is not a stimulus program there. I guess there are other factors that drive them to wanting to adopt. What is the catalyst that gets one of these postacute-care operators to pull the trigger with you guys?

I would say right -- you are right. We don't have a lot of historical knowledge about this, but we are gaining it very quickly as a result now of our now having AHT and the bundled payment system that we are moving to in healthcare in general, but it is certainly at the forefront of the minds of the postacute-care operators, and having the -- both the clinical and the financial and patient accounting systems to track that is at the forefront of their mind right now.

So I would say, from what we have seen, that is largely the number one driver for those that are in the market at this point.

Okay, thank you very much.

(Operator Instructions). Sean McBride, Robert W. Baird.

Thanks for taking the questions. I am on for Matt Gillmor. Just a quick numbers question, can you give us the recurring and nonrecurring backlog numbers?

Yes, so recurring backlog as of 6/30, $210.8 million; nonrecurring, $15.5 million.

Okay, thanks. And then, one other question. The last couple of quarters, you have been pointing towards the Canadian market. Can you -- how have you seen that market relative to the US market in the decision-making process?

We continue to be extremely pleased with our positioning there, actually in all of the English-speaking provinces. It moves slowly. Since we have been involved in the market now for aggressively at least for the last year and a half and a little bit before then less aggressively, but there really have been no decisions made up there. But there are a number -- without getting into any details, there are a number of individual facility decisions that we think will occur within the next 12 months and there is a couple of provinces that are looking at systems as a whole as well that we are involved in.

So it is not something that we think we're going to see a change in necessarily in the next quarter or two, but certainly in the next 12 months we will have a good idea of where we stand in Canada and if all the work that we've been doing will come to fruition.

Great, thanks.

Andrew Cooper, Raymond James & Associates.

I actually was going to ask on a few that have already been asked. But I guess in regards to your last comment on the Canadian market, when you said provinces looking at systems as a whole, could you just go into a little bit more color on what exactly you mean by that?

Not a whole lot. There is a couple English-speaking provinces up there that are -- their health authorities are evaluating what they have in house and what their long-term strategy is, whether that is to have one system for the entire province or to have different systems for the various regions of the province, depending on the size of the facilities and so forth. So, we are involved in a lot of those discussions.

Great, thanks.

There are no further questions at this time.

Tessa Romero, Leerink Partners.

I am in today on David Larsen's behalf. Thank you so much for taking my question. I know you all mentioned value-based care and how you are excited about some of the top health solutions that CPSI is working on. Could you provide us with a little bit more color on that, what you are working on and how you are tracking in the space overall?

This is Chris Fowler. We press-released a partnership with Caravan Health several weeks ago, which is our pilot entry into the population health and trying to help our providers at the community hospitals understand the value-based reimbursement and what their opportunities are there. So we're excited to see how that progresses and that's our first step.

That's great. I will definitely look into that. Thanks so much.

There are no other questions at this time.

Okay, great, this is Boyd. I just want to thank everyone for their time today. I appreciate your interest in CPSI, and thanks a lot. Have a great weekend.

Ladies and gentlemen, that does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your lines.