UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC  20549
______________


FORM 8-K


CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934


Date of report (Date of earliest event reported):   May 3, 2018


COMPUTER PROGRAMS AND SYSTEMS, INC.
(Exact Name of Registrant as Specified in Charter)

Delaware

000-49796

74-3032373

(State or Other Jurisdiction

of Incorporation)

(Commission File

Number)

 

(IRS Employer

Identification No.)

6600 Wall Street,

Mobile, Alabama

 

36695

(Zip Code)

(Address of Principal Executive
Offices)

 

 


(251) 639-8100
(Registrant’s telephone number, including area code)

N/A
(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company                           

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.                                    


Item 2.02.         Results of Operations and Financial Condition.

On May 3, 2018, CPSI issued a press release announcing financial information for its fiscal first quarter ended March 31, 2018.  The press release is attached as Exhibit 99.1 to this Form 8-K and is furnished to, but not filed with, the Commission.

 
Item 9.01.          Financial Statements and Exhibits.

(d)

Exhibits.

 

Exhibit Number

Exhibit

 
99.1 Press Release dated May 3, 2018.


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

COMPUTER PROGRAMS AND SYSTEMS, INC.

 

By:

/s/ J. Boyd Douglas

J. Boyd Douglas

President and Chief Executive Officer

 
 

Dated: May 3, 2018


INDEX TO EXHIBITS


Exhibit Number

Exhibit

 

99.1

Press Release dated May 3, 2018.*

*  This exhibit is furnished to, but not filed with, the Commission by inclusion herein.

Exhibit 99.1

CPSI Announces First Quarter 2018 Results

Highlights for First Quarter 2018:

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 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; 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 in the 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 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.

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:


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.

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