Computer Programs and Systems, Inc.
Q2 2016 Earnings Call Transcript

Published: 5 Aug 2016

[Operator:]

Ladies and gentlemen, thank you for standing by. Welcome to the CPSI Second Quarter 2016 Earnings Conference Call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. As a reminder, this conference is being recorded today, Thursday, August 4, 2016. I will now turn the conference over to Boyd Douglas, President and Chief Executive Officer of CPSI. Please go ahead, sir.

[John Boyd Douglas:]

Thank you, George. Good afternoon, everyone and thank you for joining us. 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 expectation 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 risk, 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. Joining me on the call today will be Matt Chambless, our Chief Financial Officer; David Dye, Chief Growth Officer; and Chris Fowler, our Chief Operating Officer. At the conclusion of our prepared comments, we will be available to take any questions you may have. Clearly, we are not satisfied with this quarter's performance and with 2016 thus far. While the net new sales pipeline is as robust as it has been in a number of years, we are also seeing a longer sales process, which has delayed some signings. I will say that overall we view this extended decision process as a positive competitive development. Simply put, the more due diligent is a hospital to us, the better off we are. We want hospitals to look at us and our competitors hard, to look at the track record of delivering proved installations especially during transitional times, to look for a vendor who has the commitment to community healthcare as a long-term partner, not a stepping stone. If they will take the time and make the effort to fully vet out all the factors and not get caught up in industry buzz or high, we feel very good about our chances. In fact, while the deals are taking longer to close, our win rate remains at an all-time high which is currently greater than 15%. We continue to experience a high level of new sales activity, and we estimate within the next six months to 18 months, that over 150 community hospitals will be evaluating whether or not they have the right healthcare IT partner for the long-term. We could not be more positive about our position and prospects in this environment. Our add-on sales activity is particularly weak right now, and we attribute that to the changing market drivers currently underway. The MU3 mandatory deadlines do not take effect until 2018. In addition, many community hospitals and providers are trying to determine how they can be successful delivering healthcare in the new world of value-based reimbursement. We believe the uncertainty created by these factors is adversely affecting add-on sales to existing clients. We expect this trend to reverse itself as we get closer to MU3 deadlines and the new reimbursement rules that our clients are facing. We are particularly excited about the prospects for our data analytics and population health solutions that our clients will undoubtedly require as this new reimbursement model begins to take effect. There're some other aspects about why we strongly believe in our position for the future that I would like to highlight. In addition to the healthy pipeline and new system sales picking up with the five sales in Q2, we have a customer base of 4,500 healthcare organizations and providers that rely on one or more of our solutions today. And to dispel a myth propagated in the current competitive environment, we enjoy a client retention rate of 97% with our Evident base and 92% with our Healthland base. For Evident, this client retention rate tracks back historically for a number of years. Taking care of our current customers first has always been a primary priority for us, a statement that I've made many times over the years to our customers, our employees, and the investment community. We know the success of this approach is reflected in our current and historical numbers for Evident, and we are putting a great deal of effort in our Healthland clients, based on the same premise. We expect those efforts to translate into a retention rate for our Healthland base comparable to that of our Evident base in the near future. Our continued strong sales of our business management, consulting, and IT services with TruBridge is another good indication of our client retention and growth opportunity. In fact, $1.3 million of our TruBridge bookings was into our Healthland client base. Our community hospital EHR is the foundation that we will build upon, with new and complementary solutions. Our data analytics solution, currently in beta, our new chronic care management consulting service in pilot right now, and our Patient Portal, are the type of solutions that will work with our EHR to improve the health of communities we serve by focusing on preventive care. We have also aligned our pricing and packaging offerings to align with market demand and going forward, we expect more than 50% of our new EHR sales to be subscription-based or through our new interest offering. Considering that we are in a replacement market, this shift in purchasing behavior is not unexpected. This change in our business is leading to increased long-term profitability and recurring revenue growth. As we account for the many changes occurring not only in this market, but across our entire business, our $200 million annual run rate of recurring revenue puts us in a very stable position while we ride out the bumpiness of prolonged purchasing decisions and the temporary lull in the add-on market. With another quarter behind us following the acquisition, we're also pleased with the impact our combined and new leadership team is having across our entire business. Our product development efforts across all of the CPSI companies, led by John Peterson, who came from Healthland, is already making headway in improving our efficiencies, quality output, and ensuring we leverage the strengths of all of our technologies. The American HealthTech and Healthland client bases have also had more time now to get to know those of us who are new to them from CPSI. At the same time, they've seen commitment demonstrated and representation of their voice, with key executives staying on board with CPSI, including Julie Weber-Kramer, who continues as Senior VP of Client Experience for Healthland; and Teresa Chase, President of American HealthTech. Before I turn this over to Matt, I have a couple other items I want to address. I'm sure you all noticed the change to our longstanding dividend policy, implementing a conservative dividend strategy as compared to what many deemed an aggressive approach in our former dividend policy is a change that takes our current business, changing times and the variations to the balance sheet post-acquisition into consideration. As a much larger company now, we felt that it was the right time to adopt this new dividend strategy to ensure long-term success, allow us to stay focused on long-term results and not be distracted by possible fluctuations in cash flows and the corresponding impact on dividends. As stated in the press release, we are implementing a variable dividend structure. Moving forward, we will pay 70% of the trialing quarter non-GAAP EPS to our shareholders. This dividend strategy not only gives us the flexibility to pay-off debt more quickly, it also allows us to increase our investment in new and revenue generating services and product development. As I mentioned previously, we're making real headway in this area and an incremental investment will only help us to stay ahead of those market drivers coming with the value-based care and new growth opportunities including; integration across all of our platforms to support the needed coordination and continuity of care across the continuum, continued development and enhancement of our analytics solutions, development of new and enhanced post-acute solutions for American HealthTech to ensure we have the right solutions as more and more care is provided outside the hospital, and to expedite our efforts in the localization of our products for use (9

[Matt J. Chambless:]

Thanks, Boyd and good afternoon, everyone. As Boyd alluded to during the early portion of his prepared remarks, second quarter 2016 certainly didn't land where we had aimed. Although we're continuing to execute on our cost containment strategies and the Healthland integration efforts are yielding exactly the synergies we've been expecting, the story of this past quarter has been stubborn revenue growth, particularly within non-recurring system sales. Given our cost structure, the relative pluses and minuses on the top-line fall heavily to the bottom-line, resulting in revenues, adjusted EBITDA and non-GAAP EPS all falling below our expectations for the quarter. The confidence that we displayed in our expectations regarding cost on the last earnings call appear to have been well founded as our non-EBITDA costs have fallen directly in line with our expectations. Obviously, the revenue side of the earnings equation has been a different story as we're still acclimatizing to the current dynamics within the community and rural healthcare marketplace and shifting through the noise of the acquisition. Now on to some non-financial metrics. In the second quarter, we installed the Thrive financial and patient accounting system in five hospitals none of which were installed in a cloud environment. We installed our core clinical departmental applications at seven facilities, six hospitals implemented Thrive point-of-care, five installed our Thrive Emergency Department Information System and six customers went live with physician applications. Thrive Provider EHR was installed in 10 facilities. At this time, we expect to install Thrive financial and patient accounting systems in six new client facilities in the third quarter 2016. We anticipate five installations of our core clinical departmental applications, five installations of Thrive point-of-care, four installations of our Thrive Emergency Department Information System and seven installations of physician applications. Thrive Provider EHR is expected to be installed in 11 facilities. On the Healthland front, we had no new installs and three migrations from Classic to Centriq in the second quarter with one new net install and two migrations expected for the third quarter. Our employee head count as of June 30 was 1,960; a decrease of 36 from March 31, that's the direct result of the execution of our integration plan with respect to the Healthland acquisition. Now on to our systems and support revenues; revenue from the Healthland entities remained relatively flat sequentially coming in at $22.2 million in the second quarter versus $22.3 million for the first quarter. However, CPSI legacy operations saw $1.7 million or 6% sequential decline and a $2.4 million or 8% year-over-year decline in system sales and support, as the elongated sales process and weakness in add-on sales that Boyd alluded to have worked their way into our top-line. On the cost side, margins of 54% overall were sequentially in line with the first quarter, but does show a slight compression from the 55% in the second quarter of last year, primarily due to lower margins within the Healthland revenue streams, which had standalone margins of 51% during the second quarter. CPSI legacy margins were 56% during the second quarter, a slight decrease from the first quarter's 58% because of the interplay of the aforementioned revenue declines with our somewhat fixed cost structure. Year-over-year, CPSI legacy margins improved from 55% to 56%, as our efforts to manage head count over the trailing 12 months benefited our margins, muting the margin impact of the aforementioned year-over-year decline in CPSI legacy system sales and support revenues. Our business management, consulting and managed IT services revenues experienced a 3% sequential increase and a 10% increase year-over-year. The largest contributors to these gains continue to be our accounts receivable management services, which again experienced nice gains as service offering continues to expand upstream into hospitals, posing larger revenue opportunities than our historical averages, and medical coding services, as the added complexity within the coding environment since the effective date of ICD-10 has resulted in increased demand, as we've expected. Overall, margins for our business management, consulting and managed IT services remained sequentially flat at 45% but were down versus the 48% margin in the second quarter of 2015, as our efforts to expand personnel to accommodate demand were a slight drag on margins year-over-year. Our product development cost increased sequentially by $1 million, or 14%, nearly all of which is driven by the Healthland entities. Approximately half of that increase is related to the first quarter's consolidation, excluding the first week of 2016's Healthland activity due to the timing of the acquisition, with the remainder mostly due to head count reallocations, based on departmental shifts that have occurred during the integration process. Year-over-year product development costs are up $4.6 million; an increase that's wholly attributable to the incremental cost associated with the Healthland Technologies, with CPSI legacy spend on product development remaining relatively flat. Our sales and marketing costs were essentially flat from the first quarter and up $2 million or 42% year-over-year, with Healthland entities contributing $1.8 million to these increases. CPSI legacy operations saw a $200,000 or 3% year-over-year increase due to increased payroll and travel cost. Our general and administrative costs decreased $6.9 million sequentially, primarily as transaction-related costs have decreased from $7.6 million in the first quarter to $0.5 million in the second quarter. Year-over-year, costs have increased $4.3 million, with $3.7 million of that increase directly attributable to the Healthland entities, including the $0.5 million of transaction costs experienced during the quarter. The remainder of the year-over-year increase in general and administrative was caused by a $0.5 million increase in bad debt expense, due mostly to an expansion in our receivables base. The amortization of intangibles increased by $300,000 from the first quarter, primarily as we made upward adjustments to the estimated fair values of the Healthland-related intangible assets. With our purchase price allocation near finalized, we don't expect any further changes in these values going forward. As a reminder, we had no intangible assets in the second quarter of 2015 and as a result, no such amortization during the prior year period. Our interest expense increased $200,000 from the first quarter, mostly due to the debt related to the Healthland transaction being outstanding for the entirety of the second quarter, whereas the first quarter was missing a week of expense because of the timing of the acquisition on January 8. Again, with no debt prior to the Healthland acquisition, there was no such expense in the prior year. And finally on the tax front, the impact of non-deductable transaction facilitative cost continues to inject some oversized influence on our effective tax rate, which when combined with the slight change in our assumptions on effective state tax rates, resulted in an effective tax rate of 45.9% for the quarter. And with that, I'll now turn things over to David Dye, our Chief Growth Officer.

[David A. Dye:]

Thanks, Matt. As Boyd mentioned, we are extremely disappointed in our poor revenue performance in the first half of 2016. However, there's justification for optimism for solid growth to resume at the end of this year and into full year 2017. First, TruBridge bookings for the quarter established a new record high of $5.7 million. This included $1.3 million in TruBridge sales into the Healthland customer base, proving that the potential for revenue synergies of the combined companies is real. In addition, we expect TruBridge bookings to continue to grow in future periods as more of our new Thrive customers sign entrust agreements that include the utilization of TruBridge for their accounts receivable management. Accordingly, we look for upper-teen to 20% year-over-year TruBridge growth in 2017. We continue to be excited about the potential for growth via Rycan, as our demonstrations of the Rycan product to the Evident customer base have been well received. Rycan bookings were nearly $400,000 for the quarter and we expect double that figure in Rycan bookings for the third quarter 2016. AHT bookings are up 18% year-over-year thus far in 2016, at $5.3 million versus $4.5 million a year ago. As Boyd mentioned, we are investing significantly in additional AHT development resources as we believe the post-acute care EHR market is right for growth in years ahead. Sales of add-on software modules to the existing Evident and Healthland customer base continues to be difficult due to the saturations of our market. We do expect add-on sales to increase later this year and into 2017 primarily from license sales of our analytics dashboard solutions and in late 2017 and early 2018 as a result of pending Stage 3 MU requirements. On the new business front, in the second quarter we executed five new hospital EHR contracts, one for Centriq and four for Thrive. Thus far in Q3, we have signed four new Evident, Thrive, EHR agreements. At this time, we have installed or are currently slotted to install 25 new hospitals in 2016. The number of prospects in our pipeline remains at a five-year high and we are optimistic regarding our potential for new EHR client sales growth in 2017. I want to close by taking about the competitive environment in the community hospital EHR market. Our traditional competitors, the companies we have completed against for the last 30-plus years have largely abandoned the market. In addition, the new entrants to the market corresponding with the Meaningful Use boom have failed to remain competitive and either no longer exist, have been acquired or are losing their customers as Stage 3 MU approaches. Therefore, in new business competitive deals, we are occasionally seeing MEDITECH, MEDHOST, AllScripts, and Epic and more frequently competing against Cerner and Athena. In new business competitive deals this year, we are above 50% win rate head-to-head against those vendors and we have displaced Cerner once and Athena three times. While both vendors have displaced us as well, we have an above 97% retention rate among Evident clients and 92% among Healthland customers. We are working hard to improve the retention rate for the Healthland acute care base through our demonstrated investment in the Centriq product in favorable terms for Classic clients to migrate to either Centriq or Thrive. We are aware of Athena's claims of displacement of Evident, Healthland and other incumbent vendors in the community hospital market. Obviously, there is a discrepancy in their characterization of their success versus our comments on both new client wins and customer retention. The crux of the discrepancy is this. In each competitive situation that we have encountered with Athena, Athena is offering the hospital an agreement that includes a no cause 90-day out clause that can be exercised by either party at any time, along with no deposit or down payment due with contract execution. In fact, several hospitals have told us that Athena points to the existence of this 90-day out clause along with no deposit due in an effort to convince the hospital to sign, as there is no risk to the hospital, so they later decide not to implement. In essence, in our view, Athena is telling sign here, give it a shot, you have nothing to lose. By contrast, upon execution of Evident contract, the hospital makes a financial commitment to purchase and our commitment is to have the complete system live typically within 90 days to 120 days. In addition, while we have always viewed our EHR solution as cost competitive and our head-to-head deals with Athena, the price they are proposing for the initial term is typically less than our cost. With regard to client retention, we only know of one Evident customer that has discontinued live operations of outpatient accounting applications to run Athena software. By contrast, in the last two months, we have installed Thrive as a replacement financial and clinical solution at two Athena client facilities. Furthermore, by review of publicly available CMS MU attestation data of the original 23 RazorInsights client hospitals that we can locate in this CMS MU database that has attested to any stage of Meaningful Use, three are now on our system and fourth signed a contract with us this week. Three more have closed their doors and another three have either moved or are in the process of converting from Athena to competitive vendor replacements other than Evident. We acknowledge that Athena's entry into the acute care EHR marketplace could create a formidable challenge to our company, along with our competitors now and in the years ahead and as we have always done over the 35-year plus existence of our company, we welcome the competition. George, if you could please open the call for questions.

[Operator:]

Certainly. And our first question comes from the line of Mohan Naidu with the Oppenheimer. Please go ahead.

[Mohan Naidu:]

All right. Thank you so much for taking my questions. Dave, on the comments that you just made around Athena's no commitment deals (28

[David A. Dye:]

Mohan, no. That's a great question. No, I can't say. We have – I think there's an understanding that our system exists now and what we're selling is something that we have in the field in hundreds and hundreds of hospitals. And essentially, our take is that what they're selling is they signed here and you get a installation – you get in line for an installation shot – slot in the future, should you decide that at that point you do want to implement based on what you're seeing with our successor like thereof with the ones we've installed prior to that. So I think, the answer to that question is no.

[Mohan Naidu:]

Okay. And maybe – because you're seeing more subscription deals, can you help us understand the pricing or the revenue submission comparison between license model versus the subscription model?

[David A. Dye:]

Yeah. The majority of our subscription models now, Mohan, were proposing our entrust agreement, which is a percentage of net revenue. In another words, a percentage of the cash that we collect. And with that, that's inclusive with what the hospital pays us with that percentage is inclusive of the system itself. And payment to us for those services that we provide via both Evident and TruBridge. So that's the most common subscription agreement that we're seeing. The licensed agreement typically is a hospital that wants to – at this point they don't want to – they want to keep their business office in-house and they're just interested in the software that we provide.

[Mohan Naidu:]

Okay. Maybe one last question, Matt. On the revenue miss in Q2, can you help us understand what portion of the miss came from weaker add-on sales versus weaker new software installations are like Healthland in the quarter?

[Matt J. Chambless:]

For the most part Mohan, the revenue miss in the second quarter versus what our expectations were showing were primarily within the add-on sales. There was a slight miss on the top move (30

[Mohan Naidu:]

Okay. Maybe I'll sneak one last one in. Are you guys still sticking with your targets that around the revenue from Healthland for the full year? I thought you just had about $120 million target from Healthland contribution?

[John Boyd Douglas:]

I think we made it clear. We're kind of backing off on guidance altogether, and that would include getting kind of disaggregated on the revenue lines. I mean, I would say that Healthland's performance during the second quarter was not materially different from what we thought it would be.

[Mohan Naidu:]

Okay. Thank you so much for taking my questions.

[David A. Dye:]

Thank you, Mohan.

[Operator:]

Our next question comes from the line of Jamie Stockton with Wells Fargo. Please go ahead.

[Jamie J. Stockton:]

Hi. Good evening. Thanks for taking my questions. I guess maybe the first one. Boyd, I didn't catch the numbers around the number of hospitals. I think you may have said like 150 that you think will make decisions in some period of time. Could you just repeat that for me, please?

[John Boyd Douglas:]

Yeah. I said within the next six months to 18 months, and there was 150 hospitals that are not on a good long-term solution, that either they don't have confidence – usually, one of three things is that they don't have confidence that it's going to – the system they're on, or systems they're on, which is usually the case, we'll be able to get them to Meaningful Use 3. Or, they're not going to be able to help them with the new value based reimbursement methodologies that are coming; or thirdly, and this is probably all equal, but probably most importantly is physician satisfaction, end user satisfaction. Frankly, they put in systems that weren't long-term good solutions. Yes, it was good enough to get them Meaningful Use money, but the physicians and other caregivers aren't particularly happy with the functionality.

[Jamie J. Stockton:]

Okay. That's great. Well, you answered my follow-up on that one. As far as the retention rate that you guys have quoted, what is the period of time you're looking at the 97% for Evident and the 92% for Healthland?

[David A. Dye:]

At the beginning of 2015, Jamie.

[Jamie J. Stockton:]

Okay. And then, I understand you're tracking guidance given the volatility in the system sales right now. Are there any kind of long-term goals that you would like us to keep in mind, that you guys have still, as far as growth or profitability are concerned?

[David A. Dye:]

Yeah. Jamie, I mean our goal, long-term goal, will be to grow the company 10%. That's been the case for some time. Obviously, we have not achieved that over the last couple of years and that's what we want to get back to. Obviously inclusive in that, and inclusive in shareholder value, is going to be, as we grow profitabilities, generating cash and paying the dividend, but the goal from a top-line perspective is to grow the overall company 10% long-term.

[Jamie J. Stockton:]

Okay. That's great. And maybe just one more. Matt, I thought that there was, I think, $1.7 million or so of deferred revenue adjustment during the quarter. Can you help us understand how we should be bucketing that, between the system sales and TruBridge segments?

[Matt J. Chambless:]

And so Jamie, that deferred revenue adjustment, so that's all falling out of the purchase price accounting and the fair value adjustment that we had to take on the significant deferred revenue balances that came over in the Healthland acquisition. So none of those are related to any TruBridge revenues. They all fall into the system sales and support line.

[Jamie J. Stockton:]

Okay. All right. All right. That's great. Yeah, that makes perfect sense. Okay, thank you.

[John Boyd Douglas:]

Thanks, Jamie.

[Operator:]

Our next question comes from the line of Donald Hooker with KeyBanc Capital Markets. Please go ahead.

[Donald H. Hooker:]

Hi. Good afternoon. So I missed, did you – there was a range of numbers you guys provided, the bookings from Healthland, did you mention that?

[John Boyd Douglas:]

The TruBridge number that we gave, that was a result of – from Healthland. The booking – TruBridge bookings that came from the Healthland base in the quarter was $1.3 million.

[Donald H. Hooker:]

Got you. I'm just trying to think; the total – it looks like the total bookings for the quarter was $24.2 million? So, I was just curious like if, what portion of that – if I think about it, what number in there is Healthland?

[John Boyd Douglas:]

Yeah. Donald, hi. This is Matt. Healthland came in at $2.9 million worth of bookings for system sales and support, which was a pretty healthy jump from the first quarter, mostly because we had a completely new – what we would term, a net new install win during the second quarter for Healthland.

[Donald H. Hooker:]

Got you. Okay. And then, I guess you guys mentioned seeing a little bit more Cerner in your stakes which is – I would think of them as tending to target some of the larger institutions, or as you guys kind of have a tailored solution for smaller hospitals? I mean is there a – when we think about competition with Cerner and even Epic, at what point they sort of stayed off as you move down the sort of curb on hospital in terms of size. I mean, do they tend to – you see them more 100-bed plus or you've seen them more down in the 50-bed area?

[David A. Dye:]

Yeah. With regard to Epic first, which is secondary part of your question, but we rarely see them at all unless it's involving a smaller hospital potentially tying in with a larger hospital that's geographically nearby. And that happens when we compete against that scenario a handful of times per year. At this point, we are seeing Cerner competitively in any size hospital. With their CommunityWorks product and in terms of some pricing reductions that, in our view, they've done recently, they've become – although that's still significantly more than us, they've become more price competitive in smaller hospitals and we are seeing that they've increased their sales effort in all size hospitals including the smallest of hospitals.

[Donald H. Hooker:]

Got you. Okay. And then maybe one last one from me. I think you guys have emphasized well that for the post-acute care market is kind of an interesting area for you guys for expansion with Healthland and some of the cross-sell opportunities. Maybe my last question, can you help us think about how nursing homes think about, IT systems? I guess there's not a stimulus program there. I guess there're other factors that drive them to wanting to adapt (37

[David A. Dye:]

Yeah. I'd say, right. We don't have a lot of historical knowledge about this, but we're gaining it very quickly as a result now having AHT. And the bundled payment system that we're moving to in healthcare in general, it is certainly at the forefront of the minds of the post-acute care operators and having the both the clinical and the financial and patient accounting systems to track that is at the forefront of their mind right now. So I would say, from what we've seen, that is largely the number one driver for those that are in the market at this point.

[Donald H. Hooker:]

Okay. Thank you very much.

[David A. Dye:]

Thanks, Donald.

[Operator:]

Our next question comes from the line of Sean McBride with Robert W. Baird. Please go ahead.

[Sean P. McBride:]

Hey, guys. Thanks for taking the questions. I'm on for Matt Gillmor. Just a quick numbers question. Can you give us the recurring and non-recurring backlog numbers?

[Matt J. Chambless:]

Yeah. So recurring backlog as of 6/30 is $210.8 million, non-recurring, $15.5 million.

[Sean P. McBride:]

Okay. Thanks. And then, one other question. The last couple of quarters you've been pointing towards the Canadian market. How have you seen that market relative to the U.S. market in your decision making process?

[John Boyd Douglas:]

We continue to be extremely pleased with our positioning there. Actually, in all of the English speaking provinces. It moves slowly. Since we've been involved in the market now for aggressively at least for the last year-and-a-half, and a little bit before then less aggressively, but there really have been no decisions made up there. But there are number – without getting into any details, there're a number of individual facility decisions that we think will occur within the next 12 months and there's a couple of provinces that are looking at systems as a whole as well that we are involved in. So it's not something that we think we're going to see a change in necessarily in the next quarter or two, but certainly in the next 12 months, we'll have a good idea of where we stand in Canada and all the work that we've been doing will come to fruition.

[Sean P. McBride:]

Great. Thanks.

[John Boyd Douglas:]

You bet. Thank you, Sean.

[Operator:]

Our next question comes from the line of Andrew Cooper with Raymond James and Associates. Please go ahead.

[Andrew Cooper:]

Hey, guys. Actually I was going to ask on a few that have already been asked. But I guess in regards to your last comment on the Canadian market, when you said provinces looking at systems as a whole. Could you just go into a little bit more color on what exactly you mean by that?

[David A. Dye:]

Not a whole lot. There's a couple English speaking provinces up there that are – their health authorities are evaluating what they have in house and what their long-term strategy is, whether that's to have one system for the entire province or to have different systems for the various regions of the province depending on the size of the facilities and so forth. So, we're involved in a lot of those discussions.

[Andrew Cooper:]

Great. Thanks.

[David A. Dye:]

You bet.

[Operator:]

There are no further questions at this time. Pardon me, we have one question from Tessa Romero with Leerink Partners. Please go ahead.

[Tessa Romero:]

Hi there. Hi. I'm in today on David Larsen's behalf. Thank you so much taking my question. I know you mentioned value-based care and sort of how you are excited about some of top health solutions that CPSI is working on. Could you provide us a little bit more color on that. What you're working on and sort of how you're tracking in the space overall?

[Tessa Romero:]

Hey, Tessa. This is Chris Fowler. We press released a partnership with Caravan Health several weeks ago, which is our pilot entry into the population health and trying to help our providers that community hospitals understand the value-based reimbursement and what their opportunities are there. So we're excited to see how that progresses and, yeah, that's our first step.

[Tessa Romero:]

That's great. I will definitely look into that. Thank you so much.

[Operator:]

There are no other questions at this time.

[John Boyd Douglas:]

Okay. Great. This is Boyd. I just want to thank everyone for their time today. I appreciate your interest in CPSI and thanks a lot. And have a great weekend.

[Operator:]

Ladies and gentlemen, that does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your lines.