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CPSI Announces Third Quarter 2020 Results

Highlights for Third Quarter 2020:

  • Revenues of $68.3 million;
  • GAAP net income of $5.3 million and non-GAAP net income of $9.4 million;
  • GAAP earnings per diluted share of $0.36 and non-GAAP earnings per diluted share of $0.67;
  • Adjusted EBITDA of $11.8 million;
  • Bookings of $21.5 million;
  • Cash provided by operations of $8.1 million; and

Net debt of $77.9 million

MOBILE, Ala.--(BUSINESS WIRE)--Nov. 5, 2020-- CPSI (NASDAQ: CPSI), a community healthcare solutions company, today announced results for the third quarter of 2020 and nine months ended September 30, 2020.

As previously announced on September 9, 2020, and in tandem with the authorization of the Company’s $30 million stock repurchase program, the CPSI Board of Directors opted to indefinitely suspend all quarterly dividends.

Total revenues for the quarter ended September 30, 2020, were $68.3 million, compared with total revenues of $68.7 million for the prior-year third quarter. GAAP net income for the quarter ended September 30, 2020, was $5.3 million, or $0.36 per diluted share, compared with $4.1 million, or $0.29 per diluted share, for the quarter ended September 30, 2019. Cash provided by operations for the third quarter of 2020 was $8.1 million, consistent with $8.1 million for the prior-year quarter. Net debt at September 30, 2020, was $77.9 million compared to $118 million one year ago.

Total revenues for the nine months ended September 30, 2020, were $197.6 million, compared with total revenues of $204.0 million for the prior-year period. GAAP net income for the nine months ended September 30, 2020, was $11.1 million, or $0.77 per diluted share, compared with $9.2 million, or $0.65 per diluted share, for the nine months ended September 30, 2019. Cash provided by operations for the first nine months of 2020 was $33.0 million, compared with $25.5 million for the prior-year period.

Commenting on the Company’s financial performance for the third quarter of 2020, Matt Chambless, chief financial officer of CPSI, stated, “A strong schedule for net new Thrive implementations and the continued recovery in hospital patient volumes, which helped drive our TruBridge revenues, resulted in impressive sequential increases on both the top and bottom lines. Revenues in the third quarter increased 15% from the second quarter, while net income nearly doubled and Adjusted EBITDA increased 54% over the same period. This top line strength, combined with continued discipline on the cost side, allowed us to extend our recent success in generating cash flows, with trailing twelve-month operating cash flows in excess of $51 million, a 48% improvement compared to the same metric a year ago. Our performance across all of these metrics is a testament to the resiliency of CPSI and our customer base, who view us as a committed partner as they navigate the unique challenges they have confronted in 2020.”

Boyd Douglas, president and chief executive officer of CPSI, stated, “We are pleased that in this challenging environment, total CPSI bookings year-to-date are up 15% over last year. As we head into the last quarter of 2020 with improved visibility and confidence in our operations, we anticipate being able to provide long-term guidance metrics when we release full-year 2020 results. There will always be market factors that can create uncertainty for CPSI and our customers. However, after more than 40 years of serving community healthcare providers, we measure our success not only by how quickly we react to those uncertainties, but also by what we learn and how we can emerge even stronger.”

CPSI will hold a live webcast to discuss its third quarter 2020 results today, Thursday, November 5, 2020, 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 four companies – Evident, LLC, American HealthTech, Inc., TruBridge, LLC and iNetXperts, Corp. d/b/a Get Real Health. 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. 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: our ability to successfully execute repurchases of our common stock under the newly-approved stock repurchase program, as well as the potential for such repurchases to affect the price of our common stock and increase volatility; the global pandemic related to the novel coronavirus COVID‑19, including the size and breadth of this pandemic, which has decreased our hospital customers’ patient volumes and negatively impacted our variable revenues, and could negatively impact our gross margins and income, as well as our 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; overall business and economic conditions affecting the healthcare industry, including the effects of the federal healthcare reform legislation enacted in 2010, and implementing regulations, on the businesses of our hospital customers; government regulation of our products and services and the healthcare and health insurance industries, including changes in healthcare policy affecting Medicare and Medicaid reimbursement rates and qualifying technological standards; changes in customer purchasing priorities, capital expenditures and demand for information technology systems; saturation of our target market and hospital consolidations; 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; our substantial indebtedness, and our ability to incur additional indebtedness in the future; our potential inability to generate sufficient cash in order to meet our debt service obligations; restrictions on our current and future operations because of the terms of our senior secured credit facilities; market risks related to interest rate changes; competition with companies that have greater financial, technical and marketing resources than we have; 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; 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; failure to properly manage growth in new markets we may enter; misappropriation of our intellectual property rights and potential intellectual property claims and litigation against us; changes in accounting principles generally accepted in the United States; 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; 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 and Quarterly Reports on Form 10-Q. 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. 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.

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

COMPUTER PROGRAMS AND SYSTEMS, INC.

Unaudited Condensed Consolidated Statements of Income

(In thousands, except per share data)

Three Months Ended
September 30,

Nine Months Ended
September 30,

2020

2019

2020

2019

Sales revenues:

System sales and support

$

40,388

$

40,990

$

116,297

$

123,877

TruBridge

27,945

27,709

81,342

80,119

Total sales revenues

68,333

68,699

197,639

203,996

Costs of sales:

System sales and support

17,628

18,761

51,901

54,776

TruBridge

15,287

14,023

44,100

41,660

Total costs of sales

32,915

32,784

96,001

96,436

Gross profit

35,418

35,915

101,638

107,560

Operating expenses:

Product development

8,549

9,158

25,190

27,684

Sales and marketing

6,359

6,654

18,526

21,158

General and administrative

11,440

10,996

34,242

34,909

Amortization of acquisition-related

intangibles

2,866

3,100

8,599

8,139

Total operating expenses

29,214

29,908

86,557

91,890

Operating income

6,204

6,007

15,081

15,670

Other income (expense):

Other income

916

4

1,241

535

Loss on extinguishment of debt

-

-

(202

)

-

Interest expense

(850

)

(1,702

)

(2,832

)

(5,269

)

Total other income (expense)

66

(1,698

)

(1,793

)

(4,734

)

Income before taxes

6,270

4,309

13,288

10,936

Provision for income taxes

1,002

174

2,165

1,695

Net income

$

5,268

$

4,135

$

11,123

$

9,241

Net income per common share – basic

and diluted

$

0.36

$

0.29

$

0.77

$

0.65

Weighted average shares outstanding used

in per common share computations – basic

and diluted

14,095

13,829

14,022

13,760

COMPUTER PROGRAMS AND SYSTEMS, INC.

Condensed Consolidated Balance Sheets

(In thousands, except per share data)

Sept. 30,

2020

Dec. 31,

2019

(Unaudited)

ASSETS

Current assets:

Cash and cash equivalents

$

11,777

$

7,357

Accounts receivable, net of allowance for doubtful accounts of $2,155 and $2,078, respectively

33,698

38,819

Financing receivables, current portion, net

12,535

12,032

Inventories

1,290

1,426

Prepaid income taxes

1,988

1,337

Prepaid expenses and other

6,990

5,861

Total current assets

68,278

66,832

Property and equipment, net

13,500

11,593

Software development costs, net

2,278

-

Operating lease assets

6,919

7,800

Financing receivables, net of current portion

13,998

18,267

Other assets, net of current portion

2,407

1,771

Intangible assets, net

74,511

83,110

Goodwill

150,216

150,216

Total assets

$

332,107

$

339,589

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable

$

7,987

$

8,804

Current portion of long-term debt

3,457

8,430

Deferred revenue

7,454

8,628

Accrued vacation

5,520

4,301

Other accrued liabilities

11,100

11,767

Total current liabilities

35,518

41,930

Long-term debt, less current portion

86,224

99,433

Operating lease liabilities, net of current portion

5,376

6,256

Deferred tax liabilities

8,683

7,623

Total liabilities

135,801

155,242

Stockholders’ Equity:

Common stock, $0.001 par value; 30,000 shares authorized;
14,512 and 14,356 shares issued and outstanding

15

14

Additional paid-in capital

179,791

174,618

Retained earnings

16,500

9,715

Total stockholders’ equity

196,306

184,347

Total liabilities and stockholders’ equity

$

332,107

$

339,589

COMPUTER PROGRAMS AND SYSTEMS, INC.

Unaudited Condensed Consolidated Statements of Cash Flows

(In thousands)

Nine Months Ended
September 30,

2020

2019

Operating activities:

Net income

$

11,123

$

9,241

Adjustments to net income:

Provision for bad debt

2,696

1,975

Deferred taxes

1,060

376

Stock-based compensation

5,174

7,297

Depreciation

1,334

1,084

Amortization of acquisition-related intangibles

8,599

8,139

Amortization of software development costs

78

-

Amortization of deferred finance costs

242

259

Loss on extinguishment of debt

202

-

Changes in operating assets and liabilities:

Accounts receivable

3,490

(157

)

Financing receivables

2,701

3,483

Inventories

136

26

Prepaid expenses and other

(1,765

)

(1,426

)

Accounts payable

(817

)

1,318

Deferred revenue

(1,174

)

(1,975

)

Other liabilities

553

(4,116

)

Income taxes payable

(651

)

(11

)

Net cash provided by operating activities

32,981

25,513

Investing activities:

Purchase of business, net of cash acquired

-

(10,733

)

Investment in software development

(2,356

)

-

Purchases of property and equipment

(3,241

)

(1,670

)

Net cash used in investing activities

(5,597

)

(12,403

)

Financing activities:

Dividends paid

(4,338

)

(4,293

)

Proceeds from long-term debt

67

-

Payments of long-term debt principal

(3,132

)

(11,665

)

Payments of revolving line of credit

(15,561

)

(9,693

)

Proceeds from revolving line of credit

-

11,000

Payments of contingent consideration

-

(206

)

Proceeds from the exercise of options

-

3

Net cash used in financing activities

(22,964

)

(14,854

)

Net increase (decrease) in cash and cash equivalents

4,420

(1,744

)

Cash and cash equivalents, beginning of period

7,357

5,732

Cash and cash equivalents, end of period

$

11,777

$

3,988

COMPUTER PROGRAMS AND SYSTEMS, INC.

Unaudited Other Supplemental Information

Consolidated Bookings

(In thousands)

Three Months Ended

September 30,

Nine Months Ended

September 30,

2020

2019

2020

2019

System sales and support(1)

$

13,715

$

13,365

$

37,646

$

34,668

TruBridge(2)

7,760

10,248

23,176

17,572

Total

$

21,475

$

23,613

$

60,822

$

52,240

(1)

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

(2)

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

Bookings Composition

(In thousands, except per share data)

Three Months Ended
September 30,

2020

2019

System sales and support

Included in period’s revenues

$

917

$

838

Non-subscription sales (1)

6,241

6,431

Subscription revenue (2)

6,557

6,096

TruBridge

Net new (3)

3,455

4,632

Cross-sell (3)

4,305

5,616

Total

$

21,475

$

23,613

(1)

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

(2)

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.

(3)

“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, such bookings are 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.

Acute Care EHR Net New License Mix

Three Months Ended

September 30,

2020

2019

SaaS (1)

3

1

Perpetual license (2)

5

4

Total

8

5

(1)

SaaS license arrangements exhibit revenue that is recurring in nature (recognized as the services are provided over the contract term).

(2)

Perpetual licenses exhibit revenue that is nonrecurring in nature (recognized effectively upon system installation).

COMPUTER PROGRAMS AND SYSTEMS, INC.

Unaudited Reconciliation of Non-GAAP Financial Measures

(In thousands)

Adjusted EBITDA

Three Months Ended
September 30,

Nine Months Ended
September 30,

2020

2019

2020

2019

Net income, as reported

$

5,268

$

4,135

$

11,123

$

9,241

Depreciation expense

442

354

1,334

1,084

Amortization of software development costs

24

-

79

-

Amortization of acquisition-related intangible assets

2,866

3,100

8,599

8,139

Stock-based compensation

1,564

2,170

5,174

7,297

Severance and other nonrecurring charges

711

587

816

2,928

Interest expense and other, net

(66

)

1,698

1,793

4,734

Provision for income taxes

1,002

174

2,165

1,695

Adjusted EBITDA

$

11,811

$

12,218

$

31,083

$

35,118

COMPUTER PROGRAMS AND SYSTEMS, INC.

Unaudited Reconciliation of Non-GAAP Financial Measures

(In thousands, except per share data)

Non-GAAP Net Income and Non-GAAP

Earnings Per Share (“EPS”)

Three Months Ended
September 30,

Nine Months Ended
September 30,

2020

2019

2020

2019

Net income, as reported

$

5,268

$

4,135

$

11,123

$

9,241

Pre-tax adjustments for Non-GAAP EPS:

Amortization of acquisition-related intangible assets

2,866

3,100

8,599

8,139

Stock-based compensation

1,564

2,170

5,174

7,297

Severance and other nonrecurring charges

711

587

816

2,928

Non-cash charges to interest expense

73

86

242

259

Loss on extinguishment of debt

-

-

202

-

After-tax adjustments for Non-GAAP EPS:

Tax-effect of pre-tax adjustments, at 21%

(1,095

)

(1,248

)

(3,157

)

(3,911

)

Tax shortfall from stock-based compensation

-

-

299

186

Non-GAAP net income

$

9,387

$

8,830

$

23,298

$

24,139

Weighted average shares outstanding, diluted

14,095

13,829

14,022

13,760

Non-GAAP EPS

$

0.67

$

0.64

$

1.66

$

1.75

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:

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

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.

The CPSI family of companies

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