Computer Programs & Systems (CPSI) Q1 2020 Earnings Call Transcript

Computer Programs & Systems (CPSI) Q1 2020 Earnings Call Transcript

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Computer Programs & Systems (NASDAQ:CPSI)

Q1 2020 Earnings Call

May 05, 2020, 4: 30 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Operator

Good day, and welcome to the CPSI first-quarter 2020 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.

Drew AndersonInvestor Relations Contact

Good afternoon, and welcome to the CPSI first-quarter 2020 earnings conference call. During this conference call, we may make statements regarding future operating plans, expectations and performance that constitute forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. We caution you that any such forward-looking statements only reflect management expectations and predictions based upon currently available information and are not guarantees of future results or performance. Actual results might differ materially from those expressed or implied by such forward-looking statements as a result of known and unknown risks, uncertainties and other factors, including those described in our public releases and reports filed with the Securities and Exchange Commission, including, but not limited to, our most recent annual report on Form 10-K.

We also caution investors that the forward-looking information provided in this call represents our outlook only as of this date, and we undertake no obligation to update or revise any forward-looking statements to reflect events or developments after the date of this call. At this time, I will now turn the call over to Mr. Boyd Douglas, president and chief executive officer. Please go ahead, sir.

Boyd DouglasPresident and Chief Executive Officer

Good afternoon, everyone. Thank you for joining us today, and I hope this finds all of you and your family safe and well. With regard to the COVID-19 pandemic from a global or national perspective, I don’t believe there’s anything I can add that hasn’t been said or speculated on countless times already. I would be remised, however, if I did not express our gratitude on behalf of CPSI and all of our employees to all those on the front lines during this time, including, especially from our viewpoint, healthcare workers and their families.

As you would expect, we are going to spend a good amount of time on this call, speaking to the effect of the pandemic on our company and our customers. While there have been many negative impacts, as we all know, there are some positive aspects we think are important to bring to light as well. From a financial perspective, we entered this period of crisis from a position of financial strength and positive growth momentum, which has enabled us to continue to execute at a high level despite the dramatic shifts in the operational and market environment associated with COVID-19. Our conservative approach from a fiscal standpoint has again put us in a strong position, as Matt will expand on in a few minutes.

Our first-quarter bookings performance was more than respectable, especially given the impact on the sales decisions we experienced in the last two weeks of the quarter. Our overall bookings for the quarter were up 39% over the same period last year, and TruBridge delivered again with significant growth, including over $3 million in bookings for our nTrust offerings. On the financials, revenue showed positive movement in Q1 versus 2019. We generated nearly $8 million in cash from operations, and our leverage stands at less than two times EBITDA.

With $8 million of cash on the balance sheet and $34 million of availability on our revolver, we have ample liquidity to fund our operations, our long-term strategic initiatives and our quarterly dividend. Nonetheless, given the uncertainty that our customers and all healthcare providers are facing, we have decided to withdraw our 2020 guidance. While our software and services are mission-critical for our customers, TruBridge has exposure to customer volumes, which have become unpredictable during this pandemic. We continue to closely monitor customer billings and our own cash flows and stress test our position using those numbers.

But it remains too early to accurately forecast the shape of the recovery in our markets. From an operational perspective, I cannot say enough about how our employees have responded to the challenge of completely shifting to a remote work environment in a very short time frame. Over 97% of our staff are working remotely, and we were able to accomplish this with no impact on the quality of support and services we are providing our customers or on our productivity from a developmental and operational standpoint. One of the positives, I referenced earlier is that we have learned new ways of delivering both our services and support in a more efficient manner.

These changes have resulted in higher employee and customer satisfaction, and we have already incorporated these changes into our delivery processes for the future. As one example, our clients that operate in an on-premise server environment routinely upgrade those servers and other critical network infrastructure. That equipment is purchased through us. And normally, as part of that purchase, we would have a member of our ITS team on-site at the client to do the installation and data transition.

Circumstances necessitated that we continue to do several of those upgrades during the COVID-19-related travel restrictions. We refined several processes to run automatically and others so that we could perform them remotely or with client assistance. Going forward, we are confident that for the vast majority of these installations, we will be able to offer a remote installation, which costs the customer less and is more efficient for us. Now I’d like to shift things to a customer focus.

First, what have we directly done for our customers? As I said before, from a support and services perspective, we believe we haven’t missed a beat. And the feedback we get directly from our customers tells us the same. Our client services division did an outstanding job quickly retooling our implementation processes to a fully remote protocol that includes the full scope of education and training that would normally be included with an on-site installation. This has enabled us to move forward with scheduled installations as planned.

From a product standpoint, we have delivered two new solutions in record time to help our customers deal with the impact of COVID-19. In partnership with the technology innovation firm QliqSOFT, we released a COVID-19 toolkit that includes essential tools to allow clinicians to safely engage with their communities in response to the pandemic. The toolkit includes a screening algorithm for assessment based on CDC guidelines. It also includes chatbots that use artificial intelligence and natural language processing to anticipate the needs of the patient to effectively triage them virtually via video chat and texting tools.

At this time, more than 200 of our clients have been set up to use the toolkit, and they are performing around 11,000 visits per day for patients in their communities. We also released the telehealth solution taught with TalkWithYourDoc. This solution enables providers of all sizes to continue offering revenue-generating healthcare services while serving patients’ needs during the COVID-19 outbreak. TalkWithYourDoc is an EHR-agnostic, HIPAA-compliant, secure solution that needs no EHR integration and enables quick provider to patient communication, engagement and data sharing.

Given its EHR-agnostic nature, TalkWithYourDoc is being made available to any healthcare provider and just as importantly, is being offered at no cost for the remainder of 2020, as is our COVID-19 toolkit. In addition to these two product solutions, we have also made a concerted effort to provide an easily accessible resource for streamlined information related to the pending. Our compliance and learning teams have been continually gathering, evaluating and organizing information and making it available to our clients through a COVID-19 resource page on our client website. Information such as CDC guidelines, financial assistance programs, regulatory changes and more are all included and continually updated with the most recent information.

Along with this online resource, we are hosting routine webinars that feature recommendations and best practices from our own experts and our clients. Finally, during the early stages of the COVID-19 pandemic, we had planned to reschedule our Annual National Client Conference that was originally scheduled to take place this month to mid-August. However, it has become clear that is in the best interest of our clients and employees to cancel the 2020 conference and look to alternative channels to educate and inform our clients this year. This is very disappointing for us because of all the benefits we know both we and our customers get from this event.

But even in this instance, there is some positive in that we will be saving approximately $1 million that we would normally invest in this meeting. Before I turn this over to Matt, I would like to spend a few moments on the broader impacts being felt by our clients as a result of the pandemic and, hopefully, some positive outcomes as a result of those impacts. As we all know, the vast majority of healthcare providers are suffering severe financial impacts from COVID-19. Outside of the hotspots, those impacts are related to the massive drop in revenues from the suspension of all-elective procedures per CDC guidelines.

In our view, no one is feeling this more than the rural hospitals and providers. Rural hospitals and other healthcare providers face challenges, financial and otherwise, before the onset of the pandemic, and the pandemic has served to further magnify those problems. The silver lining in this is that the COVID-19 crisis has put the spotlight squarely on the critical need for healthcare in rural communities and better reimbursement to support those that provide it. A number of our clients’ CEOs have taken this crisis as an opportunity to voice those concerns at all levels of government and in the media, both locally and national.

The federal government, through its recent actions, recognizes the need for accessible healthcare for rural Americans and has responded with funding to support those providers. The CARES Act and subsequent supplemental funding through the Paycheck Protection Program and the Health Care Enhancement Act provides a financial lifeline for healthcare, including some $10 billion targeted specifically to rural hospitals and clinics. Under the distribution plan for this $10 billion just announced by HHS yesterday, we know that rural hospitals, including critical access hospitals will receive a minimum base payment of $1 million, plus an additional percentage based on their annual expenses. Also, any rural health clinics, whether independent or operated by the hospital, will receive a minimum payment of $100,000, again, with an additional amount to account for operating expenses added as well.

It has been estimated that the average rural hospital will receive approximately $3.6 million in financial relief. These funds are being paid directly starting this week. There is no application process and no repayments. Through direct-customer contact with virtually all of our clients, we know that over 98% of them have applied for financial relief.

And to date, over 80% of them have received funds. The impact of this financial assistance on our customers and other healthcare providers, rural and otherwise, cannot be overstated. We hope going forward that the federal government’s acknowledgment of the financial challenges of rural healthcare during the pandemic will translate into a longer-term solution to strengthen the financial position of rural providers. With that, I’ll turn the call over to Matt.

Matt ChamblessChief Financial Officer, Secretary, and 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 walkthrough of our first-quarter financial results. The COVID-19 pandemic had a muted impact on our operations and results for the first quarter of 2020, but we do expect that impact to increase over the next couple of quarters. So I’ll wrap up my prepared commentary with the discussion of how this pandemic is impacting our cash flows, operational metrics and outlook for 2020.

Total bookings for the first quarter of $19.3 million decreased 29% sequentially, but improved 39% over the first quarter of 2019. System sales and support bookings were relatively flat year over year but decreased $7.8 million or 44% from the fourth quarter of 2019, as the momentum gained during the back half of 2019 was met by headwinds from the impact of the COVID-19 pandemic on hospital purchasing decisions, which expectedly created a challenging sales environment during the latter stages of the most recent quarter. Despite this challenging environment, TruBridge showed yet another impressive bookings performance. With recent initiatives to aggressively market our nTrust offering and expand our services footprint beyond our traditional EHR base, resulting in bookings that were flat sequentially and more than twice the first quarter of 2019.

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 four new client facilities going live with our Thrive solution in the second-quarter 2020, with two expected to go live in a cloud or SaaS environment. Turning to the financial results for the period. Quarterly adjusted EBITDA decreased $700,000 or 5% from the prior year, mostly as high-margin MU3 revenues during the first quarter of 2019 were replaced by lower margin services revenues from our TruBridge segment in the first quarter of 2020.

Despite the margin headwinds from this change in revenue mix, non-GAAP net income remained flat as interest expense has benefited from beneficial rate movements on our variable rate debt, combined with the substantial debt repayments we’ve made over the trailing 12 months. Over the past year, we’ve reduced our bank debt nearly 20% to just under $103 million currently, compared to just over $125 million a year ago. TruBridge posted revenues that were up 10% over the first quarter of 2019 and down 2% sequentially. As you may remember from the last call, the fourth quarter of 2019 benefited from a surge in nonrecurring revenues, driven by strong upsell of GRH’s patient engagement solutions.

Excluding GRH, TruBridge revenues increased $800,000 or 3% sequentially and $1.4 million or 5.5% year over year with both increases primarily driven by continued strength in our accounts receivable management services offering. TruBridge gross margins were relatively flat, compared to the first quarter of 2019 but decreased from 49% during the fourth quarter of 2019 to 47% during the first quarter of 2020, mostly due to the margin impact of the aforementioned decrease in GRH nonrecurring revenues. Next, system sales and support revenues were flat sequentially, but down $2.1 million from the first quarter of 2019. SaaS revenues for our acute-care EHR segment increased by $1.3 million year over year or 131%, but were more than offset by the combined effects of trailing 12-month attrition and nonrecurring implementation revenues, which have been negatively impacted by the shift in license mix and the near exhaustion of the MU3 opportunity now that the related deadline is well in the rearview mirror.

Year-over-year SaaS mix for new Thrive implementations has increased from 25% in the first quarter of 2019 to 89% in the first quarter of 2020. MU3 revenues were $2.4 million in the first quarter of 2019 and only $200,000 in the first quarter of 2020. From a margin standpoint, gross margins of 55% showed a slight improvement over the fourth quarter of 2019 to 54% margins, but the aforementioned year-over-year top-line dynamics drove margins down from the first quarter of 2019’s nearly 58% margins. Moving on to operating expenses.

The capitalization of $900,000 of software development costs during the first quarter of 2020 made up the entirety of both the sequential and year-over-year decreases in GAAP product development costs, while our cash spend was largely unchanged sequentially and year over year. The capitalization of software development cost 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, an ambitious multiyear endeavor that Boyd has spoken to on prior calls. While we expect continued capitalization of these costs for the remainder of 2020, the quarterly amounts for the remainder of the year are expected to be slightly less than the amount capitalized during the first quarter with eventual amounts depending on resource allocation among our various development projects. Sales and marketing costs increased $400,000 sequentially due to an expanded sales force and decreased 7% year over year due to the top-line impact on commissions.

General and administrative costs increased $2.8 million sequentially, due mostly to seasonality in our 401(k) match costs, legal and accounting fees and vacation utilization. Year over year, costs were flat as the $1 million decrease in severance and other nonrecurring costs was mostly offset by detrimental swings in employee health costs. Lastly, on the income statement, our effective tax rate during the quarter was 23%, essentially flat with the prior year, but up from the fourth quarter of 2019’s 12% rate. Going forward, we continue to expect an effective tax rate of 17% normalized for discrete items.

Operating cash flows during the first quarter were strong at $7.6 million, down $300,000 year over year, as working capital was a use of $4.3 million of cash during the first quarter of 2020, compared to only $3 million during the first quarter of 2019. Trailing 12 months operating cash flows now stand at over $43 million or 88% of adjusted EBITDA over the same time frame, compared to $29 million or 60% of trailing 12-month adjusted EBITDA a year ago. This continued strength in cash flow has allowed for a net reduction in bank debt of $6 million for the quarter and $23 million for the past 12 months. Turning now to the topic that is front of mind for everyone.

We were fortunate that the global COVID-19 pandemic had a muted impact on our results for the first quarter of 2020, bookings notwithstanding. However, although we believe that we have a thoughtful, data-driven approach to monitoring and sizing the impact of the pandemic on our customers and our financials, the reality is that an unprecedented health and economic disruption of this scale remains unpredictable. Given the uncertainty around when patient volumes were recovered to normal levels and when business can return to normal for our sales and implementation professionals, we have decided to withdraw our previous guidance for 2020. At such time, when the path forward for CPSI and our customers becomes clearer, we’ll share our updated expectations with you.

That said, we’d like to provide you with an update on where we’ve been, where we are, what we’re currently seeing and what we generally expect for the remainder of the year. Although there’s never a good time for events like this to take place, CPSI is in the enviable position of entering this pandemic in our strongest position in years. Our focus on increasing the recurring revenue mix for our top line and effectively managing our cost structure have placed us on an upward trajectory of operating cash flows that has yielded positive cash flows in each of the past 15 quarters. Mix of this strength in operating cash flows with an operating structure that is light on capital investment, and you have the ingredients of a strong free cash flow generating enterprise.

We have been intentionally conservative over the past few years with how we put these excess cash flows to work, employing a capital allocation strategy that prioritizes debt minimization and creating the inherent flexibility that comes with lower leverage. That conservatism now shows its true wisdom, as we enter this challenging time with ample liquidity on top of a cash generation engine that we feel is well served to sustain us through this pandemic and position us for more opportunistic uses of capital in the future. Balance sheet cash at March 31 was $4.3 million with cash on hand increasing to approximately $8 million since. We have not made any draws on our revolving credit facility since the onset of the pandemic.

So cash available under the revolver still stands at $34 million. This revolver capacity, combined with current cash on hand, brings our total available liquidity to over $42 million, enough to sustain nearly an entire quarter of run rate cash expenses, absent any contributions from cash collections. While we have seen natural decreases in travel costs and health claims, we are using this financial strength today to honor our commitments to our employees, vendors and customers, all key stakeholders critical to our ongoing success during and after the pandemic. We remain in constant contact with our valuable banking partners to ensure that funds currently available to us under the revolving credit facility remain available to us and are exploring opportunities to work with them to further increase available dry powder.

Turning to what we’re seeing in our operations in the market. To date, we have not seen any meaningful impact on our cash collections as a result of the pandemic. Using 2019 as a benchmark, we’ve actually seen improvements versus benchmark from March 31 through April 30 in terms of both trailing 10-day and trailing 20-day cash collections from our customers, but these are trailing indicators. However, our position in the healthcare landscape provides us with unique and valuable insights into the patient volumes of our customers, which serve as a forward-looking indicator for what we can expect, since roughly 80% of TruBridge’s revenues are related to hospital volumes.

Claims processed through the insurance services division of TruBridge first saw notable declines during the week ending March 22 with decreases versus benchmark in the high single digits. Volumes have notably deteriorated from there, sustaining at roughly 40% below benchmark for the past couple of weeks. This will naturally have a negative impact on our per-claim revenue sources, like most of our insurance services and medical coding divisions and eventually for our percentage of collections revenue sources such as nTrust, accounts receivable management and private pay services. The big question on everyone’s mind is how deep and how wide this downturn will be.

Although it’s impossible to confidently predict where these volume declines will bottom out and how long the period of suppressed volumes will persist, the most current data available to us suggest that further volume declines are becoming less likely, as the slight improvements we’re seeing in some metrics are positive indicators that we may have already reached the bottom. Our touchpoints with our customers, particularly those with high historical levels of electric procedures, point to a gradual ramp-up in patient volumes that could place us back at near historical levels by early fourth quarter. Regarding our acute and post-acute EHR segments, we’ve been pleasantly surprised that customers are, by and large, opting to continue with scheduled implementations. The desire of our customers to move forward with implementations combined with our proven ability to adapt to the times and provide remote installation and training services has minimized the risk to backlog conversion.

However, social distancing protocols, travel restrictions and customers and prospects overriding focus on crisis management has created challenges in generating new sales, which we expect to persist at least in the short term. These factors all suggest that the opportunities we saw at the beginning of 2020 are likely to be pushed out to future periods. Lastly, there are natural concerns, no doubt amplified by media coverage that these volume declines, however, temporary they may be, will place additional hardships on community hospitals, many of which were already financially distressed. Boyd did a good job in his opening remarks of describing the unprecedented level of financial support allocated by the federal government to community hospitals through the public health and social services emergency funds and other stimulus programs.

Although our view is that these efforts provide ample relief to our hospital customers, the pandemic does increase the risk of further cash flow headwinds related to our customers’ financial distress. If these headwinds materialize, it can naturally put pressure on our ability to collect from our customers in the short term and, to the extent these impacts are permanent, may result in increased write-offs of receivables and related bad debt expense over the next few quarters. In response, we’ve mobilized our client success managers and regulatory affairs professionals to work hand-in-hand with our customers with individual touch points to ensure that they get the relief that is designed for them. To close, we’re certainly in unprecedented times, but CPSI is more than prepared for this challenge.

The reward for conservatism is stability and never has that been more brilliantly underlined than today. Our unprecedented speed to market with telemedicine solutions and our ability to deliver uninterrupted support to assist our customers has not gone unnoticed, converting already hand-in-hand relationships to joint to the hip alignment. And our customers have never been more appreciative of our efforts than they are today. Our commitment to our employees has solidified an already strong relationship with those we rely on the most and allow them to focus on the communities and healthcare workers they support.

A stable enterprise, a truly appreciative customer base and a dedicated family of professionals, that’s the powerful combination that has us as excited as ever for what the future holds. And with that, we’d like to open up the line for questions.

Questions & Answers:


Operator

[Operator instructions] The first question today comes from Jeff Garro of William Blair. Please go ahead.

Jeff GarroWilliam Blair and Company — Analyst

Yeah. Good afternoon. Thanks for taking the questions. I appreciate all the commentary so far.

I’ll dig in a little further to the outlook and certainly understand that you’re withdrawing guidance for a good reason. Hoping for some additional color there. And I’ll start with, given the recent success of and the nTrust businesses, and their exposure to client volumes and collections, can you just detail how much of your business historically is exposed to client volumes and percentage of collection models?

Matt ChamblessChief Financial Officer, Secretary, and Treasurer

Yes. So Jeff, as we mentioned in the prepared remarks, right now, roughly 80% of TruBridge revenues are derived from some function of hospital patient volumes, whether it’s a per claim fee or a percentage of collection fee. And that’s, for the most part, held constant historically. So that 80% of TruBridge with TruBridge making up roughly 40% of the P&L comes out to about a third of the total top line being tied to hospital volumes.

Jeff GarroWilliam Blair and Company — Analyst

Great. And then, does that include or not include customers that are utilizing that nTrust model?

Matt ChamblessChief Financial Officer, Secretary, and Treasurer

That includes nTrust.

Jeff GarroWilliam Blair and Company — Analyst

Excellent, that helps. And to follow up a little bit further. Understanding that there certainly will be some geographic variability. But would love to hear your comments on what shape of recovery, you’re maybe modeling out different scenarios you’re modeling out internally as you think about how your customers can kind of turn the corner on the pandemic?

Chris FowlerChief Operating Officer and President

Yeah. Hi, Jeff, this is Chris. So from a modeling standpoint, we have the luxury of being very specific per hospital with their data. And we are — as Matt said, we’re monitoring that on a weekly basis.

So we are seeing signals in certain areas where hospitals are. The elective services are being turned back on. We’ve had a couple of hospitals that actually shuttered for a short period of time that have now reopened. So our model takes into account every specific hospitals revenue scenarios, specifically to them based on their previous week.

And to that point, we had seen a four-week number that was within a variance of about 2%. And this past week was the first week where we’ve seen a modest uptick from that. So not ready to call it a trend yet, but obviously, seeing some opportunity of maybe that there’s some slight upside coming from the elective services and the utilization of the hospitals.

Boyd DouglasPresident and Chief Executive Officer

And to add on to that, and like Chris said, some hospitals have even shuttered. But I think it’s important to point out, too, that, in a lot of cases, the rural hospitals aren’t as subject to the electives as some of the things that you’re reading in the press about because it is the only source of healthcare in these communities. So the people with heart attacks and acute things that they need to get to the hospital for. But I think it’s probably, I would say, on average, the elective stuff is not as much of an impact on hospital as probably what you’re seeing in the media in more urban settings.

Just throwing that in.

Jeff GarroWilliam Blair and Company — Analyst

No, Boyd, that makes a lot of sense. And that’s partially what’s driving my question around the potential shape of the recovery. All of these hard attacks, GI issues, all the various issues, underlying conditions that aren’t going away for patients. And just how do you think your clients are modeling the return of patient volumes, knowing that it’s not something — elective procedure, that you can push out a month, but it’s an underlying condition that it may raise itself in a more urgent manner later on, but may not get someone right back in the door once the doors are open as well.

Boyd DouglasPresident and Chief Executive Officer

Yes, we would agree with that. And I think it’s important, and Chris said it well, you really have to look at every hospital on an individual basis. And we’ve got some states and some counties where COVID-19 is somewhat rampant. And then, we’ve got others that there’s very few cases even in the state.

So they’re just dealing with the fact that there’s no volumes to deal with. So it really is hard to kind of generalize and talk about our clients in general because every case needs to be looked at it on a case-by-case basis.

Jeff GarroWilliam Blair and Company — Analyst

Understood. And last one I’ll sneak in is, you had some very positive comments around cash flow trends over the last month. But as we think about the rest of the year and payment terms and how the federal aid plays in, how should we think about cash flow and DSO trends as you and your clients navigate 2020?

Matt ChamblessChief Financial Officer, Secretary, and Treasurer

Yes. So from a pure cash flow standpoint, naturally, the top-line pressure from patient volumes at TruBridge is going to put a little bit of a crunch on cash flow in kind of the middle two quarters of the year, partially because the dollar amount of our invoices are going down because they’re tied to patient volumes. Like we said in the prepared remarks, we feel like the stimulus funds and the other relief funds the federal government has made available are sufficient to provide a fairly broad safety net for the hospitals that are in our customer base. But all that being said, there’s still a lot of uncertainty out there as to exactly what the impact in the rural markets are going to be compared to the urban setting.

So it’s something that we’re all just going to have to keep an eye on.

Jeff GarroWilliam Blair and Company — Analyst

Got it. Thanks for taking the questions, guys.

Boyd DouglasPresident and Chief Executive Officer

Thanks, Jeff.

Operator

The next question comes from Donald Hooker of KeyBanc. Please go ahead.

Donald HookerKeyBanc Capital Markets — Analyst

And as a follow-up — guys, good morning. As a follow-up to that previous question, the — you commented you were impressed with some of the CARES Act funding. I think you said north of $3 million average funds were provided to hospitals does that — I mean, is there anything that affects your revenue from that? I mean, is that a revenue collection maybe for TruBridge? Or is that just go straight to the balance sheet of your client?

Matt ChamblessChief Financial Officer, Secretary, and Treasurer

Yeah. So this is Matt. And I think that that’s — it’s not really a revenue item for us. It’s really more kind of reducing some of the balance sheet risk that we have out there related to receivables.

Making sure that hospitals in financial distress is being addressed by these stimulus programs.

Donald HookerKeyBanc Capital Markets — Analyst

Super. OK. And then, in terms of GRH, it looks like they had some nice contribution in the quarter. Did you comment on the bookings and EBITDA contribution there? I didn’t recall that in the prepared remarks.

Matt ChamblessChief Financial Officer, Secretary, and Treasurer

Yeah, the bookings — yeah, bookings from GRH for the quarter were somewhere between $200,000 and $300,000. Revenues for GRH were $1.3 million this quarter, compared to $2.7 million last quarter, which you may recall, we pointed out to some significant upsell opportunities for GRH that closed in Q4 of 2019. From an EBITDA standpoint, they were effectively flat this quarter.

Donald HookerKeyBanc Capital Markets — Analyst

OK, super. And then, maybe I’ll ask one more. In terms of the TruBridge gross margins, they’ve been very high for several quarters now. Is this like a new normal for gross margins kind of in the mid- to high 40s there? Or how do we think about that in a normalized manner? I always thought of TruBridge margins being a little bit lower, but maybe there’s a reset higher here, maybe from efficiencies or something?

Chris FowlerChief Operating Officer and President

Yeah. There’s a little bit of that. I think the other part is, as we continue to see success on the TruBridge RCM product, which is more of a pure software play, you’re going to see higher margins creep in. So the larger the contribution that we have there, the higher the uptick is on the margin side.

And obviously, we continue to work through efficiencies in the more labor-intensive areas, the accounts receivable management, the early out collections and the medical coding.

Donald HookerKeyBanc Capital Markets — Analyst

Great. Thank you very much.

Boyd DouglasPresident and Chief Executive Officer

Thanks, Donald.

Operator

The next question comes from Jamie Stockton of Wells Fargo. Please go ahead.

Jamie StocktonWells Fargo Securities — Analyst

Hey, good evening. Thanks for taking my questions. I guess, maybe the first one is about cost. I think Matt may have said — you guys are seeing TruBridge collections down something like 40% for about 80% of the business.

You’ve, obviously, taken a lot of cost out over the last couple of years. So there may not be a lot incrementally you can do. But could you just talk about the extent to which some employees might be hourly and you could cut back on hours or any levers that could be pulled on that front?

Matt ChamblessChief Financial Officer, Secretary, and Treasurer

Yeah. So on the cost side, I think one of the things that’s important to point out here is that we have committed to keeping everyone in that volume base side of the TruBridge business on payroll until at least August 1. And then, we’ll reassess from there based on what the conditions look like at that time, what the pipeline looks like, what backlog looks like. So that’s the first thing we just want to make sure it gets addressed.

That’s based on the expectation that patient volumes will begin ramping back up toward the end of the second quarter, beginning of the third, but reaching near-normal levels by Q4. But if that suppressed patient volume levels that we’re seeing right now, if they look like they’re going to persist, we certainly have levers that we can pull to further rightsize the cost structure, particularly for the TruBridge business. Roughly 65% of TruBridge cost structure bears some correlation to volumes. So that’s somewhere up to $10 million per quarter of cost that we could look to reduce if necessary.

Boyd DouglasPresident and Chief Executive Officer

And Jamie, I just want to add on to that. When we made the decision to let the employees know that through August, we planned on keeping everybody on board, no furloughs, no salary reductions, anything. We really feel that we’re going to come out of this stronger than — we were strong when we entered the pandemic, but we think there’s some real opportunities here, and we wanted to have all of our resources available to us because we think there’s a good chance that we’re going to have a chance to execute and to do quite well on the backside of this thing. So we wanted to be in a position of strength and be able to do that as opposed to — if that opportunity came and then trying to reonboard people and things like that.

So for the long term, we think it’s the best long-term decision for the company.

Jamie StocktonWells Fargo Securities — Analyst

Well, that’s a good lead into my next question, Boyd, which was about bookings. I think understandably, the kind of system sales piece of bookings will be under some pressure. But TruBridge had a good quarter in Q1. Just any thoughts about the ability to sustain that momentum for the TruBridge piece of the business over the next few quarters? Or is it really just going to be, hey, everybody is kind of battening down right now, and when they come up for air, we want to be poised to execute well?

David DyeChairman and Chief Growth Officer

Yeah. Entering the quarter, Jamie, good afternoon, David here, we thought that your latter comment would be more the case. And that was what we were seeing in terms of every communication that we were having with our client, which was generally speaking, a check-in communication, how are you, what can we do to help you, but anything that had been ongoing had been in the pipeline was not being discussed and was put on hold indefinitely. And then, I would say, I think after the initial shock of COVID and sort of the pace at which — between mid-March and early April, everything sort of came to a screeching halt.

Our hospitals were like everyone else, but they were in regular meetings all day about what to do if and preparing themselves for if their communities suffered a rapid increase in patients, and they saw the volume and how many will they keep in-house? And how many would they transfer? And what if the larger facilities were overwhelmed and we’re transferring patients to them? So they were planning for every scenario. And then, as that wore off in the middle toward the latter part of April, the activity that we began to see and are seeing now both for TruBridge and for system sales were pleasantly high. When we think about April in review, and obviously, it’s not very far in the rearview mirror. But we can’t imagine a scenario, and this is true for all of us, hopefully, where there would be a month that would be better set up for just no sales at all.

And we were very pleasantly surprised with what we were actually able to sign and execute in April and then where the pipeline stood at the end of April. So certainly, we’re not tracking to have a quarter like we had in the last half of last year by any means when we were seeing mid-20s and upper 20s in terms of — million in terms of bookings. But our pipeline in terms of both the 30, 60 and the 90-day pipeline is virtually at an all-time high in terms of opportunity, the ability to actually close on that given the situation remains to be seen. It is worth noting that we do have some significant dollars in the pipeline that are hospitals.

In particular, right now, two hospitals, one in Tennessee and one in California that are reopening because of COVID, under community and government pressure to reopen the facilities as a result of COVID. So there, as it was everything that’s a big negative, there are some positives that are potential as well. So that would be the overall commentary. I think it’s equally muted but better than expected for both TruBridge and for revenue.

Jamie StocktonWells Fargo Securities — Analyst

OK. Just maybe one more quick one. I appreciate that. Activations, I mean, is there anything you can’t do remotely as far as getting a hospital live on your system?

Chris FowlerChief Operating Officer and President

Hey, Jamie, no. Again, we’ve been pleasantly surprised, and to Boyd’s point in his commentary, we’re 97% remote. We have a handful of jobs that have to be done in the office. But with everybody’s push toward the teleconferencing, whether it be Webex or Zoom or whatever, and that’s the new normal.

That we have adapted just as the hospitals have as well. Obviously, we’ve got some demand from some customers and some installs coming up over the next several months, where there is a desire to see that on-site presence. But the ability for our customers and our employees to adapt to the ability to install remote has been nothing short of amazing. So to your question as a yes or no.

No, there’s nothing that that’s a double negative, I apologize. We can do everything from an implementation standpoint remotely. There will be situations going forward where there is an opportunity for us to be on-site, and we’ll be very reticent to that and making sure that we’re putting our best foot forward to deliver the same quality of implementation that we’ve come to be known for.

Jamie StocktonWells Fargo Securities — Analyst

OK. Thank you.

Operator

The next question comes from George Hill of Deutsche Bank. Please go ahead.

George HillDeutsche Bank — Analyst

Yeah. Good afternoon, guys. I think a lot of the blocking and tackling questions have been picked up. I guess, Boyd, what I’d be interested in is kind of two comments is just from recovery, can you talk about, I guess, from downturn in recovery, what are you seeing in your — kind of your most rural hospitals versus your most suburban or closest to urban hospitals? And I guess, as you look at the market after the crisis, do you feel like the rural and community space, do they come out in a better situation or a worse situation from an end-market perspective after the crisis?

Boyd DouglasPresident and Chief Executive Officer

OK. So on your first question, again, I’ll go back to what I said earlier. It’s just really — it’s on an individual basis. Yes, some of the more suburban hospitals are hit more with more COVID cases and things like that, but it really depends on where the hotspots are for COVID.

And then, we have rurals that have been hit with COVID, but then we also have rurals that haven’t seen a case in their county. So it’s kind of all over the board there. On the second question, and this goes back to my comments earlier about keeping the full labor force available to us we feel like not only we’re going to come out of this stronger, but one of the reasons we do feel like we’re going to be coming out stronger is because I think — and by and large, our hospitals will. I think this — as I said in my prepared comments, I think this pandemic has really put a focus on how important rural healthcare is and how much these facilities are needed.

And I think that’s at all levels. I think the local communities are feeling it. David mentioned the two hospitals that were previously closed, that there’s a lot of pressure from community and local politicians and state politicians to open those places back up. And I think it’s made everybody realize how important these facilities are, not only to their individual communities, but just to healthcare in general in the U.S.

And I think the government has realized that. And again, a lot of our CEOs are taking advantage of the situation and letting their voices be heard, both within the media and at the political level. So we think it’s only going to help, and that’s why we want to be in a position to take advantage of it when it does.

Chris FowlerChief Operating Officer and President

Yeah. And I’ll add something to that, George, too. From a rural versus suburban, the relationships that the populations have at — with our hospital could be key to the bounce back there as well. Part of this is going to come down to a trust standpoint, right? Are you as a patient willing to go into the hospital.

That’s kind of the question that remains unanswered. The hospitals are open. States are opening. Services are made available, but will the supply be there? So I think when you’re thinking about the campaigns that the hospitals are going to be running to assure their patients that they’re open and ready and equipped to be able to take those services on.

I think you could make an argument that at the rural standpoint, the trust and relationship that they have at that hospital may be a key factor to a bounce back there.

George HillDeutsche Bank — Analyst

OK, that’s great color. I appreciate it, guys. Thanks.

Boyd DouglasPresident and Chief Executive Officer

Sure. Thanks, George.

Operator

The next question comes from Sean Wieland of Piper Jaffray. Please go ahead.

Sean WielandPiper Jaffray — Analyst

Hi. Thank you very much. So on the average $3.6 million that your clients will get from the federal government. Is that money typically earmarked to cover payroll and to keep the doors open? Or is that being viewed as funds that they could then redeploy for future initiatives?

Boyd DouglasPresident and Chief Executive Officer

I believe, to my knowledge, it can be used for anything they want to use it for. And just so you know that number came from a report from the National Rural Hospital Association. They did it. They did a report not too long ago on that.

But it’s for all the pieces.

Chris FowlerChief Operating Officer and President

Yeah, there’s a lump sum, and then it’s based on a percentage of your operating expenses.

Boyd DouglasPresident and Chief Executive Officer

Correct.

Chris FowlerChief Operating Officer and President

That’s how they arrived at that number.

Sean WielandPiper Jaffray — Analyst

OK. But what I understand, it can be used for anything. But I mean, generally, what I’m trying to assess here is in you in the outlook. Like should I brace myself for increased level of DSOs because clients can’t afford to pay their bills, which doesn’t seem like that’s the case or on the other end of the extreme, your average client got $3.6 million, and now they’re going to go and buy GRH or invest in TruBridge or something like that?

Matt ChamblessChief Financial Officer, Secretary, and Treasurer

Yes. So Sean, all we can really say on that is what we’re seeing today. And then, layer on top of that, what we see as far as the stimulus funding that’s going to be layered on top that Boyd had mentioned that we’ve been talking about this $3.6 million average per hospital, per rural hospital. And I think it’s important to point out that what we’re seeing today in terms of cash collections and the impact of COVID-19 on our customer base right now.

We really haven’t seen it so far. We entered April flat on a trailing 10-day basis, compared to last year and down 7% on a trailing 20-day basis compared to last year. That was entering April. As of today, cash collections are up 24% on a trailing 10-day basis versus last year and up 3% on a trailing 20-day basis versus last year.

So there’s still a lot of uncertainty about exactly how broad and widespread, the impact of COVID-19 is going to be on rural environments. But what we’re seeing right now in the actual data so far has been positive for us. And we think that the strength of the stimulus funds and the stimulus efforts that the federal government has taken really bolster and help minimize that balance sheet risk that we have related to receivables.

Sean WielandPiper Jaffray — Analyst

OK. Thanks for that. And on GRH, is there a role that GRH can play in a deliverable around COVID-19 from a patient engagement standpoint?

David DyeChairman and Chief Growth Officer

Yeah, Sean. Actually, they already have. We were able to ramp up, TalkWithYourDoc, which is our telehealth offering, within about — from concept to pilot within about three weeks. It was something that was on the road map anyway, but was greatly accelerated as a result of COVID.

And as was mentioned on the call, that’s free to anybody, including our customer base, our EHR customer base for the remainder of 2020. And very quickly, we’ve had over 150 customers that have committed to use that product as their telehealth product. And that product is based on the instant PHR patient engagement platform within GRH. I think the other big opportunity is we were in the pilot phase of our Chronic Care Management offering with TruBridge, which uses Ellie, which is GRH’s Chronic Care Management tool that’s based on their CHBase platform.

And we are now mobilizing that more quickly than we had otherwise planned to roll that out to our entire market as a TruBridge offering as well. So between TalkWithYourDoc and then the use of Ellie in Chronic Care Management, obviously, because of GRH, we’ve been able to react and are rolling those out in a much more aggressive fashion.

Sean WielandPiper Jaffray — Analyst

Thank you very much.

David DyeChairman and Chief Growth Officer

You bet.

Boyd DouglasPresident and Chief Executive Officer

Thanks, Sean.

Operator

The next question comes from Stephanie Davis Demko of SVB Leerink. Please go ahead.

Stephanie Davis DemkoSVB Leerink — Analyst

Hey, guys. Thank you for taking my questions. And sad to see the guidance go after just being reintroduced there, no fault of your own. So as you guys just mentioned, rural hospitals tend to be the only source of care for many areas.

With that in mind, what level have you seen, or better yet, have you ever seen any meaningful involuntary attrition from closing during the prior recessions?

Matt ChamblessChief Financial Officer, Secretary, and Treasurer

Yeah. Stephanie, it’s been well documented over the past few years from a number of different media sources. The hospital closures have kind of ramped up toward the tail end of the implementation of the ACA. And I believe 2016, 2017, we started seeing hospital closures starting to kind of trickle back down.

It doesn’t look like they’ve normalized somewhat over the past couple of years. I think it’s still too early to tell. Right now, we’re, well, maybe six weeks into this COVID-19 pandemic, and it’s too early to tell whether that’s going to accelerate the closure of some hospitals that were kind of already on the line there. But it’s definitely something that we’ve kept our eye on and the financial distress of small community hospitals has always been something that we’ve closely monitored.

And I think to Boyd’s point, what he pointed out earlier, this is — we think one of the potential benefits of this current climate is when we get on the other side, everyone’s going to realize how important healthcare and community healthcare is, and the value of these rural hospitals to their communities is just going to skyrocket as far as the intangibles are concerned. So we see the public support just increasing from there, which is only going to help the friction that you’re mentioning there with hospital closures over the past few years.

Stephanie Davis DemkoSVB Leerink — Analyst

When it was at peak levels? Just to — sorry, I’m not interrupting you guys but just to add in there. Is there any sort of way we should think about it? Was it a low single-digit percentage, mid-single digits, any ballparking there?

Matt ChamblessChief Financial Officer, Secretary, and Treasurer

I’d say it was low single digits. I mean, you’re talking about perhaps at the maximum level based on the data that we’ve seen somewhere around 20 hospitals in one single annual year of closing. So you’re talking about, what, roughly 2,600 community hospitals across the U.S. that are in our bed size.

That it’s a pretty small percentage. Now granted, they make the front page of the newspaper whenever it does happen. So it gets a lot of media coverage. So it does kind of exacerbate the issue and make it seem like it’s larger than reality.

Boyd DouglasPresident and Chief Executive Officer

Because, to tag on to that, while it makes the headlines when they close, it never gets any media coverage at all when it opens back up. And frankly, that happens a lot more than most people realize is that a hospital will close, but then either the community will come to the aid of it or one of these management firms that manages small hospitals will buy it and then will open it back up, and that never gets the headlines. So all you ever see in the media is the closings.

David DyeChairman and Chief Growth Officer

And Stephanie, the two hospitals that I mentioned in response to an earlier question that are in the process. So actually, one has already reopened in Tennessee as a result of COVID-19 under — during political pressure. They were hospitals that shut down because they — for financial reasons, both of them within the last two years. And so whether they remain open long-term remains to be seen.

But I think it’s an important point to note that there’s a bit of positive that’s coming out of this as well.

Stephanie Davis DemkoSVB Leerink — Analyst

Understood. So these are — although they are closing, it’s not something we should view as really that much of a net attrition from you guys, as they often reopen with an opportunity to then sell the same systems or just continue having the same systems in them?

Matt ChamblessChief Financial Officer, Secretary, and Treasurer

Yeah. I think that’s a fair way to characterize it. But also, especially in the current environment, this is not an incremental risk to anything that we’ve been seeing over the past 10 years.

Stephanie Davis DemkoSVB Leerink — Analyst

I hear that. And then, one quick follow-up then. As you have seen some pretty healthy bookings ahead of the pandemic and a little bit into it, when we look around at what folks are buying and what they aren’t buying, some of them like TalkWithYourDoc looks like it’s free. So how should we think about the monetization strategy there? Is it more of a goodwill play? Or is there any opportunity for kind of some revenues there?

David DyeChairman and Chief Growth Officer

It’s a combination of both. It’s certainly a goodwill play in the near term. And then, long term, we’re, obviously, a business and hopeful that it’s a monetary, a profitable play. I’ll tell you, the way we’re looking at this right now, we don’t know for sure, but based on the commitments that we have to date and what we think we’ll be able to charge for it on a per-provider basis, we believe we’re on a run rate entering 2021 to have about $0.5 million a year in recurring revenue from TalkWithYourDoc, and that’s pretty conservative.

Stephanie Davis DemkoSVB Leerink — Analyst

Fair enough.

Boyd DouglasPresident and Chief Executive Officer

And therefore, I would say that that’s more near term, too. We think longer term, it’s, obviously, going to be a way of life in the way healthcare is delivered now. And the integration between the EHR and the TalkWithYourDoc product really will give us, frankly, a leg up on the competition because we will have both of those solutions integrated. And I think that’s what people have always looked to us for in these rural community hospitals is that integration and the seamless workflows between the two different systems, if you will.

Stephanie Davis DemkoSVB Leerink — Analyst

All right. Super helpful. Thank you, guys.

Boyd DouglasPresident and Chief Executive Officer

Thanks, Stephanie.

Operator

The next question comes from Steve Halper of Cantor Fitzgerald. Please go ahead.

Steve HalperCantor Fitzgerald — Analyst

Yeah, hi. Specific to TruBridge, how should we think about the average time lag between the patient visit and when that accrues to revenues for you?

Chris FowlerChief Operating Officer and President

Hey, Steve. So it’s a little different based on the service line. But I would say, on average, if you wanted to take all the different service lines that are contributing to that, probably about three months would be a fair number to plot that out at.

Steve HalperCantor Fitzgerald — Analyst

OK, great. Thank you.

Boyd DouglasPresident and Chief Executive Officer

Thanks, Steve.

Operator

The next question comes from Dave Windley of Jefferies. Please go ahead.

Dave WindleyJefferies — Analyst

Hi. Thanks. Mostly follow-ups on — particularly on the TalkWithYourDoc. You touched on it a little bit about integration.

I wanted to clarify. So you did accelerate this availability. Is that integration in place today? Or that’s something you’re still working on?

Boyd DouglasPresident and Chief Executive Officer

No, that’s definitely something we’re still working on. We had that product on the product road map for delivery later this year. We simply rearranged some priorities, enhanced and gave more focus on that but, certainly, integration. We think that’s how we’re going to set ourselves apart is the integration with our EHR systems.

Dave WindleyJefferies — Analyst

Understood. And then, you mentioned 150 customers. I assume you’re defining that as, say, a facility or a customer entity as opposed to individual physicians, do you have a physician number that you could offer?

David DyeChairman and Chief Growth Officer

Yes. So we are defining that as nonfacilities, and we are conservatively guestimating about 15 providers utilizing it per facility.

Dave WindleyJefferies — Analyst

Got it. And then, understanding your — to Stephanie’s question on monetization strategy, you’re offering this for free at the moment. Is it too early to ask kind of in broad strokes, how you would anticipate pricing this product when you do assign a price?

David DyeChairman and Chief Growth Officer

Yeah. We’re going to charge a per-provider fee, probably per provider per month or for some period of time. We have not —

Dave WindleyJefferies — Analyst

And — I’m sorry, go ahead, I’m sorry.

David DyeChairman and Chief Growth Officer

We haven’t nailed down exactly what that is yet.

Dave WindleyJefferies — Analyst

And not an additional per-visit fee, just the per-provider per-month-type fee.

David DyeChairman and Chief Growth Officer

Correct.

Dave WindleyJefferies — Analyst

Got it. Thanks for the clarification.

Chris FowlerChief Operating Officer and President

Dave, the only opportunity where that may come up is where David was referencing the Chronic Care Management and how that might evolve going forward from a care management standpoint that we may be able to deliver through TruBridge, where there might be an opportunity for a per-visit fee that would come along. But I think we’re too early to speculate on what that might look like.

Dave WindleyJefferies — Analyst

And I’m sorry, since you brought it up. So you mentioned in that context, Ellie and Chronic Care Management. I’m not totally familiar, is that the next externally sourced functionality or capability? I just wanted to clarify on the Ellie mention there.

Chris FowlerChief Operating Officer and President

Yes. So Dave, so Ellie is an instance of the patient portal via Get Real Health, and we’re using that right now via TruBridge to deliver Chronic Care Management. So we are actually employing the care providers via TruBridge and delivering that service to a handful of hospitals right now. What we’re in the process of doing is moving that from pilot into general availability with the premise of that would be part of the nTrust offering.

So we would be delivering additional care — coordination care management for our hospitals that would or could potentially drive additional revenue for them.

Dave WindleyJefferies — Analyst

OK, great. Thanks for taking my questions.

Chris FowlerChief Operating Officer and President

No, thank you.

Operator

This concludes our question-and-answer session. I would like to turn the conference back over to Boyd Douglas for any closing remarks.

Boyd DouglasPresident and Chief Executive Officer

Great. Thank you. I want to thank everyone for their time today. I especially want to say thank you to our customers for your support.

And I want you to know that we will continue to do whatever it’s needed to assist you in your mission throughout this pandemic and beyond. And finally, a big thank you to all of our employees. Your dedication and performance over the past weeks has been admirable, as well as aspirational. Appreciate, everyone, and keep in mind, we will get through this together.

Thank you.

Operator

[Operator signoff]

Duration: 67 minutes

Call participants:

Drew AndersonInvestor Relations Contact

Boyd DouglasPresident and Chief Executive Officer

Matt ChamblessChief Financial Officer, Secretary, and Treasurer

Jeff GarroWilliam Blair and Company — Analyst

Chris FowlerChief Operating Officer and President

Donald HookerKeyBanc Capital Markets — Analyst

Jamie StocktonWells Fargo Securities — Analyst

David DyeChairman and Chief Growth Officer

George HillDeutsche Bank — Analyst

Sean WielandPiper Jaffray — Analyst

Stephanie Davis DemkoSVB Leerink — Analyst

Steve HalperCantor Fitzgerald — Analyst

Dave WindleyJefferies — Analyst

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