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Computer Programs and Systems, Inc. (CPSI) Q4 2020 Earnings Call Transcript

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Computer Programs and Systems, Inc. (NASDAQ: CPSI)
Q4 2020 Earnings Call
Feb 9, 2021, 4:30 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Greetings and welcome to the CPSI Q4 2020 Earnings Conference Call. [Operator Instructions].

I would now like to turn the conference over to your host, Drew Anderson.

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Drew Anderson -- Investor Relations Contact

Thank you. Good afternoon and welcome to the CPSI fourth quarter 2020 earnings conference call.

During this 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 Douglas -- President and Chief Executive Officer

Thanks Drew. Good afternoon everyone and thank you for joining us. After my comments, I will hand the call over to Matt Chambless, our Chief Financial Officer, who will provide additional color regarding our fourth quarter and year-end numbers and discuss our expectations for 2021 and beyond. At the conclusion of our prepared comments, the two of us, along with David Dye, our Chief Growth Officer; and Chris Fowler, our Chief Operating Officer, will be available to take your questions.

Before I begin, I would like to acknowledge our sincere appreciation for the never-ending efforts of our hospital, nursing home, and clinic customers, as they continue to aggressively and tirelessly Before I begin, I would like to acknowledge our sincere appreciation for the never-ending efforts of our hospital, nursing home and clinic customers as they continue to aggressively and tirelessly fight the pandemic in their communities. In recent check-in calls with hospital leadership, I have heard descriptions of overflow ICU beds and hallways, along with nursing shortages and overworked clinicians, all while simultaneously executing on vaccination rollout efforts for essential workers and elderly community residents. We are beyond proud to be partnered with these heroic healthcare providers and their communities.

We end 2020 with pride in our execution, during a challenging year, and enter the new year looking forward to what the future holds in 2021 and beyond. To that end, this afternoon, I'm going to spend some time framing up what's next for CPSI and our strengthened focus to increase total shareholder return.

Although it may sound cliche, we have taken the Never Waste A Crisis mantra to heart, using disruption of the past year as an opportunity to reassess our company growth strategy. During the past several months, we have partnered with a premium consulting firm to review our business and growth opportunities, and to assist us in identifying the best path, to increase value for our shareholders, while also safeguarding the interest of other critical stakeholders, such as our clients and employees.

The purpose of this assessment was to more clearly define a strategy, that would drive long-term sustainability and stewardship, gross CPSI's footprint and maximize our success in a post-COVID world. Our assessment confirmed and identified several compelling opportunities to grow our core business, while investing in new technologies and improving overall profitability. The outcome is an aggressive, yet attainable plan that is intended to provide significant shareholder returns over the next three to four years, culminating in an end goal of $80 million in adjusted EBITDA in 2024.

There are three equally important components to this plan that we will pursue simultaneously, core growth, margin optimization and tangible upside growth through innovation.

The core growth component of our plan is concentrated around our current markets, and along with margin optimization, will help drive our targeted 2024 adjusted EBITDA. The initiatives for core growth utilize our 41 years of success in the healthcare market and our most valuable asset, the client base that we have acquired along the way. The core growth component includes three initiatives intended to drive higher demand, penetration and share, in our current fields of play.

First, we will continue expanding our established sales relationships, by cross-selling TruBridge services into our substantial, acute and post-acute EHR basis. While this initiative is not new to CPSI, we look to improve our execution on this opportunity, turning the page from good to great. With a total market opportunity of $400 million in annual revenues, we have confidence in a target of $60 million in incremental annual TruBridge revenues, through cross-sell efforts by the end of 2024.

Second, an estimated 85% of our hospitals are still managing their RCM operations in-house, with hospitals facing increasing financial pressure due to fluctuating patient volumes, increasing self-pay accounts, and the impact of COVID-19, we expect to see a continued shift to outsourcing, and we remain confident in our ability to continue expanding TruBridge market share of those providers that use competitor EHRs, including upmarket, into [Phonetic] larger hospitals and health systems.

With the total addressable market outside of more than $1 billion in annual revenues, our target of $25 million in incremental annual TruBridge revenues from outside of our EHR base by the end of 2024 is attainable. Total 2020 TruBridge bookings from this segment totaled $10.5 million, up 33% over 2019, setting us on a solid course to continue to execute and achieve this goal.

The third initiative of our core growth plan is to maintain a healthy retention rate across our EHR base and pursue conservative growth of new EHR clients, as they are critical to driving cross-sales with TruBridge. Our relationship-driven approach, along with the continued delivery of a single solution, gives us confidence that we will maintain or improve on our current retention levels, with our acute EHR segment closing 2020 with a 95% retention rate. Based on historical win rates and continued confidence that the recent abatement of pricing pressures will support average selling prices, consistent with what we experienced in 2020, we see a clear line of sight, to maintain our consistent track record of net new EHR client wins.

Supporting these core growth efforts, we will routinely seek, find and execute on initiatives that modernize our business, increase our efficiency and resulting in cost savings that we can then use to invest in additional growth. Our operational initiatives over the next three years will seek to optimize margins, further supporting our 2024 adjusted EBITDA target of $80 million, as we execute toward targeted cost savings of $25 million by 2024.

The first asset in our margin optimization efforts, is an organizational realignment, intended to help create a more nimble and dynamic organization, that will spur faster decision-making, by flattening our organization, to bring our leadership closer to our customers and frontline employees. The 8-K that we filed today reflects our efforts to date, with this optimization initiative, with 1% of our employee base impacted by today's position eliminations. While these were certainly difficult decisions, they were essential to bolstering the transformation necessary for CPSI to reach our long-term goals.

All told, the actions announced in today's 8-K filing, will result in annualized cost savings of $3.9 million, with a $3.3 million impact to 2021's financial results. By realigning our organization, we have the framework in place to begin improving how we work. We are establishing efficiencies by defining and standardizing processes and activities by function, aligning incentives to ensure productivity and desired outcomes, and reassessing vendor partnerships that may present expanded automation and offshoring opportunities in the future. Successful execution on the core growth and margin optimization components of our strategy, provides us with a clear roadmap to achieving our targeted 2024 adjusted EBITDA of $80 million.

Running parallel to these components will be the upside future growth component of our plan, representing new adjacent opportunities. These growth levers are dependent on our further analysis and would lead to additional uplift to our core growth and margin optimization efforts. The market drivers that fuel the pursuit of new innovation, include an increased appetite for patient engagement, industry insights, reporting and analytics technology.

As one example, the traction of new business and partnerships that have helped our expansion into Canada, other English-speaking countries and most recently the Middle East, creates a window of opportunity for continued investment in Get Real Health and new and expanded patient experience solutions.

In order to hold ourselves accountable along the way, support the governance of our efforts, and to drive long-term transformation, we are excited to announce the formation of a Transformation Management Office within CPSI. This team will help orchestrate our plan, ensure companywide transparency and visibility to our progress, along with any associated risk, drive change and ensure we take time to celebrate our successes along the way. Of course, we will also share our progress against key KPIs with you quarterly, so that you too can hold us accountable for our goals.

Specifically, we will provide metrics regarding TruBridge cross-sell bookings, upmarket wins comprised of TruBridge net new bookings, EHR customer retention, as we strive to protect and expand our base, and margin expansion, as we execute our cost optimization efforts. Our commitment to the future growth of CPSI that will ensure continued long-term success has been reenergized, while the core growth plan has not drastically changed, we are emboldened by this go-forward strategy, that crystallizes the promising expansion of opportunity within our wheelhouse, more clearly defines the path to capturing growth and identifies key adjacencies that have the potential to fuel even more outsized shareholder returns through 2024 and beyond.

To achieve this vision will require true business transformation, including the rapid evolution of how we service our customers and accelerating the culture of innovation, necessary to thrive in the dynamic markets that we serve. We are excited to embark on this journey and look forward to bringing you along, as we report our progress going forward.

And now, I will turn the call over to Matt for a deeper look at the financials.

Matt Chambless -- Chief Financial Officer

Thanks Boyd and good afternoon, everyone. We're pleased with the way we concluded the challenging year that was 2020, recognizing that the lingering impact of the pandemic and the continued shift toward a higher mix of SaaS arrangements, had a muting effect on the past quarter's results. On today's call, I'll provide a high level overview of this quarter, including some additional details on bookings performance, a brief walk through our fourth quarter financial results, and our outlook for 2021 and beyond.

Starting with bookings, total bookings for the quarter of $21.2 million were flat sequentially, and marked a 22% decrease from a tough comp against the fourth quarter of 2019. System sales and support bookings were down 19% sequentially, due to a slow pace for net new acute care EHR decisions, driving acute care EHR bookings down $1.5 million or 13%.

Our post-acute segment saw bookings normalize somewhat, after posting its highest bookings quarter of the past four years during the third quarter, with the fourth quarter showing a $1.1 million or 50% sequential decline. Compared to the fourth quarter of 2019, system sales and support bookings were down $6.5 million or 37%, as the fourth quarter of 2019 saw bookings that were at near-record levels, adjusted for MU3, making for a particularly tough comp.

Looking back at full year bookings, 2020's total system sales and support bookings of $48.8 million marked a 7% annual decline, with declining bookings for acute care EHR add-on sales masking what we see as promising trends for 2021 and beyond. Particularly, net new acute care EHR bookings increased 4%, despite the headwinds posed by the pandemic. While our post-acute segment had its best bookings year since 2016, showing a 25% improvement over 2019's annual result.

We see both of these trends, the improvement in net new acute care EHR bookings, and the gaining momentum for our post-acute segment, as tangible proof that our markets recognize and appreciate the investments we've made in our EHR products, serving to protect our EHR customer base that is so vital to our core growth initiatives that Boyd touched on earlier.

Including add-on sales, subscription arrangements made up 29% of the fourth quarter's total EHR bookings, as we continue to execute on our strategy to drive long-term recurring revenues, by emphasizing our SaaS offerings throughout the sales process, with half of our net new acute care EHR contract signings during the quarter, and 57% of contract signings during all of 2020, being under a SaaS arrangement.

Moving over to TruBridge; bookings of $10.1 million were up $2.3 million or 30% sequentially, as non-GRH cross-sell bookings increased $700,000 or 16%, while bookings from outside our EHR base increased $700,000 or 23%, and GRH bookings of $1.4 million or three times the related bookings in the third quarter. Compared to the fourth quarter of 2019, TruBridge bookings increased $400,000 or 4%, as the $1.2 million or 47% increase in bookings from outside our EHR base, more than offset slight declines in bookings for GRH and cross-sell opportunities.

Looking back at full year bookings, 2020's TruBridge bookings of $33.2 million marked the highest in company history, surpassing 2019 by 22%, and eclipsing the previous record set in 2017 by 6%. Cross-sell bookings finished the year at $20.3 million, a 19% increase over 2019 amount, while bookings from outside our EHR base finished the year at $10.5 million, a 33% increase.

As Boyd mentioned earlier, driving TruBridge revenue growth through both cross-sell efforts and increasing our footprint outside of our EHR base, are both critical components of our overall growth strategy, and this impressive full year growth has CPSI as confident as ever, about our ability to execute on our stated goals.

Turning to the financial results for the period; decreased implementation volumes and shifting license mix, created headwinds for non-recurring revenues that outpaced TruBridge revenue gains, resulting in a $1.5 million or 2% sequential decrease in revenues and a $3.8 million or 5% decrease in revenues from the fourth quarter of 2019.

On the profitability front, seasonal cost dynamics outpaced sequential revenue declines, resulting in a $500,000 or 4% sequential improvement in adjusted EBITDA, while an increase in the fourth quarter's effective tax rate was the primary driver behind a $1.6 million or 17% sequential decrease in non-GAAP net income.

Compared to the fourth quarter of 2019, the aforementioned decrease in non-recurring revenues drove a $2.5 million or 17% decrease in adjusted EBITDA and a $2.9 million or 27% decrease in non-GAAP EPS. On the margin front, the fourth quarter saw an adjusted EBITDA margin of 18.4%, an improvement over the third quarter's 17.3%, but behind the fourth quarter of 2019's 21% margin.

For the full year, the pandemic put pressure on non-strategic IT purchases by our hospital customers, creating headwinds for our non-recurring add-on sales to existing EHR customers, that were exacerbated by the work down of MU3 opportunities in prior years. The end result was a $12.4 million decrease in system sales and support revenues, that eclipsed modest revenue growth for TruBridge, which itself was suppressed by the pandemic's impact on hospital-patient volumes, resulting in total revenues decreasing $10.1 million or 4% from 2019. This decrease in annual revenues translated into lower profitability, with adjusted EBITDA decreasing $6.6 million or 13% and non-GAAP net income decreasing $3.8 million or 11%.

From a margin perspective, adjusted EBITDA margins decreased from 18.2% in 2019 to 16.4% during 2020. Despite considerable margin improvement in the second half of 2020, the weight of the pandemic's impact on our profitability could not be fully overcome, particularly in the second quarter, where adjusted EBITDA margins came in at 12.4%.

Recurring revenues made up roughly 88% of total revenues during the quarter, increasing 3% sequentially on the heels of continued improvement in patient volumes and up 2% compared to the fourth quarter of 2019. For the full year, recurring revenues made up roughly 85% of revenues compared to 83% during 2019, with total recurring revenues decreasing slightly by $2.6 million or around 1%.

Looking deeper at our segments, TruBridge revenues increased 8% sequentially on continued improvement in patient volumes at our client hospitals, with the related margins improving to a record 51% from 45.3% a quarter ago. Revenues increased $1 million or 3.5% from the fourth quarter of 2019, as the revenue contributions from new TruBridge client wins over the trailing 12 months were partly offset by lumpiness in GRH revenues, and the pandemic's lingering impact on patient volumes. Although patient volumes have continued to improve, we exited 2020 with patient volumes roughly 10% below pre-COVID levels. Despite the pandemic's pressure on patient volumes, TruBridge revenues excluding GRH increased nearly 7% compared to the fourth quarter of 2019. TruBridge gross margins improved 230 basis points from the fourth quarter of 2019's 48.7% margin. As a reminder, we didn't institute any COVID-induced headcount reductions during 2020, making the fourth quarter's margin expansion all the more impressive.

Next, system sales and support revenues decreased $3.7 million or 9% sequentially, as lower installation volume and 100% SaaS mix for net new acute care installations during the fourth quarter, drove a $4.5 million or 50% reduction in non-recurring revenues from our acute care segment. Similarly, non-recurring revenues from our acute care segment were down $4 million or 47% from the fourth quarter of 2019, driving the total $4.8 million or 12% decrease in total system sales and support revenues. These sequential and year-over-year overall revenue decreases, mask a couple of promising trends that are key to our long-term growth strategy.

First, acute care SaaS revenues increased 10% sequentially and 36% from the fourth quarter of 2019, a testament to our focus on prioritizing our SaaS offerings in new customer conversations, and successful attempts to convert existing customers to SaaS. For the full year, acute care SaaS revenues were just shy of $10 million, a 69% increase from 2019 amounts.

Second, our post-acute segment posted a modest 2.2% sequential increase in recurring revenues, its second consecutive quarter of recurring revenue growth, following a period in which 11 of the previous 12 quarters posted sequential declines. We view this as evidence, that our efforts to revitalize our post-acute offerings, are being recognized and appreciated by the post-acute market.

From a margin standpoint, decreased non-recurring revenues caused system sales and support gross margins to decrease to 52.4% during the fourth quarter compared to 56.4% in the third quarter of 2020, and 53.9% for the fourth quarter of 2019. We currently anticipate seven new client facilities going live with our Thrive solution in the first quarter of 2021, with four expected to go live in a cloud or SaaS environment.

Moving on to operating expenses; product development costs were relatively flat sequentially, but were down $900,000 or 10% from the fourth quarter of 2019, due to the capitalization of software development costs. As a reminder, the capitalization of software development costs was 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, a multi-year endeavor that we've discussed on previous calls.

Sales and marketing costs were down $700,000 or 11% sequentially, as the decrease in non-recurring system sales and support revenues drove commission expenses lower. Costs were down $1 million or 14% from the fourth quarter of 2019, due to decreased travel costs and lower spend on general marketing programs.

General and administrative costs increased $400,000 or 4% sequentially, mostly due to increased non-recurring costs associated with our strategic transformation project that Boyd discussed. Costs increased $2.9 million or 32% from the fourth quarter of 2019, driven by transformation project costs and increased levels of bad debt.

Closing out the income statement; our effective tax rate during the quarter was 43% compared to 12% during the fourth quarter of 2019, due mostly to year-end tax true-ups, including provision to return adjustments and lowered expectations on qualified research expenditures eligible for the R&D tax credit.

For 2021, we expect an effective tax rate of 18% to 19% normalized for discrete items. From a cash flow standpoint, operating cash flows of $16.2 million were nearly double that of the third quarter, but $1.9 million or 11% below the fourth quarter of 2019's record $18.1 million. The significant sequential improvement in cash flows is mostly timing related, coupled with the work down of existing financing receivables balances.

DSOs were relatively flat sequentially at 45 compared to 51 a year ago. For the full year, operating cash flows increased $5.5 million or 13% to $49 million or 113% of annual adjusted EBITDA compared to 87% of adjusted EBITDA a year ago. Net of capitalized software development costs, operating cash flows were up $2.2 million or 5% from 2019 amounts. This continued strength in cash flows has allowed for a net reduction in bank debt of $31 million during the past 12 months, with balance sheet cash increasing by over $5 million over the same timeframe. Our successful execution on cash flow priorities during 2020, marks a continuation of 2019's momentum, when operating cash flows nearly doubled from their 2018 levels.

A little over three years ago, we set a capital allocation priority of rightsizing our leverage profile, setting a target leverage ratio with 2.5 times debt-to-EBITDA, that was achieved during 2019 and since surpassed. With the improved health of our balance sheet, coupled with robust cash-generating capabilities, we're now poised to confidently deploy capital in opportunistic ways, that enhance shareholder value and support our growth strategy.

As we highlighted on the last earnings call, we announced in early September that our Board of Directors have authorized a share repurchase program, providing for a maximum of $30 million of share repurchases to be executed over a two-year timeframe. At the same time, our board suspended our quarterly dividend indefinitely, all with the goal of optimizing flexibility, as we pursue a multifaceted capital allocation strategy. This strategy includes using value-based stock repurchases, while maintaining abundant capital to continue to invest in our business, and pursue attractive acquisitions that strengthen and broaden our market position, using a disciplined approach to M&A that will be additive to the organic growth plan, that Boyd discussed at length.

During the fourth quarter, we began executing on our newly formed share repurchase program, with our first shares repurchased on November 6th. In total for the fourth quarter, we repurchased 47,000 shares for a total of $1.3 million. Our primary rationale is to capture value from undervalued shares, using the program as a flexible tool to enhance shareholder value and return capital, when prudent. The cadence in volume of our repurchases will be influenced by a number of factors, with valuation being chief, but also considering capital needs and availability, potential M&A, cost of replacement capital, and other capital allocation alternatives. Capital allocation alternatives and priorities may evolve over time. So, a lack of repurchase activity in any given quarter, may not reflect our views on the intrinsic value of our stock.

Lastly, as Boyd mentioned in the last earnings call, 2021 brings with it the return to guidance for CPSI. A year ago, we introduced guidance for the first time since 2016, later joining in with a host of other companies in retracting 2020 guidance amid the uncertainty of the pandemic. In some ways, that uncertainty has naturally abated, with hospital volumes inching closer to historical levels and the pandemic's end in sight, behind the bold actions of state and federal governments, and successful private sector efforts toward vaccine research, production and distribution.

In the meantime, we've continued our efforts to minimize the risk of the uncertainty, by further stabilizing our EHR base and increasing the prevalence of recurring revenues in our total topline mix. This, coupled with the efforts Boyd discussed around our long-term strategy, gives us confidence in achieving the targets we'll set for ourselves for 2021 and beyond.

Our long-term outlook calls for average annual organic growth in recurring revenues of 5% to 8%, driven by continued growth in TruBridge and a continued shift toward SaaS EHR arrangements. For 2021, we expect recurring revenue growth to be toward the high end of that range, and anticipate total revenues of $270 million to $280 million, with the midpoint of this range representing 4% revenue growth over 2020. As a reminder, our focus on increasing SaaS mix for our EHR arrangements, brings tremendous long-term benefits, but does place incremental pressure on near-term non-recurring and total revenues. This near-term pressure on total revenues will limit our ability for margin expansion during 2021.

On adjusted EBITDA margins, we envision 2021 margins to land within a range of 16.5% to 17.5%, with a long-term target of achieving adjusted EBITDA margins in excess of 20% by 2023. Compared to 2020, the midpoint of this range represents a 60 basis point expansion in adjusted EBITDA margins. In terms of cash generation, we expect 2021 operating cash flows to represent roughly 80% to 85% of adjusted EBITDA.

Lastly, although we won't be providing quarterly guidance, we expect next quarter to show a meaningful mismatch in revenue and expense recognition, that will shift more profits to the remainder of the year. Specifically, we expect the elective procedure volumes for the first quarter to be slightly below last quarter, yielding internal expectations of overall revenues, that are relatively flat sequentially, and will place incremental pressure on profitability metrics.

And with that, we'd like to open up the line for questions.

Questions and Answers:

Operator

[Operator Instructions] Our first question is from Steve Halper of Cantor Fitzgerald.

Steven Halper -- Cantor Fitzgerald -- Analyst

Yeah hi. Just a point of clarification on the EBITDA guidance for 2021. Does that include the costs related to the headcount reduction, as well as the benefit, I guess?

Matt Chambless -- Chief Financial Officer

Yeah Steve. So yes, the anticipated costs from the 8-K that was announced today and the headcount reductions that Boyd spoke of, they are included in that guidance number.

Steven Halper -- Cantor Fitzgerald -- Analyst

Right. So, in theory, you should be able to get most of the benefit in 2022, correct?

Matt Chambless -- Chief Financial Officer

That's right.

Steven Halper -- Cantor Fitzgerald -- Analyst

On a net basis? Okay. And then you talked about procedure volume inching closer to historical levels, with regard to your 2021 profitability expectations, have you made assumptions around that topic?

Chris Fowler -- Chief Operating Officer and President, TruBridge

Yeah, hey Steve. This is Chris. As it relates to the model that we've put out for 2021, we're making assumptions based on 90% of historical volumes, and that's just based on that being flatlined over the last several months. And also with the thought that, that volume may not return. Just based on trends over that last six to 12 months, where may be going to telehealth or urgent care or some other form service versus back into the historical setting in the hospital.

Steven Halper -- Cantor Fitzgerald -- Analyst

And last question as a follow-up. Did your customer base see a decline in utilization, say in November, December, January, as COVID cases started to increase again in some markets?

Chris Fowler -- Chief Operating Officer and President, TruBridge

Not from the elective services. I would definitely say again with -- where we're seeing that flatline is in the ER, which I think long-term is probably a positive for the hospitals. It's just a matter of making up that utilization in the interim.

Steven Halper -- Cantor Fitzgerald -- Analyst

Great. But elective procedures are hanging in pretty well?

Chris Fowler -- Chief Operating Officer and President, TruBridge

From our hospitals, what we're seeing, yes.

Steven Halper -- Cantor Fitzgerald -- Analyst

Great. That's very helpful. Thank you.

Chris Fowler -- Chief Operating Officer and President, TruBridge

Thank you.

Operator

Our next question is from Donald Hooker of KeyBanc Capital Markets. Please state your question.

Donald Hooker -- KeyBanc Capital Markets -- Analyst

Great. Good afternoon. Thank you. I just want to make sure I understand the math, you kind of threw out a bunch of numbers here. So it would seem like by my quick back of the envelope math -- a math here, you're growing TruBridge at about $111 million in 2020. I think you want -- you're saying, you want to add, looks like about $85 million on top of that by 2024. So we're kind of talking about kind of a 15% revenue CAGR to get to that incremental revenue, both within the client base and without -- outside of the client base. Am I getting my numbers there right or am I missing something?

Matt Chambless -- Chief Financial Officer

Yeah. You're right. I mean if -- I mean I don't have the math in front of me, but the starting point, 2020's aiming revenue number and we do expect the incremental $60 million from cross-sell, $25 million from outside of the EHR base. So yes, you're thinking about it right.

Donald Hooker -- KeyBanc Capital Markets -- Analyst

Okay. So that's a hefty -- that's a good growth rate. I'm thinking about any kind of investments near term, just to -- I know you kind of threw out an $80 million EBITDA target, which is an admirable goal as well. Are there any kind of upfront costs? And just thinking about, to grow that, I mean you have a 51% gross margin in TruBridge. From the outside looking in, it would look like you're running pretty lean there. How do I think about that? How do I interpret that gross margin of 51%? Does that need to come down significantly, bring in staff to grow that 15%?

Chris Fowler -- Chief Operating Officer and President, TruBridge

Yeah Steve, one of the ways that we're thinking about increasing that margin, specifically on the TruBridge side, is through automation, and looking for opportunities for efficiencies there. Right now, we're still very human capital heavy on delivering the TruBridge services. So one of the initiatives inside of our Transformation Management Office, is a focus toward that automation and process efficiency.

Donald Hooker -- KeyBanc Capital Markets -- Analyst

Okay, super. And then maybe one last one for me, kind of outside of the talking points around this quarter, would you still have these long-term financing receivables on the balance sheet? They seem like they have been coming down, just as you told us they would. You still have a fair number -- fair amount of receivables there left? I'm hoping that comes in. How do we -- let's take $11.5 million long-term and $10.8 million short-term. I think a lot of that I thought was related to the meaningful use program to a $22 million of receivables, financing receivables, when will we expect that to be collected? That would be a nice lift to cash flow.

Matt Chambless -- Chief Financial Officer

Yeah. So you pick up on a nice -- a nice pickup in cash flow for this year. I think it was worth about $6 million of cash contribution from financing receivables, which right now are at their lowest point that they've been in the past three years, which makes sense, given the high SaaS mix that we've seen in the past couple of years and then our collection on these meaningful use Stage-3 balances, which were mostly financed over these 12-month terms. So in short, as financing decisions coupled with this shift in license mix toward more SaaS, has created a bit of a -- now a favorable disconnect between current period revenues and cash flows. So all that to say, going forward, we may see some 90-day windows where financing receivables drag down cash flows, but we generally expect them to be cash flow positive next year, somewhere in, say, $5 million to $6 million range.

Donald Hooker -- KeyBanc Capital Markets -- Analyst

Okay, super. Thank you. I'll jump [Phonetic] again. Thanks.

Operator

Our next question is from Joy Zhang of SVB Leerink. Please state your question.

Joy Zhang -- SVB Leerink -- Analyst

Good afternoon and thanks for taking my question.

Boyd Douglas -- President and Chief Executive Officer

Certainly.

Joy Zhang -- SVB Leerink -- Analyst

So I want to circle back on your comment on investing in automation within RCM. Can we assume that's going to be toward tech acquisitions or will that be your in-house effort as well? And as a follow-up to that, can we sort of read that as -- that will be your area of focus within M&A rather than, let's say, Get Real Health or other areas that you've been seeing? Thanks.

Chris Fowler -- Chief Operating Officer and President, TruBridge

Hey Joy. This is Chris. I don't know if I would necessarily assume that that's going to be the lane for us from an M&A standpoint. I think we're looking at it much like we do the other development innovation throughout the company. It's a mix of what we can deliver in-house, who we can partner with to achieve that goal, or is there anything opportunistically that we can find. When you are thinking about automation, artificial intelligence, to throw a handful of other buzzwords there, the multiples go sky high. So there is -- we are probably leaning a little more toward the partnership aspect of it, but we're not ruling anything out there.

Joy Zhang -- SVB Leerink -- Analyst

Very helpful. And as a follow-up, given your prepared remarks on strategically targeting new wins within the EHR markets, wanted to just ask about the competitive environment and if that has changed over this past year? I know during this time last year, you talked about seeing a health exit and seeing an opportunity in perhaps Cerner being -- that's quite focused on that market. Are there still opportunities going forward, or -- what are some others?

David Dye -- Chief Growth Officer

Hey Joy. David Dye here. We haven't seen any significant change over the course of the last year. I mean, we still have -- Athena health is still supporting their acute care customers but not doing any further sales efforts or development on that product. So we have seen some of those hospitals enter the market. We expect that more will do so over the course of 2021. There are still approximately 150 or so acute care hospitals under 100 beds that are, on what we call vulnerable vendors. Some are not enhancing the product and others are continuing to enhance the product. But we feel like from a position and clinician satisfaction standpoint, their scores are incredibly low. So a lot of those hospitals either currently are or will be entering the market in the near future.

We do continue to see Cerner on a somewhat regular basis. They -- I would say that they don't have an intense focus on the small hospital marketplace right now, but it continues to be an area where they play in selectively and we continue to see Meditech, as we have for decades, as well on a somewhat regular basis. But there is no significant change.

Joy Zhang -- SVB Leerink -- Analyst

That's helpful. Thank you very much.

David Dye -- Chief Growth Officer

Thanks Joy.

Operator

Our next question is from Sandy Draper of Truist Securities. Please state your question.

Sandy Draper -- Truist Securities -- Analyst

Hey guys, It's Sandy. I guess I dropped my S.

Boyd Douglas -- President and Chief Executive Officer

We were wondering,

Sandy Draper -- Truist Securities -- Analyst

Yes. So a couple of questions. First on the, I think I heard you right, saying it was a 100% SaaS sales in the quarter. I know this bounces around a lot, but do you -- are you seeing anything and it may be related to the pandemic, related to financial situations that suggest, that we're leaning more toward those type of deals and you would expect a hyper ponder to SaaS? But if I kind of recall, there was a several quarters ago, whereas very heavy SaaS and like the next quarter, it was like literally inverse traditional license and it just flipped back. I'm just trying to see if there is anything you guys are seeing, that suggest, OK, we're likely to stay more toward the SaaS.

Matt Chambless -- Chief Financial Officer

So Sandy, this is Matt. Just a point of clarification. So 50% of the contracts that were signed during the quarter for net new EHR on the acute side were SaaS, but 100% of the installations. So it's just a bit of a clarification.

Sandy Draper -- Truist Securities -- Analyst

Okay. Well, so I guess maybe then if I take the last two quarters then -- trends, I guess the question is the same. I had that some of the -- I misheard you. But are there trends that suggest we're leaning more toward SaaS or do you expect it to still be really lumpy quarter-to-quarter?

David Dye -- Chief Growth Officer

Hey, David Dye, I'm picking up here, Sandy, from Matt. But it will of course be somewhat lumpy, but we are definitely seeing a trend move more to SaaS and I'd say that's for two reasons. One is frankly because we're pushing in that direction as much as we possibly can. But two, the customers continue to be just more receptive from a marketplace standpoint to a SaaS environment, a lot of that has to do with the connectivity and bandwidth availability and rural areas continues to improve quickly. So that's helping us as well. But we're currently projecting that 75% of our net new business sales in 2021 will be SaaS, based on the pipeline that we have today.

Sandy Draper -- Truist Securities -- Analyst

Okay. Great. That's helpful clarification. Sorry about the mishear on that, Matt. But so on the -- second question is on the RCM side of TruBridge. When you think about -- there have been some sales in the space, when you think about going outside of your customer base, what are the key things that you think can differentiate you? What are people looking for, and is it really a reference sale? And they just want to talk to five other people and they say, you guys do a great job? Do they want to see specific metrics, capabilities? What is it? Because there -- it's changing, but there's still a lot of players out there. What is it that I think you have that you think can be -- make you successful outside of the -- where you got a core software relationship?

Chris Fowler -- Chief Operating Officer and President, TruBridge

Hi Sandy. This is Chris. So a lot there to unpack. I guess I'll start by saying for us, and what we've really been focused on over the last 18 months is just a brand awareness, is making sure that we are in the game when somebody is making a decision. If you look to the other side on the EHR front, I don't think there is a community hospital EHR decision that CPSI is not a part in. And so, aspirationally, we'd like to be there from an RCM standpoint.

When we're thinking about metrics and referenceable, we feel like our product stacks up against anybody else. We've got the -- we've got some, the awards, whether it'd be HFMA Peer Reviewed or other credentialing to show that the product stands up. It's just a matter of getting the at-bats. We had some significant wins last year that we look to capitalize on and obviously, use those as a reference to catapult going forward.

Sandy Draper -- Truist Securities -- Analyst

Great. That's helpful. Thanks.

Chris Fowler -- Chief Operating Officer and President, TruBridge

Yes. Thank you.

Operator

Ladies and gentlemen, we have reached the end of the question-and-answer session. And I would like to turn the call back to Boyd Douglas for closing remarks.

Boyd Douglas -- President and Chief Executive Officer

I want to thank everyone for your time this afternoon. I hope that you were able to sense our genuine enthusiasm around the transformation that we have begun at CPSI. We believe the time and effort that is going into this plan, some of which we highlighted today, will have a very positive impact on our effectiveness, efficiency and value delivered to our shareholders, clients and employees. We look forward to providing updates on our progress each quarter, as you join us on our mission to deliver efficient, accessible and transformative products and services to the global healthcare marketplace.

Thanks everyone and have a good evening.

Operator

[Operator Closing Remarks]

Duration: 48 minutes

Call participants:

Drew Anderson -- Investor Relations Contact

Boyd Douglas -- President and Chief Executive Officer

Matt Chambless -- Chief Financial Officer

Chris Fowler -- Chief Operating Officer and President, TruBridge

David Dye -- Chief Growth Officer

Steven Halper -- Cantor Fitzgerald -- Analyst

Donald Hooker -- KeyBanc Capital Markets -- Analyst

Joy Zhang -- SVB Leerink -- Analyst

Sandy Draper -- Truist Securities -- Analyst

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