News

CPSI Announces First Quarter 2018 Results

Highlights for First Quarter 2018:

  • Revenues of $70.9 million;
  • Recurring revenues up 3% sequentially, 8% year over year;
  • TruBridge revenues up 22% year over year;
  • 12-month backlog of $264.6 million;
  • Quarterly bookings of $22.1 million;
  • GAAP earnings per diluted share of $0.29 and non-GAAP earnings per diluted share of $0.59;
  • GAAP net income of $4.0 million and Adjusted EBITDA of $12.7 million;
  • Cash provided by operations of $3.1 million; and
  • Quarterly dividend of $0.10 per share.

MOBILE, Ala.--(BUSINESS WIRE)--May 3, 2018-- CPSI (NASDAQ: CPSI), a community healthcare solutions company, today announced results for the first quarter ended March 31, 2018.

The Company also announced that its Board of Directors has declared a quarterly cash dividend of $0.10 per share, payable on June 1, 2018, to stockholders of record as of the close of business on May 17, 2018.

Total revenues for the first quarter ended March 31, 2018, were $70.9 million, compared with total revenues of $64.1 million for the prior-year period. Net income for the quarter ended March 31, 2018, was $4.0 million, or $0.29 per diluted share, compared with net income of $0.2 million, or $0.02 per diluted share, for the quarter ended March 31, 2017. Cash provided by operations for the first quarter was $3.1 million, compared with cash provided by operations of $9.7 million for the prior-year period.

“Our first quarter results were solid from a revenue and earnings standpoint, including a 22% increase in revenue year over year from TruBridge, our business management, consulting, and managed IT services business,” said Boyd Douglas, president and chief executive officer of CPSI. “We also welcomed 14 community hospitals to the CPSI family this quarter. With this strong start and a healthy sales pipeline, we remain well positioned for continued revenue and earnings growth in 2018.”

Commenting on the Company’s financial performance for the quarter, Matt Chambless, chief financial officer of CPSI, stated, “Robust revenue growth at TruBridge, coupled with our continued sales of EHR systems pursuant to CMS’ healthcare IT initiatives, resulted in total revenues and non-GAAP earnings per share for the quarter that were our second highest since the Healthland acquisition. These results were only surpassed by those during the fourth quarter of 2017, where revenues related to stage 3 of “meaningful use” propelled a strong finish to the year. Optically, cash flow provided by operations appear light, decreasing $6.6 million from the first quarter of 2017. This decrease was primarily driven by the payment of 2017 annual bonuses and the timing of payroll expenditures, which required approximately $6.0 million in cash during the first quarter. Despite this decrease in operating cash flows, we were able to achieve an incremental reduction in amounts outstanding under our credit facilities and move closer toward reaching our target leverage of 2.5 times Adjusted EBITDA, which we hope to achieve by the end of 2018.”

Douglas added, “CPSI has an eye to the future, as we are nearing the conclusion of a period focused on assisting our customers with meeting federally mandated EHR requirements. We are encouraged by meaningful growth opportunities in revenue cycle management and other community healthcare solutions, as we see continued demand from our clients to help them make the shift to value-based care.”

CPSI will hold a live webcast to discuss first quarter 2018 results today, Thursday, May 3, 2018, 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 plus other healthcare systems and post-acute care facilities. Founded in 1979, CPSI is the parent of four companies – Evident, LLC, TruBridge, LLC, Healthland Inc. and American HealthTech, Inc. 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 and services for community hospitals and their affiliated clinics. TruBridge focuses on providing business, consulting and managed IT services, along with its complete RCM solution for all care settings. Healthland provides integrated technology solutions and services to small rural and critical access hospitals. American HealthTech is one of the nation’s largest providers of financial and clinical technology solutions and services for post-acute care facilities. 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 estimated and projected earnings, leverage ratio, margins, costs, expenditures, cash flows, growth rates,the Company’s level of recurring and non-recurring revenue and backlog, the Company’s shareholder returns and future financial 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: overall business and economic conditions affecting the healthcare industry, including the potential 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 affectingMedicareandMedicaidreimbursement 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; our ability to successfully integrate the businesses of Healthland, American HealthTech and Rycan with our business and the inherent risks associated with any potential future acquisitions; our ability to remediate a material weakness in our internal control over financial reporting; competition with companies that have greater financial, technical and marketing resources than we have; failure to develop new or enhance current technology and products in response to market demands; failure of our products to function properly resulting in claims for 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 or enhancements free of undetected errors or problems; interruptions in our power supply and/or telecommunications capabilities, including those caused by natural disaster; our ability to attract and retain qualified customer 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 inthe United States; 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 theSecurities 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.

Unaudited Condensed Consolidated Statements of Income

(In thousands, except per share data)

 
          Three Months Ended

March 31,

          2018     2017
Sales revenues:                
System sales and support         $ 45,751       $ 43,423  
TruBridge           25,131         20,652  
Total sales revenues           70,882         64,075  
                 
Costs of sales:                
System sales and support           18,417         19,512  
TruBridge           13,380         11,863  
Total costs of sales           31,797         31,375  
                 
Gross profit           39,085         32,700  
                 
Operating expenses:                
Product development           8,757         8,077  
Sales and marketing           7,714         7,127  
General and administrative           12,364         11,661  
Amortization of acquisition-related intangibles           2,602         2,601  
Total operating expenses           31,437         29,466  
                 
Operating income           7,648         3,234  
                 
Other income (expense):                
Other income           198         70  
Interest expense           (1,978 )       (1,807 )
Total other income (expense)           (1,780 )       (1,737 )
                 
Income before taxes           5,868         1,497  
Provision for income taxes           1,901         1,251  
Net income         $ 3,967       $ 246  
                 
Net income per common share – basic and diluted         $ 0.29       $ 0.02  
                 
Weighted average shares outstanding used in per common share computations – basic and diluted           13,475         13,374  

 

 
 
 
 
COMPUTER PROGRAMS AND SYSTEMS, INC.

Condensed Consolidated Balance Sheets

(In thousands, except per share data)

 
         

March 31,

2018

   

Dec. 31,

2017

          (Unaudited)      
ASSETS
Current assets:                
Cash and cash equivalents         $ 1,727       $ 520  
Accounts receivable, net of allowance for doubtful accounts of $2,876 and $2,654, respectively           40,664         38,061  
Financing receivables, current portion, net           15,482         15,055  
Inventories           1,358         1,417  
Prepaid expenses and other           5,935         2,824  
Total current assets           65,166         57,877  
                 
Property and equipment, net           11,223         11,692  
Financing receivables, net of current portion           13,245         11,485  
Other assets, net of current portion           1,191         -  
Intangible assets, net           94,111         96,713  
Goodwill           140,449         140,449  
Total assets         $ 325,385       $ 318,216  
                 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:                
Accounts payable         $ 7,738       $ 7,620  
Current portion of long-term debt           5,825         5,820  
Deferred revenue           12,637         8,707  
Accrued vacation           4,421         3,794  
Income taxes payable           407         810  
Other accrued liabilities           9,539         14,098  
Total current liabilities           40,567         40,849  
                 
Long-term debt, less current portion           136,231         136,614  
Deferred tax liabilities           6,019         4,667  
Total liabilities           182,817         182,130  
                 
Stockholders’ Equity:                
Common stock, $0.001 par value; 30,000 shares authorized; 13,760 and 13,533 shares issued and outstanding           14         14  
Additional paid-in capital           157,017         155,078  
Retained earnings           (14,463 )       (19,006 )
Total stockholders’ equity           142,568         136,086  
Total liabilities and stockholders’ equity         $ 325,385       $ 318,216  

 

 
 
 
 
COMPUTER PROGRAMS AND SYSTEMS, INC.

Unaudited Condensed Consolidated Statements of Cash Flows

(In thousands)

 
          Three Months Ended

March 31

          2018     2017
Operating activities:                
Net income         $ 3,967       $ 246  
Adjustments to net income:                
Provision for bad debt           646         174  
Deferred taxes           777         1,124  
Stock-based compensation           1,939         1,281  
Depreciation           529         718  
Intangible amortization           2,602         2,601  
Amortization of deferred finance costs           86         182  
Changes in operating assets and liabilities:                
Accounts receivable           (3,004 )       (801 )
Financing receivables           (2,432 )       (147 )
Inventories           59         480  
Prepaid expenses and other           (527 )       (154 )
Accounts payable           118         927  
Deferred revenue           2,700         3,903  
Other liabilities           (3,932 )       (480 )
Income taxes payable           (403 )       (367 )
Net cash provided by operating activities           3,125         9,687  
                 
Investing activities:                
Purchases of property and equipment           (60 )       -  
Net cash used in investing activities           (60 )       -  
                 
Financing activities:                
Dividends paid           (1,394 )       (3,384 )
Proceeds from long-term debt           8,330         -  
Payments of long-term debt           (8,794 )       (6,635 )
Net cash used in financing activities           (1,858 )       (10,019 )
                 
Net increase (decrease) in cash and cash equivalents           1,207         (332 )
                 
Cash and cash equivalents, beginning of period           520         2,220  
Cash and cash equivalents, end of period         $ 1,727       $ 1,888  

 

 
 
 
 
COMPUTER PROGRAMS AND SYSTEMS, INC.

Unaudited Other Supplemental Information

Consolidated Bookings

(In thousands)

      Three Months Ended

March 31,

      2018   2017
System sales and support(1)     $ 18,232   $ 16,955
TruBridge(2)       3,818     6,594
Total     $ 22,050   $ 23,549
 

(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).

 

 
 
 
 
COMPUTER PROGRAMS AND SYSTEMS, INC.

Unaudited Reconciliation of Non-GAAP Financial Measures

(In thousands)

 
Adjusted EBITDA   Three Months Ended
March 31,
    2018   2017
Net income, as reported   $ 3,967   $ 246
Depreciation expense     529     718
Amortization of acquisition-related intangible assets     2,602     2,601
Stock-based compensation     1,939     1,281
Transaction-related costs     -     5
Non-recurring severance     -     397
Interest expense and other, net     1,780     1,737
Provision for income taxes     1,901     1,251
Adjusted EBITDA   $ 12,718   $ 8,236
 

The performance measure of Adjusted EBITDA, as presented above, excludes the cash benefits derived from the utilization of net operating loss carryforwards acquired in the Healthland acquisition (“NOL Utilization”), which is included as an adjustment to net income in order to calculate Consolidated EBITDA per the terms of our credit facility. NOL Utilization was approximately $0.8 million for the three months ended March 31, 2018, compared to $1.3 million for the three months ended March 31, 2017.

 

 
 
 
 
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
March 31,
          2018     2017
Net income, as reported         $ 3,967       $ 246  
Pre-tax adjustments for Non-GAAP EPS:                
Amortization of acquisition-related intangible assets           2,602         2,601  
Stock-based compensation           1,939         1,281  
Transaction-related costs           -         5  
Non-recurring severance           -         397  
Non-cash interest expense           86         182  
After-tax adjustments for Non-GAAP EPS:                
Tax-effect of pre-tax adjustments, at 21% and 35%, respectively           (972 )       (1,563 )
Tax shortfall from stock-based compensation           362         764  
Non-GAAP net income         $ 7,984       $ 3,913  
Weighted average shares outstanding, diluted           13,475         13,347  
Non-GAAP EPS         $ 0.59       $ 0.29  
 
 
 
 

 

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 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 (loss) as reported and adjusts for: (i) depreciation; (ii) amortization of acquisition-related intangible assets; (iii) stock-based compensation; (iv) transaction-related costs; (v) non-recurring severance; (vi) interest expense and other, net; and (vii) the provision for income taxes.
  • Non-GAAP net income – Non-GAAP net income consists of GAAP net income (loss) as reported and adjusts for (i) amortization of acquisition-related intangible assets; (ii) stock-based compensation; (iii) transaction-related costs; (iv) non-recurring severance; (v) non-cash charges to interest expense and other; and (vi) the total tax effect of items (i) through (v).
  • 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:

  • 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.
  • Non-recurring expenses and transaction-related costs - Non-recurring expenses relate to certain severance and other charges incurred in connection with activities that are considered one-time. Transaction-related costs are the non-recurring costs related to specific acquisitions (such as the Healthland acquisition). We exclude non-recurring expenses 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-cash charges to interest expense and other - Non-cash charges to interest expense and other includes amortization of deferred debt issuance costs. We exclude non-cash charges to interest expense and other 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; (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; and (iii) excluding these amounts assists in the comparability between current period results and results during periods prior to the adoption of ASU 2016-09.

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.

Source: CPSI

CPSI
Tracey Schroeder, 251-639-8100
Chief Marketing Officer
Tracey.schroeder@cpsi.com