Computer Programs and Systems, Inc. (NASDAQ:CPSI) Q2 2023 Earnings Call Transcript

George Hill: Well, you clarified my first question on the product, which is I knew what it was. I guess what was the – what’s the financial impact for the year? So how do we think about, what is the – because you guys kept the revenue guidance the same, but you also indicated a slowing revenue recognition from the nature of this contract. So how do we think about the headwinds and the puts and takes on the top line? And then I have a couple more questions.

Matt Chambless: Yes. So the puts and takes on the top line, while we did see this headwind stir up with regards to these couple of True Code contracts. We have had some tailwinds on the top line. They’re going to help offset some of the overall top line impact from the year. And I think Chris mentioned it earlier, one of the positive surprises I say – I would say for this year has been that the EHR retention of that customer base, while we expected it to be strong coming into the year. It’s outpaced even our expectations, and this is probably the second or third straight year where that business unit’s been stronger and more stable than what we had even expected. So that’s kind of what’s offsetting that and resulting in a top line guidance that’s kind of unchanged right now.

George Hill: Okay. That’s helpful. And then if I think about the SG&A in the quarter came in about $7 million higher than what I had modeled, and that kind of that’s pretty close to the EBITDA guide down for the year. I guess, so should we look at Q2 as kind of the high watermark from a discretionary expense perspective as we go through the balance of the year? You guys kind of indicated the cost cutting initiatives that that should kind of like lead for that number to go through with the employee retirement programs and stuff like that?

Matt Chambless: Yes. So if you’re looking at SG&A, there are a couple of items that are making that really pop in the second quarter. First of all, we do have some seasonal costs in there with our National Client Conference that takes place in May of every year. And as much as we’d love to be able to smooth that cost out throughout the year, the costs have to be booked when they’re actually incurred and that all happens in the second quarter. And I think that was for somewhere between $1.2 and $1.3 million in SG&A. And frankly, the rest of the SG&A cost increase in the second quarter was really all EBITDA neutral stuff from non-recurring charges partly related to the severance event that Chris mentioned on the voluntarily retirement program.

George Hill: Okay. And then my last one will be given what you guys discussed as it relates to inflation, and this kind of piggybacks on Jeff’s last line of questions a little bit is, how does this change how you guys were thinking about the longer-term guidance of the reaccelerating the revenue growth profile and the earnings profile, given that it looks like we’re going to be operating from a higher cost basis as we go through 2024 – 2023, probably into 2024 and 2025?

Chris Fowler: Yes. I’ll start there and then Matt can fill in any blanks that, that I leave. What I would say is that, we have taken a really hard look at the second half of this year and really, really sharpened the pencil to make sure that we are fine tuned on where we’re going to come in. We continue to do work on what we have understood or what we have seen happen through the first half of this year, and what we know will happen in the back half and what impact that’ll have on next year. So I don’t think that we’re ready to give any guidance into 2024, but that’s something that we’ll be doing in the next call or two, but know that we understand that that’s something that we’ve got to get out there. I will say, as we look at it, big picture, and I’m not going to put a date on this, we still feel like the levers that we have in front of us as it relates to the offshore initiative and what we had talked about the first of this year, the offshore initiative, our opportunities with automation that we still see a path to get to those 20%-plus EBITDA margin grows.