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Computer Programs and Systems, Inc.  (NASDAQ:CPSI)
Q4 2018 Earnings Conference Call
Feb. 15, 2019, 9:30 a.m. ET

Contents:

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the CPSI Fourth Quarter and Year-End 2018 Earnings Conference Call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. (Operator Instructions) As a reminder, this conference is being recorded Friday, February 15, 2019.

I would now like to turn the conference over to Boyd Douglas, President and Chief Executive Officer, CPSI. Please go ahead.

Boyd Douglas -- President and Chief Executive Officer

Thank you, Chris, and good morning, everyone. Thanks for joining us. 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 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. At the conclusion of our prepared comments, the two of us, David Dye and Chris Fowler will be available to take any questions you may have.

As we announced in our Q4 results this morning, we are pleased with the solid finish we had in 2018. This year, TruBridge eclipsed $100 million in revenue and delivered a third consecutive quarter of growth for total bookings, which included $3 million in bookings for our new SaaS offering nTrust. Last year, we began positioning nTrust with our current clients as an alternative to their existing license and maintenance model.

We are excited about the level of interest from our base, and we will continue to leverage this SaaS offering to convert our client revenue stream to a subscription model. TruBridge continues to make strides in the reach outside of the community healthcare market. Just one example is the contract we were recently awarded with the University of Louisville Physicians to overhaul their upfront collections process. This deal is yet another example of the fact that TruBridge has scalable solutions and services for larger healthcare organizations. In addition, our EHR base continues to fuel TruBridge, helping them deliver key results for CPSI.

In 2018, TruBridge was awarded the prestigious designation of Peer Reviewed by HFMA and earlier this week, they were recognized as the top-rank revenue cycle management solutions and consulting services by Black Book Research. We are very proud of these accolades and view them as independent third-party endorsements that carry real credibility.

Turning to our key EHR business, there were 18 centric and classic clients that chose to move to our Thrive product in 2018, signifying their loyalty to CPSI and our family of companies. The acute EHR replacement market continues to experience churn, resulting in 29 net new community hospital installations in 2018. Another sound porter of net new hospital bookings contributed to the 25% growth in total bookings sequentially.

On the AHT front, work continues on our two-year development plan that we have previously discussed. Our optimism remains high as we continue to hit internal milestones and also continue to receive positive feedback from the customer base. Based on regulatory changes in the post-acute space, we see organic growth opportunities for software and for TruBridge in this sector of our business. As we head into 2019, we are embolden by our strengthening cash flows with operating cash flows of just over $9 million in the fourth quarter alone and a healthy recurring revenue base. With a clear line of sight, we will achieve our $10 million set goal of incremental benefit to our bottom line in 2019 based on the 2018 expense exit run rate.

Before I turn the call over to Matt, I will close by reiterating our vision of helping communities thrive through vision, innovation and collaboration. There are many examples in 2018 of our progress, and we have kicked off 2019 with the strong start. Just this week, we announced that patients of the Evident community hospitals and clinics can access their health records via health records on iPhone.

This collaboration allows patients to easily see, at any time, their hospital and clinic medical data organized into one comprehensive and easy-to-understand patient view through the existing Apple Health app. This is a step toward helping our clients improve the health of their community by increasing the level of engagement with patients outside the walls of their hospital or clinic.

Our shared solution strategy, where we are designing and developing applications at once to be shared across all of our EHR platforms, continues to gain traction as our efforts are geared toward improving the experience providers have with our solutions across the inpatient, ambulatory and skilled nursing care settings.

Building these solutions with an architecture which depends upon a suite of containerized micro services accelerates the process of building functionality, expands future scalability and allows us to bring valuable new solutions and improvements to our clients in a more efficient manner in the near-term as well as into the future.

With that, I'd like to turn the call over to Matt.

Matt Chambless -- Chief Financial Officer

Thanks, Boyd, and good afternoon, everyone. As we mentioned in the earnings release, the four quarter's 12 new Thrive implementations marked our highest point since 2010 and drove solid results on both the top and bottom lines. Quarterly revenues of $72.3 million are up 4% sequentially and were the second highest in the history of CPSI, trailing only the fourth quarter of 2017s meaningful use-driven results. Non-GAAP EPS effectively matched last quarter's all-time high and outpaced the fourth quarter of 2017 by 24%. Adjusted EBITDA grew 28% sequentially and reached the highest point since our acquisition of Health Plan.

We're proud to close out 2018 with such a strong quarter with post-acquisition highs in operating pre-tax net and adjusted EBITDA margins with second-best results for non-GAAP net margin. Operating cash flows for the quarter increased for the third consecutive period to $9.1 million, up nearly 30% sequentially and over 70% from the fourth quarter of 2017. The combined strengths of our sizable recurring revenue base and cash conversion on existing financing receivables propelled us to our best cash flow period since the first quarter of 2017, all while faced with a $3.5 million further expansion and financing receivables, driven by the record new Thrive implementations.

All told, operating cash flows doubled from $7.8 million during the first half of 2018 to $16.1 million during the second half of the year. These strong operating cash flows, particularly in the second half of the year, allowed for a year-over-year increase in balance sheet cash of $5.2 million, while net payments against long-term debt totaled $11.7 million, including a $5 million advanced payment against our revolving credit facility during the fourth quarter.

Reduced debt levels combined with continued EBITDA execution resulted in our leverage ratio as calculated under the terms of our credit agreement, decreasing from 2.7 to 2.54, just shy of our target of 2.5. Timing issues aside, we expect this elevated level of cash flows to continue into 2019 with financing receivables no longer expected to be a drag on cash flow for the next 12 months. Recurring revenues made up 79% of revenues for the period and 81% of trailing 12-month revenues. Quarterly revenues grew 22 -- 2% sequentially and 3% year-over-year with the full fiscal year showing 5% growth in recurring revenues.

Moving away from the income statement for a moment, total bookings showed impressive growth as well, increasing 25% sequentially and 19% over the fourth quarter of 2017. TruBridge bookings continued their upward trajectory for the year, posting a third consecutive quarter of growth with bookings that were up 6% sequentially and 41% over the fourth quarter of 2017. The software side of our business experienced solid bookings' performance as well with increases in nearly all categories driving a 37% sequentially increase, while a $3.1 million MU3 booking headwind dragged the year-over-year quarterly increase down to 11%. Of the $15.9 million in system sales and support bookings, roughly $2.2 million is included in our fourth quarter revenues. $9.4 million represents non-subscription sales that should trickle into revenue over the next 12 months with an average lag between booking and install of five to six months.

$4.2 million represents EHR subscription revenue to be recorded over a weighted average period of five years with the start date in the next 12 months and similar to our non-subscription sales and average lag between booking and install of five to six months. Our $7.8 million of bookings from TruBridge are nearly all comprised of recurring revenues to be recorded over a one-year period starting in the next four to six months. 12 customer sites went live with our Thrive acute care product compared to six in the previous quarter and seven in the fourth quarter of 2017. One of these periods go-lives were under a cloud or subscription model compared to none in either the third quarter of 2018 or the fourth quarter of 2017.

At this time, we expect six new client facilities to go live with our Thrive solution in the first quarter of 2019 with one expected to go live in the cloud environment. Our employee headcount as of December 31 was roughly 2,020, a 1% decrease from the September 30 number.

Turning to the income statement, TruBridge posted results that were relatively flat sequentially with revenues up 9% year-over-year for the fourth quarter versus the fourth quarter of 2017 with total fiscal year revenues eclipsing prior year amounts by 13%.

Specific to the quarterly numbers, accounts receivable management and insurance services revenues were the primary drivers of the year-over-year quarterly growth. Accounts receivable management revenues increased 21% year-over-year as hospital clients continue to partner with us for their full business office needs, and insurance services revenues increased 10% as consistently strong bookings for the TruBridge RCM solutions are beginning to hit full revenue run rate.

Increased labor cost contributed to a sequential decline in margins from 45% to 43%, while year-over-year quarterly margins improved from 42% to 43%. System sales and support revenues increased $2.8 million sequentially as the eight-year record number of installations resulted in a $3.2 million increase in net new revenues. Year-over-year, quarterly revenues were down $7.8 million as the $2.7 million increase in net new installation revenues was eclipsed by a $9.2 million decline in MU3-related revenues.

It's worth noting that the fourth quarter of 2017 was a particularly strong period of MU3-related revenue with $12.3 million of revenue for the related applications compared to $3.1 million in the fourth quarter of 2018. That $12.3 million of MU3 revenue in the fourth quarter of 2017 makes up roughly 43% of total life-to-date MU3 revenue and is nearly 3 times the second highest quarter for such revenues, underscoring exactly how outsized an impact this nonrecurring element had on year-over-year comparatives. To date, we've recognized $28.2 million in MU3-related revenue with live-to-date bookings of $30.1 million. Of the remaining $1.9 million of MU3 bookings and backlog, we currently have $1.4 million scheduled for implementation and revenue recognition during the first quarter of 2019.

Our costs of system sales and support were down nearly 6% sequentially as hardware cost declined due to revenue mix. Costs were down 10% year-over-year as revenue mix resulted in lower hardware costs, a more efficient implementation approach led to reduced travel spend and employee bonus expense decreased $700,000. The flat sequential cost coupled with the sequential increase in revenues resulted in margins improving from 56% to 61%, which were the second highest since our acquisition of Healthland and trailing only the fourth quarter of last year's 63% margins, which were heavily impacted by the aforementioned $12.3 million of high-margin MU3 revenue.

Product development costs were down slightly from the third quarter of 2018 and flat year-over-year as the $400,000 year-over-year decrease in bonus expense has been offset by additional salary cost due to our strategic initiatives designed to improve provider adoption and clinical workflow and rejuvenate our post-acute offering.

Sales and marketing costs increased $400,000, as improved implementation volumes drove commission expense higher, while year-over-year cost decreased $1.8 million due to $0.5 million decrease in bonus expense and a $1.3 million reduction in commission expense due to the aforementioned decline in the MU3 revenues. General administrative costs decreased $700,000 from the third quarter due to decreased costs related to severance and other employee benefits with increased healthcare costs mostly offset by decreased costs associated with our 401(k) match and paid time-off benefits.

Year-over-year costs were down $2.5 million, primarily as healthcare costs and bad debt have normalized from the record high levels reached during the fourth quarter of 2017. For a bit of perspective, healthcare claims during the fourth quarter of 2017 were $400,000 higher than the second highest period since the Healthland acquisition, while bad debt expense was $1.1 million higher than the second highest period.

Lastly, our effective tax rate during the quarter was 4%, primarily as an updated analysis of our state net operating loss carry-forwards resulted in improved estimates regarding future utilization, prompting a $1.1 million beneficial adjustment to the related valuation allowance. We've obviously seen a lot of noise in our effective tax rate over the past couple of years with the adoption of 2017's tax reform legislation and the ASC 730 Safe Harbor directive related research and development tax credit. Assuming no other discrete items, we anticipate an effective tax rate of approximately 17% for 2019 with the ASC 730 Safe Harbor directive impacting our expectations by 4.5% to 5%.

One year ago, we pointed toward a healthy replacement market, significant long-term growth prospects for TruBridge, continued execution around our MU3 initiatives and the strength of our recurring revenue base as the basis for our optimism in the future of CPSI. 2018's results have proven that optimism to be well founded, and we remain excited for what the future holds at CPSI. For 2019, we're confident that continued execution around TruBridge and our cost-savings initiative will result in continued revenue growth and improved profitability.

And with that, we'd like to open the call up for any questions. 18:33

Questions and Answers:

Operator

Thank you. (Operator Instructions) Our first question is from the line of Jeff Garro with William Blair & Company. Please go ahead.

Jeff Garro -- William Blair & Company -- Analyst

Yes. Good morning, all, thanks for taking the question. I'll start with the backlog, maybe you could give us the split between the recurring and nonrecurring portion. And then just maybe some commentary on how we can think about the right coverage level for the next 12 months revenue really, anything different to call out from typical historical performance versus that metric?

Matt Chambless -- Chief Financial Officer

Yes. Jeff, this is Matt. So the backlog split as of 12/31 was roughly $228 million for recurring and $29 million on the nonrecurring side. There was a little bit of a pullback on nonrecurring backlog, which was somewhat to be expected given the work through (ph) that meaningfully used three backlog during 2018. Other than that, kind of the status of where we are backlog-wise versus kind of revenue outlook for 2019 is kind of where we expect things to be.

Jeff Garro -- William Blair & Company -- Analyst

Got it. Maybe another one on the revenue front. You gave the expectation for Q1 installs, which seems quite healthy. I was hoping you could give us some type of expectation for full year installs versus this past year and the year before? I know you guys have kind of caught out long-term that '17 and '18 seemed to represent probably the right expectation for net new installs going forward, but wanted to check in there.

David Dye -- Chairman and Chief Growth Officer

Yes. Hey, Jeff, good morning. This is David. The expectation is 28 to 30 net new installs in 2019.

Jeff Garro -- William Blair & Company -- Analyst

Great. Perfect. Then maybe one more from me more on the operating expense side of things. Operating expenses maybe down 3% for 2018, but down 19% if we will look at Q4. So hoping you could help us understand what in Q4 represents the right run rate going forward or may be other areas where we should look at the full year as being more representative of future spending?

Matt Chambless -- Chief Financial Officer

Yes, this is Matt. I'd say that Q4 is a pretty good glimpse of where we are starting 2019. The fourth quarter represents a good kind of run rate, I guess, leaving the year. There weren't any kind of goofy one-time items that were coming through. Now that being said, we do have $10 million or so worth of cost-savings initiatives that we do intend to execute on during 2019. So we do expect the cost for the Company to come out significantly less than where we are right now. But that's the answer, the Q4 is kind of the good base for exiting the year.

Jeff Garro -- William Blair & Company -- Analyst

Great. I'll jump back in the queue with that. Thanks, guys.

Operator

Our next question comes from the line of Mohan Naidu with Oppenheimer. Please go ahead.

Mohan Naidu -- Oppenheimer -- Analyst

Thanks for taking my questions and congratulations on reaching the $100 million mark on TruBridge. Just a couple of questions on nTrust. In the nTrust bookings, do you guys split them between system sales and TruBridge or is it all going to one bucket?

Matt Chambless -- Chief Financial Officer

Yes. So for bookings reporting, there is an allocation of the revenue between the subscription revenues. So the amounts that we called out related to bookings for the software side, that are our subscription base, those would include any subscription side of the nTrust deal with the other side being allocated to business office services that we provide for TruBridge. So there is an allocation that's performed.

Mohan Naidu -- Oppenheimer -- Analyst

Okay. Boyd, may be a question around the replacement market. You said you think you gave us some comments around there. What is driving the hospitals now to still look at replacements without any regulatory, I guess, pressures on them on the changes?

Boyd Douglas -- President and Chief Executive Officer

I would say the major driver is and has been for a while now physicians and their satisfaction with the system. Again, there's still a lot of people that made -- or a lot of hospitals that made not good long-term decisions with Meaningful Use. And so coming out of Meaningful Use, they realize that whatever solution they're on is not a good long-term solution. Physicians aren't happy, other caregivers aren't happy, and that's why they're looking mainly. I think others, I think cost can be a factor. Maybe there were -- it's costing more than what the vendor initially implied and -- or overall overhead to run a system, so things like that, but mainly dissatisfaction on the users.

Mohan Naidu -- Oppenheimer -- Analyst

Okay. Thanks, Boyd. Maybe the last one. Matt, to your earlier comments to Jeff, the $10 million cost synergies going into 2019. Should we think about that looking at 2018 expenses and taking out 10 out of that into '19 in the face of a flat or up-ish revenue growth or how should we think about the $10 million savings going into '19?

Matt Chambless -- Chief Financial Officer

Yes. So the $10 million represent savings that we're going to execute on throughout the year and the overwhelming majority of those will be actually realized during the year.

Mohan Naidu -- Oppenheimer -- Analyst

Okay. Thank you very much.

Operator

Our next question comes from the line of David Larson with Leerink Partners. Please go ahead.

David Larson -- Leerink Partners -- Analyst

Hi, Matt. It seems like the cost reduction efforts (technical difficulty) you would have $10 million of savings as you exit 2018, so that would manifest in 2019. It sounds to me like you're not done yet and you're still going to go after even more (technical difficulty) in 2019. Is that correct? And can you give us sort of color around what you would like to see personally in terms of like long-term either EBITDA or gross margin expansion? Thanks.

Matt Chambless -- Chief Financial Officer

Yes. So, David, your line was breaking up a little bit on me. Perhaps, I was the only one that was getting that interference, but I think I heard your question well. The $10 million is still a pretty solid number for where we think that we're going to land year-over-year cost reduction-wise 2018 to 2019. We've identified the steps that we have to take and in many cases, we already kind of decisioned those and are now just kind of waiting for the benefits to start flowing through. And when it comes to long-term, where we'd like to see particularly EBITDA margins land, I think we've stated previously that 20% we think is a healthy EBITDA margin profile for our business and that's our target to reach that level and sustain it naturally. Obviously, we reached that level this past quarter on the heels of some heavy nonrecurring revenues, but the idea is to strip some costs out of the system so that we're not overly reliant on nonrecurring revenues to get us to that target.

David Larson -- Leerink Partners -- Analyst

Okay. Thanks very much. Congrats on a good quarter.

Matt Chambless -- Chief Financial Officer

Thanks, Dave.

Operator

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

Donald Hooker -- KeyBanc -- Analyst

Great. Good morning. Question on sort of the MU3 bookings and revenue. I just want to make sure I understand. How much of your client base overall has taken advantage of that opportunity or has taken advantage of that? So is there any leakage -- I mean, you gave guidance for 1Q 2019 of, I think, $1.4 million revenue there, but is there any chance you could get some revenue from that in the following quarters?

David Dye -- Chairman and Chief Growth Officer

Yes. Hey, Donald, this is David. About 65% of our clients have taken advantage of it. The remaining, there's approximately 20% to 25% of our customer base wouldn't attest for MU3 because of their status as a facility, maybe they're specialty facility, behavioral, et cetera. The remaining, in the numbers that we're thinking going forward will be pretty conservative, there's some hospitals that have decided to take the penalty at this point. Of course, that could change. So, yes, there is opportunity beyond just this quarter, but it's a relative unknown at this point.

Donald Hooker -- KeyBanc -- Analyst

Got you. And in the software and -- in the system sales and support line, I guess I will see it in the K, but what is the recurring revenue in that of the 47.2?

Matt Chambless -- Chief Financial Officer

Yes. So it looks like $33 million of recurring revenue from system sales and support for the period.

Donald Hooker -- KeyBanc -- Analyst

Okay. Got you. And maybe just -- maybe the last one. Just thinking about the Healthland acquisition from a few years back. Can you just update us in terms of -- I assume a lot of the migrations are done, are there any remaining sort of legacy users of, I guess, classic or whatever left, are sort of migrations done?

Boyd Douglas -- President and Chief Executive Officer

Donald, there's about 15 Healthland classic sites that are left, that are potential for migrations.

Donald Hooker -- KeyBanc -- Analyst

Got you. Why would they stay on -- is there a reason why they stay on classic, are they just comfortable with it?

David Dye -- Chairman and Chief Growth Officer

Yes, they're comfortable with it. It works. There's some expense in transitioning as comfortable as we try to make that for them. Obviously, there's expense in conversion, et cetera. So that would be the primary reasons that the 15 are left.

Donald Hooker -- KeyBanc -- Analyst

Okay. Thank you. Thank you so much.

David Dye -- Chairman and Chief Growth Officer

Thanks, Donald.

Operator

Our next question comes from the line of Jonathan Bentley with SVP Leerink.

Jonathan Bentley -- SVP Leerink -- Analyst

Hi. I just have one question and a follow-up after Dave's question earlier. I think last quarter, you had talked about having 13 implementation scheduled for fourth quarter, and I think I heard that you guys had actually 12 occur. Is that correct that one got pushed? And why did that got pushed if it is the case?

Matt Chambless -- Chief Financial Officer

Yes. This is Matt, Jonathan. The pushes that we've been seeing all throughout the year and the fourth quarter push, there's really no difference here. It's been with start-up facilities with our implementation and go-live heavily reliant upon a number of different kind of balls lining up in place, including getting provider numbers and things like that. So that's effectively all of our -- every time, we've had a slip from one quarter to the next, that's kind of been the answer and that's what happened in Q4 as well.

Jonathan Bentley -- SVP Leerink -- Analyst

Okay. So do you expect that those pushes will then be implemented in the future or any deals that are actually getting hung up?

Matt Chambless -- Chief Financial Officer

No. These aren't hung-up deals. These are just deals that are -- I mean, they're -- we certainly -- they're on our implementation calendar right now for 2019. There's a particular hospital, I can't remember exactly whether it's in Q1 or early Q2 now. But as far as any slippage off of our radar completely, that's not something that we typically see.

Jonathan Bentley -- SVP Leerink -- Analyst

Okay. Great. Thank you very much.

Operator

Our next question comes from the line of Sean Wieland with Piper Jaffray. Please go ahead.

Sean Wieland -- Piper Jaffray -- Analyst

Hi. Thanks. Curious if you have any initial reactions to ONC's proposed regs on embracing FHIR standards and information blocking that came out earlier this week. How you think that impacts how you're going to market and as well as more broadly for the industry, what you think the effects of that will be?

David Dye -- Chairman and Chief Growth Officer

Yes. Sean, from a development perspective, certainly it's a lift for us. As been the case in the past, typically new regulations and things like that from ONC or whoever are typically good for us because it drives some of the smaller players here as the market or where they can't comply. And so -- and our customers see that and look to us because they got the confidence in us that we will make those regulations. Certainly, it will affect our road map for our future things that we were planning on doing. But that's part of what we do and kind of normal course of business to have these type of things happen. We view it as a positive. I think it's good for the industry. It would be interesting to see how that aligns with what we're doing with Commonwealth and how that comes into play. But we certainly welcome the change and look forward to the final rule.

Sean Wieland -- Piper Jaffray -- Analyst

Okay. Thanks for that. And just a quick one, what percentage of the TruBridge bookings was from within your base versus outside your base?

Chris Fowler -- Chief Operating Officer and President, TruBridge

Sean, this is Chris. Just a bit of a slag on that. I would say probably 85%, 90% Q4.

Sean Wieland -- Piper Jaffray -- Analyst

It is within your base?

Chris Fowler -- Chief Operating Officer and President, TruBridge

Yes.

Sean Wieland -- Piper Jaffray -- Analyst

Yes. Okay. Thank you very much.

Chris Fowler -- Chief Operating Officer and President, TruBridge

Thanks, Sean.

Operator

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

Jamie Stockton -- Wells Fargo -- Analyst

Good morning. Thanks for taking my questions. I guess may be real quick on TruBridge, the gross margin kind of trended down over the course of the year. I suspect you guys may have been doing some hiring late in the year for business that you think is going to ramp really this year. Could you just talk about how we should think about the gross margin there? It's kind of bounced from the low-40s to the mid-40s depending on what quarter you look at. If you can start there, that would be great?

Chris Fowler -- Chief Operating Officer and President, TruBridge

Yes. Hey, Jamie, this is Chris. So the margins for TruBridge overall, we anticipate staying in that 43% to 46% overall. A lot of that depends though on where the growth comes from. On the TruBridge RCM side, obviously, we have much higher margins. We're in the 70%, whereas in the accounts receivable service, which is our 35% of the business, those margins are about 30%. We aren't -- that's where we're probably seeing the trend a little bit down on that and a little bit of that just based on our hiring philosophy changing to where we're going to a little bit more of a remote staff, more senior employees that are a little more efficient in the operation that they can run. So we feel confident we hold that number about 30% for the ARMs. And so, again, a little bit depending on what the mix looks like in the services, but feel confident for 2019 overall margins in that 45% range.

Jamie Stockton -- Wells Fargo -- Analyst

Okay. Thank you. And then maybe just a quick one on the balance sheet. I think Matt said you guys are basically at about 2.5 turns net debt to trailing EBITDA. And I think last quarter, you said that was kind of your target and it was possible that once you hit that level, you might either get a little more aggressive at investing in the technology platform or maybe start to do some more tuck-in acquisitions. Can you just give us an update on your thoughts about the balance sheet now and potential M&A kind of as we go through 2019?

Boyd Douglas -- President and Chief Executive Officer

Yes. Jamie, you're right. It's exactly a year ago that we identified the target of 2.5. And as you know, we're right there. I think we've made commentary throughout the year that we continue to look at potential tuck-in acquisitions, especially those that we think could help accelerate our TruBridge growth, and we continue to do that.

Jamie Stockton -- Wells Fargo -- Analyst

Okay. Thank you.

Boyd Douglas -- President and Chief Executive Officer

Thanks, Jamie.

Operator

(Operator Instructions) Our next question comes from the line of Stephanie Demko with Citi. Please go ahead.

Stephanie Demko -- Citi -- Analyst

Hey, guys. Thank you for taking my questions. Just a quick one coming out of HIMS. Can you talk to us on the areas of client demand (inaudible) surprised you in some of the foot traffic in the booths?

Boyd Douglas -- President and Chief Executive Officer

I don't know that there were any huge surprises from it. HIMS, I would call it the typical HIMS. Frankly, we don't get a lot of traffic from either existing customers or potential customers. And typically in our market, they just came forward to come to something like that. We certainly encourage them if they're going to spend travel dollars to come to our user conference that's in May and get a lot more benefit of it. So it's the usual. You do get a flavor of international at HIMS. But whether any of that will really ever pan out, you don't know, but you usually get some foot traffic related to that, and we did get some of that again this year.

David Dye -- Chairman and Chief Growth Officer

And good morning, Stephanie. I'll add to that too. I mean, I think -- and it's a focus of ours, I think there's increased chatter. At HIMS every year, there's something that sort of goes to the next level, and I think that this year is patient engagement and the future of that, and we certainly saw that, and it's something that we're thinking heavily about.

Stephanie Demko -- Citi -- Analyst

I hear that. I mean, I guess beyond (inaudible) of clients that they don't to HIMS, is there any thought on the patient engagement side, if that is a potential area of M&A now that you have freed up some cash in the balance sheet or will that be more of an internal investment project?

David Dye -- Chairman and Chief Growth Officer

We look at it both ways. Certainly, we've already got some functionality there with that we are in the process of continually enhancing and as in anything with regard to how it could help us grow our services business going forward from an M&A perspective or from a development perspective, that's something that we're heavily invested in.

Boyd Douglas -- President and Chief Executive Officer

And I talked about it in the prepared comments. Obviously, the press release we just announced with Apple is a step in that direction.

Stephanie Demko -- Citi -- Analyst

I hear you. I hear you. Well, thank you so much for taking my questions.

David Dye -- Chairman and Chief Growth Officer

Thanks, Stephanie.

Operator

Our next question comes from the line of Gene Mannheimer with Doughtery & Company. Please go ahead.

Eugene Mannheimer -- Doughtery & Company -- Analyst

Thank you. Good morning. Congrats on a good finish to the year. With respect to TruBridge, guys, I think in the past, Boyd, you've discussed your targets of mid-teens growth for that business. We saw that 9% growth in the back half of the year. So just wanted to try to reconcile what gives you the confidence that we can get there this year to that mid-teens number? I do note of really positive bookings number in the fourth quarter. So is that kind of what gives you that comfort level?

Chris Fowler -- Chief Operating Officer and President, TruBridge

Yes. Hey, Gene, this is Chris. That's exactly right. I mean, what we're seeing, I think Boyd's comments spoke to it from an nTrust standpoint. Obviously, that's one of the largest drivers for that number. Year-over-year, we were 13% growth from '18 to -- from '17 to '18. So with the optimism around nTrust, what's already booked and to be implemented this year and also what the pipeline looks like, we feel pretty good about that mid-teens growth a year.

Eugene Mannheimer -- Doughtery & Company -- Analyst

Okay. Excellent. Thank you for that. And with respect to nTrust, really exciting model there. I'm just curious, to date, how many clients have opted for that? And if you have any expectation for what conversion might look like going forward? Would you think 10% of the base or 20% of the base would opt for this model? Thank you.

Chris Fowler -- Chief Operating Officer and President, TruBridge

So first question, the number's 10% so far. And it's hard to put a pen on it. We would love to say we see getting upwards of 50% on the base if that we go to this model. I think David and Boyd have both said it in calls in the past that we anticipate one day where people won't be running around business offices, virtually all hospitals allow all sorts of business office. So we feel like we're positioned to get the vast majority of that for the CPSI base. So I think 2019 will be a telling year for what we think will give as an opportunity to have a little more insight into what that looks like going forward. But again, the pipeline is strong, both from an internal customer base conversion to that model as well as the net new deals.

Eugene Mannheimer -- Doughtery & Company -- Analyst

Well, that -- I mean, that's terrific. So my last question would be then on that is, can you talk about maybe the revenue lift for a customer to go from a license model today to an nTrust model? What does that look like in terms of wallet share, so to speak?

Chris Fowler -- Chief Operating Officer and President, TruBridge

So there's one variable in there that is contingent on the software that they purchase today, obviously, converting them from the perpetual license into that SaaS model. But from a pure TruBridge standpoint, the number is on average $400,000 of additional revenue that we would see. So just -- if you want to take a baked number all the way from a customer -- a current customer going from the license model to nTrust, probably $0.5 million a year.

Eugene Mannheimer -- Doughtery & Company -- Analyst

Great. Thank you.

David Dye -- Chairman and Chief Growth Officer

Thanks, Gene.

Operator

And there are no further questions on the phone lines at this time. Mr. Douglas, I'll turn the presentation back to you.

Boyd Douglas -- President and Chief Executive Officer

Yes. I want to thank everyone for being on the call this morning. Obviously, we're excited with the way we ended the year and are looking forward to a great 2019. So thank you for being on the call and hope everyone has 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.

Duration: 43 minutes

Call participants:

Boyd Douglas -- President and Chief Executive Officer

Matt Chambless -- Chief Financial Officer

Jeff Garro -- William Blair & Company -- Analyst

David Dye -- Chairman and Chief Growth Officer

Mohan Naidu -- Oppenheimer -- Analyst

David Larson -- Leerink Partners -- Analyst

Donald Hooker -- KeyBanc -- Analyst

Jonathan Bentley -- SVP Leerink -- Analyst

Sean Wieland -- Piper Jaffray -- Analyst

Chris Fowler -- Chief Operating Officer and President, TruBridge

Jamie Stockton -- Wells Fargo -- Analyst

Stephanie Demko -- Citi -- Analyst

Eugene Mannheimer -- Doughtery & Company -- Analyst

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