Investors

Press Release

CPSI Announces Second Quarter 2019 Results

August 6, 2019 at 4:05 PM EDT

Company Announces Quarterly Cash Dividend of $0.10 Per Share

Highlights for Second Quarter 2019:

  • Revenues of $66.2 million;
  • GAAP net income of $1.7 million and non-GAAP net income of $6.9 million;
  • Adjusted EBITDA of $10.4 million;
  • Cash provided by operations of $9.6 million;
  • GAAP earnings per diluted share of $0.12 and non-GAAP earnings per diluted share of $0.50; and
  • Quarterly dividend of $0.10 per share.

 

MOBILE, Ala.--(BUSINESS WIRE)--Aug. 6, 2019-- CPSI (NASDAQ: CPSI), a community healthcare solutions company, today announced results for the second quarter and six months ended June 30, 2019.

The Company also announced that its Board of Directors has declared a quarterly cash dividend of $0.10 per share, payable on August 30, 2019, to stockholders of record as of the close of business on August 16, 2019.

Total revenues for the second quarter ended June 30, 2019 were $66.2 million, compared with total revenues of $67.9 million for the prior-year second quarter. GAAP net income for the quarter ended June 30, 2019 was $1.7 million, or $0.12 per diluted share, compared with $0.3 million, or $0.02 per diluted share, for the quarter ended June 30, 2018. Cash provided by operations for the second quarter of 2019 was $9.6 million, compared with $4.7 million for the prior-year quarter.

Total revenues for the six months ended June 30, 2019 were $135.3 million, compared with total revenues of $138.8 million for the prior-year period. GAAP net income for the six months ended June 30, 2019 was $5.1 million, or $0.36 per diluted share, compared with $4.3 million, or $0.31 per diluted share, for the six months ended June 30, 2018. Cash provided by operations for the first six months of 2019 was $17.5 million, compared with $7.8 million for the prior-year period.

“Our second quarter performance reflects improved earnings for CPSI compared with the second quarter last year and consistent top line growth for our TruBridge business,” said Boyd Douglas, president and chief executive officer of CPSI. “TruBridge revenues accounted for 40 percent of our sales revenues for the second quarter, with most of this due to the recurring revenue model for our business services.

“Bookings for the second quarter were affected by an elongated sales cycle for both the business office outsourcing services and our acute EHR system sales. However, we are confident in the growing demand for our TruBridge services, as well as the opportunity within the acute EHR space as more hospitals look to switch vendors. We also remain optimistic about our ability to close these deals, and our pipeline for both lines of business continues to be strong.”

Commenting on the Company’s financial performance for the quarter, Matt Chambless, chief financial officer of CPSI, stated, “Although the sluggish bookings environment resulted in a slight decrease in revenues compared to the second quarter of 2018, the optimization of our cost structure over the past year propelled the second quarter growth in net income to nearly five times the prior year amount, with Adjusted EBITDA and non-GAAP EPS increasing 28% and 47%, respectively. This improvement, combined with operating cash flows that were their highest in nearly ten quarters, highlights our successes in profitability and cash flow generation.”

Douglas added, “As we position CPSI for continued success amidst a dynamic healthcare environment, we are focused on maintaining our strong retention rates by improving our clients’ experience and delivering innovative solutions that will meet the unique needs of community healthcare providers.”

CPSI will hold a live webcast to discuss second quarter 2019 results today, Tuesday, August 6, 2019, 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 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 estimated and projected earnings, margins, costs, expenditures, cash flows, growth rates,the Company’s level of recurring and non-recurring revenue, bookings, and customer retention rates, 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 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; 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 inthe 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 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
June 30,

Six Months Ended
June 30,

 

2019

2018

2019

2018

Sales revenues:

System sales and support

$

39,640

 

$

42,746

 

$

82,887

 

$

88,498

 

TruBridge

 

26,516

 

 

25,159

 

 

52,410

 

 

50,290

 

Total sales revenues

 

66,156

 

 

67,905

 

 

135,297

 

 

138,788

 

 

 

Costs of sales:

 

System sales and support

 

17,673

 

 

19,528

 

 

36,010

 

 

37,946

 

TruBridge

 

13,948

 

 

13,531

 

 

27,637

 

 

26,910

 

Total costs of sales

 

31,621

 

 

33,059

 

 

63,647

 

 

64,856

 

 

 

Gross profit

 

34,535

 

 

34,846

 

 

71,650

 

 

73,932

 

 

 

Operating expenses:

 

Product development

 

9,297

 

 

9,314

 

 

18,526

 

 

18,071

 

Sales and marketing

 

7,016

 

 

7,518

 

 

14,508

 

 

15,232

 

General and administrative

 

12,090

 

 

13,188

 

 

23,914

 

 

25,552

 

Amortization of acquisition-related intangibles

 

2,516

 

 

2,601

 

 

5,039

 

 

5,203

 

Total operating expenses

 

30,919

 

 

32,621

 

 

61,987

 

 

64,058

 

 

 

Operating income

 

3,616

 

 

2,225

 

 

9,663

 

 

9,874

 

 

 

Other income (expense):

 

Other income

 

283

 

 

194

 

 

532

 

 

392

 

Interest expense

 

(1,763

)

 

(1,807

)

 

(3,567

)

 

(3,785

)

Total other expense

 

(1,480

)

 

(1,613

)

 

(3,035

)

 

(3,393

)

 

 

Income before taxes

 

2,136

 

 

612

 

 

6,628

 

 

6,481

 

Provision for income taxes

 

473

 

 

284

 

 

1,521

 

 

2,185

 

Net income

$

1,663

 

$

328

 

$

5,107

 

$

4,296

 

 

Net income per common share – basic and diluted

$

0.12

 

$

0.02

 

$

0.36

 

$

0.31

 

 

Weighted average shares outstanding used in per common share computations – basic and diluted

 

13,794

 

 

13,561

 

 

13,725

 

 

13,518

 

 

COMPUTER PROGRAMS AND SYSTEMS, INC.

Condensed Consolidated Balance Sheets

(In thousands, except per share data)

 

 

June 30,
2019

Dec. 31,
2018

 

(Unaudited)

 

ASSETS

Current assets:

Cash and cash equivalents

$

6,849

 

$

5,732

 

Accounts receivable, net of allowance for doubtful accounts of $2,008 and $2,124, respectively

 

37,748

 

 

40,474

 

Financing receivables, current portion, net

 

13,243

 

 

15,059

 

Inventories

 

1,869

 

 

1,498

 

Prepaid income taxes

 

3,115

 

 

2,120

 

Prepaid expenses and other

 

5,800

 

 

5,055

 

Total current assets

 

68,624

 

 

69,938

 

 

 

Property and equipment, net

 

11,532

 

 

10,875

 

Operating lease assets

 

6,909

 

 

-

 

Financing receivables, net of current portion

 

18,196

 

 

19,263

 

Other assets, net of current portion

 

974

 

 

995

 

Intangible assets, net

 

88,987

 

 

86,226

 

Goodwill

 

149,869

 

 

140,449

 

Total assets

$

345,091

 

$

327,746

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable

$

5,422

 

$

5,668

 

Current portion of long-term debt

 

7,783

 

 

6,486

 

Deferred revenue

 

10,117

 

 

10,201

 

Accrued vacation

 

4,395

 

 

3,929

 

Other accrued liabilities

 

15,282

 

 

12,219

 

Total current liabilities

 

42,999

 

 

38,503

 

 

 

Long-term debt, less current portion

 

122,040

 

 

124,583

 

Operating lease liabilities, net of current portion

 

5,646

 

 

-

 

Deferred tax liabilities

 

7,247

 

 

4,877

 

Total liabilities

 

177,932

 

 

167,963

 

 

 

Stockholders’ Equity:

 

Common stock, $0.001 par value per share; 30,000 shares authorized; 14,355 and 14,083 shares issued and outstanding

 

14

 

 

14

 

Additional paid-in capital

 

169,920

 

 

164,793

 

Retained earnings

 

(2,775

)

 

(5,024

)

Total stockholders’ equity

 

167,159

 

 

159,783

 

Total liabilities and stockholders’ equity

$

345,091

 

$

327,746

 

 

COMPUTER PROGRAMS AND SYSTEMS, INC.

Unaudited Condensed Consolidated Statements of Cash Flows

(In thousands)

 

Six Months Ended
June 30,

2019

2018

Operating activities:

Net income

$

5,107

 

$

4,296

 

Adjustments to net income:

Provision for bad debt

 

1,990

 

 

1,695

 

Deferred taxes

 

1,177

 

 

1,404

 

Stock-based compensation

 

5,128

 

 

4,692

 

Depreciation

 

730

 

 

1,067

 

Amortization of acquisition-related intangibles

 

5,039

 

 

5,203

 

Amortization of deferred finance costs

 

173

 

 

173

 

Changes in operating assets and liabilities:

Accounts receivable

 

1,265

 

 

(4,453

)

Financing receivables

 

2,718

 

 

(1,669

)

Inventories

 

(371

)

 

(62

)

Prepaid expenses and other

 

(617

)

 

(594

)

Accounts payable

 

(841

)

 

(1,806

)

Deferred revenue

 

(514

)

 

2,363

 

Other liabilities

 

(2,528

)

 

(3,030

)

Income taxes payable

 

(995

)

 

(1,461

)

Net cash provided by operating activities

 

17,461

 

 

7,818

 

 

Investing activities:

Purchase of business, net of cash received

 

(10,840

)

 

-

 

Purchases of property and equipment

 

(1,022

)

 

(417

)

Net cash used in investing activities

 

(11,862

)

 

(417

)

 

Financing activities:

Dividends paid

 

(2,858

)

 

(2,803

)

Payments of long-term debt principal

 

(10,118

)

 

(10,335

)

Payments of contingent consideration

 

(206

)

 

-

 

Proceeds from revolving line of credit

 

11,000

 

 

7,300

 

Payments of revolving line of credit

 

(2,300

)

 

(591

)

Net cash used in financing activities

 

(4,482

)

 

(6,429

)

 

Net increase in cash and cash equivalents

 

1,117

 

 

972

 

 

Cash and cash equivalents, beginning of period

 

5,732

 

 

520

 

Cash and cash equivalents, end of period

$

6,849

 

$

1,492

 

 

COMPUTER PROGRAMS AND SYSTEMS, INC.

Unaudited Other Supplemental Information

Consolidated Bookings

(In thousands)

 

Three Months Ended
June 30,

Six Months Ended
June 30,

2019

2018

2019

2018

System sales and support(1)

$

11,586

$

17,125

$

21,301

$

35,357

TruBridge(2)

 

3,096

 

6,371

 

7,324

 

10,189

Total

$

14,682

$

23,496

$

28,625

$

45,546

 

(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
June 30,

Six Months Ended
June 30,

 

2019

2018

2019

2018

Net income, as reported

$

1,663

$

328

$

5,107

$

4,296

Depreciation expense

 

369

 

538

 

730

 

1,067

Amortization of acquisition-related intangible assets

 

2,516

 

2,601

 

5,039

 

5,203

Stock-based compensation

 

2,691

 

2,753

 

5,128

 

4,692

Severance and other nonrecurring charges

 

1,168

 

-

 

2,341

 

-

Interest expense and other, net

 

1,480

 

1,613

 

3,035

 

3,393

Provision for income taxes

 

473

 

284

 

1,521

 

2,185

Adjusted EBITDA

$

10,360

$

8,117

$

22,901

$

20,836

 

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”). However, NOL Utilization 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 and $1.7 million for the three months and six months ended June 30, 2019, respectively, compared with $0.8 million and $1.6 million for the three and six months ended June 30, 2018, respectively.

 

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
June 30,

Six Months Ended
June 30,

2019

2018

2019

2018

Net income, as reported

$

1,663

 

$

328

 

$

5,107

 

$

4,296

 

Pre-tax adjustments for Non-GAAP EPS:

 

 

Amortization of acquisition-related intangible assets

 

2,516

 

 

2,601

 

 

5,039

 

 

5,203

 

Stock-based compensation

 

2,691

 

 

2,753

 

 

5,128

 

 

4,692

 

Severance and other nonrecurring charges

 

1,168

 

 

-

 

 

2,341

 

 

-

 

Non-cash interest expense

 

86

 

 

86

 

 

173

 

 

172

 

After-tax adjustments for Non-GAAP EPS:

 

 

 

 

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

 

(1,357

)

 

(1,142

)

 

(2,663

)

 

(2,114

)

Tax shortfall from stock-based compensation

 

104

 

 

32

 

 

186

 

 

394

 

Non-GAAP net income

$

6,871

 

$

4,658

 

$

15,311

 

$

12,643

 

Weighted average shares outstanding, diluted

 

13,794

 

 

13,561

 

 

13,725

 

 

13,518

 

Non-GAAP EPS

$

0.50

 

$

0.34

 

$

1.12

 

$

0.94

 

 

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) severance and other non-recurring expenses; (v) interest expense and other, net; and (vi) 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) severance and other non-recurring expenses; (iv) non-cash charges to interest expense; and (v) the total tax effect of items (i) through (iv). Adjustments to Non-GAAP net income also include the after-tax effect of the shortfall from stock-based compensation.
  • 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.
  • Severance and other non-recurring expenses – Non-recurring expenses relate to certain severance and other charges incurred in connection with activities that are considered one-time. 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

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

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