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spk03: EHR solutions to the post-acute care market. As part of the agreement, we will be PCC's exclusive partner for complete business office services. We are not including anything at this time materially in our forecast as the post-acute market is lagging behind the acute care market in terms of converting to the outsourced model. Second, our integration of UGLE is progressing as expected. As a reminder, early in the fourth quarter, we acquired Bugle with the aim of bringing our globalized workforce in-house rather than continuing to rely on third-party outsourcing. We split the initial integration plan into two tracks. One, getting our offshore resources to scale for existing customers, and two, bringing on the new customers. For existing customers, we went account by account to map out a plan for the ramp. And for our new customers, we are planning to staff them with the appropriate mix from the initial go-live. It's important to note that as we ramp up our global capacity over the course of 2024, we will likely experience a little margin pressure early on, but we expect that to reverse as the year progresses. Longer term, our goal is to achieve a workforce comprised of 70% offshore and 30% US-based employees. While we work through this transition, it remains a top priority to maintain the same quality of service for all of our customers. As we look forward into 2024, our entire organization is committed to returning to growth and realizing the operational leverage that our global workforce can achieve. We believe that our dedication to embracing technology and modernizing our infrastructure is key to our ability to consistently deliver best-in-class solutions to our customers. This is exactly why we continue to use AI to automate the RCM process wherever possible and utilize the cloud to improve capabilities and enhance our services. This commitment to leveraging technology has and will continue to be a top priority within our organization. As we've acknowledged in the past, we are in the midst of a transformation. 2023 was focused primarily on our people and ensuring we have the right team in place to take advantage of the growth opportunities for this year and beyond. In 2024, while we'll still continue to invest in our people, our focus will be on capital allocation. For example, making sure our investments in technology have a sharp focus on ROI to ensure our investments closely align with our strategic aim. With that, I'm very excited to hand it over to our new CFO, Vinay Bassey, Vinay brings a skill set that is already proving to be a huge asset to our organization. His extensive experience across the board, he has extensive experience across the board, but particularly in offshore operations and has been and will continue to be extremely beneficial to our team during this transformational time. Vinay, can you take us through the numbers? Thank you, Chris, for the introduction.
spk01: Before I review our fourth quarter results, and our initial 2024 outlook, I want to share with you all a bit about why I joined CPSI. Most of my working years have been focused in technology and services, primarily telecom communications at Avaya and media at Nielsen. CPSI is an extension of that journey where I'm excited to join a company operating in healthcare technology and services. During the interview process, I was impressed with Chris and his commitment to transform the company. I was fully aware of the missteps in 2023 performance, but the company's strong mode of RCN growth within the EHR customer base, coupled with strategic acquisitions and divestitures, reinforced my confidence that the team is focused on transforming the company. My own experience in building a strong team, enforcing fiscal discipline, and leading with a data-driven approach were at the forefront of my decision to join CPSI to be part of its next chapter. Some of my areas of focus for the near term include, first, getting a thorough understanding of the key business drivers that serve as a leading indicator for forecasting, including bookings conversion and increasing trajectory of offshore resources while meeting customer service level agreements. Second, building a strong finance team built on principle of a fact-based, forward-looking approach and closely linked with the business. I believe This will help in improving forecasting and fiscal discipline going forward. Third, taking a fresh look at capital allocation and capex with a return on investment mindset. We have invested in many projects to date and we will be reviewing those efforts to prioritize the ones that will benefit us near term. Fourth, Continuing the cost optimization initiatives that directly impact EBITDA. And last, ensuring the successful integration of Google. Now, let's jump into the numbers. Total bookings in the quarter came in at $26 million. RCM bookings at $14.2 million made up about 54% of the total. which represents an increase 5.9% from 2022. Total revenue for the fourth quarter of $85.9 million compares to 83.2 million a year ago. RCM comprised 59% of the total revenue and crossed the 50 million threshold for the first time. Let me provide additional color on revenue. vehicle contributed approximately 3.8 million dollars in about two and a half months in q4 further rtm excluding vehicle showed growth of 3.3 percent compared to q4 22. ehr showed a decline primarily due to the impact of sunsetting the centric platform in the quarter we reported cost of revenue of $43.7 million, which yielded a gross margin of 49.1% compared to 46.5% a year ago. The improvement in margins came primarily from savings associated with our voluntary employment retirement program and lower bonus accrual due to the 2023 performance. In the fourth quarter, reporting Reported operating expenses, excluding goodwill and trademark impairment, as a percent of total revenue was 53.2% compared to 41.4% a year ago. The increase was primarily from severance expense and other one-time items, including fees incurred for M&A activities. On an apples-to-apples basis, excluding these one-time items, operating expense as a percent of revenue would have been 45.2%, driven primarily by vehicle and increased investments in sales and marketing, technology, including the cloud migration, as well as aging receivables. With all that taken into consideration, adjusted EBITDA for the quarter came out to $12 million compared to $13.2 million a year ago. Adjusted EBITDA margin of 14% in the quarter decreased 190 basis points over year due to the impact from increased investments in sales and marketing, cloud, some Microsoft licenses, and technology resources for future growth, and was partially offset by the benefit from our savings associated with our voluntary employment retirement program and lower bonus accrual in 2023. We ended the year with a cash balance of 3.8 million and a net debt of 194.5 million. Operating cash flow for the year was 1 million, versus $32.4 million in 2022. The reason for decline was primarily a result of lower adjusted EBITDA, higher interest expense from funding the vehicle acquisition, severance, and other one-time items. Lastly, in connection with the company's disposition of EHT in January 2024 and other factors, management is finalizing certain line items in the financial statements, primarily related to the amount of goodwill impairments and the final numbers will be included in our 10-K filing. Moving on to our guidance. First, in an effort to improve our transparency, we will begin providing guidance for the upcoming quarter starting today. For the first quarter, we expect revenue to be in the range of $82 million to $84 million. Adjusted EBITDA to be between 8.5 to 9.5.
spk07: It appears that we are just experiencing some technical difficulties. One second.
spk00: Ladies and gentlemen, please stand by. The conference will resume momentarily. We thank you for your patience. Ladies and gentlemen, we thank you for your patience. Our event will now resume.
spk03: Yeah, this is Chris. We're going to go back to Vinay starting at the beginning of guidance. So we just wanted to make sure that we went ahead and put him straight into the fire. So here we go. Thank you.
spk01: Moving to our guidance. First, in an effort to improve our transparency, we will begin providing guidance for the upcoming quarter starting today. For the first quarter, we expect revenue to be in the range of $82 million to $84 million, adjusted EBITDA to be between $8.5 million and $9.5 million, and for the full year 2024, we expect revenue of $340 million to $350 million adjusted EBITDA to be $45 million to $50 million. I want to give you a little insight into our thought process and assumptions that went into this year's guidance. Firstly, we have assumed impact of AFC in the guidance. In other words, the guidance assumes only 15 days of AFC in Q1. As a point of reference, AST accounted for approximately $16 million in revenue in 2023 with approximately $2 million of contribution to adjusted EBITDA. Secondly, a full year of vehicle is included in these numbers. For 2024, we expect revenue of less than $20 million with an approximately $4.5 million contribution to adjusted EBITDA. Starting with bookings, we took a conservative approach for the full year and assumed 2024 will be relatively flat compared to last year, excluding AFC and durable. In terms of quarterly cadence, we expect the first quarter to be the lowest of the year and then build as the year progresses. That said, please keep in mind that bookings are lumpy. The midpoint of our annual revenue ranges implies 6.5% growth, excluding ASD from 2023, and that will be primarily driven by organic growth in our RCM business and the full-year contribution from vehicle. Last year, RCM, including vehicle, in Q4 accounted for 57% of our total revenue, and this year we think could be about two-thirds of total revenue. We are forecasting our EHR business to be relatively flat, excluding the impact from some setting of our centric platform. I also want to provide further detail on how we anticipate EBITDA margins to progress over the year. The first quarter will be our lowest EBITDA margin in 2024 at approximately 11% based on the midpoint of our quarterly guidance range. This is because we have just begun ramping our global workforce and therefore have some duplicated costs during the initial transition to ensure continuity for our existing customers. We expect the second half to have higher EBITDA margins to reflect the benefits from already negotiated vendor savings, savings from ramping the offshore workforce and expected first half bookings converting to revenue. I have been conservative to not include any other future cost savings initiatives in our guidance that we have initiated as part of cost rationalization and capital allocation strategy. These initiatives are in the preliminary stages but include a review of overall cost structure relating to vendor spend, GMA including real estate, and capex spend. We could see benefits in the second half, but there are too many moving parts as it relates to the contribution from the offshore transition along with other factors to count them in the financials for now. I'd like to close out my first call by thanking Chris and the rest of the CPSI team for a warm welcome to the company and a great first couple of months. I'm excited to help CPSI successfully capitalize on the many opportunities that lie ahead of us And I look forward to getting to know many of you in the coming weeks and months and keeping you updated on our progress as the year unfolds. With that, I will open the call up to questions.
spk02: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate that your line is in the queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions. Our first question comes from Jeff Garrow with Stevens, Inc. Please proceed with your question.
spk04: Yeah, good afternoon. Thanks for taking the questions and welcome to the call, Vinay. Wanted to ask about margins in 2024. you know, would expect bugle and further offshore leverage as well as, you know, potentially some reduced R&D following the post-acute divestiture to be accretive to margins. So could you discuss those in some more detail and also any potential offsets that have you landing at those roughly flat EBITDA margins at the midpoint of the guidance year over year? Thanks.
spk01: Thank you, Jeff. First of all, I'm excited and looking forward to building this relationship with all of you. You're absolutely right. It looks like a flat margin, and all the reasons you outlined are also factored in. But there are a couple of big offsets that I would highlight. One is our budget for 24 will be based at full bonus. So compensation-related expense adds a significant portion, and this compensation is bonus accrual as well as merit increase. that offsets most of this gains right now. And barring that then, obviously we had smaller increases from the full-time impact of the hirings that we had done in the second half of 23, full-year impact is felt in 24. So these are investments in support, technology, and sales and marketing.
spk04: Got it, that helps. step back a bit and throw one out there for Chris. You've done the bugle acquisition. You've divested the post-acute business. Curious if we should think about potential for additional strategic moves to come, or do you now have the platform that you want to grow and drive leverage across?
spk03: I think it's a super fair question. I would say right now for 2024, we've got a full plate and we're looking to execute. And so, you know, we were excited about obviously getting the Bugle deal done at the end of last year, excited about the AHT divestiture, creating the additional focus there. And right now, top of mind for us is continuing to drive sales and revenue growth and really capturing the value of the Bugle workforce transformation over the course of this year. And, you know, Going back to that margin question, you know, you can look at, you know, I'm excited about the fact that we're providing the quarterly look ahead guidance, which allows a bit more visibility for you guys as we're continuing to march through this transformation. But you can also tell, you know, just from the bridge of looking at Q1 over the course of the year, there's a pretty steady ramp as that margin grows as we continue to execute on the offshore workforce.
spk04: Excellent. I appreciate that. One last one from me before I jump back in the queue, but want to make sure we hit bookings and, you know, saw the nice finish to the year. Could you help us think about the pipeline from here and where our expectations should be for bookings in 2024?
spk03: Yeah, we were definitely thrilled to see the rebound that we had in Q4 over Q3. we continue to remain cautiously optimistic. I think the trap we fell into last year, Jeff, was getting a little over our skis with, and I know we've talked about this throughout the year, of how quickly this market was going to unlock. So if you look at our guidance, I think that we've taken a very measured approach at how the bookings contribution has impact over the course of the year. With that said, the pipeline continues to be strong. We're continuing to have the same great conversations with customers and seeing those pick up both in our existing customer base and with our outside of the EHR.
spk04: Great. Thanks again for taking the questions. I'll hop back in the queue.
spk02: Our next question comes from Sarah James with Cantor Fitzgerald. Please proceed with your questions.
spk09: Thank you. I was hoping you could unpack the seasonality a little bit more. So the year looks like, especially on the EBITDA side, a little bit more back-end loaded. Are there any one-timers in there we should think about? Is the cost of rebranding in 1Q24 and how sizable is that?
spk01: Yeah, so that's a great question, Sarah. Nice to meet you again. Sarah, the margins I give is adjusted EBITDA margins and rebranding and all our one-time items that are taken out. We have rebranding costs for this year, but it's not included in the adjusted EBITDA margin. You're right. The margin is back-end loaded for two reasons. The ramping that we will have is on a month-to-month basis. So if I have something in the first month, I get rebranded. in the last quarter, all the benefits. So it's a ramping up of month by month so that my fourth quarter will be the maximum benefit. That's one. Secondly, my vendor savings that we have negotiated, it kicks in from Q2 onwards. So that's the second aspect of it. And obviously, the bookings and the revenue that you expect is the benefits that we will see is also back and loaded. So it's a mix of all three. The good advantage part of it is vendor savings has already been negotiated. And the bookings, first half will decide, will give us a great color for the second half of revenues.
spk09: Great. Thank you, Vinay. And maybe you could give us a little bit of insight into your process there, how you've been going through the review of the business units, and how you think about guidance philosophy, whether it's conservative or optimistic.
spk01: That's a great question that you say. I've always been told future will tell me whether I was optimistic or conservative, but I'll tell you how I have thought through these. As you know, Sarah, there are a lot of moving pieces, a lot of pieces that could change, but how I have thought through is looking at the past to be my, looking at history, and then looking at future and breaking it to two parts, like what Chris said, One, being a little conservative on making sure what we learned of optimism of 23 is not baked into 24. So a flat bookings number excluding vehicle and AST was a good, especially despite coming high, a good on the Q4. That was one. Second aspect on margins, some of it is my history and my background. Laser focused on the controllable and making sure the rigor that we need, we have started putting on on these expenses and everyone to fight to stay on that, on the P&L, has, I would say, some of it which are fully baked is already captured, like the vendor saving, but the other that I mentioned in my prepared remarks are work that I'm trying to do and have an ROI focused and more near-term focused. So CapEx, product development expenses that we are spending, Looking at it from a project by project and the ROI of not having too long term and near term is the cadence that I have just instituted. It's still early, but I would say that's the mindset I have. So answer your question. I feel at least 60 days in, it looks like a balanced budget to the best of my ability of understanding, but I feel more like what Chris said, cautiously optimistic, and there's a lot more work to be done in the coming months.
spk03: No, I think you nailed it. And again, Sarah, I would say definitely, you know, between the optimistic and conservative, I would say realistic is, you know, over the first 60 days is the way that I would categorize Vinay and appreciate that approach. Also, again, I'm going to say this for the second time. I love the fact that we're giving the quarterly guidance, which I think helps you know, everybody kind of keep track of our progress as we go. As we do know that it's not quite a straight line on this transformation.
spk02: Our next question comes from Jesse Davis with Barclays. Please proceed with your question.
spk10: Hey guys, it's Stephanie Davis from Barclays, but it's okay because I can have a new name as you guys have a new name too. Congrats on the rebranding. Now, I was hoping to hear, Chris, you just came from a customer conference week on heels of every brand. So tell me, what's the feedback? What are folks looking for? And what was the big area of demand that everyone talked about?
spk07: Hello, Chris, are you there? Please stand by while I...
spk03: Maria we're welcoming back our speaker now to answer Jesse Davis from Barclays correct well we'll call her Stephanie so Stephanie Thanks for the question. Like I was saying, we have been thrilled with the response to the rebrand on all fronts. Granted, it is early days, but obviously you shared your email and obviously you've been bugging us about this for quite a while. I think the sentiment from the street has been finally make it easier to tell the story. Our customers and our employees all seem to get it as well and appreciate the consolidation and the ease of of how we talk about who we are. You know, going to the conference to Vive, you know, what I would say that we saw kind of more than anything is that people are looking for insights, you know, insights on where there are opportunities for them to improve efficiencies, which lined up really nicely with we had a little soft launch for an analytics platform that we're driving out. And so, you know, our thought is that, you know, step one is, you know, the technology that's available to find the areas for improvement on the RCM side. And then obviously with the opportunity for us to back that up with some services that come in, which I think is, you know, is as much of top of mind to the customers, you know, as identifying what those problems are. Once you've identified them, then it's about how do you solve them.
spk10: When I think about a legacy industry that does a lot of insights work, I think in Nielsen, and we've got Vinay coming from there. Vinay, is there anything you're seeing in that opportunity where you can kind of get some learnings from your past?
spk01: I would say, Stephanie, past, not just Nielsen, helps, but Avaya, my banking, everything has, I'm learning from those experiences and utilizing it here. And the key one I would say is focus a lot on my controllable, which is cost structure and capex, because that's an influence I can make. And having lived through two private equity learnings, and they have been amazing teachers to me. So bringing that cadence of an ROI mindset has helped me a lot, one. Secondly, in my Nielsen on having focused on revenue and all It's building that partnership with the business where accountability is and ownership are shared. And that translation of bookings into revenue in the right from a forecasting is the second one. And the third, which is not Nielsen, not Avaya, just who I am. Cash is the only truth I'm going after. So improving my free cash flow is being the mantra that I'm committed to. So it's a journey that I'm I know might be longer, but every day, every month is where I'm looking to make a difference.
spk10: Love hearing that. On the rent cycle side, I want to dig in a little bit. It looks like your cross sales motion is a little bit softer for the past two quarters. Is there any color on this? And then last one's a quick housekeeping one. I didn't see an NPR metric. Is that going to be disclosed or is there anything you can share on that?
spk03: Yeah, I'll take the first and then let Vinay talk a little bit about the NPR and kind of the approach there. As it relates to the bookings and just kind of from a macro view, you know, I would say we're still very confident as it relates to the cross-sell opportunity. We continue to see that end of the market continue to have some momentum. I think it's still, you know, we still have the same challenges to an extent while we're seeing them turn down a little bit. It's the economic impact of the jobs in the community, and it is the concept of outsourcing in general. You know, remember, we're still talking about a market that, you know, 70, 80% of it's still being done in-house, and, you know, there's not a regulatory push to drive to this model. And so we're still selling the idea of outsourcing before we're selling TrueBridge as the provider for that service. And so we're making great strides. You know, that sales force has now been intact for a full year. So they definitely have their feet under them, one, on the value proposition of what it is that we're selling. and two, building that relationship with their customers. And so we're expecting to see that, you know, as the year unfolds, continue to make progress there. And I'll let Vinay talk a little bit about the NPR.
spk01: Yeah. So Stephanie, I feel bookings is a great metric because it is effort and reward of our own that we are reflecting. NPR, I just wanted to take a little more time to do the homework of understanding the ins and outs Because, like everyone else, a portion of our NPR data is relied on third-party inputs. And when it's not in my control, knowing how the out inputs come in, what's the cadence, I just want to do that homework a little bit longer to just make sure I understand what are the ins and outs and how How is that a leading indicator for me? So that's the reason why you didn't see it in this, but bookings, which is obviously deals close, is a great indicator for us for the timing.
spk10: These are helpful. Looking forward to seeing the metrics. Thank you, guys.
spk03: Thanks, Stephanie, or Jessie, whichever it is.
spk02: Our next question comes from George Hill with Deutsche Bank. Please proceed with your question.
spk08: Hi, it's Maxima for George. Thanks for taking the question. Can you talk a little bit about what has changed in outsourcing conversations lately with prospective clients just given the recent macro environment?
spk03: Yeah, I'm sorry I didn't catch your name, but I'll answer the question. I did hear most of that. What I would say is definitely we're seeing the increased interest and That is based on, you know, as I said in the prepared remarks, you know, the pressure on the labor market specific to the communities that we're serving. And secondly, you know, as the reimbursements continue to get complex, more complex, the need for the specialized skills and continuing to stay on top of that continues to ratchet up. And to give an example of that, if you go back five years ago, the vast majority of these hospitals, their payments were on the backs of traditional Medicare, Medicaid, and probably a Blue Cross was going to make up the vast majority of their payments. And a pretty straightforward payment model that they were getting reimbursed on and also getting paid within 14 to 17 days. While it may not be the dollars that they want to get, they knew the money that they were going to get. They knew in the time that they would get it, and they could budget for that. What's happened is you've seen this kind of proliferation of the move to the Medicare Advantage or the value-based care model. It's created more complexity and making a little not quite so straightforward in getting that money in. So it's about, again... having the resources, one, that are available, just the bodies and the chairs, and then secondly, making sure that they're able bodies and that they're on top of the changing landscape of how that reimbursement is. So that's really where the vast majority of the conversation is shifted to. And again, as we have, this is what we do. We live and breathe by this, specifically with more than half of our business. And so we're able to sell... the success that we've had with our 20 plus years of experience to be able to bring that consistency and success into the delivery for those opportunities.
spk02: It appears that there are no further questions at this time. I would now like to turn the floor back over to Chris Fowler for closing comments.
spk03: Well, thanks, everybody, for joining us. Also, thank you for the patience with our technical difficulties. Hopefully that will be a one-time and only. And obviously, you know, thank you to the new co-pilot that we've got sitting with us, Benet Bassey. I'm looking forward to going and finishing this transformation and continuing the progress that we've started here at CPSI, soon to be Truebridge on Monday. But hope everybody has a wonderful rest of your day and good weekend. And thank you again for your support in our company.
spk02: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
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