TruBridge (TBRG) Stephens 26th Annual Investment Conference | NASH2024 summary

Market and demand trends

• Labor shortages remain a top challenge for healthcare customers, especially in rural and RCM sectors, driving demand for outsourced solutions.

• Regulatory changes, such as Medicare Advantage shifts and Medicaid funding risks, are seen as opportunities to help customers operate more efficiently.

• New interoperability rules (HTI-1, HTI-2) are expected to create opportunities as smaller vendors struggle to comply, opening market share for compliant providers.

• Demand is growing among larger hospitals (100–400 beds) for RCM-only services, with initial projects often leading to broader, recurring engagements.

• Consistent $20 million quarterly bookings reflect improved sales execution, diversified deal pipelines, and increased demand for bundled EHR and RCM offerings.

Revenue and earnings quality

• Recurring revenue is projected at 96%, with 40% of revenue now tied to percentage of collections, aligning client and provider success.

• Double-digit growth in core CBO offerings is driven by faster conversion of bookings and focus on customer retention.

• EHR segment has been a drag due to divestitures and product sunsets, but stabilization and new product partnerships are expected to support low single-digit growth.

• Mid to high single-digit revenue growth is targeted for 2025, supported by strong bookings, reduced attrition, and operational improvements.

• Quality of earnings is being enhanced by reducing capitalized software expenses, focusing on ROI-driven investments, and improving EBITDA-to-cash flow conversion.

Operational efficiency and margin expansion

• Offshoring to Viewgol is progressing, with 30% of business converted and another 30% targeted by end of 2025, aiming for high single-digit million-dollar savings.

• Customer satisfaction is prioritized alongside cost savings, with stabilization periods monitored post-transition to ensure service quality.

• EBITDA margin is expected to rise from 16.5% to at least 20% by late 2025, driven by offshoring, revenue growth, operating leverage, and cost discipline.

• CapEx as a percent of revenue is being reduced, with a near-term goal of 4.5%, and investments are scrutinized for near-term ROI.

• Free cash flow is improving due to lower severance costs, tighter working capital management, and a commitment to reducing leverage.