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CPSI Announces First Quarter 2022 Results

Highlights for First Quarter 2022:

  • Revenues of $77.9 million;
  • GAAP net income of $8.1 million and non-GAAP net income of $11.6 million;
  • GAAP earnings per diluted share of $0.55 and non-GAAP earnings per diluted share of $0.81;
  • Adjusted EBITDA of $16.2 million;
  • Bookings of $20.4 million;
  • Cash provided by operations of $11.8 million;
  • Net debt of $125.5 million; and
  • Subsequent announcement of amendment to credit facilities in order to facilitate a continued strategy of M&A to supplement significant organic growth opportunities

MOBILE, ALA. (May 3, 2022) – CPSI (NASDAQ: CPSI), a healthcare solutions company, today announced results for the first quarter ended March 31, 2022.

Total revenues for the first quarter ended March 31, 2022, were $77.9 million, compared with total revenues of $68.0 million for the prior-year first quarter. GAAP net income for the quarter ended March 31, 2022, was $8.1 million, or $0.55 per diluted share, compared with $4.1 million, or $0.28 per diluted share, for the quarter ended March 31, 2021. Cash provided by operations for the first quarter of 2022 was $11.8 million, compared with $13.7 million for the prior-year quarter. Net debt at March 31, 2022, was $125.5 million.

Commenting on the Company’s financial performance for the first quarter of 2022, Matt Chambless, chief financial officer of CPSI, stated, “CPSI had a solid financial performance for the first quarter, reflecting the continued execution of our transformative growth strategy. Combined with one month of activity from the recently acquired Healthcare Resource Group, Inc. (“HRG”), the resiliency of our customer base during this transition phase of the pandemic continues to provide momentum that has TruBridge soaring to new heights and driving near-record performance across all metrics. We are excited about the organic growth potential of TruBridge and our ability to accelerate that growth with the right mix of M&A execution. Along those lines, we are pleased to announce the recent amendment to our credit facilities, expanding our revolver capacity from $110 million to $160 million and gaining additional flexibility at the margins to pursue a responsible capital allocation strategy.”

CPSI will hold a live webcast to discuss first quarter 2022 results today, Tuesday, May 3, 2022, at 4:30 p.m. Eastern time. A 30-day online replay will be available approximately one hour following the conclusion of the live webcast. To listen to the live webcast or access the replay, visit the Company’s website, www.cpsi.com.

About CPSI
CPSI is a leading provider of healthcare solutions and services for community hospitals, their clinics and post-acute care facilities. Founded in 1979, CPSI is the parent of five companies – Evident, LLC, American HealthTech, Inc., TruBridge, LLC, iNetXperts, Corp. d/b/a Get Real Health and TruCode LLC. Our combined companies are focused on helping improve the health of the communities we serve, connecting communities for a better patient care experience, and improving the financial operations of our customers. Evident provides comprehensive EHR solutions for community hospitals and their affiliated clinics. American HealthTech is one of the nation’s largest providers of EHR solutions and services for post-acute care facilities. TruBridge focuses on providing business, consulting and managed IT services, along with its complete RCM solution, for all care settings. Get Real Health focuses on solutions aimed at improving patient engagement for individuals and healthcare providers. TruCode provides medical coding software that enables complete and accurate code assignment for optimal reimbursement. For more information, visit www.cpsi.com.

 Forward-Looking Statements
This press release contains forward-looking statements within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified generally by the use of forward-looking terminology and words such as “expects,” “anticipates,” “estimates,” “believes,” “predicts,” “intends,” “plans,” “potential,” “may,” “continue,” “should,” “will” and words of comparable meaning. Without limiting the generality of the preceding statement, all statements in this press release relating to the Company’s future financial and operational results are forward-looking statements. We caution investors that any such forward looking statements are only predictions and are not guarantees of future performance. Certain risks, uncertainties and other factors may cause actual results to differ materially from those projected in the forward looking statements. Such factors may include: the impact of the ongoing COVID-19 pandemic and related economic disruptions which have materially affected CPSI’s revenue and could materially affect CPSI’s gross margin and income, as well as CPSI’s financial position and/or liquidity; federal, state and local government actions to address and contain the impact of COVID-19 and their impact on us and our hospital clients; operational disruptions and heightened cybersecurity risks due to a significant percentage of our workforce working remotely; significant legislative and regulatory uncertainty in the healthcare industry; exposure to liability for failure to comply with regulatory requirements; saturation of our target market and hospital consolidations; unfavorable economic or market conditions that may cause a decline in spending for information technology and services; general economic conditions, including changes in the financial and credit markets that may affect the availability and cost of credit to us or our customers; potential inability to secure additional financing on favorable terms to meet our future capital needs; our substantial indebtedness, and our ability to incur additional indebtedness in the future; competition with companies that have greater financial, technical and marketing resources than we have; potential future acquisitions that may be expensive, time consuming, and subject to other inherent risks; potential failure to develop new products or enhance current products that keep pace with market demands; failure to develop new technology and products in response to market demands; failure of our products to function properly resulting in claims for medical and other losses; breaches of security and viruses in our systems resulting in customer claims against us and harm to our reputation; failure to maintain customer satisfaction through new product releases free of undetected errors or problems; failure to convince customers to migrate to current or future releases of our products; failure to maintain our margins and service rates; increase in the percentage of total revenues represented by service revenues, which have lower gross margins; exposure to liability in the event we provide inaccurate claims data to payors; exposure to liability claims arising out of the licensing of our software and provision of services; dependence on licenses of rights, products and services from third parties; misappropriation of our intellectual property rights and potential intellectual property claims and litigation against us; interruptions in our power supply and/or telecommunications capabilities, including those caused by natural disaster; our ability to attract and retain qualified client service and support personnel; disruption from periodic restructuring of our sales force; potential inability to properly manage growth in new markets we may enter; exposure to numerous and often conflicting laws, regulations, policies, standards or other requirements through our international business activities; potential litigation against us; pressures on cash flow to service our outstanding debt; restrictive terms of our credit agreement on our current and future operations; changes in and interpretations of financial accounting matters that govern the measurement of our performance; significant charges to earnings if our goodwill or intangible assets become impaired; fluctuations in quarterly financial performance due to, among other factors, timing of customer installations; volatility in our stock price; failure to maintain effective internal control over financial reporting; lack of employment or non-competition agreement with most of our key personnel; inherent limitations in our internal control over financial reporting; vulnerability to significant damage from natural disasters; market risks related to interest rate changes; and other risk factors described from time to time 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. Relative to our dividend policy, the payment of cash dividends is subject to the discretion of our Board of Directors and will be determined in light of then-current conditions, including our earnings, our leverage, our operations, our financial conditions, our capital requirements and other factors deemed relevant by our Board of Directors. In the future, our Board of Directors may change our dividend policy, including the frequency or amount of any dividend, in light of then-existing conditions. We also caution investors that the forward-looking information described herein 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 press release.

Computer Programs and Systems, Inc.
Condensed Consolidated Statements of Income
(In '000s, except per share data)
(Unaudited)
     
 

Three Months Ended March 31,

 

2022

 

2021

Sales revenues:    
TruBridge  

$

43,108

 

 

$

31,639

 

System sales and support  

 

34,763

 

 

 

36,366

 

Total sales revenues  

 

77,871

 

 

 

68,005

 

     
Costs of sales:    
TruBridge  

 

21,373

 

 

 

15,779

 

System sales and support  

 

16,683

 

 

 

17,376

 

Total costs of sales  

 

38,056

 

 

 

33,155

 

     
Gross profit  

 

39,815

 

 

 

34,850

 

     
Operating expenses:    
Product development  

 

7,101

 

 

 

8,429

 

Sales and marketing  

 

7,042

 

 

 

5,301

 

General and administrative  

 

13,014

 

 

 

13,149

 

Amortization of acquisition-related intangibles  

 

3,672

 

 

 

3,057

 

Total operating expenses  

 

30,829

 

 

 

29,936

 

     
Operating income  

 

8,986

 

 

 

4,914

 

     
Other income (expense):    
Other income  

 

157

 

 

 

814

 

Gain on contingent consideration  

 

1,250

 

 

 

-

 

Interest expense  

 

(917

)

 

 

(627

)

Total other income (expense)  

 

490

 

 

 

187

 

     
Income before taxes  

 

9,476

 

 

 

5,101

 

     
Provision for income taxes  

 

1,363

 

 

 

957

 

     
Net income  

$

8,113

 

 

$

4,144

 

     
Net income per common share—basic  

$

0.55

 

 

$

0.29

 

Net income per common share—diluted  

$

0.55

 

 

$

0.28

 

     
Weighted average shares outstanding used in per common share computations:    
Basic  

 

14,381

 

 

 

14,159

 

Diluted  

 

14,381

 

 

 

14,221

 

Computer Programs and Systems, Inc.
Condensed Consolidated Balance Sheets
(In '000s, except per share data)
     
  March 31, 2022
(unaudited)
  Dec. 31, 2021
Assets    
Current assets    
Cash and cash equivalents  

$

15,981

 

 

$

11,431

 

Accounts receivable, net of allowance for doubtful accounts of $2,699 and $1,826, respectively  

 

41,483

 

 

 

34,431

 

Financing receivables, current portion, net  

 

5,740

 

 

 

6,488

 

Inventories  

 

567

 

 

 

855

 

Prepaid income taxes  

 

4,115

 

 

 

4,599

 

Prepaid expenses and other  

 

12,911

 

 

 

11,194

 

Total current assets  

 

80,797

 

 

 

68,998

 

     
Property & equipment, net  

 

11,467

 

 

 

11,590

 

Software development costs, net  

 

15,409

 

 

 

11,644

 

Operating lease assets  

 

8,079

 

 

 

7,097

 

Financing receivables, net of current portion  

 

6,012

 

 

 

7,231

 

Other assets, net of current portion  

 

4,952

 

 

 

3,874

 

Intangible assets, net  

 

115,731

 

 

 

95,203

 

Goodwill  

 

192,446

 

 

 

177,713

 

Total assets  

$

434,893

 

 

$

383,350

 

     
Liabilities & Stockholders' Equity    
Current liabilities    
Accounts payable  

$

7,240

 

 

$

8,079

 

Current portion of long-term debt  

 

4,863

 

 

 

4,394

 

Deferred revenue  

 

14,131

 

 

 

11,529

 

Accrued vacation  

 

5,478

 

 

 

5,262

 

Other accrued liabilities  

 

15,023

 

 

 

17,163

 

Total current liabilities  

 

46,735

 

 

 

46,427

 

     
Long-term debt, less current portion  

 

136,633

 

 

 

94,966

 

Operating lease liabilities, net of current portion  

 

6,018

 

 

 

5,505

 

Deferred tax liabilities  

 

14,755

 

 

 

13,880

 

Total liabilities  

 

204,141

 

 

 

160,778

 

     
Stockholders' Equity    
Common stock, $0.001 par value; 30,000 shares authorized; 14,906 and 14,734 shares issued  

 

15

 

 

 

15

 

Treasury stock, 140 and 89 shares  

 

(4,226

)

 

 

(2,576

)

Additional paid-in capital  

 

188,796

 

 

 

187,079

 

Retained earnings  

 

46,167

 

 

 

38,054

 

Total stockholders' equity  

 

230,752

 

 

 

222,572

 

     
Total liabilities and stockholders' equity  

$

434,893

 

 

$

383,350

 

Computer Programs and Systems, Inc.
Condensed Consolidated Statements of Cash Flows
(In '000s)
(Unaudited)
     
  Three Months Ended March 31,
 

2022

 

2021

Operating activities:    
Net income  

$

8,113

 

 

$

4,144

 

Adjustments to net income:    
Provision for bad debt  

 

734

 

 

 

938

 

Deferred taxes  

 

692

 

 

 

1,058

 

Stock-based compensation  

 

1,717

 

 

 

1,034

 

Depreciation  

 

578

 

 

 

553

 

Amortization of acquisition-related intangibles  

 

3,672

 

 

 

3,057

 

Amortization of software development costs  

 

526

 

 

 

73

 

Amortization of deferred finance costs  

 

73

 

 

 

73

 

Gain on contingent consideration  

 

(1,250

)

 

 

-

 

Changes in operating assets and liabilities:    
Accounts receivable  

 

(2,020

)

 

 

(2,183

)

Financing receivables  

 

1,810

 

 

 

1,994

 

Inventories  

 

288

 

 

 

(258

)

Prepaid expenses and other  

 

(2,316

)

 

 

321

 

Accounts payable  

 

(1,140

)

 

 

(974

)

Deferred revenue  

 

2,602

 

 

 

703

 

Other liabilities  

 

(2,951

)

 

 

3,576

 

Prepaid income taxes  

 

689

 

 

 

(399

)

Net cash provided by operating activities  

 

11,817

 

 

 

13,710

 

     
Investing activities:    
Purchase of business, net of cash received  

 

(43,362

)

 

 

-

 

Investment in software development  

 

(4,291

)

 

 

(872

)

Purchases of property and equipment  

 

(27

)

 

 

(493

)

Net cash used in investing activities  

 

(47,680

)

 

 

(1,365

)

     
Financing activities:    
Treasury stock purchases  

 

(1,650

)

 

 

(1,063

)

Payments of long-term debt principal  

 

(937

)

 

 

(937

)

Proceeds from revolving line of credit  

 

48,000

 

 

 

-

 

Payments of revolving line of credit  

 

(5,000

)

 

 

(5,000

)

Net cash provided by (used in) financing activities  

 

40,413

 

 

 

(7,000

)

     
Net increase in cash and cash equivalents  

 

4,550

 

 

 

5,345

 

     
Cash and cash equivalents, beginning of period  

 

11,431

 

 

 

12,671

 

Cash and cash equivalents, end of period  

$

15,981

 

 

$

18,016

 

Computer Programs and Systems, Inc.
Consolidated Bookings
(In '000s)
  Three Months Ended
In '000s  

3/31/2022

 

3/31/2021

TruBridge(1)  

$

10,151

 

$

2,687

System sales and support(2)  

 

10,246

 

 

6,090

Total  

$

20,397

 

$

8,777

(1)

Generally calculated as the total contract price (for non-recurring, project-related amounts) and annualized contract value (for recurring amounts)

(2)

Generally calculated as the total contract price (for system sales) and annualized contract value (for support).

Computer Programs and Systems, Inc.
Bookings Composition
(In '000s, except per share data)
(Unaudited)
     
 

Three Months Ended

 

3/31/2022

 

3/31/2021

TruBridge    
Net new(1)  

$

4,356

 

$

462

Cross-sell(1)  

 

4,079

 

 

1,589

Get Real Health  

 

1,578

 

 

636

TruCode  

 

138

 

 

-

System sales and support    
Non-subscription sales(2)  

 

3,266

 

 

2,997

Subscription revenue(3)  

 

6,071

 

 

1,907

Other  

 

909

 

 

1,186

     
Total  

$

20,397

 

$

8,777

(1)

“Net new” represents bookings from outside the Company’s core EHR client base, and “Cross-sell” represents bookings from existing EHR customers. In each case, generally comprised of recurring revenues to be recognized ratably over a one-year period and an average timeframe for commencement of bookings-to-revenue conversion of four to six months following contract execution.

(2)

Represents nonrecurring revenues that generally exhibit a timeframe for bookings-to-revenue conversion of five to six months following contract execution.

(3)

Represents recurring revenues to be recognized on a monthly basis over a weighted-average contract period of five years, with a start date in the next 12 months and an average timeframe for commencement of bookings-to-revenue conversion of five to six months following contract execution.

Computer Programs and Systems, Inc.
Acute Care EHR Net New License Mix
     
  Three Months Ended
  3/31/2022   3/31/2021
SaaS(1)  

3

 

2

Perpetual license(2)  

-

 

3

     
Total  

3

 

5

(1)

Exhibit revenue attribution that is recurring in nature.

(2)

Exhibit revenue attribution that is nonrecurring in nature.

Computer Programs and Systems, Inc.
System Sales and Support Revenue Composition
(In '000s)
(Unaudited)
     
  Three Months Ended March 31,
 

2022

 

2021

Recurring revenues - system sales and support    
Acute Care EHR  

$

27,364

 

$

27,210

Post-acute Care EHR  

 

3,895

 

 

4,222

Total recurring revenues - system sales and support  

 

31,259

 

 

31,432

     
Nonrecurring revenues - system sales and support    
Acute Care EHR  

 

3,028

 

 

4,680

Post-acute Care EHR  

 

476

 

 

254

Total nonrecurring revenues - system sales and support  

 

3,504

 

 

4,934

     
Total system sales and support revenues  

$

34,763

 

$

36,366

Computer Programs and Systems, Inc.
Adjusted EBITDA - by Segment
(In '000s)
     
 

Three Months Ended March 31,

In '000s  

2022

 

2021

TruBridge  

$

10,789

 

$

6,520

Acute Care EHR  

 

5,032

 

 

4,684

Post-acute Care EHR  

 

332

 

 

620

     
Total  

$

16,153

 

$

11,824

Computer Programs and Systems, Inc.
Reconciliation of Non-GAAP Financial Measures
(In '000s)
(Unaudited)
     
 

Three Months Ended March 31,

Adjusted EBITDA:  

2022

 

2021

Net income, as reported  

$

8,113

 

 

$

4,144

 

     
Deferred revenue and other acquisition-related adjustments  

 

79

 

 

 

-

 

Depreciation expense  

 

578

 

 

 

553

 

Amortization of software development costs  

 

526

 

 

 

73

 

Amortization of acquisition-related intangible assets  

 

3,672

 

 

 

3,057

 

Stock-based compensation  

 

1,717

 

 

 

1,034

 

Severance and other nonrecurring charges  

 

594

 

 

 

2,193

 

Interest expense and other, net  

 

761

 

 

 

(187

)

Gain on contingent consideration  

 

(1,250

)

 

 

-

 

Provision for income taxes  

 

1,363

 

 

 

957

 

Adjusted EBITDA  

$

16,153

 

 

$

11,824

 

Computer Programs and Systems, Inc.
Reconciliation of Non-GAAP Financial Measures
(In '000s, except per share data)
(Unaudited)
     
 

Three Months Ended March 31,

Non-GAAP Net Income and Non-GAAP EPS:  

2022

 

2021

Net income, as reported  

$

8,113

 

 

$

4,144

 

     
Pre-tax adjustments for Non-GAAP EPS:    
Deferred revenue and other acquisition-related adjustments  

 

79

 

 

 

-

 

Amortization of acquisition-related intangible assets  

 

3,672

 

 

 

3,057

 

Stock-based compensation  

 

1,717

 

 

 

1,034

 

Severance and other nonrecurring charges  

 

594

 

 

 

2,193

 

Non-cash interest expense  

 

73

 

 

 

73

 

After-tax adjustments for Non-GAAP EPS:    
Tax-effect of pre-tax adjustments, at 21%  

 

(1,288

)

 

 

(1,335

)

Tax shortfall (windfall) from stock-based compensation  

 

(112

)

 

 

(84

)

Gain on contingent consideration  

 

(1,250

)

 

 

-

 

     
Non-GAAP net income  

$

11,598

 

 

$

9,082

 

     
Weighted average shares outstanding, diluted  

 

14,381

 

 

 

14,221

 

     
Non-GAAP EPS  

$

0.81

 

 

$

0.64

 

Explanation of Non-GAAP Financial Measures

We report our financial results in accordance with accounting principles generally accepted in the United States of America, or “GAAP.” However, management believes that, in order to properly understand our short-term and long-term financial and operational trends, investors may wish to consider the impact of certain non-cash or non-recurring items, when used as a supplement to financial performance measures that are prepared in accordance with GAAP. These items result from facts and circumstances that vary in frequency and impact on continuing operations. Management uses these non-GAAP financial measures in order to evaluate the operating performance of the Company and compare it against past periods, make operating decisions, and serve as a basis for strategic planning. These non-GAAP financial measures provide management with additional means to understand and evaluate the operating results and trends in our ongoing business by eliminating certain non-cash expenses and other items that management believes might otherwise make comparisons of our ongoing business with prior periods more difficult, obscure trends in ongoing operations, or reduce management’s ability to make useful forecasts. In addition, management understands that some investors and financial analysts find these non-GAAP financial measures helpful in analyzing our financial and operational performance and comparing this performance to our peers and competitors.

As such, to supplement the GAAP information provided, we present in this press release and during the live webcast discussing our financial results the following non GAAP financial measures: Adjusted EBITDA, Non-GAAP net income, and Non-GAAP earnings per share (“EPS”).

We calculate each of these non-GAAP financial measures as follows:

  • Adjusted EBITDA – Adjusted EBITDA consists of GAAP net income as reported and adjusts for (i) deferred revenue purchase accounting adjustments arising from purchase allocation adjustments related to business acquisitions; (ii) depreciation expense; (iii) amortization of software development costs; (iv) amortization of acquisition-related intangible assets; (v) stock-based compensation; (vi) severance and other non recurring charges; (vii) interest expense and other, net; (viii) gain on contingent consideration; and (ix) the provision for income taxes.

  • Non-GAAP net income – Non-GAAP net income consists of GAAP net income as reported and adjusts for (i) deferred revenue purchase accounting adjustments arising from purchase allocation adjustments related to business acquisitions; (ii) amortization of acquisition-related intangible assets; (iii) stock-based compensation; (iv) severance and other non-recurring charges; (v) non-cash interest expense; and (vi) the total tax effect of items (i) through (v). Adjustments to Non-GAAP net income also include the after-tax effect of the shortfall (windfall) from stock-based compensation and gain on contingent consideration.

  • Non-GAAP EPS – Non-GAAP EPS consists of Non-GAAP net income, as defined above, divided by weighted average shares outstanding (diluted) in the applicable period.

Certain of the items excluded or adjusted to arrive at these non-GAAP financial measures are described below:

  • Deferred revenue purchase accounting adjustments – Deferred revenue purchase accounting adjustments includes acquisition-related deferred revenue adjustments, which reflect the fair value adjustments to deferred revenues acquired in business acquisitions. The fair value of deferred revenue represents an amount equivalent to the estimated cost plus an appropriate profit margin, to perform services related to the acquiree’s software and product support, which assumes a legal obligation to do so, based on the deferred revenue balances as of the acquisition date. We add back deferred revenue and other adjustments for non-GAAP financial measures because we believe the inclusion of this amount directly correlates to the underlying performance of our operations.

  • Amortization of acquisition-related intangible assets – Acquisition-related amortization expense is a non-cash expense arising primarily from the acquisition of intangible assets in connection with acquisitions or investments. We exclude acquisition-related amortization expense from non-GAAP financial measures because we believe (i) the amount of such expenses in any specific period may not directly correlate to the underlying performance of our business operations and (ii) such expenses can vary significantly between periods as a result of new acquisitions and full amortization of previously acquired intangible assets. Investors should note that the use of these intangible assets contributed to revenue in the periods presented and will contribute to future revenue generation, and the related amortization expense will recur in future periods.

  • Stock-based compensation – Stock-based compensation expense is a non-cash expense arising from the grant of stock-based awards. We exclude stock-based compensation expense from non-GAAP financial measures because we believe (i) the amount of such expenses in any specific period may not directly correlate to the underlying performance of our business operations and (ii) such expenses can vary significantly between periods as a result of the timing and valuation of grants of new stock-based awards, including grants in connection with acquisitions. Investors should note that stock-based compensation is a key incentive offered to employees whose efforts contributed to the operating results in the periods presented and are expected to contribute to operating results in future periods, and such expense will recur in future periods.

  • Severance and other non-recurring charges – Non-recurring charges relate to certain severance and other charges incurred in connection with activities that are considered one-time. We exclude non-recurring expenses (primarily related to costs associated with our recent business transformation initiative and one-time lease terminations costs) and transaction-related costs from non-GAAP financial measures because we believe (i) the amount of such expenses in any specific period may not directly correlate to the underlying performance of our business operations and (ii) such expenses can vary significantly between periods.

  • Non-operating loss from lease termination (non-cash) – Non-operating loss from lease termination relates solely to the write-off of the remaining net book value of leasehold improvements and other property and equipment associated with operating leases terminated as a result of specific actions taken during the period. We exclude such non-operating lease termination losses from non-GAAP financial measures because we believe (i) the amount of such expenses in any specific period may not directly correlate to the underlying performance of our business operations and (ii) such expenses can vary significantly between periods.

  • Non-cash interest expense – Non-cash interest expense includes amortization of deferred debt issuance costs. We exclude non-cash interest expense from non-GAAP financial measures because we believe these non-cash amounts relate to specific transactions and, as such, may not directly correlate to the underlying performance of our business operations.

  • Tax shortfall (excess tax benefit) from stock-based compensation – ASU 2016-09, Improvements to Employee Share-Based Payment Accounting, became effective for the Company during the first quarter of 2017 and changes the treatment of tax shortfall and excess tax benefits arising from stock based compensation arrangements. Prior to ASU 2016-09, these amounts were recorded as an increase (for excess benefits) or decrease (for shortfalls) to additional paid-in capital. With the adoption of ASU 2016-09, these amounts are now captured in the period’s income tax expense. We exclude this component of income tax expense from non-GAAP financial measures because we believe (i) the amount of such expenses or benefits in any specific period may not directly correlate to the underlying performance of our business operations; and (ii) such expenses or benefits can vary significantly between periods as a result of the valuation of grants of new stock-based awards, the timing of vesting of awards, and periodic movements in the fair value of our common stock.

  • Gain on contingent consideration – The purchase agreement for our acquisition of TruCode in 2021 contained contingent consideration, or “earnout,” provisions whereby the previous shareholders of TruCode would receive additional consideration at the conclusion of a one-year period beginning on the acquisition date and ending on the first anniversary of the acquisition date, depending on the achievement of certain profitability targets. After the initial measurement period, U.S. GAAP requires that any adjustments to the estimated fair value of this contingent liability, including upon final determination of amounts due, should be recorded in the relevant period’s earnings. We exclude gains on contingent consideration from non-GAAP financial measures because we believe (i) the amount of such gains in any specific period may not directly correlate to the underlying performance of our business operations and (ii) such gains can vary significantly between periods.

Management considers these non-GAAP financial measures to be important indicators of our operational strength and performance of our business and a good measure of our historical operating trends, in particular the extent to which ongoing operations impact our overall financial performance. In addition, management may use Adjusted EBITDA, Non-GAAP net income and/or Non-GAAP EPS to measure the achievement of performance objectives under the Company’s stock and cash incentive programs. Note, however, that these non-GAAP financial measures are performance measures only, and they do not provide any measure of cash flow or liquidity. Non-GAAP financial measures are not alternatives for measures of financial performance prepared in accordance with GAAP and may be different from similarly titled non-GAAP measures presented by other companies, limiting their usefulness as comparative measures. Non-GAAP financial measures have limitations in that they do not reflect all of the amounts associated with our results of operations as determined in accordance with GAAP. Additionally, there is no certainty that we will not incur expenses in the future that are similar to those excluded in the calculations of the non-GAAP financial measures presented in this press release. Investors and potential investors are encouraged to review the “Unaudited Reconciliation of Non GAAP Financial Measures” above.

CONTACT
Tracey Schroeder
Chief Marketing Officer
Tracey.schroeder@cpsi.com
(251) 639-8100

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