TruBridge Inc (TBRG) 2020 Q2 法說會逐字稿

Good day, and welcome to the CPSI Second Quarter Conference Call.

(Operator Instructions) Please note, this event is being recorded.

I would now like to turn the conference over to [Drew Anderson].

Please go ahead.

Good afternoon, and welcome to the CPSI Second Quarter 2020 Earnings Conference Call.

During this 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.

At this time, I will now turn the call over to Mr. Boyd Douglas, President and Chief Executive Officer.

Please go ahead, sir.

Thank you, [Drew].

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

Joining me on the call today is Matt Chambless, our Chief Financial Officer.

At the conclusion of our prepared comments, the 2 of us, along with David Dye, our Chief Growth Officer; and Chris Fowler, our Chief Operating Officer; will be available to take any questions you may have.

As our country continues to deal with the unprecedented conditions created by the COVID-19 pandemic, I am very pleased to share that CPSI had another strong quarter on many fronts.

Before I talk about the quarter in detail, however, I want to address the critical role of community health care in navigating this crisis and the need for greater support of those providers.

It is no secret that hospitals, clinics and skilled nursing facilities in all parts of the country are facing real hardship during this pandemic.

Rural hospitals, in particular, have had to take a larger and more challenging role in providing care to their communities and safeguarding public health.

Meanwhile, they are struggling financially to endure the ongoing economic impact of the pandemic.

As I shared in our call last quarter, the CARES Act and subsequent supplemental funding through the Paycheck Protection Program and the Health Care Enhancement Act provided a short-term financial lifeline for many of our hospital clients.

However, more long-term support is needed from our federal government to help rural health care providers manage the financial strains created by COVID-19, and avoid detrimental workforce reductions during a time of need.

We hope that the pandemic has increased awareness of the critical role of community health care providers and the need for better support and reimbursement for health care in rural communities.

For our part, we continue to work with our clients and others to advocate for long-term sustainable solutions to these issues.

Though these circumstances have challenged our business, we are encouraged by our second quarter performance.

Most notably, total bookings of $20 million, which are up 36% over the second quarter of last year, and contributed to an increase of 37% compared with the first half of 2019.

TruBridge, our revenue cycle outsourcing business booked $5.9 million, which is nearly double the same quarter bookings of $3.1 million in 2019 despite lower hospital volumes and the financial pressures we discussed earlier stalling the decision-making process.

Our acute business led the quarter in bookings with $11.9 million compared to $8.9 million last quarter and $9.9 million in the second quarter of last year.

Another highlight of the second quarter has been the progress of our development efforts towards the delivery of our single platform solution.

In addition to delivering products to help our clients deal with the impact of COVID-19, which we discussed on our last call, releases in the quarter and over the last 6 to 12 months have included improved features, functionality and user experience that we are leveraging across our acute, ambulatory and post-acute products.

We believe that this progress is responsible for the increase in post-acute bookings, which reached the highest level since the fourth quarter of 2016.

Our operational flexibility continues to serve CPSI well in confronting the COVID crisis.

In particular, virtual implementations and support have helped to ensure the majority of our scheduled go-lives remain on track and to allow more than 90% of our staff to continue working remotely, protecting their health and safety.

We expect the value and efficiency of these new ways of doing business will serve CPSI well into the future.

Despite the headwinds we faced, these measures and our conservative management of finances have helped us to drive respectable outcomes in this quarter's revenue, EBITDA and operating cash flows, which Matt will cover shortly.

Looking at the road ahead, we remain conservative and are thinking about the impact of COVID.

As we entered the third quarter, our 6-month sales pipeline is up 10% over last quarter, which is encouraging as we look to the second half of the year.

We are optimistic that the sales pipeline across our EHR and services business will continue to convert at a respectable rate through the end of the year, albeit lower than pre-COVID conversion.

Based on these and other leading indicators that we have been tracking, we are hopeful that business will return to pre-COVID levels in the fourth quarter of this year, and cautiously optimistic that we once again be able to provide guidance.

Regardless of the path this recovery takes, we remain steadfast in our efforts to build long-term value for our shareholders.

These efforts are centered around continued conversion of our EHR revenue to a subscription model, driving the penetration of TruBridge into a total addressable market of more than $1 billion, targeting the robust international markets, including those opportunities specific to Get Real Health.

And finally, maintaining a strong balance sheet and healthy cash flow that support a more opportunistic capital allocation strategy.

I'd like to quickly highlight a few examples of progress that have been made in each of these areas this past quarter.

First, I'm pleased to share that more than 60% of the second quarter new system implementations and net new acute care EHR bookings were SaaS contracts maintaining our momentum to convert our EHR revenue from a license model to a subscription model.

Second, TruBridge was once again awarded with the prestigious Peer-Reviewed by HFMA designation.

This most recent award was for the TruBridge accounts receivable management service, which means that, together with the cloud-hosted TruBridge RCM product suite, the majority of TruBridge end-to-end revenue cycle management offering now has the Peer-Reviewed by HFMA designation.

This is a highly sought after and respected designation that buyers typically look for when considering business office outsourcing.

In addition, TruBridge launched an EHR agnostic price transparency solution that allows patients to easily shop for services based on price.

The price transparency offering also improves the collectibility of the amount owed to providers for their services and ensures hospitals can meet the CMS price transparency mandate that goes into effect in January of 2021.

Early indications lead us to believe that there is a strong interest in this new offering from the hospitals we target.

Third, I'm certain many of you saw that we refinanced our credit facilities in June to create flexibility for more opportunistic future uses of capital.

This refinancing increased the maximum borrowing capacity under the revolving credit facility from $50 million to $110 million.

This refinancing has improved the position of CPSI to execute on its long-term growth initiatives and potentially take advantage of the opportunities that the current economic turmoil may present us.

And finally, we have seen an increase in our level of involvement with a number of international opportunities in Canada, the Middle East and Asia Pacific that are attributed to Get Real Health, our patient engagement solutions offering.

We are very pleased with this uptick in sales opportunities and activity outside of the U.S. market.

The progress we've achieved here and across all of our businesses in the second quarter, has made us cautiously optimistic as we head into the second half of the year.

Before I turn the call over to Matt to discuss the financials, I would like to conclude by saying that I'm very pleased with this quarter's results, particularly in light of the extremely challenging circumstances.

And once again, I would like to express our gratitude on behalf of CPSI and our employees to all those on the front lines during this time, especially health care workers and their families.

With that, I'd like to turn it over to Matt for the financials.

Thanks, Boyd, and good afternoon, everyone.

On today's call, I'll provide a high-level overview of the quarter, including some additional detail on bookings performance, a brief walk through our second quarter financial results and some commentary about the impact of COVID-19 on our business.

Starting with bookings.

Total bookings for the second quarter of $20 million were relatively flat sequentially and increased 36% over the second quarter of 2019.

System sales and support bookings increased $4.3 million or 43% sequentially, and increased $2.5 million or 22% from the second quarter of 2019.

Despite the challenging sales environment caused by COVID-19, we saw strong demand for non-MU3 add-on applications within our acute care EHR base and a resurgence of activity in our post-acute segment which, as Boyd mentioned, reached its highest bookings in 3.5 years.

Including add-on sales, subscription arrangements made up 40% of the second quarter's total EHR bookings compared to only 14% in the first quarter and 12% in the second quarter of 2019.

This is encouraging evidence that our strategy to drive long-term recurring revenue growth by emphasizing our SaaS offerings throughout the sales process is gaining traction.

While the EHR business posted impressive bookings, the headwinds for TruBridge bookings were harder to overcome.

Overall, TruBridge bookings were down $3.6 million or 38% sequentially, but up $2.8 million year-over-year, nearly doubling the second quarter of 2019.

The sequential impact from the challenging sales environment was most notably felt in our net new bookings, which decreased by $2.7 million or 38% from the previous quarter.

Nonetheless, we remain confident about the long-term opportunities to expand the TruBridge footprint beyond our EHR customer base.

We'd like to refer you back to the tables in the earnings release for the composition and conversion time frames for quarterly bookings and the historical volumes and license mix for net new Thrive acute care implementations.

With regards to the near-term outlook for this metric, we currently anticipate 9 new client facilities going live with our Thrive solution in the third quarter of 2020, with 3 expected to go live in a cloud or SaaS environment.

Turning to the financial results for the period.

The impact of the pandemic certainly made its presence felt on our top line with challenges to application adoption pressuring EHR revenues and the expected decline in patient volumes suppressing TruBridge revenues.

All told, revenues were down 15% sequentially and 10% from the second quarter of 2019.

As we mentioned on the previous earnings call, CPSI made the strategic decision to provide our employees with much needed job security, taking the long-term view that this would strengthen our team, improve customer satisfaction and better position us to capture opportunities as our markets recover.

The short-term consequence of maintaining our team was that the second quarter revenue declines had an outsized impact on adjusted EBITDA and non-GAAP net income, with adjusted EBITDA decreasing 38% sequentially and 29% from the second quarter of last year.

And non-GAAP net income decreasing 36% sequentially and 21% from the prior year.

Looking deeper at our segments.

TruBridge revenues were down 13% sequentially and 6% from the second quarter of 2019.

As we mentioned on the previous call, the metrics we use to gauge patient volumes at our client hospitals first showed notable declines during the week ending March 22, with volumes bottoming at roughly 40% below pre-COVID levels throughout the months of April and May.

Patient volume showed improvement during June, increasing to 20% below pre-COVID levels and have remained at roughly that level since.

With 80% of TruBridge revenues correlated with hospital volumes, the impact of these declines on our revenues was significant.

For example, revenues for our accounts receivable management services decreased $2 million or 20% sequentially and $1.3 million or 13% from the prior year.

As I did mentioned, we did not pull all of the cost containment levers at our disposal during the second quarter, sacrificing short-term margin to protect capacity for future growth.

As a result, TruBridge gross margins decreased to 45% during the second quarter of 2020 compared to 47% during both the previous quarter and the second quarter of 2019.

Next, system sales and support revenues decreased $6.5 million or 16% sequentially and $4.9 million or 12% year-over-year.

The pandemic's impact was greatest in our nonrecurring revenue streams, which were down $5.6 million sequentially and $3.1 million from the second quarter of 2019.

However, our SaaS revenues also faced headwinds as over half of those revenues come from nTrust arrangements where our cloud EHR offering is paired with TruBridge services.

Our billings and revenues for nTrust contracts are based on a percentage of the hospital customers' cash collections, which contracted during the second quarter.

The end result was a 10% decline in SaaS revenue sequentially, but these revenues were still up nearly $1 million or 79% from the previous year due to the dramatic shift in license mix we've experienced over the past 12 months.

From a margin standpoint, margins remained relatively flat at 55% during the second quarter, despite the large top line declines with decreased travel costs, improved sales mix and lighter third-party software costs preserving margins.

Moving on to operating expenses.

Product development costs were relatively flat sequentially.

The capitalization of $500,000 of software development costs during the second quarter of 2020 was the leading contributor to a $900,000 or 10% decrease in product development costs year-over-year.

As a reminder, the capitalization of software development costs is new to CPSI for 2020, and is the direct result of GAAP capitalization requirements for the investment we're making in the development of our single platform solution for all care settings, a multiyear endeavor that Boyd discussed earlier.

Sales and marketing costs decreased $1.8 million or 26%, both sequentially and year-over-year.

Revenue declines resulted in decreased commissions, travel restrictions drove our related costs down and the impact of COVID-19 on our 2020 outlook resulted in reduced incentive compensation costs.

General and administrative costs decreased $900,000 sequentially, primarily driven by seasonal reductions in legal and accounting costs.

Similarly, costs are down $1.1 million from the second quarter of 2019 with the largest contributor being the cancellation of our national client conference, originally scheduled for May of 2020.

Closing out the income statement, our effective tax rate during the quarter was a benefit of 4% compared to an expense of 22% during the second quarter of last year.

The second quarter of 2020 saw some outsized benefit related to R&D tax credits, which don't necessarily correlate with pretax income, resulting in a heavy benefit to the effective rate.

Turning to one of the clear highlights for the quarter.

Operating cash flows of $17 million were the second highest in company history and nearly matched the record $18 million quarters ago.

This strength in cash flows is a testament to the resiliency of our community hospital customer base in what we view as successful efforts by the federal government to provide emergency funding to health care providers.

The impact to CPSI was a $3 million workdown of financing receivables and a $6 million workdown of accounts receivable while DSOs improved to 49 from 50 at the end of the first quarter and 52 at the end of the second quarter of 2019.

Trailing 12-month operating cash flows now stand at $51 million or 110% of adjusted EBITDA over the same time frame compared to $34 million or 67% of trailing 12-month adjusted EBITDA a year ago.

This continued strength in cash flows has allowed for a net reduction in bank debt of $27 million during the past 12 months with balance sheet cash increasing $12 million over the same time frame.

Before we open the line for questions, I'd like to cover just a couple more subjects.

First, our current outlook and the return of guidance.

When we step back and look at the health of our markets and customers, the continuing improvement in patient volumes and the financial support from the federal government through the overall $175 billion provided relief fund, much of which was specifically aimed at rural and other safety net hospitals, have increased our confidence that our community hospitals has survived the worst of the pandemic economic effects.

All indications out of Washington are that additional substantial funding is likely to follow, which bodes well for our hospital customers' ability to weather the storm and maintain their commitments to key partners like CPSI.

Despite this view, there are still too many unknowns and too much inconsistency in the recovery to comfortably provide guidance at this time.

Directionally, we continue to expect hospital volumes to return to near-normal levels by the end of the fourth quarter, alleviating much of the top line pressure on TruBridge revenues.

Likewise, a return to normal operating environments for our hospital customers, paired with continued federal support for safety net facilities and the prospects for a vaccine in early 2021, all point to a more normal sales environment as we enter the new year.

We feel it's important to lay out these expectations as they've influenced our response to the pandemic so far.

As I mentioned earlier, we have been uniquely committed to our employees during the past 4 months with the expectation that the pandemic's impact on our financials will be both temporary and short-lived.

If the pandemic's impact on our hospital customers' volumes and our financials extends beyond our current expectations, we will revisit our response to this challenge, including whether additional rightsizing of our cost structure makes sense.

We've pulled very few of the levers at our disposal so far and feel we have ample room to rightsize in the event of a prolonged downside scenario.

Second, I'd like to spend a little time on our recent refinancing.

We mentioned on the last earnings call that we were comfortable with our capital availability with March 31 cash of $4 million and revolver capacity of $34 million.

With the strong cash flows this quarter and the successful refinancing of our credit facilities, the balance sheet now boast $19 million of cash and $81 million of revolver capacity nearly tripling our overall capital availability from a quarter ago.

June's refinancing marked the successful completion of a goal we've set towards the end of 2019, the aim of which was to create additional dry powder for more opportunistic uses of capital.

We now have the flexibility to act decisively on strategic tuck-in M&A opportunities, invest in new and existing products and services and potentially pursue value-driven share repurchases.

This enhanced optionality has us excited about the opportunity set in both the current and eventual post-COVID environments.

And with that, we'd like to open up the line for questions.

(Operator Instructions) Our first question comes from Jeff Garro from William Blair & Company.

Yes.

I think I'll start off by just asking a little bit more about the health of the end market.

Clearly, it shows some resiliency.

But I think it would be helpful from here if you could parse out the near-term survival of community hospitals and rural health facilities generally with the appetite of those providers to pursue strategic IT initiatives.

I think, Jeff, with the increased attention from the government, they seem to be financially viable, even as recently as yesterday, there are some new initiatives coming from President Trump.

So we still feel good about it.

It's really, I think, brought to light how important rural health care is to overall -- to delivering health care in the U.S. And so we feel good about where the end market is at this point.

Jeff, David Dye here.

I'll add to that a little bit.

We touched on this in the prepared comments, but another thing that we're happy with in the first half of the year is that in the deals that we've won from an EHR perspective is if the average contract size is up rather significantly from where it was last year.

And we've seen that as hospitals are buying systems, and in particular, they're buying -- they have in an EHR system that they're contracting for the entire suite of products.

And that's -- again, that's an increase that's substantial over last year.

And the hospitals are out there in the marketplace are looking for the full suite, and they're coming off of whatever system they're on.

Now they've got all the products already installed.

So we continue to see that in the second quarter.

We actually saw the average contract size continue to go up.

So there's a few less hospitals that have actually made decisions, but those that have seen an increase in what they're buying.

That's on the Evident side.

As we touched on the TruBridge side, on the TruBridge side of the business, the volume there from a total bookings perspective in the second quarter was overall disappointing, but given that we were in the COVID environment, we don't believe that it was disappointing.

But that's where we're going to be more curious to see in the second half of the year is how that comes back as we resume more of a normal environment.

Great to hear.

Great validation of the product suite and of your efforts to partner with your clients.

I'll dive a little bit deeper on bookings and maybe how -- put a quant of aspect to it and help us frame expectations.

Last year, the first half was a little bit slower, but you finished stronger in the second half of the year.

That momentum has continued in the first half of 2020 despite the challenging environment.

So where you stand now?

Where is the confidence in delivering full year bookings growth or maybe even year-over-year growth for bookings in the second half of the year?

Sure.

Great question, Jeff.

Yes, we did, of course, to put more simply, we had a relatively easy comp for the first half of the year, and we're excited that we were able to execute and significantly outperform that comp in the first half of this year, especially with COVID being so predominant since the mid-March.

We do have a more difficult comp in the back half of the year.

As Boyd mentioned in his prepared comments, our 6-month weighted pipeline as of June 30 is at an all-time high.

So that gives us some confidence that we will be able to perform well in the second half of the year.

In order to achieve on that, we are going to need to pick up on -- we're going to need to continue to execute on the Evident EHR front, which we're confident we can do.

We're going to need to continue to execute on the nTrust front, which we're confident that we can do.

And we're going to have to see some pickup in what we're seeing from a TruBridge standpoint, more like what we saw in the first quarter as compared to what we saw in the second quarter.

It's in the pipeline.

It's just a question of, A, of course, can we execute?

But B, are our customers, in particular, that upmarket, those MEDITECH hospitals, et cetera, we're having a lot of early success in penetrating with TruBridge.

Are we going to be able to do that in the second half of the year?

We're optimistic that we can, but it remains to be seen.

Great.

I understood the optimism and that TruBridge is where there's a little bit more uncertainty.

I have one last question.

I want to dive in a little bit more specifically on the Trump initiatives announced yesterday.

And clearly, it's very early.

But maybe you could just speak more broadly about how CPSI can further public health in the U.S. and maybe dive more specifically, the ability to help clients navigate efforts by CMS to pilot new reimbursement schemes for rural hospitals.

Yes.

And you hit the nail on the head.

What -- just for everybody on the call, what Trump came out with yesterday was basically a voluntary pilot program value-based program.

And his comment, which I thought was spot on, was it's going to help streamline the reimbursement from CMS for Medicare patients.

A lot of times, we see the reimbursement ebb and flow significantly from month to month and part of his initiative is to streamline that out and make it easier, I guess, to run those businesses because it's obviously, it's difficult to run a business when you have the changes you have with the reimbursement from month to month as our clients experience it.

As far as what we can do, we think we continue to offer products and services that are affordable to them that fit their cost structure of their facility that help deliver -- that help them deliver the best patient care they can to their communities.

And that's everything from -- obviously, that starts with the EHR, but that goes over into the TruBridge with the services, with chronic care management services and the patient portal services and patient engagement services that we're offering now.

The next question comes from Donald Hooker from KeyBanc.

Congrats on making it through a tough quarter, clearly.

So I guess my question around TruBridge, I know you're not providing guidance, but there are a number of moving parts within TruBridge.

And my understanding is that the revenue recognition for some of those parts lags the underlying client patient volume.

So would it be fair to assume that there's another step down in Q3 before then there's a sharp recovery in Q4 into 2021?

I just want to make sure we have the cadence of expectations, correct?

Yes.

So Don, I don't necessarily think that Q3 is going to be a step down from Q2.

It's going to be more of like a lateral step from where we were in the second quarter with Q4 significantly outperforming versus where the middle 2 quarters of the year were.

Okay.

That's fair.

And then the other thing that jumped out, I did see you guys had that press release around the transparency solution, which is interesting.

And I know there is these requirements from CMS, as you mentioned, around interoperability provisions of the CARES Act.

Is this something that you can put a -- is this a requirement for your entire client base in some way that can we put a number on that?

Is there a particular sale -- revenue associated with an install like similar to MU1, 2 and 3, can we sort of think about that in terms of kind of a…

Yes.

Great question, Donald.

And that's a really good way to think about it, very similar to the meaningful use.

So -- and I'll give you an analogy kind of staying with that idea.

So physician documentation is an application that was available to be purchased stand-alone, but was a requirement through the meaningful use initiative.

Very similar to that, the price transparency service that we're now offering is built upon other applications that we have available already for the customer base.

And when we're looking at the installed base, the price transparency by itself is not a huge needle mover per customer.

However, when we look at the add-on applications that are required to get to the -- prerequisite applications required to get to price transparency -- sorry.

We're looking at about an $11 million add to recurring revenue with about a potential at $10 million in implementation fees.

So it's a nice sort of bump that could be recognized.

I think the question is going to become -- I think the big questions that are outlying right now is, one, will it be delayed?

And two, will there be any changes based on the rural hospitals.

So we'll see how that plays out by the end of the year.

The feedback that we're receiving from our customer base right now is very positive that they like what they're seeing.

And assuming that there's no changes to the deadline, we anticipate that continuing to uptick as we go.

Great.

And then just one last I think you could add -- one last one.

You guys canceled your user conference, you commented on that in your prepared remarks.

Is there something to think about around there?

Does that feed your sales and marketing in some way?

Is that a concern?

Or are you going to kind of reinstate that next year?

We're certainly planning on reinstating it.

And I don't know that it has -- I think it's more of an educational experience for our users.

There's certainly a sales and marketing touch to it.

And certainly, people find out about maybe a new application or a new service that we're offering from TruBridge.

But the whole focus of the conference is client education and clients really communicating with each other, collaboration with themselves and with us, so that we can get feedback.

So I don't -- I wouldn't expect to take a big hit from a sales and marketing perspective for the company.

Yes.

And to that point, Donald, we're going to be offering some of the classes virtually.

We're in the process right now of building that out.

Obviously, we're disappointed that we're not able to get together face to face, but we're going to make sure that, that education is available throughout the year.

The next question comes from David Larsen from Verity.

Can you remind me what the number of expected installs are for the third quarter?

And I think it's a pretty significant sequential increase.

And then how are you actually doing those installs with the pandemic?

Can you do those installs remotely?

Yes.

So Dave, we mentioned in the prepared remarks that we've got -- currently, we have 9 net new system implementations for Thrive scheduled for the third quarter.

And again, 3 of those are going to be on a cloud or a SaaS environment.

And I'll let Chris kind of speak to whether -- what the mix is virtual versus kind of on-site implementations.

Yes.

So David, I think our success in doing those implementations remote obviously shows the resiliency and flexibility of both the customer base and our employees.

I think Matt gave the number, our travel costs are down, obviously, significantly, and that points directly to those implementations.

And so through our ability to do either Webex conferences or have classes available for the implementations.

The feedback has been quite positive of us being able to install the software remote.

Okay.

Great.

And then, Matt, I think you had taken some steps to improve the cost structure of the organization.

Can you just remind me, like where are you in that process?

And what is the incremental benefit expected to be to either operating income or adjusted EBITDA?

Yes.

So David, I think you're referring to some initiatives that we had underway, say, maybe 12 or 15 months ago, where we had initially announced a $10 million cost savings initiative that we executed on.

And then later identified, I believe it was $3 million of additional savings to layer on top.

We have achieved all of that run rate cost savings.

So related to those initiatives, there's nothing on the come.

The next question comes from Stephanie Davis from SVB Leerink.

This is Joy on for Stephanie.

This was asked a little earlier, but I just wanted to dig into volumes a bit more.

Can you speak to how you're internally modeling volumes through the rest of the year?

And whether you're expecting a stabilization at the 80% level you mentioned or if you're baking in a potential second wave?

Yes.

So we're looking at a handful of indicators.

RCM claims transmission volume, medical coding, the accounts receivable management volumes.

Those are the leading indicators that we're looking at.

Right now, we're hovering in about a 15% to 20% off of pre-COVID volumes.

We have not assumed any sort of second wave into our thoughts to the second year.

But obviously, that's a concern, which I think speaks to the uncertainty and why we stayed where we are relative to guidance for the rest of the year.

Got you.

That's helpful.

And as a follow-up, understand that you're offering your telehealth solution at no charge through 2020.

But looking ahead, are you planning on monetizing it and maybe adding in more features for a larger value prop?

And if that's the case, what kind of pricing model?

And what kind of new features would you implement?

Yes.

Thanks, Joy.

We are continuing to offer that at no charge to the end of 2020.

We do plan to begin to charge for that on a per physician -- our per clinician license basis recurring revenue basis beginning in January of 2021.

I can give you some rough figures at the penetration rate where we are right now, that would come out to about $315,000 annually in incremental additional revenue.

We stated on the last call, I believe, and we still believe that as we enter 2021, we'll be on at least a rate of about $500,000 or $0.5 million incrementally annually.

With the TalkWithYourDoc product going into next year.

We are certainly -- to answer to your question, considering new features and are actively receiving client feedback now for those features.

But I think it's important to note that we also -- that product is integrated with instant PHR, which is to get real health to patient engagement portal product.

And it's also integrated with our care management feature that we're rolling out now with TruBridge, which will help us as we try to penetrate our market with those products and services.

Yes.

And one additional follow-on there, Joy, is that I think the final piece of that secret sauce from an integration standpoint is into the EHRS, which makes the product that much more appetizing to our installed customer base.

The next question comes from George Hill from Deutsche Bank.

This is Charlotte on for George.

Given the mid-quarter financing activities, does increase flexibility change the way you're thinking about M&A?

And what functionality do you not have that you would like to have?

And where do you see the white space?

Yes.

So I mean, obviously, one of the primary motivations behind our refinancing was to create this additional dry powder.

And when we reference more opportunistic uses of capital it's clear that M&A is a priority with that.

We mentioned in the earnings or in the press release announcing the refinance that not only do we increase the -- or upsized the size of the revolver.

We also removed some of the dollar amount restrictions on both an annual basis and over the term of the credit agreement around M&A activity.

So absolutely have an eye towards increased activity in that area going forward.

Yes.

As far as areas of focus, obviously, from a TruBridge perspective, efficiency is one of the key value drivers for us.

So areas where we can identify opportunities to make our service much more scalable and deliverable to both the installed base and to the net new market are obviously a high area of focus.

I hate to throw the word artificial intelligence out there just because it's such a catch all.

But obviously, when we're thinking about how we can leverage the ability to use that from an automation standpoint to, again, deliver more value to the customers as we're providing the service for them.

That's a key focus for us.

The next question comes from Sandy Draper from Truist Securities.

This is Stan on for Sandy.

Maybe if you can start off, can you tell us the contribution Get Real Health had in the quarter?

Yes, Stan.

So Get Real Health had revenues of about $400,000 for the quarter.

That brings them to $1.7 million year-to-date and $4.9 million over the past 12 months.

From a booking standpoint, bookings for GRH were between $200,000 and $300,000.

Got it.

And then maybe looking at bookings, maybe particularly on the cross-sells.

I'm just curious is there any change in the product mix that you're seeing now versus a year ago?

Yes.

From an EHR standpoint, Stan, we did have, as Matt mentioned in his prepared comments, we did have a nice quarter.

I think the best quarter we've had now in a couple of years in terms of add-on sales.

We are seeing a good volume of our ED product now, and we're also seeing a good volume of our ambulatory solution into our current customer base.

I think other than that, again, compared to last year, we are down in terms of the number of hospitals that we've signed, but the average contract volume has more than made up for that.

So those would be the key differences from a year ago.

Got it.

That's helpful.

And then maybe leaving it off on an open-ended question.

Obviously, a very weak quarter for you guys on the industry at large.

I'm just curious, has anything surprised you positive or negative and whether you're looking internally or on the client side kind of as you manage through this quarter?

Yes.

I'll start.

This is Chris.

Probably one of the biggest surprises has been our ability to move the workforce home and not really miss a beat.

Again, I think that's a -- sometimes timing and luck play a little bit a part of the things, and we have made some conscious decisions prior to COVID or actually prior to the beginning of the year as far as our hiring policies looking more at a diversified workforce across the U.S., which put us in a remote workforce environment.

Our IT staff has been a huge part of the success as far as getting all of our employees to the house.

And then just being able to see that the productivity and the customer satisfaction levels have not decreased at all through the period.

So I would say, from my perspective, that's probably been the largest highlight.

And I would add to that on a positive note, just the resiliency of our customer base.

I think it needs to not go unnoticed that they've been there on the front lines.

They've been, in some cases, dealing, lots of COVID patients and in other cases, not having many COVID patients at all but dealing with a severe drop in volume.

And as you can see from cash flexes and everything that -- and the government played a big part in this, but they've been very resilient in delivering care to their communities and working with us and still installing new software that helps them deal with COVID and other issues.

So I would answer that with the resiliency of the customer base.

Yes.

So I guess maybe to give you one on balance on the other side of negative would be just a slowdown in the TruBridge bookings.

And obviously, that's based on just the uncertainty from the hospital standpoint.

I do think there's an opportunity for nTrust to catch even a higher demand.

So if we're going to make some lemonade out of something, just based on the fact that right now, the vast majority of our customers support is a static monthly fee and moving to nTrust would make that variable based on the volumes that they're seeing.

And so I think that there's an opportunity for us to use that as a lever to help continue to drive the interest demand going forward.

The next question comes from Steve Halper from Cantor Fitzgerald.

The operating cash flow was quite impressive.

As you called out, you had a couple of good line items on the receivable side, both account receivable and financing receivable.

So should we be thinking about the same levels of operating cash for the second half of the year?

Yes.

So Steve, I wouldn't necessarily expect the same level of operating cash flow for the second half of the year.

It's important to remember that the second quarter's cash flows were mostly the collection of pre-COVID revenues.

So we do expect the back half of the year to come down just a little bit based on TruBridge invoicing coming down due to lower volumes.

But even with that, we're still thinking that somewhere in the ballpark of $20 million of operating cash flows in the back half of the year is achievable.

For the 6 months?

That's right.

For the back half of the year.

Yes.

This concludes our question-and-answer session.

I would like to turn the conference back over to Boyd Douglas for any closing remarks.

Great.

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

I'd just like to reiterate that we're pleased with the results this quarter.

And in spite of the COVID pandemic, we're very proud to support the health care providers that play such a critical role in community health care.

All of us here remain focused on the efforts and opportunities ahead of us, and we will build long-term value for our shareholders.

Thanks, everyone, for your time today, and have a great afternoon.

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