TruBridge Inc (TBRG) 2021 Q3 法說會逐字稿

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  • Operator

  • Greetings, and welcome to the CPSI Third Quarter 2021 Earnings Conference Call. (Operator Instructions) As a reminder, this conference is being recorded.

  • It is now my pleasure to introduce your host, Dru Anderson. Thank you, Ms. Anderson, you may begin.

  • Dru L. Anderson - SVP and Principal

  • Good afternoon, and welcome to the CPSI Third Quarter 2021 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 turn the call over to Mr. Boyd Douglas, President and Chief Executive Officer. Please go ahead, sir.

  • John Boyd Douglas - President, CEO & Director

  • Thank you, Dru. Good afternoon, everyone, and thank you for joining us today. After my comments, I will hand the call over to Matt Chambless, our Chief Financial Officer, who will provide additional color regarding our third quarter results. At the conclusion of our prepared comments, the two of us, along with David Dye, our Chief Growth Officer; and Chris Fowler, our Chief Operating Officer, will be available to take your questions.

  • The pandemic continues to disrupt many aspects of our lives, both personally and professionally. As such, last month, we hosted a virtual event for our clients after making the difficult decision to postpone our annual in-person conference until March of 2022 in St. Louis. The need to postpone was disappointing. However, it afforded us the opportunity to give the topic of mental health within the health care workforce, the attention that it deserves.

  • Mental Health plays a part throughout the care continuum. And as our very insightful guest speaker, Dr. Izzy Justice said, it's not health care if the patient is being healed at the expense of the health care worker. And with the help of Tracey Schroeder, our Chief Marketing Officer; and Amaris McComas, our Chief People Officer, we also explored the phenomenon around the great resignation driven by the burnout employees have experienced due to the COVID pandemic. This conversation highlighted the importance of celebrating diversity and supporting the significance of inclusion and equity in the workplace to ensure people feel that they can bring their whole selves to work.

  • Understanding these important factors that impact employee engagement and talent recruitment is something we are taking seriously at CPSI, and we felt that it was important to share this with our clients during our virtual event. And lastly, as part of the business update, our clients learned from our Chief Innovation Officer, Wes Cronkite, about the innovation headway being made. Wes reaffirmed with clients that we are investing heavily in talent and technology and talked about the efforts behind expediting our approach to expand our offerings and deliver insights to clients.

  • In terms of our third quarter performance, we are very pleased with our results. A strong rebound in bookings, along with a higher percentage of SaaS deals in the sales mix are highlights from the quarter and show good progress against our 3-year growth strategy. This transformation initiative that we began in January of 2021 has delivered solid results across CPSI. I will share a few highlights and later, Matt will provide additional details.

  • First, TruBridge cross-sell bookings were just over $3 million in the third quarter and now stand at $8.6 million year-to-date. The cross-sell opportunity for TruBridge remains significant and is supported by our EHR client retention rate remaining above 95% year-to-date. TruBridge third quarter net new bookings were just under $4.8 million, and we closed a large competitive takeaway deal for our accounts receivable management services in the third quarter that was just under $2 million.

  • Finally, the key KPI that we hold ourselves particularly accountable to is margin expansion. As we execute our cost optimization efforts, we'd like to remind everyone that achievement against this goal will not be linear particularly in the short term as the transformation of our EHR business to a more SaaS-oriented business model and the resulting near-term pressure on profitability competes against other meaningful opportunities for long-term margin expansion.

  • Despite the counter effect from the SaaS transition, the third quarter saw year-over-year increases in both GAAP net margin and adjusted EBITDA margin driven by significant improvement in TruBridge, where gross margins have improved 440 basis points from the third quarter of last year. Contributors to this progress include the automation of our revenue cycle services through expanded partnerships that help absorb work related to medical coding and accounts receivable management. Both have a direct correlation to our improved scalability and delivery of these services at a lower cost.

  • Our focused intent on increasing organizational efficiencies is illustrated by the pace in which we have been able to transition the billing and coding workforce offshore. In the third quarter, we shifted 9% of this workforce, which has resulted in an estimated run rate in cost savings of more than $1 million in the third quarter.

  • Before I turn the call over to Matt, let me touch on our progress related to upside growth. First, the acquisition this past May of TruCode has delivered value as expected and is performing on plan for both top and bottom lines. And last, we continue to see the market evolve around patient engagement, which is a contributing factor to our optimism as we pursue digital innovation as a key adjacency to our core growth. The patient engagement solution from Get Real Health has experienced 117% user growth over the last 12 months and was selected in the third quarter by a U.S.-based health care system that serves approximately 12 million people as their digital front door solution. These successes contribute to the business case for our continued investment in Get Real Health and new and expanded patient experience solutions.

  • With that, I will turn the call over to Matt for a deeper dive into the financial results.

  • Matt J. Chambless - CFO, Secretary & Treasurer

  • 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, and a brief walk through our third quarter financial results.

  • Far and away, the most notable development of the quarter was the significant growth in bookings as we saw the sales environment becoming increasingly favorable with the resurgence in new hospital EHR contract signings and the emergence of Get Real Health as a viable player in the patient engagement arena.

  • On the financials, the third quarter was dominated by 2 top line themes that worked to offset each other in our GAAP results but to each point to exciting success areas for both our EHR and services businesses. First and foremost, TruBridge showed year-over-year growth of 24% with organic growth driven by improved patient volumes and recent new business wins and inorganic growth driven by our acquisition of TruCode in May of 2021. As Boyd mentioned, TruCode continues to perform according to plan with a quarterly revenue contribution of $3 million absent purchase accounting adjustments and $1.8 million of incremental EBITDA. Year-to-date contributions since the acquisition date are $4.6 million in revenues and $2.3 million of EBITDA. On a pro forma basis, including preacquisition amounts, TruCode has generated revenues of $10.2 million and EBITDA of $4.6 million.

  • The second dominant top line theme has been the success of our dramatic shift to a more SaaS-friendly license mix. A shift that has been intentional and in keeping with our strategic priority of enhancing long-term shareholder value by expanding our base of recurring revenues. While clearly aligned with long-term value creation, these license mix dynamics put significant pressure on the period's nonrecurring revenues offsetting the gains on the TruBridge line and limiting overall revenue and adjusted EBITDA growth to 3% and 4%, respectively. Clearly, a full understanding of the financial performance of CPSI includes an understanding of this nuance and how this shift in strategy forgoes short-term GAAP profits in favor of longer-term value creation.

  • Moving on to bookings. After a subpar performance for the first half of the year, the third quarter saw sales environment headwinds improving, resulting in explosive bookings growth. This growth was propelled by significant traction for Get Real Health's patient engagement solutions and net new hospital EHR bookings that were more than double our quarterly average for the past couple of years.

  • The quarter's total bookings of $29.3 million are our highest since 2017, 77% higher than the second quarter of 2021 and marked a 37% improvement over the third quarter of 2020. System sales and support bookings were up 58% sequentially and 18% compared to the third quarter of 2020 with net new hospital EHR decisions driving the growth. While the growth itself is impressive, the composition and quality of this quarter's bookings are arguably more important than the raw dollar figures, as bookings for recurring revenue sources continue to expand. Including add-on sales, subscription arrangements made up 77% of the third quarter's total EHR bookings as we continue our efforts towards driving recurring revenue growth through greater emphasis on our SaaS offerings throughout the sales process.

  • For the quarter and year-to-date, SaaS arrangements have made up 100% of our net new hospital EHR contract signings after averaging around 50% for 2019 and 2020. By steering more of our new business towards SaaS offerings, we're increasing the prevalence of recurring revenues within our top line mix, leading to enhanced predictability for revenues and cash flows.

  • TruBridge is $13.1 million of bookings for the quarter bested the prior record set in the third quarter of 2017 by 23%, more than doubling bookings for the second quarter of 2021 and 68% higher than the third quarter of 2020. A particular note was the unprecedented success of Get Real Health, both domestically and abroad, with total bookings of over $5 million for this early stage business after never having posted quarterly bookings of more than $1.7 million in the past. Other than Get Real Health, bookings from outside our EHR base increased nearly 4x from the previous quarter and 60% compared to the third quarter of 2020 as we continue to execute on our initiative to expand TruBridge's client footprint beyond our EHR customer base.

  • Turning to the financials. Revenue headwinds from our shift in license mix offset much of the tailwinds from the expansion of TruBridge revenues weighing down the period's results with total revenue showing a 2% sequential increase and 3% ahead of the third quarter of 2020. Overall, recurring revenues increased 3% sequentially and 12% over the third quarter of 2020, arriving at yet another all-time high of 91.3% of total revenues compared to 90.8% in the second quarter of 2021 and 83.4% in the third quarter of 2020.

  • On the profitability front, the SaaS transitions dampening effect on revenue growth for the period limited the ability for margin expansion and worked in tandem with elevated benefits cost to cause sequential declines in adjusted EBITDA and non-GAAP net income of 14% and 21%, respectively. Despite these headwinds, adjusted EBITDA grew by 6% compared to the third quarter of 2020, while non-GAAP net income decreased 9% behind increased tax adjustments and lower nonoperating income.

  • Looking deeper at our segments. TruBridge revenues increased 6% sequentially behind continuous improvement in client patient volumes and a $1.3 million increase in TruCode revenue as the third quarter marked our first full quarterly period with TruCode in the fold. The expanding top line drove gross margins to 50% compared to 47% last quarter.

  • Unsurprisingly, TruBridge revenues grew significantly over the third quarter of 2020's COVID impacted results showing a 24% top line improvement with margins improving by 440 basis points behind the improved top line, the injection of higher-margin TruCode revenues and the contributions from our offshoring and automation efforts that Boyd highlighted. Organic revenue growth for TruBridge was $3.8 million or 14% compared to the third quarter of last year.

  • Next, system sales and support revenue saw a slight sequential decrease in revenues that combined with flat cost of sales, brought gross margins down slightly from 51.5% in the second quarter to 51% in the third quarter. Compared to the third quarter of 2020, overall system sales and support revenues decreased $4.8 million or 12% as the aforementioned shift towards greater SaaS mix cut our nonrecurring revenues by more than half, leading to margin compression of 540 basis points from the third quarter of 2020's 56.4% margins.

  • While favorable to long-term value creation, the shift in license mix will continue to put pressure on our top line and associated margins as all new hospital EHR contracts signed during the year have been SaaS. We currently anticipate 6 new client facilities going live with our Thrive solution in the fourth quarter of 2021 and all are expected to go live in a cloud or SaaS environment.

  • Moving on to operating expenses. Product development costs increased $1.2 million or 19% sequentially due mostly to lower labor capitalization as the quarter's workload leaned more towards maintenance efforts. Year-over-year, costs have decreased $800,000 or 10% due to increased labor capitalization. As mentioned on last quarter's call, early in 2021, we worked with external subject matter experts to adopt best practices for labor capitalization in an agile software development environment, resulting in higher labor capitalization rates that we feel better reflect the investments we've been making to bring incremental functionality and features to our EHR products.

  • Sales and marketing costs were flat sequentially but decreased 18% compared to the third quarter of 2020 due to efficiencies resulting from our business transformation initiatives and decreased commission costs resulting from declining nonrecurring revenues. General and administrative costs increased $3.1 million from the second quarter of 2021.

  • As we stated on the last call, we expected some incremental headwinds to sequential EBITDA growth as employee health claims and bad debt normalized from uncharacteristically low levels during the second quarter. Year-over-year cost increased $2.7 million as heavy utilization drove employee health costs higher. Lease termination costs increased our nonrecurring expenses and TruCode increased the G&A footprint.

  • Closing out the income statement, our effective tax rate for the quarter increased to 28% compared to 16% during the third quarter of 2020, driven mostly by provision to return adjustments. This brings the full year effective tax rate to 19%, and we don't expect that to change meaningfully during the fourth quarter.

  • From a cash flow standpoint, operating cash flows of $1.3 million marked our lowest point since the second quarter of 2016. But again, the nuances tell the story here with working capital consuming a net of $9.3 million of cash flows this quarter while providing a net of $6.6 million during the second quarter.

  • The two most significant drags on cash flows were both payroll-related timing items. First, the third quarter contained an extra payroll period, good for an incremental $5 million drain on cash flows. Second, we opted for the CARES Act employer payroll tax deferral, which effectively propped up 2020 operating cash flows by around $4.6 million. We remitted these amounts during the third quarter for corporate income tax purposes.

  • Despite this quarter's low in the normal levels, trailing 12-month operating cash flows of $50.6 million are effectively the same as adjusted EBITDA over the same time frame. This strength in operating cash flows has allowed CPSI to limit our year-over-year increase in bank debt to $25 million despite funding the entire $61 million purchase price for TruCode using revolver proceeds.

  • On capital allocation, our strategy prioritizes flexibility to have CPSI optimally positioned to opportunistically deploy capital through a combination of M&A, internal investment and value-based share repurchases. Our recent acquisition of TruCode raised our leverage to nearly 2.4x, slightly below our target of 2.5x, ensuring that we remain well positioned to respond quickly to other opportunities that may arise.

  • With regards to share repurchases, we did not repurchase any shares during the quarter and remind investors that the cadence and volume of our repurchases have been and will continue to be influenced by a number of factors. Certainly considering value but also considering capital needs and availability, potential M&A, cost of replacement capital and other capital allocation alternatives. These alternatives and priorities and capital allocation are ever evolving so a lack of repurchase activity in the given quarter may not reflect our views on the intrinsic value of our stock.

  • To wrap up our prepared remarks, the dramatic shift in license mix continues to obscure much of our success during 2021, at least so far as the income statement shows. We expect that trend to continue during the fourth quarter with SaaS deals representing all of the fourth quarter scheduled new hospital EHR implementations. When combined with a vastly improved bookings environment and with TruCode, proving our capabilities and generating accretive inorganic growth, we're excited for what the future holds as we begin looking towards the new year.

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

  • Operator

  • (Operator Instructions) Our first question comes from the line of Donald Hooker with KeyBanc.

  • Donald Houghton Hooker - VP & Equity Research Analyst

  • I wanted to hear a little bit more about the Get Real Health bookings. I was particularly interested in you guys press released a deal win in Europe and then in the Netherlands, which is obviously very new for CPSI. Can you expand a little bit and maybe break down those Get Real Health bookings that were so high in the quarter?

  • David A. Dye - Chief Growth Officer & Director

  • Donald, David here. Actually, the Netherlands press release was an expansion on a relationship that we already had there. It has extensive opportunity for us down the road from a bookings standpoint. It was rather minimal in terms of to Get Real Health bookings in the quarter. The two that Matt just mentioned in his prepared remarks are split about 50-50 in terms of bookings value, both incredibly significant, both deals that were competitive and we're certainly proud that we wanted now it's time to go execute. The international was actually in the Asia Pacific to telecom provider in the Asia Pacific. We hope that this will be press released in the relatively near future, that's about as much information as we can give you right now. It's a nationalized health care systems very similar to the relationship that we have with TELUS in Canada, in particular in the provinces of Alberta and Saskatchewan, where the telecom has the exclusive right to utilize products there as a patient portal for the citizens of a particular country.

  • And then the second significant win is, as he mentioned, is the domestic health system here in the United States, where we're going to Get Real Health is going to provide the digital front door. The typical patient portal functionality and in addition, the appointment scheduling, bill pay, pharmacy refills, et cetera.

  • Donald Houghton Hooker - VP & Equity Research Analyst

  • Great. And then maybe one follow-up for me. Another data point you threw out that was interesting to me was the retention rate, which continues to be sort of 95% plus. It sounds like, I think I jotted that down correctly. I know in the past, you had -- maybe last year or the year before, you were -- you seem to be sort of alluding to an improving competitive environment, maybe getting some price as well. Just wanted to maybe get an update there on the competitive environment. It sounds like it's pretty favorable for you guys.

  • David A. Dye - Chief Growth Officer & Director

  • Yes. So on the competitive environment. Well, I mean, obviously, we felt really good about winning the 11 deals in the quarter from a pricing standpoint. To your question, we do have more pricing power than we did and we were competing with Athena, both in our existing customer base and in net new deals with Athenahealth. And obviously, we don't have that competition out there, at least from an inpatient acute care standpoint anymore. So -- and obviously, now Healthland is a part of us, some others that aren't there anymore or some other competitors that we traditionally competed with over the years. But we -- obviously, we still have the major competition from MEDITECH and Cerner and in some cases, Epic are formidable competitors. So favorable, I think, is an accurate term, but we certainly still have formidable competition out there.

  • From a pricing standpoint, it is noticeably slightly better than it has been in previous years. And that's shown in our execution and our average deal size so far this year. As to retention. I think, Matt, may touch on that.

  • Matt J. Chambless - CFO, Secretary & Treasurer

  • Yes. So Don, you had touched on the success that was 2020. We finished 2020 back kind of at our historical retention levels of around 95%. And right now, on an annualized basis, 2021 is actually projecting to be a good bit higher. We're conservative, we're really estimating that -- some of that in 2021 is going to pull in a little bit in the fourth quarter, but we still think that we're going to end the year a good bit north of 95% retention for 2021, which historically speaking, is going to be a pretty good year for us retention wise.

  • Operator

  • Our next question comes from the line of Joy Zhang with SVB Leering.

  • Yueli Zhang - Research Analyst

  • You mentioned in your prepared remarks, the great resignation movement in the labor market. I was hoping you can provide more color on how much the rural hospitals are experiencing the labor pressures compared with their more urban peers? Is it more -- is it a bigger headwind given how shallow the talent pool is? And as a follow-up, do you see this labor dynamic as a net positive tailwind for TruBridge given greater need for outsourcing?

  • Christopher L. Fowler - COO

  • Joy, this is Chris. It's a good question as you think about it as it relates to the rural versus urban. I would say just proportional based on the number of employees that they have when they lose one at the rural market, it obviously is a bigger percentage of their workforce. So I do think that there is a larger impact. Obviously, what we're seeing specifically on the nursing side, there's a lot of pressure there and there's some outside forces where the dollars that they're having to pay to staffing agencies is really creating a big headwind for them operationally and providing service and delivering that care in their communities. So something that we continue to watch and see if there's an opportunity for us to solve there.

  • As it relates to opportunities on the TruBridge side, yes, what we are seeing is that there are -- we've tried to be flexible there as it relates to how we can provide interim deals or interim opportunities from a staffing solution standpoint, which a lot of times also turns into larger, long-term deals for us. I think in the last 6 months, we've signed somewhere in the neighborhood of 15 to 20 deals where we have provided some sort of interim staffing solution to our hospitals. So it's something that we -- obviously, we're facing some of the same similar challenges that the customers -- that the hospitals are facing as far as from a labor standpoint. So there are other levers that we're continuing to pull there to make sure that we can accommodate those needs from our customers.

  • John Boyd Douglas - President, CEO & Director

  • And Joy, I'll just add on to that, in particular because I've had some very recent conversations about this. The labor market and the nursing for our post-acute facilities, skilled nursing facilities and things like that is really, really tough. And as Chris talked about, the staffing agencies, the supply nursing, the rates, they're charging are really high and really tough to absorb. So absolutely, the acute care is struggling with it, but the post-acute, I would say if you put them on a scale, post-acute is struggling even more than the acute -- on the nursing side for sure.

  • Yueli Zhang - Research Analyst

  • That'd be very helpful. And as a follow-up question on bookings, it's great to hear the positive commentary on the legacy EHR business in addition to TruBridge. So I was hoping you can give more color on how much of the rebound was driven by deals that were pushed out from the first half of the year? And would it be fair to say that demand in the rural hospital market is largely normalized? Or is COVID still a meaningful headwind?

  • David A. Dye - Chief Growth Officer & Director

  • Yes. Joy, David, I had a little trouble hearing you, but I think your question was why the success in the third quarter? Certainly, part of it was pent-up from the lack of success in the first half of the year. Any time you get 11 deals in the quarter, and they were all SaaS and the average deal size was in line with what it has been recently, which is around $1 million, which is certainly good as well. Really, the good news is, is that from a pipeline standpoint, the 3-month pipeline, if you measure at the end of each quarter actually went up going into the fourth quarter over the third. Now whether that means we actually execute on that exactly in that time frame or not remains to be seen. But -- so the 3-month pipeline went up a little bit. The 6-month pipeline, the total number went down a little bit. So basically, given that we had a $29 million bookings quarter and the fact that those remain roughly the same between the 3 and 6 months, we are particularly pleased with.

  • Operator

  • Our next question comes from the line of Jeff Garro with Piper Sandler.

  • Jeffrey Robert Garro - Senior Research Analyst

  • Maybe a couple on the bookings front. The first one, just to clarify those pipeline comments. Was that for specifically EHR deals or the comment around 3-month pipeline going up. Does that refer to the broader pipeline?

  • David A. Dye - Chief Growth Officer & Director

  • The broader pipeline, Jeff, but the EHR pipeline was consistent with those comments also.

  • Jeffrey Robert Garro - Senior Research Analyst

  • Excellent. Great to hear. And more broadly, Q3 was a really nice result with bookings, but I also want to make sure they have the right context on it with -- versus the year-to-date results and actually, there were headwinds last year as we look at the comparison. I guess, maybe more specifically interested in the subscription line, where just trying to parse out where that is year-to-date and how we should frame our expectations as we go into Q4, whether -- we're at kind of a new run rate or whether we should reel in those expectations, maybe looking more at the first 9 months of last year.

  • Matt J. Chambless - CFO, Secretary & Treasurer

  • Yes. So Jeff, getting to that question about subscription rates and where they land. I don't have the year-to-date numbers in front of me, but from a quarterly standpoint, which is given the growth curve that we're on, there is probably a little bit more indicative of what we're going to do heading into the fourth quarter and heading into 2022.

  • Right now, we're looking at just shy of a 50% increase in our SaaS EHR subscription revenues compared to the third quarter of last year. So definitely substantial and incremental growth there. And when we take a look at the bookings composition year-to-date, we mentioned in the prepared remarks that 100% of the net new hospital EHR deals that we have signed during 2021 have been SaaS. And that's actually a little bit ahead of what we had expected coming into the year. We expected somewhere closer to a 70-30 split, and we're happy with this 100% mix for SaaS licenses because we obviously believe that that's in the best interest of creating value long term.

  • So as far as the sales mix is concerned, you can't get much higher than 100%. But on the revenue line, we definitely expect to continue to grow that because as incremental customers are added, the chances are increasingly more favorable towards them coming on as SaaS customers.

  • Jeffrey Robert Garro - Senior Research Analyst

  • Excellent. All very helpful. And maybe try to translate some of that commentary around exceeding expectations on the SaaS transition to your margin expansion goals. I'm curious how we should think about the timing of your platform investments as well as the revenue mix shifting to subscription. Some interesting cross currents there. And just how that impacts the cadence of margin expansion? I know it's not going to be linear, but I think the margin levels this quarter may be a little bit bigger of a step back from Q2 than some of us might have expected.

  • Matt J. Chambless - CFO, Secretary & Treasurer

  • Yes. I mean you're kind of hitting the nail on the head as far as the logistics of what happens with our margin expansion initiatives, at least in the short term, we do kind of have these competing projects going on that have different impacts on margins. Obviously, the shift towards Saas -- more SaaS mix in the new sales environment. It's a drag on margins. There's no way around that in the near term. And that was something that we were expecting even with the 70-30 split that we had planned coming into the year. But obviously, with net new installs installing at a higher rate of SaaS and what we're expecting is pulling margins down somewhat more than what we had expected. But you're right, there's a give and take in the very short term. The two initiatives, the margin expansion initiatives through increased offshore reliance and investment in automation technologies.

  • In the short term, the two dynamics do tend to offset each other. But again, the payoff being in the longer term as we continue to stack up more and more recurring revenue for our top line that we should see margin expansion increase in the future.

  • Jeffrey Robert Garro - Senior Research Analyst

  • And just to try to pin it down a little bit further. Is it fair to think about year-over-year margin expansion every 3 months being an appropriate expectation? Or will there be even more nonlinearity than that?

  • Matt J. Chambless - CFO, Secretary & Treasurer

  • Yes. I mean I would still say that, I mean, I'd expect it to still be a bit nonlinear. There's still the chance going forward that we may have a couple of quarters here, a day in a 90-day period, anything can happen. But there may be some quarters where we do have the resurgence of the perpetual license deals that kind of held the day back in the pre-2019, 2020 time frame. So -- but we do expect, at least for, say, the next 12 months that margin -- expanding the margin on the acute care side is going to see some headwinds from this transition to SaaS.

  • Operator

  • We have no further questions at this time. I'd like to turn the floor over to Mr. Douglas for closing comments.

  • John Boyd Douglas - President, CEO & Director

  • Great. Thanks, Devin. Just to quickly summarize, certainly, we're very pleased with our third quarter performance and the positive impact that our 3-year growth plan is having on our effectiveness, efficiency and value delivered to our shareholders, clients and employees. We remain keenly focused on core growth, margin optimization and achieving tangible upside growth through digital innovation.

  • I hope everyone has a great evening tonight, and we appreciate your interest in CPSI, and we look forward to giving you another update after the fourth quarter. Thank you.

  • Operator

  • This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.