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Computer Programs & Systems (NASDAQ:CPSI)
Q1 2019 Earnings Call
May. 02, 2019, 4:30 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Operator

Greetings, and welcome to the CPSI first-quarter 2019 earnings conference call. [Operator instructions] As a reminder, this conference is being recorded, Thursday, May 2, 2019. I would now like to turn the call over to Mr. Boyd Douglas, president and chief executive officer of CPSI.

Please go ahead.

Boyd Douglas -- President and Chief Executive Officer

Thank you, Ash. 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's 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. 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, along with David Dye, our chief growth officer; and Chris Fowler, chief operating officer, will be available to take any questions you may have.

Our first-quarter revenue and earnings were relatively aligned with expectations and we're also in line with typical first-quarter results. While overall bookings were disappointing in this quarter, we remain encouraged due to a few key factors. First, the length of the sales cycle has elongated due to the fact that there are fewer impending regulatory deadlines impacting the urgency of a decision. With that in mind, while we did not close as many deals as we would have liked in the first quarter, we did not lose those deals either.

Rather, we are still waiting a decision. With a healthy and growing pipeline for our acute care EHR system sales, a win rate that continues to be strong and the demand for TruBridge services, we remain confident in our goal of welcoming 25 to 30 new clients each year. As we continue to invest in and execute on the delivery of our product strategy across our acute, post-acute and services businesses, it is imperative that we stay ahead of the revenue fluctuations that come with current market dynamics. From a financial operations perspective, we remain focused on maintaining steady progress in the management of cost against expected revenue.

While our first-quarter recurring revenue was approximately $57 million, as anticipated, nonrecurring revenue was lower than forecasted due to delays in decisions of system sales and the push of two acute system installs in the first quarter. However, as Matt will speak to you in a minute, we have exceeded our initial cost savings goal of $10 million that had an incremental benefit to our bottom-line 2019. In addition, we have identified another $3 million in cost savings that will be fully executed by the end of the second quarter of this year. These cost savings are a direct result of our driving initiative to be more efficient and focused across CPSI, and we are very pleased with the progress we have achieved thus far.

Now I'd like to turn to the announcement we made last week regarding our agreement to acquire Get Real Health. Get Real Health has a proven track record of delivering technology solutions that improve patient engagement and patient outcomes. This strategic acquisition enhances our ability to address the growing trends within the community healthcare market, such as increased spending on non-EHR solutions, delivery of new revenue generating services and engaging patients in their personal healthcare. This acquisition, along with the new offering of the Apple Health app, which I shared last quarter, broadens our reach into the patient engagement arena.

Tangible benefits for CPSI include an expanded footprint in the chronic care market, increased exposure to new opportunities in international markets and yielding approximately $1 million in annual cost synergies. Given the growing demand for this type of patient engagement solutions in community healthcare, along with the potential growth for Get Real Health, we expect the acquisition to be accretive to adjusted EBITDA for 2019. The four new complementary solutions that come with this acquisition fit nicely within our product strategy and vision. The foundation that we're building upon to offer new solutions is aligned with the trends of value-based care, as well as a broader array of value-added services, to help community healthcare organizations improve their financial and clinical operations.

The four patient engagement products include a chronic care management solution, a patient portal, a data analytics development platform. Their newest offering known as Lydia is a consumer facing personal health record that was identified by Microsoft as a destination for HealthVault users to transition their data. This new patient portal from Get Real Health will replace our existing Thrive and Centriq patient portals and bring incremental cost savings by decreasing our reliance on third-party products. Get Real Health will continue its focus and expansion in the U.S.

and internationally, in addition to strengthening their patient engagement offerings for our community hospital clients. As we look to complement the real breadth and depth of these patient engagement solutions with care management services from TruBridge, we see a great opportunity to help our community hospitals build a greater competitive advantage over the larger tertiary healthcare systems as they seek to healthcare -- to keep healthcare personal and local. As I alluded to earlier, we continue to invest in and deliver on our product strategy that benefits all of our clients across all care settings. This strategy is based on protecting our clients' investment, improving their experience by mapping our solutions to business needs and key workflows between physicians, nurses and their patients.

As we continue to build upon the efficiencies that this strategy delivers, each new offering will benefit and bring added value to our acute, post-acute and ambulatory client bases. Note, console and communications center are part of the first set of clinical offerings delivered under this product strategy. Notes is now NGA, and we are in the pallet faced with console in our Thrive EHR base. These two solutions directly impact the efficiency for providers by serving up the right information at the right time in both the hospital and ambulatory care settings.

Communication center is currently being implemented within our post-acute care base, with good success and client feedback. Finally, many of you may be aware that this year CPSI is celebrating 40 years in the community healthcare market. We are very proud of this anniversary and the 40 years we have been serving this market. CPSI entered this market four decades ago, long before ARRA drove other vendors to inner in order to get their share of the incentives available.

Now while the others in the industry take a pause to determine their long-term strategy for serving this community space, we remain steadfast in our commitment. In the midst of the changes under way in healthcare, we remain focused on community healthcare, investing in solutions, products and services that will meet the evolving needs of our clients and contribute to our combined success. Later this month, we will host more than 1,200 clients from across our family of companies for our annual national client conference as they come to learn about our existing solutions and about our newest offerings that we have spent time talking about today. We always look forward to connecting with our clients each year at this conference as it is a great opportunity for us to listen, share and especially this year celebrate our 40 years of partnership.

With that, I'll turn the call over to Matt for a look at the financials.

Matt Chambless -- Chief Financial Officer

Thanks, Boyd, and good afternoon, everyone. A stubborn decision environment drove light bookings this quarter, but should not obscure from what was fundamental a strong quarter for CPSI. Perhaps most importantly, we view the lightness in bookings this quarter as a short-term blip caused by a momentary lack of urgency in decision-making. That thesis is supported by our internal measures of our pipeline.

We show pipeline growth from 12/31/18 to 03/31/19 that outpaces the sequential decline in bookings. Secondly, our efforts to rightsize our cost structure appear to have been effectively timed, allowing CPSI to preserve profitability in the face of revenue fluctuations, with nearly all profitability metrics continuing to outperform respective metric averages since our acquisition of Health Plan and leading to a 5% year-over-year growth in non-GAAP EPS, despite a slight decrease in revenues. While on the subject of cost containment, we're pleased to announce that to date we have decisioned and actioned all $10 million of the cost savings identified during 2018, and those benefits have begun to flow through our income statement beginning in the first quarter. We continuously turn the microscope around on ourselves to find ways to further optimize our resources, and we're excited to announce that those efforts have resulted in an additional $3 million of annual savings identified during 2019, with the potential for more to come.

Again, the entire $3 million has been decisioned and actioned and benefits are expected to begin flowing through the financials as early as the second quarter of this year. At a high level, the income statement was slightly mixed versus the prior year, with revenue down slightly while the aforementioned focus on resource allocation allow for adjusted EBITDA to effectively hold steady, with EPS expanding organically. Sequential declines in revenues and profitability were as expected, given the record level of new Thrive implementations during the fourth quarter of 2018. With regards to cash flow, the headwinds from financing receivables are indeed abating, with total revenues being effectively cash neutral during the first quarter of 2019, allowing for nearly 150% increase in cash flow from operations compared to the first quarter of 2018.

On a trailing 12-month basis, we now boast nearly $29 million of operating cash flows, compared to $17 million on a trailing 12-month basis at this time last year. This improved strength in cash flows has allowed us to reduce our bank debt by $18 million since March 31, 2018, with $7 million of that reduction coming in the past quarter. This use of cash to accelerate our delever strategy has been with a target leverage ratio of two-and-a-half times in mind and all for the purpose of creating flexibility to enable more opportunistic capital allocation in the future. With the addition of Get Real Health to our portfolio of companies, we've been faithful to the strategy we laid out in October 2017.

As Boyd mentioned in his prepared remarks, GRH brings with it a portfolio of products and technologies that we can leverage to accelerate the growth of TruBridge with greater focus on the patient while adding exponentially to our international relationships, particularly in the Canadian market. GRH serves as a prime example of the incremental tuck-in opportunities that are out there for us and we're excited to see this new strategic direction take off. Given the recent increased demand worldwide for patient engagement solutions, Get Real Health's growth prospects for 2019 and beyond are significant. However, the timing and deal structure of many large opportunities in the pipeline are problematic in providing guidance on 2019 GRH financial performance.

As you likely saw in our 8-K filing, the deal earn-out structure provides incentive for capture of this pipeline under both SaaS and license terms. To reiterate Boyd's comments, we expect the deal to be accretive on an adjusted EBITDA basis. Turning to some of the details for the quarter, total bookings disappointed, posting declines of 41% sequentially and 38% from the first quarter of 2018 as win rates remained relatively with consistent historical rates but an uncharacteristic lack of decision urgency set in among our acute-care EHR net new and TruBridge opportunities. TruBridge bookings hit a bump in the road after finishing 2018 with three consecutive quarters of sequential growth, with both new and add-on bookings for business services suffering from the anemic decision pace, resulting in a sequential 45% decline.

Even with this road bump, year-over-year bookings were up 11%, albeit versus a relatively low comp. The software side of our business saw declines of 43% sequentially and 53% year over year as the slow decision dynamic had a severe impact on acute-care EHR net new bookings. Loss in the [Inaudible] of an otherwise disappointing bookings quarter was a strong showing by our post-acute segment for bookings of $1.4 million, with highest in two years and reflective of the resources we've devoted to revamping the product. Overall, live bookings in the quarter also led to a sequential $4 million decline in 12-month nonrecurring backlog as backlog fulfillment outpaced new bookings.

Of the $9.7 million in system sales and support bookings, roughly $900,000 is included in our first-quarter revenues, $7.2 million represents nonsubscription sales that should trickle into revenue over the next 12 months, with an average lag between booking and install of five to six months. $1.6 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 nonsubscription sales, an average lag between booking and install of five to six months. Our $4.2 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. Four customer sites went live with our Thrive acute care product compared to 12 in the previous quarter and five in the first quarter of 2018.

As for licensing mix, one of this quarter's go live was under a cloud or subscription model, with the same holding true for both the previous quarter and the first quarter of 2018. At this time we expect seven new client facilities to go live with our Thrive solution in the second quarter of 2019 with three expected to go live in the cloud environment. Our employee headcount as of March 31 was roughly 2,014, relatively unchanged from the end of 2018. Turning to the income statement.

TruBridge posted results that were up 3% sequentially and 3% over the first quarter of 2018. The strong bookings performance throughout 2018 for our TruBridge RCM solution resulted in strong showings for our insurance services division, with revenues increasing $500,000 or 7% sequentially and $800,000 or 11% year over year. Rounding up the revenue story compared to the previous quarter, our accounts receivable management, private pay and IT-managed services divisions saw combined increase of $700,000 largely offset by a $300,000 decrease in nonrecurring consulting revenue. These divisions saw a combined $1 million increase compared to the first quarter of 2018, effectively matched by a combined $1 million decrease in nonrecurring consulting revenues and volume-driven revenue declines for our medical coding services.

Sequentially, volume-related costs related to certain third-party spend categories declined, allowing for margins to improve to 47% from 43% in the previous quarter and 45% in the first quarter of 2018. System sales and support revenues decreased $4 million sequentially as the previous quarter's eight-year record number of installations made for a tough comp. Year over year, quarterly revenues were down $2.5 million, with the largest factor being a $2 million decrease in MU3-related revenues decreasing from $4.4 million to $2.4 million. Our cost of system sales and support were effectively flat sequentially and year over year, and when coupled with the revenue declines noted above resulted in gross margins decreasing to 58% in the first quarter of 2019 from 61% in the previous quarter and 60% in the first quarter of 2018.

Product development costs were up 3% sequentially and 5% year over year, driven by additional salary costs due to our strategic initiatives designed to improve provider adoption and clinical workflow and rejuvenate our post-acute offering. Sales and marketing cost decreased $400,000 as decreased implementation revenues drove commissions lower work while year-over-year cost decreased $200,000 behind reduced payroll cost. General and administrative cost increased $1.3 million from previous quarter. Severance and other nonrecurring costs increased of $900,000, driven by strategic initiatives such as our acquisition of GRH.

Vacation utilization expense increased $1.1 million due to the seasonal dynamic of employee vacation time. Similarly, the expenses associated with our 401(k) match program increased $1 million due to seasonal dynamics that tend to force our annual expense largely into the first three quarters of the year. These cost increases were largely offset by reductions in employee health cost resulting from planned design changes contingent to drive down costs while still providing competitive benefits to our employees. Year-over-year costs are down $500,000 despite a $1.2 million increase in severance and other nonrecurring cost largely due to the aforementioned reduction in employee health cost, which were part of our $10 million cost savings initiative that we spoke to you during much of 2018.

Lastly, our effective tax rate during the quarter was 23.3% as discrete items such as state notices from prior years, tax shortfalls from stock-based compensation and nondeductible costs associated with the GRH acquisition increased the effective rate by 5% collectively. In closing, when we look back at the first quarter, there were obviously some negatives and positives, but what has encouraged is that the negatives, mostly to our lighter-than-expected implementation calendar and a suddenly stubborn decision environment for bookings, are largely short-term phenomena. Conversely, the positives, with a big spotlight on the $10 million cost savings we identified during 2018 and incremental $3 million we're identified during 2019, are long-term canvas for improving profitability going forward. We're also emboldened by recent changes in the competitive landscape that in our view has resulted in a much less aggressive approach by some key competitors to the smaller hospital market, placing CPSI in an even stronger position to protect and grow our share.

Lastly, although CPSI does not provide specific guidance, we have looked at our expectations for how the rest of the year will unfold, excluding the contributions of GRH, lighter-than-expected bookings during the first quarter make for headwinds against the top line for next quarter, while the timing of our annual national client conference in May should result in incremental general and administrative cost of $1 million to $1.5 million, creating headwinds against the bottom line for next quarter. However, better-than-expected cost savings, including the incremental $3 million identified and already actioned in 2019, combined with what's shaping up to be another back loaded schedule for new Thrive implementations, provides us with comfort that we will meet our full-year expectations as previously expressed and remain on track to hit our medium-term margin targets. And with that, we'd like to open up the line for questions.

Questions & Answers:


Operator

[Operator instructions] Our first question comes from the line of Donald Hooker with KeyBanc. Your line is open. Please proceed with your question.

Donald Hooker -- KeyBank Capital Markets -- Analyst

Great. Good afternoon. A -- so this Get Real acquisition, I was sort of scribbling down numbers as you were talking. Did you guys give a revenue number? Some sort of revenue guidance number or historical numbers so we can sort of think how that might flow into the P&L, top and bottom line?

Matt Chambless -- Chief Financial Officer

Don, this is Matt. As we said in our prepared remarks, there are -- given the explosive growth that we're seeing internationally and the demand for patient engagement solutions and the number of deals in the pipeline right now that are still in flux both in terms of volume and in the license dynamics, it makes it very difficult for us to really pinpoint a number for guidance. So that's the best we can say right now is that we do expect GRH to be accretive to EBITDA for 2019, and we can provide further updates on the next call.

Donald Hooker -- KeyBank Capital Markets -- Analyst

OK. And then maybe higher level. I mean I guess there have been some positive sort of reimbursement commentary from CMS for rural healthcare providers, which I think is good news I'm sure for you guys ultimately and so far that it probably helps your clients. Just wondering if you guys had any feedback from your client base as to kind of how CMS rules might benefit them?

Boyd Douglas -- President and Chief Executive Officer

Yes. It's been limited so far because that news is relatively new. But certainly we view it the same way you view it. It looks like it is going to help them, and we're certainly excited about that because they certainly are struggling and have been for a while, so that should bring some relief to them.

Donald Hooker -- KeyBank Capital Markets -- Analyst

OK. And then maybe just last question for me and then I'll yield the floor. In terms of the Get Real acquisition, how does this fit into, like, your broader, sort of, movement in the pop health. When I think about your partnership with Caravan with some of the dashboard work you've done, can you give kind of a broader perspective on your route strategy and how this sort of plugs into that?

Chris Fowler -- Chief Operating Officer

Yes. Donald, this is Chris. I think that this fits exactly into the population health strategy. I mean so the future is around patient engagement, watching the healthcare become more distributive.

And as we move toward value-based care, we've got to have tool and technology that allows us to create patient loyalty with our rural community hospitals. And we 100% believe that Get Real Health is the missing link for that. So this is the -- we historically have developed our own but obviously this is something that we need to accelerate -- we felt the need to accelerate our technology portfolio and this was a perfect solution for that.

Donald Hooker -- KeyBank Capital Markets -- Analyst

OK. Great. Thank you.

Operator

Our next question comes from the line of Mike Ott with Oppenheimer. Your line is open. Please proceed with your question.

Mike Ott -- Oppenheimer -- Analyst

Good afternoon. thanks for taking my question. Wonder if there was any bookings contribution this quarter from nTrust, I believe it was roughly $3 million last quarter?

David Dye -- Chief Growth Officer

Yes. There was not. We were pleasantly surprised, Mike, by the contribution in the fourth quarter this year and we were disappointed in the first quarter this year. There are -- do continue to be significant interest opportunities in the pipeline.

There do continue to -- we do continue to have regular discussions with our clients. We've got a clientwide webinar next week. It will be a major topic of discussion at our previously mentioned user conference in May. So we do think it continues to be a very significant opportunity going forward.

But there was zero contribution in the first quarter.

Mike Ott -- Oppenheimer -- Analyst

All right. And then on the $3 million incremental cost savings, are there any specific areas or line items that you've targeted for those?

Matt Chambless -- Chief Financial Officer

I think generally we would say that that's mostly going to come out of opex, not so much out of cost of sales.

Mike Ott -- Oppenheimer -- Analyst

OK. And then on the increase in competitive takeaways, much less aggressive competitive environment. It was read that Pena [Sp] is going to pull back from the sales on their hospital efforts. Is there more than that or can you confirm that?

Boyd Douglas -- President and Chief Executive Officer

We are not seeing Pena [Sp] in any net new deals. Correct.

Mike Ott -- Oppenheimer -- Analyst

All right. Thanks very much.

Boyd Douglas -- President and Chief Executive Officer

You bet. Thanks, Mike.

Operator

[Operator instructions] The next question comes from the line of Gene Mannheimer with Dougherty & Company. Your line is open. Please proceed with your question.

Gene Mannheimer -- Dougherty and Company LLC -- Analyst

Thanks. Good afternoon. A few for me. Understand you're not giving guidance on Get Real Health revenue, but can you at least share the trailing revenue number from that asset so we can get price to revenue on the acquisition?

Matt Chambless -- Chief Financial Officer

Gene, as stated, the explosive environment there right now and the opportunities we see in the pipeline for 2019 really make the 2018 number not really a relevant data point, so we're not in the position really to provide that right now.

Gene Mannheimer -- Dougherty and Company LLC -- Analyst

All right. So it sounds like it'll be a meaningful uptick from what it was, based on your comments?

Matt Chambless -- Chief Financial Officer

Yes. That's the expectation. And it's a hot space right now and the demand that we're seeing, not just domestically but internationally certainly has us encouraged.

Gene Mannheimer -- Dougherty and Company LLC -- Analyst

OK. All right, good. With respect to the bookings decline, I know you made the remark that pipeline growth is very strong during the quarter, but I mean what gives you the confidence that this urgency will return to the marketplace, driving a faster conversion to your pipeline, what makes you feel, like, bookings are going to pick up?

David Dye -- Chief Growth Officer

Gene, I don't know that urgency is the proper word or in the thought that actual urgency will return. The confidence is that in our win rate for the quarter and the fact that deals didn't just disappear, they just didn't execute. And the fact that net of the fact that we were obviously significantly lower than we would have expected to be during the quarter, the pipeline still increased significantly, that's encouraging. From a sales circle perspective, obviously the hospitals that are in the pipeline aren't going to be looking forever.

Most of them are in a dedicated decision-making process. They're not window shopping. So that's the reason why we feel confident in the pipeline.

Gene Mannheimer -- Dougherty and Company LLC -- Analyst

OK. And with respect to the TruBridge then, I noticed -- I noted the growth was only about 3% year on year, while I thought your goal was to drive growth more in the double digits, if not low to mid-teens on an annual basis. Can you help reconcile that for us?

Chris Fowler -- Chief Operating Officer

Yes. So -- this is Chris, Gene. From a year over year, looking at our core growth or looking at the customers that we had on the arms and the medical coding service, we saw shrinkage of about 8%. And that's related to some closing business lines and some closures of facilities and some of the larger deals that we've booked and installed over the last several years.

So it's a bit of a new phenomenon for us to see an existing customer's volume drive that much change in the revenue growth. But as we continue to have some success in the larger markets, we're going to have some swing like that. So notwithstanding that core growth, if we net -- net of the core services for arms and coding year over year, we'd have been right at 10% growth from Q1 '18 to this year. So again, that's something that is new to us, but obviously we'll be tracking it and keeping a finger on.

And as it relates to the 15% growth for the year, obviously with the performance for this quarter and then the light booking set, that makes that number a little tough to get to. So we're looking more into the upper single digits for growth for TruBridge this year.

Gene Mannheimer -- Dougherty and Company LLC -- Analyst

All right. Very helpful. Thank you.

Operator

Our next question comes from the line of Stephanie Demko with Citi. Your line is open. Please proceed with your question.

Joy Zhang -- Citi -- Analyst

Hi. This is Joy on for Stephanie. With regards to bookings, how should we think about the time line for converting your bookings to revenue? And with that in mind, does the 1Q miss has a follow-on impact in 2019, 2020?

Matt Chambless -- Chief Financial Officer

Yes. So Joy, this is Matt. We generally state in our opening commenting both on the system sales cycle and on the TruBridge side, we usually see a lag of about four months to six months between just signing of the booking and when the related implementation takes place, so you're looking at perhaps a two-quarter lag. So it does provide some headwinds, which we spoke to in the opening commentary toward revenues in Q2 and the previously stated growth goal for TruBridge for 2019.

Joy Zhang -- Citi -- Analyst

Got it. Thanks.

Operator

Our next question comes from the line of David Larsen with SVB Leerink. Your line is open. Please proceed with your question.

Westley Dupray -- SVB Leerink -- Analyst

Hi. Good afternoon. This is Westley on for Dave. I just wanted to follow up quickly on the adjusted EBITDA profile and the accretion that you're expecting from the Get Real Health acquisition.

And I guess you've previously mentioned that 20% is a healthy EBITDA margin profile? I was just wondering if that was without giving any guidance kind of still what you're viewing as a healthy profile and how maybe the severance numbers can be expected moving forward?

Matt Chambless -- Chief Financial Officer

Yes. So as far as the margin profile for our business, we still think that, that 20% number is a good number and that's kind of our medium-term target that we're shooting for. So 20% is the goal that we have in mind. As far as the GRH's contribution to that, again, just reiterate that there are a lot of moving parts there that economically make a ton of sense and gets us excited.

But as far as how the GAAP plays out, where rev rec takes place, it really makes it difficult to pinpoint what the exact EBITDA contribution for 2019 is going to be, aside from saying that we do believe that it's going to be accretive for the year.

Westley Dupray -- SVB Leerink -- Analyst

OK. Great. And then just one more follow, I guess you guys referenced that there were two pushed installs in the first quarter. I was just wondering what the reason for those two are?

Matt Chambless -- Chief Financial Officer

Yes. So the reasons are the same as they generally have been for the past couple of years, whether it's a start-up facility or it's a client facility that hasn't gotten their CMS provider number yet, so these are both client requested delays in their implementation. So again, key thing to remember, they have not rolled all [Inaudible] implementation calendar, they've just moved back.

Westley Dupray -- SVB Leerink -- Analyst

OK. Thank you.

Matt Chambless -- Chief Financial Officer

You're welcome.

Operator

We have a follow-up from the line of Donald Hooker with KeyBanc. Your line is now open. Please proceed with your question.

Donald Hooker -- KeyBank Capital Markets -- Analyst

Great. Just a couple, if you don't mind. In terms of the MU3 bonuses, does it kind of throws of our models from the outside? What are the remaining bonuses that we should expect? You said $2.4 million in the first quarter, what should that be in Q2 and Q3, roughly? I mean, how much is left?

Matt Chambless -- Chief Financial Officer

Yes. So we think that the overall size of the remaining opportunity is somewhere in the ballpark of, say, $4 million. And I'd expect the overwhelming majority of that to fall in Q3 at this point.

Donald Hooker -- KeyBank Capital Markets -- Analyst

OK. And then maybe last one, can you share with us the recurring software support revenue in the quarter? I guess that'll be in your Q.

Matt Chambless -- Chief Financial Officer

Yes, it'll be in the Q. Yes, so just be on the lookout for that in the Q.

Operator

There appear to be no further questions queued up over the phone line at this time.

Boyd Douglas -- President and Chief Executive Officer

Great. Thanks, Ash, and thanks, everyone, for joining the call today. I hope everyone has a great evening. Thank you.

Operator

[Operator signoff]

Duration: 37 minutes

Call participants:

Boyd Douglas -- President and Chief Executive Officer

Matt Chambless -- Chief Financial Officer

Donald Hooker -- KeyBank Capital Markets -- Analyst

Chris Fowler -- Chief Operating Officer

Mike Ott -- Oppenheimer -- Analyst

David Dye -- Chief Growth Officer

Gene Mannheimer -- Dougherty and Company LLC -- Analyst

Joy Zhang -- Citi -- Analyst

Westley Dupray -- SVB Leerink -- Analyst

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