Executive Summary / Key Takeaways

• TruBridge is executing a strategic transformation, shifting from a traditional EHR vendor to a solutions provider focused on integrated Revenue Cycle Management (RCM) and Patient Care for rural and community hospitals, aiming to capitalize on the growing need for outsourced financial services.
• Operational efficiency initiatives, particularly the accelerated global workforce transition (offshoring), are driving significant margin expansion, with Q1 2025 Adjusted EBITDA margin reaching 20.9%, an 860 basis point improvement year-over-year.
• Financial health is improving dramatically, evidenced by a $7.4 million increase in operating cash flow in Q1 2025 compared to the prior year and a reduction in the net leverage ratio to 2.4x, down from 4x a year ago.
• Growth is being pursued through cross-selling Financial Health services into the existing Patient Care base, expanding into larger hospital segments (100-400 beds), and leveraging integrated offerings like nTrust and new technologies like Analytics and AI.
• While facing market uncertainties and execution risks related to the offshore transition and internal controls, management's increased full-year 2025 Adjusted EBITDA guidance signals confidence in continued operational improvements and profitability gains.

Setting the Scene: TruBridge's Evolution and Market Position

TruBridge, Inc. (NASDAQ: TBRG), founded in 1979, has long served the vital, yet often underserved, market of rural and community hospitals and their associated clinics. What began primarily as an Electronic Health Record (EHR) vendor has strategically evolved. Recognizing the increasing prevalence and demand for outsourced Revenue Cycle Management (RCM) services and complementary solutions, the company has deliberately shifted its focus. This transformation was formally acknowledged on March 4, 2024, with the change from Computer Programs and Systems, Inc. to the TruBridge name, reflecting its deepening commitment to providing comprehensive solutions that improve both patient care and financial operations.

TruBridge operates through two reportable segments: Financial Health (formerly RCM) and Patient Care (formerly EHR, now including Patient Engagement). The Financial Health segment provides a broad suite of RCM services, professional IT services, and software solutions, designed to optimize financial performance for healthcare providers regardless of their primary IT vendor. The Patient Care segment offers comprehensive acute care EHR solutions, related implementation and support services, and patient engagement technologies. This dual focus, particularly the integration of RCM and EHR capabilities, forms the bedrock of TruBridge's strategy to become the indispensable partner for its target market.

In the competitive landscape, TruBridge operates alongside larger, more diversified players like UnitedHealth Group (UNH)'s Optum segment, and RCM specialists such as R1 RCM Inc. (RCM) and MultiPlan Corporation (MPLN). While Optum and RCM often compete for larger hospital systems with their scale and automation capabilities (RCM, for instance, leverages AI for claim processing, achieving higher operating margins around 18% compared to TBRG's recent 6% TTM operating margin), TruBridge carves out its niche by focusing specifically on the rural and community hospital market. Its integrated offering, combining EHR and RCM, provides a unique value proposition that competitors with narrower focuses or broader market strategies may not replicate effectively. For example, TBRG's EHR platform is designed for its specific market, enabling faster data processing for patient engagement and reportedly achieving high HIPAA compliance rates (98%), which can be a critical differentiator for smaller, resource-constrained facilities. While larger competitors may boast higher overall revenue growth (UNH at 15% in 2024 vs. TBRG's 10% in 2024) and superior ROIC/ROE metrics, TBRG's targeted approach and deep understanding of its market's unique needs position it to capture share within this segment, where "no decision" is often a greater barrier than losing to a competitor.

Technological Foundation and Innovation Edge

TruBridge's technology portfolio is central to its strategy, particularly in enabling its integrated service delivery and driving efficiency. At its core is the Patient Care EHR platform, tailored for the workflows and needs of community hospitals and clinics. While specific quantitative performance metrics for the EHR platform relative to competitors were not detailed beyond its role in supporting integrated offerings and compliance, its proprietary nature is noted.

On the Financial Health side, technology underpins the RCM service delivery. The company is actively investing in enhancing this tech stack, with a clear demand for automation identified by new Financial Health General Manager, Merideth Wilson. Pilots are underway within the innovation team to leverage generative AI to drive value for clients, specifically aiming to automate Central Business Office (CBO) workflows. Management sees both the value and risk of AI in healthcare and is participating in networks like TRAIN (Trustworthy and Responsible AI Network) to help shape governance. Discussions are also ongoing with strategic partners to integrate their solutions into the TruBridge ecosystem, such as the ERP partnership with Multiview, which is expected to contribute to Patient Care growth.

The strategic intent behind these technological efforts is multifaceted:

• Enhancing the Integrated Offering: Technology facilitates the seamless connection between the EHR and RCM services in solutions like nTrust, creating a stickier, higher lifetime value customer relationship.
• Driving Operational Efficiency: Automation and AI are targeted at improving the efficiency of RCM operations, particularly in conjunction with the global workforce strategy. This is expected to lead to meaningful per-unit cost efficiencies, contributing to margin expansion.
• Creating New Revenue Streams: The Analytics offering, launched in Q2 2024, leverages customer data to provide actionable insights, improving clinical outcomes and identifying revenue cycle bottlenecks. This adds value to the existing base and serves as a selling point for new customers.
• Maintaining Competitive Relevance: In a market increasingly influenced by technology, continuous investment in areas like AI is crucial to keep pace with competitors like RCM, which emphasizes automation. While TBRG may currently trail some competitors in the speed of AI-driven processes, its focused R&D (10% of revenue in 2024) aims to close these gaps.

The shift in Patient Care new installations to 100% SaaS since 2022 is a direct reflection of technology adoption influencing the business model. This move, while potentially impacting short-term non-recurring revenue, leverages the technology platform to deliver services on a recurring basis, aligning with customer preference for lower upfront capital outlay and benefiting long-term revenue predictability.

Operational Transformation: Driving Efficiency and Margin Expansion

A cornerstone of TruBridge's current strategy is the aggressive pursuit of operational efficiency, primarily through the expansion of its global workforce and cost optimization initiatives. The acquisition of Viewgol in October 2023 was pivotal, providing a captive offshore operation that significantly enhanced control and scalability for the global workforce strategy.

The transition of CBO clients to offshore support is progressing rapidly. By the end of Q1 2025, approximately one-third of CBO clients were supported offshore, with a stated goal to double this to 60% by the end of 2025. This transition involves initial costs, such as overlapping staff to ensure a smooth customer experience and investments in standardizing processes and establishing a centralized workplace in India. However, management anticipates that these efforts will yield significant margin improvement in 2025 as efficiencies ramp up. Net savings from the global offshore initiative are expected to be in the mid-single-digit millions for the full year 2025.

Beyond offshoring, TruBridge has implemented broader cost optimization initiatives since 2024, including organizational realignment and leveraging frameworks like Scaled Agile in product development and support to enhance efficiency. These actions have already contributed to reduced operating expenses, particularly in product development and sales and marketing, as seen in the Q1 2025 results.

While the operational transformation is crucial for margin expansion, it is not without challenges. Management noted slightly elevated levels of customer satisfaction issues during the transition periods, which they are addressing by carefully evaluating the right mix of global and domestic staff and leveraging Viewgol's expertise in customer management. The success of this initiative hinges on balancing cost savings with maintaining or improving customer delight and retention, particularly for the approximately 60 key Financial Health clients up for renewal over the next 24 months.

Financial Performance: Tangible Results of the Transformation

The strategic and operational shifts are beginning to translate into tangible improvements in TruBridge's financial performance. Q1 2025 results demonstrated strong momentum, exceeding key financial expectations.

Total revenues for the three months ended March 31, 2025, increased by 4% year-over-year to $87.2 million. This growth was primarily driven by the Financial Health segment, which saw revenues increase by 5% to $56.1 million, fueled by growth in core RCM services from new bookings. The Patient Care segment also contributed positively, with revenues increasing by 1% to $31.1 million, primarily due to higher installation and SaaS revenue from new contracts. Notably, Patient Care revenue excluding the divested AHT and sunsetting Centriq products grew by a robust 9% year-over-year.

Profitability saw dramatic improvement. The company moved from a net loss of $1.9 million in Q1 2024 to net income of $0.5 million in Q1 2025. This swing was largely driven by the combination of revenue growth and significant reductions in operating expenses. Total costs of revenue exclusive of amortization and depreciation decreased by $2.2 million, or 5%, primarily due to lower domestic labor costs in Financial Health resulting from the global workforce transition. Product development expenses decreased by 23%, and sales and marketing costs decreased by 18%, reflecting the impact of 2024 cost optimization initiatives.

Adjusted EBITDA, a key metric for management, nearly doubled year-over-year, increasing by 77% to $18.2 million in Q1 2025, resulting in an Adjusted EBITDA margin of 20.9%, an impressive 860 basis point expansion from 12.3% in Q1 2024. Both segments contributed to this margin improvement, with Financial Health Adjusted EBITDA increasing by 66% and Patient Care Adjusted EBITDA increasing by 97%. While Q1 2025 Adjusted EBITDA benefited from approximately $2 million in timing differences (revenue and rescheduled sales meeting), the underlying trend of margin expansion driven by operational efficiencies is clear.

Strengthening the Balance Sheet and Liquidity

Improving financial health extends beyond the income statement to the balance sheet and cash flow generation. TruBridge has placed a strong emphasis on working capital management and debt reduction, leading to a significantly strengthened financial position.

Cash flow from operations saw a dramatic turnaround, increasing by $7.4 million to $5.8 million in Q1 2025 compared to a net use of $2.0 million in Q1 2024. This improvement was primarily attributed to increased collections resulting from better working capital management. Accounts receivable were down 12% year-over-year, and Days Sales Outstanding (DSO) improved by 12 days, although they remained flat sequentially, which management anecdotally linked to customer caution amid external policy uncertainty.

The company continues to prioritize debt reduction. An additional $3 million of principal was paid down on the credit facilities in Q1 2025, bringing the total principal repayments to $26 million since January 2024. This focus, combined with the growth in Adjusted EBITDA, has significantly improved the net leverage ratio, which decreased to 2.4x as of March 31, 2025, a substantial reduction from 4x a year prior and 2.8x at the end of 2024. Management is pleased with these levels and aims to maintain leverage around this range.

As of March 31, 2025, TruBridge held $10.1 million in cash and cash equivalents and had $46.6 million in remaining borrowing capacity under its revolving credit facility. These funding sources, combined with expected future operating cash flows, are deemed adequate to meet ongoing cash requirements for the next twelve months and beyond. The company was in compliance with the restrictive covenants of its credit agreement as of the reporting date.

Outlook and the Path Forward

Building on the strong start to 2025 and the momentum from operational improvements, TruBridge has provided updated guidance. For the full year 2025, the company maintains its revenue expectation between $345 million and $360 million but has increased its Adjusted EBITDA guidance range to $60 million to $66 million, up from the previous range of $59 million to $66 million. This upward revision incorporates the EBITDA outperformance seen in Q1.

Management anticipates a sequential step down in Q2 2025 results compared to Q1. Q2 revenue is expected to be between $85.5 million and $87.5 million, down slightly from Q1 due to revenue timing differences. Q2 Adjusted EBITDA is guided between $12.5 million and $14.5 million, a decrease from Q1 primarily due to approximately $3 million in costs related to the annual user conference and rescheduled sales kickoff meeting, the $1 million Q1 revenue timing benefit, and approximately $1 million in incremental labor costs from annual cost of living adjustments and investments in Financial Health staffing.

The full-year guidance implies continued progress towards management's longer-term goals of achieving mid-single-digit revenue growth and EBITDA margins in the mid-20s. The expected revenue growth is projected to be driven by the Financial Health business, particularly core CBO and new offerings, and low single-digit growth in Patient Care from new products like Analytics and partner solutions.

Bookings remain a key operational metric. Q1 2025 bookings totaled $22 million on a Total Contract Value (TCV) basis ($13 million Financial Health, $9 million Patient Care). The company is transitioning to reporting bookings on an Annual Contract Value (ACV) basis, with Q1 2025 ACV bookings reported at $17.34 million ($12.78 million Financial Health, $4.56 million Patient Care). This change aims to provide clearer visibility into expected near-term revenue. Q1 bookings included wins in the target 100-400 bed hospital segment and competitive displacements in Patient Care, demonstrating traction in key growth areas. However, approximately 25% of Q1 bookings are expected to have little revenue impact in 2025 due to customer-driven go-live timing, highlighting the variability in bookings conversion.

Management's confidence in the outlook is rooted in the continued execution of the global workforce strategy, expected to drive further margin expansion, and the momentum seen in bookings and pipeline, despite acknowledging potential customer caution due to external policy uncertainty.

Key Risks and Challenges

While the outlook is positive, several risks and challenges could impact TruBridge's trajectory.

• Market Uncertainty: Ongoing legislative and regulatory uncertainty in the U.S. healthcare industry, particularly regarding future funding and reimbursement rates (like payment parity discussions), could cause customers to delay investment decisions or take a more cautious approach to capital allocation, potentially impacting bookings and revenue growth.
• Operational Execution: The success of the global workforce transition is critical for margin expansion but carries execution risk. Ensuring a smooth transition while maintaining customer satisfaction and retaining talent is paramount. Elevated customer satisfaction challenges during this period could negatively impact retention and future growth.
• Inflationary Pressures: As a service organization, TruBridge's cost structure is heavily reliant on human capital. Wage inflation, particularly for domestic staff, and potential price adjustments in vendor contracts indexed to inflation could erode margins if not effectively managed or passed on to customers.
• Internal Control Weakness: The identified material weakness in internal control over financial reporting related to revenue transactions, while not resulting in prior material misstatements, could pose a risk if not remediated effectively and timely.
• Competitive Pressures: Competition from larger, more diversified players and RCM specialists remains intense. TruBridge must continue to differentiate its offerings and execute efficiently to maintain and grow market share.

Conclusion

TruBridge is in the midst of a significant transformation, strategically pivoting towards becoming a more efficient, RCM-centric integrated healthcare solutions provider for the rural and community hospital market. The first quarter of 2025 demonstrated tangible progress, with strong revenue growth driven by Financial Health, dramatic margin expansion fueled by operational efficiencies (particularly the global workforce initiative), and a substantially strengthened balance sheet marked by improved cash flow and reduced leverage.

The investment thesis hinges on TruBridge's ability to successfully execute its strategy: leveraging its integrated EHR/RCM offering and new technologies like Analytics and AI to capture market share through cross-selling and expansion into larger hospital segments, while simultaneously driving profitability through continued operational optimization, especially the offshore transition. Management's increased full-year Adjusted EBITDA guidance reflects growing confidence in the financial benefits of these initiatives.

Key factors for investors to monitor include the continued execution and customer impact of the global workforce transition, the conversion of bookings into revenue amidst potential market uncertainty, and the company's ability to effectively remediate its internal control weakness. Despite facing competitive pressures and macro headwinds, TruBridge's focused market strategy, operational discipline, and improving financial profile suggest a compelling narrative of a company successfully transforming itself to capitalize on the evolving needs of its core market.