Really excited. Welcome to the afternoon at day two after the lunch keynote. Really excited to have TruBridge here. Chris and Vinay, thank you for being here. Vinay, we've had a recent conversation. I'm Mark Odendahl, the Director of Research. We've covered TruBridge now for about two years, year and a half, two years. Thank you very much for coming here. I'd love to kick it off, just Chris, with a quick overview of the business. And then maybe if you could weave that into some of the repositioning of the company that you've done over the last year or so into revenue cycle management. And we'd love to be educated on that as investors look at your company.
Sure. Thanks for having us, first of all. We enjoy the relationship, and always a good time to be here at the conference. We have been in business since 1979. I think at the heart of who we are, I think it's important to know that we serve the rural and community market. We define that in our two business units, which one is our EHR business, which is obviously focused on technology and clinical outcomes in that market, and then our RCM business, which is delivering cash and accelerated operations for our customers. On the EHR side of the business, we're 100 beds and under. On the RCM side, we're 400 beds and under is the market that we feel like we can very reasonably and successfully serve. Over the last 40-plus years, we have, up until 2016, grown the business organically.
In 2016, made our first acquisition of a competitor, Healthland, and have seen some changes as we've tried to continue to grow the business through acquisition and also organically. As we look at where we are today, again, I think our focus is on that rural community market, not letting ourselves get distracted by going upmarket, by going international, but really staying focused on delivering to that customer base for a couple of reasons. One, we believe that there is a need for somebody to say, "This is who we are, and this is who we're going to serve." Rural America is underserved in so many different ways. We believe from a technology and a services standpoint, we have a role to play.
Also believe that with that being the case, if everybody else is not paying attention to it, there's an economic opportunity for us as well, financial impact that we can create for our shareholders. We have really become laser-focused on making sure that we are keeping our technology up to date and investing, and also continuing to expand our services to deliver for them so that our customer can focus on their mission, which is patient care.
Got it. I think you recently had your annual client conference. Can you educate us a little bit on what that is and any big takeaways from that that we could see results from in the coming years?
Yeah. That conference has historically been focused on our EHR customer base, which is 450 hospitals that are using our platform across the United States. We are there to showcase for them the investment innovation in our technology and also educate them on the additional services that we provide. Honestly, learn from them on what challenges they are facing so that we can make sure that our investments line up with their needs. What we are seeing is that we are kind of right where we need to be from what we are focused on. It is just a matter of continuing to expand beyond that. Over the last couple of years, we announced a partnership with Microsoft where we are leveraging their Azure platform to deliver our technology in the cloud. What that has also opened the door up to us is the additional technologies and advancements that they have.
Case in point would be Nuance and their Dragon software and how Copilot has now fit in. Why that's important is you go back into the mid-2000s, early 2000s with meaningful use. Now all providers have to use technology. It's really an inhibitor to, again, what they're trying to do, which is deliver patient care. They're spending more time in the computer than they are or in the software versus with the patient. The Copilot and Dragon opportunity gives us the opportunity to automate some of those functions, the documentation and the chart summarization to allow that doctor or provider to spend more time with the patients. That was a big focus for us.
As we see RCM as the big growth driver, continuing to hear that resonate with our customer base, that as the pressures from Washington potentially come down, as it just gets harder and harder to deliver service, their need to have a steady cash flow and to get all the cash that they can is top of mind. We are positioned to be able to deliver that for them.
How's the health of the rural hospital market, and how are you helping that market?
Yeah. It's a great question. I think everybody gets really scared of the rural market because it's an easy headline to say that 40% of the rural hospitals are on the verge of closure. I would argue that you could play that same headline with larger hospitals too. The margin profile, regardless of the size of your hospital, is relatively the same. You just maybe have a little bit more bandwidth to hold on to it at the higher side. What I would say is the thing that remains constant in the rural market is the desire for that community to have local healthcare and the community being supportive of that initiative. Now what happens in the role that we play is how do we allow them to be more efficient from a delivery standpoint for their patient care with our technology?
How do we make their back-end process more efficient so the cash is coming in? How do we help them from a business standpoint? This is where, as I think about the future, this is the part that I get excited about, is what are the other roles we can play if we're staying focused in this end of the market? How do we help them get more financially stable so that they can find additional services that they bring? At our conference, I told a story about a hospital of ours in West Virginia that has expanded over the last 10 years from 150 employees to 500 employees. They've built a new hospital. They have one of the only, one of two hospitals in the state that has a da Vinci robot.
They have a partnership with the West Virginia University to deliver cancer care in their community. So there's opportunity for our hospitals to be creative with how they partner and how they deliver the service without giving away their healthcare organization to a larger system.
How's the competitive set? How do you win in these rural hospital settings?
Yeah. Two different questions. Again, if we think about the business in two halves, the EHR business, it's an interesting one in the fact that virtually every hospital is on a technology platform now. There's no greenfield. Where we think we differentiate is a couple of things. One, again, we're the only one focused in this space. We've seen some consolidation over the last several years. There's really just a handful of players now. You've got Cerner and Epic that are very much focused at the top end of the market. They obviously are in our space, but I would not say that that's core to their growth strategy going forward. You have Meditech in the middle. That kind of above 100-400 beds is probably where they are. We're below that.
There is a handful of other names that I would put out there. If you look at our market, there are probably 500, 600, 700 hospitals, in my opinion, that when you take our focus on the rural community market, you take our ability to deliver the RCM service coupled with the technology we have, I think we can create a differentiating value for those hospitals versus just a fixed fee tech cost and having to figure out the other on the other side. That is where we continue to, why we have both businesses is we think it fits nicely for that market, but also sets up an ability to win.
Any update on, you talk a lot about automation and standardization and AI investments. Could you help us understand some of those initiatives and how do you expect them to impact your business?
Yeah. So again, I feel like a Charles Dickens book, Tale of Two Cities, right? On the RCM side, it really is about how do we go from, if you're keeping up with us, we have made an investment in moving our business or a bulk of our business offshore just to keep up with the inflation and just the ability to find the talent to do the job. The end goal is not to just move the labor from one place to another, but it's how do we continue to find ways to be more efficient in that delivery. It's not 10 in a different location. It's 7, then 6, then 5, people that we need to do the job.
It is how do we standardize our processes so that then we can apply robotic process automation to do some of these more binary functions that we think obviously we can be more efficient with. We can save some money. We can be more accurate. We can free up our staff to do the more impactful work on the larger claim follow-up and so forth and so on. On the EHR side of the business, I think it, again, it comes to how do we make the providers more efficient in their time as it relates to their regulatory requirements from a documentation standpoint so that either they get the information surfaced to them more succinctly and less work on the back end from a documentation standpoint. They are able to spend more time with their patients. They are able to spend more time at home. They're able to spend more time doing other things versus just pure provider burnout or fatigue. That obviously is another headline that everybody reads about.
Anybody feel free for asking questions along the way. We'd like this to be interactive. Russ?
[audio distortion]
Yeah. You want to go?
Yeah. It's a great question. We have, over the last year and a half, moved a lot of resources there. If your question is about training and all, we have been cautious about doing that because at the end, the fundamental principles which are guiding at customer satisfaction and delight have to be there. There is some overlap that happens on training from US to offshore at various levels. Obviously, as we are trying to put more improved processes on it, and as we go through the learning curve, the shrinkage in or the learning from the past catches up. We obviously, like anything, do have a double battle for some time as we transition, and we capture that in our forecast, if that was the question.
If I could switch to financial results. You have a very solid Q1. Could you help us understand how to think about the rest of the year in terms of guidance and financial results?
Sure. If you look at, I'll give you a little like 30 seconds of the past. Five Quarters, we have been putting a lot of focus in building the foundation, which means putting resources and processes on forecasting predictability of that. Then underlying and trying to find the drivers for the business, which is more leading indicators than lagging indicators. If you look at, if I take five Quarters, we have beaten or exceeded consensus in five out of five. Now, keeping our fingers crossed that we continue that path. For us, if you look at Q1, Q1, Q4, a couple of surprises in the sense of just nothing else but pure one or two million of timing, which is what I call the normal forecasting improvement. Overall health of the business from a financial perspective has improved significantly.
We were roughly what, 11%, 12% EBITDA in Q1, 2024. We had a 20% Q4, a 20%, but exclude one time at 17%, 18%. Significant improvement there. We have put a maniacal focus on cash. That has yielded, we have repaid $26 million of debt, reported leverage of over four to two and a half. What it gives us now is having the benefit of Q1. Yes, there were a couple of things which were stymie, but obviously, a couple of things were giving us the tailwind. What we have, we still believe our guidance is truthfully in the right place. I also am a little, I've been a little cautious there having gone through myself last year. We hired a new GM for RCM. While she's been three months, she has been phenomenal in understanding the nuances of the business.
The good part is there is no fundamental change in the strategy. The other part is what we are trying to figure out is the investments that we might need. We are a lot more remote and offshore right now. We said, hey, after understanding it, we might put a location there. Our guidance right now, we feel, is good. With the tailwind that we have got in, I just reduced it to the lower end, but in that sweet spot we feel, and let's see how the next couple of Quarters go. I would say the guidance in profitability and revenue growth is reflective of the investments we would make and the results we are seeing. Obviously, the economic uncertainty will play its own role, but to the best of our ability, we have captured.
I would say, sorry to add on there, just more from a color standpoint versus just the straight numbers. I think to me, the call out is, especially with Meredith, Vinay as well, is in years past, we would have continued to just try to figure this out with the team that we had in place. Case in point, go back to 2016 when we had our first acquisition. We did not have anybody on the team that had ever gone through an M&A at all. We were figuring this out on the fly. I was right at the heart of that. I got moved into the COO role and was in charge of integration and had never done that.
Not that that's wrong, but I think that it's a call out to say we made a huge investment in our acquisition at the end of 2023, made a huge bet on saying, we're going to move our workforce offshore without anybody that had really done that. We figured that out through last year that there was an opportunity for us to expand our bench or think about how talent and people, I'll steal one of Vinay's lines, people with scars on their backs of the experience of going through some of these things of how that will help our organization go. To me, it's a signal of we're not looking to continue to do things the same way, but making sure that every year, every minute that we've got the right team on the field to deliver the strategy that we've got.
Team and structure, is that infrastructure to be more acquisitive then?
You know, I think it's definitely one of the things that we'll look at as Vinay was talking about our financial healthiness returning. As we have more capital available to deploy, we'll go through the same capital allocation process that most good companies do. We'll have some hurdles that we'll look at internally to say, what's the best use of this? Is it a stock buyback? Is it investing in the company? Or is there an acquisition that's available? I would say if M&A becomes a thing that we're looking at, we'll be very targeted in that approach. It will not be something that's opportunistic. It'll be something that we have thought through. We've cut and measured. We've figured out the theme and the space that we want to go after and be super intentional in doing so.
Just longer term, when you think about the two businesses, EHR and RCM and the EBITDA margin expansion you've had, is there a goal or what's the right margin for the business longer term, two, three years from now?
We do not think of things as the end goal as much as we do in waypoints. I would say we talked about getting to 20% this year or by the end of this year, an exit of 20% going into 2026. I think we accomplished that. The next target is 25%. Once we capture 25%, then we will look at 30%. I think it is more about setting ourselves biteable steps that we can go get and incrementally improve as we go. At the heart of it, we want to make sure that our customer satisfaction is really the core to the success of what we are doing. If you get too caught up on that number, you can lose sight very short term to hit that versus making sure that we are taking care of our customers.
We had Secretary Azar here yesterday. You asked me for some feedback. I did not give you much. Rural hospitals, talk to us about the reimbursement environment there. Plays into my earlier question on the health. How does that impact your business?
Right now, I would say just they're no different than anybody else. They have no idea what's going to happen next. Everybody, you ask five people, you get five different opinions on what's going to happen tomorrow. Something could happen in the next five minutes. I think ultimately, the assumption is that the impact will be felt through the Medicaid, Medicare programs, what happens with the expansion of Medicaid, what happens potentially with the reimbursement amounts. I would argue, and we have channels where we're trying to help be a voice for this, that if the reimbursement for rural community hospitals is already lower and there's a reimbursement parity initiative, it's already lower. It costs less or not costs less. They get paid less to deliver the same service in a small town as they do in a large city.
I would hope from a common sense standpoint that we're already as low as it can go and that hopefully any parity adjustments that would be made would be bringing people, bringing the urban market closer to rural versus taking the rural farther down. Nobody knows how that's going to play out. What we're focused on is if that's an impact, how do we help these hospitals continue to figure out the right services to provide and the right cost structure to provide those services so that they can stay viable. I would also argue that as more pressure comes on their reimbursement, it creates more opportunity for us to be their solution from an RCM standpoint to stabilize that back end.
I go back to the business growth and kind of the product set. You've recently introduced some SaaS bundles. That's an acronym that investors like. Help us understand that introduction.
Yeah. So we, not like a lot of other, unlike a lot of other legacy companies, our model up until probably five years ago was a licensed model with support and maintenance. So the vast majority of our EHR customer base is in that support and maintenance model, which means that when we offer something new, they've got to pay to buy the new thing. Nobody buys anything anymore, right? To your point, everybody likes SaaS because it's a subscription. It's easy to predict, but it's also easier for the hospital because there's not this capital allocation that they've got to come up with. What we're looking to do is to convert all of our new business. I think this is the right stat. Over the last two, maybe two and a half years, virtually 100% of our new EHR customers are in the SaaS model.
Even if we've tried to sell them a license, nobody wants to buy it. Now it's about moving that existing customer base over. What we're doing is taking the new solutions that we have, like the DAX that we talked about, the partnership with Microsoft, and creating tiers of this SaaS model for them to opt into so that as we continue to develop, it's available for them. If they choose to opt up, they can. It really becomes about the belief from our customers that there's innovation that we're delivering for them to move into that model. Like I said, we just came out of our conference. One second. We just came out of the conference, and this is a brand new initiative. The interest was intriguing. Don't have all the data from it yet. It's something that we'll be able to kind of parse in the next coming weeks and hopefully provide some more insight on the earnings call. Sorry.
Do you have the number on the first one? [audtio distrotion]
[audtio distortion] Term. Now, we do have a going back to the differentiated model. We do couple our services with our technology. It's an offering we call Entrust. And while it's still in a SaaS model, instead of there being a fixed fee associated with that, it's all contingent. It puts the whole thing at risk for us with our customer, which I think really puts us in line. To go back to the issue or the challenge potentially with Medicare, Medicaid reimbursements, we're moving with them as that moves. Instead of $50,000 a month that we would just be getting steady state, if their business is impacted, so are we. It's in our best interest to continue to help them figure out how to keep delivering even when things get tricky.
Just to add on this piece, what we call the Entrust bundle, it's not a huge number from a revenue perspective. It's not like big changes will have big swings in our number. The shift of SaaS and the old support legacy, we still have, I would say, in the EHR base, 60% plus that has to transition. Whenever renewals come in. Behavior-wise, what we find is like with the Entrust and with the SaaS bundles, it becomes easier for our customers to get the value and spread their budgets part of it because they want it. It's not like an upfront cost part of it. I'll be honest for myself, learning through the customer conferences. They love this. They embrace it. They need it. They can pay for it, but it's not upfront. They can manage it through their process.
Yeah. Again, where we've seen the success there is when we've coupled the service with it. This is really the kickoff of just a focus on the software conversion. So we're very early innings of that. Yeah, yeah.
Just to end it, sorry, Russ, what do you think is the most underappreciated part of your business by investors over the next two or three years?
Wow. I think part of the story here is, and Vinay maybe could say this better than I can because he's been with the organization 15 months now. Recruiting him and getting to the other side of it, I asked him once I felt like he wasn't going to run for the hills, what is it that brought you here? There were a bunch of things that he said, but there was something to me that it's kind of become a personal challenge is we were labeled a bit as a lifestyle company before, and it's moving more towards that performance-driven, let's go take the opportunity that's there in front of us and making sure that we have a team prepared and willing and ready to go serve the market that we're in, but also understand the financial opportunity that's in front of us.
That's what we've really, I've put the vast majority of my focus in getting the right people at the table that can see the opportunity, build their teams underneath them, and then execute on that. We're down that road now, and it's fun to be a part of it. It's a challenge, but it's a lot of fun.
Thank you for being here. We're out of time. Hopefully you have some great meetings with some investors upstairs and War Eagle.
Yeah. I roll Tide.