CPSI Announces Third Quarter 2023 Results

CPSI Announces Third Quarter 2023 Results

November 8, 2023

MOBILE, Ala.--(BUSINESS WIRE)-- CPSI (NASDAQ: CPSI), a healthcare solutions company, today announced results for the third quarter ended September 30, 2023.

Third Quarter 2023 Financial Overview

All comparisons are to the quarter ended September 30, 2022, unless otherwise noted.

Chris Fowler, chief executive officer of CPSI, said, “Unfortunately, our third quarter results came in below our expectations, as we faced some continued external pressures and the ramifications of cost structure and budgeting missteps from earlier in the year. Our electronic health record (EHR) business performed well with continued strength in existing customer retention, and we remain optimistic on the opportunity in RCM, despite facing a challenging environment, as hospitals will ultimately need to outsource operations and will look to us as the solution.

“Our recent acquisition of Viewgol brings a massive global resource expansion and alleviates resource pressure we have faced in our RCM business. We are also laser-focused internally, improving the efficiency of our operations, and bringing Vinay Bassi on board as our new chief financial officer in yet another move to evolve and adapt our leadership team to the changing needs of an organization in transformation.

“This has been a challenging quarter, but the visibility into our pipeline, the work we are doing to ensure overall organizational health, and our acute focus on improving profitability gives me optimism we will be well positioned to take advantage of all future potential opportunities,” added Fowler.

Financial Outlook1

For the full year 2023, the Company revised its previously issued guidance as follows:

__________________________

1 Excluding revenues, the Company does not provide guidance on a GAAP basis as certain items that impact Adjusted EBITDA or non-GAAP net income such as severance and other nonrecurring charges, which may be significant, are outside the Company’s control and/or cannot be reasonably predicted. Please see the “Explanation of Non-GAAP Financial Measures” at the end of this press release for detailed information on calculating non-GAAP measures. For a reconciliation of other non-GAAP financial measures, see the non-GAAP financial reconciliation tables in this release.

Conference Call Information

CPSI will hold a live webcast to discuss third quarter 2023 results today, Wednesday, November 8, 2023, at 3:30 p.m. Central time/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 has over four decades of experience in connecting providers, patients and communities with innovative solutions that support both the clinical and financial side of healthcare delivery. We provide business, consulting, and managed information technology (IT) services, including our industry leading HFMA Peer Reviewed® suite of revenue cycle management (RCM) offerings, to help streamline day-to-day revenue functions, enhance productivity, and support the financial health of healthcare organizations. Our patient engagement solutions provide patients and providers with the critical information and tools they need to share existing clinical data and analytics that support value-based care, improve outcomes, and increase patient satisfaction. We support efficient patient care across an expansive base of community hospitals and post-acute care facilities with electronic health record (EHR) product offerings that successfully integrate data between care settings. We make healthcare accessible through data-driven insights that support informed decisions and deliver workflow efficiencies, while keeping patients at the center of care. We are a healthcare solutions company. We clear the way for care. For more information, please 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: a public health crisis, such as the COVID-19 pandemic, and related economic disruptions; saturation of our target market and hospital consolidations; unfavorable economic or market conditions that may cause a decline in spending for information technology and services; significant legislative and regulatory uncertainty in the healthcare industry; exposure to liability for failure to comply with regulatory requirements; transition to a subscription-based recurring revenue model and modernization of our technology; competition with companies that have greater financial, technical and marketing resources than we have; potential future acquisitions that may be expensive, time consuming, and subject to other inherent risks; our ability to attract and retain qualified client service and support personnel; disruption from periodic restructuring of our sales force; potential inability to properly manage growth in new markets we may enter; exposure to numerous and often conflicting laws, regulations, policies, standards or other requirements through our international business activities; potential litigation against us; our reliance on an international workforce which exposes us to various business disruptions; potential failure to develop new products or enhance current products that keep pace with market demands; failure of our products to function properly resulting in claims for medical and other losses; breaches of security and viruses in our systems resulting in customer claims against us and harm to our reputation; failure to maintain customer satisfaction through new product releases free of undetected errors or problems; failure to convince customers to migrate to current or future releases of our products; failure to maintain our margins and service rates; increase in the percentage of total revenues represented by service revenues, which have lower gross margins; exposure to liability in the event we provide inaccurate claims data to payors; exposure to liability claims arising out of the licensing of our software and provision of services; dependence on licenses of rights, products and services from third parties; misappropriation of our intellectual property rights and potential intellectual property claims and litigation against us; interruptions in our power supply and/or telecommunications capabilities, including those caused by natural disaster; potential inability to secure additional financing on favorable terms to meet our future capital needs; our substantial indebtedness, and our ability to incur additional indebtedness in the future; pressures on cash flow to service our outstanding debt; restrictive terms of our credit agreement on our current and future operations; changes in and interpretations of financial accounting matters that govern the measurement of our performance; significant charges to earnings if our goodwill or intangible assets become impaired; fluctuations in quarterly financial performance due to, among other factors, timing of customer installations; volatility in our stock price; failure to maintain effective internal control over financial reporting; lack of employment or non-competition agreement with most of our key personnel; inherent limitations in our internal control over financial reporting; vulnerability to significant damage from natural disasters; market risks related to interest rate changes; potential material adverse effects due to macroeconomic conditions, including bank failures or changes in related regulation; 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 our Quarterly Report on Form 10-Q for the quarter ended March 31, 2023. We also caution investors that the forward-looking information described herein represents our outlook only as of this date, and we undertake no obligation to update or revise any forward-looking statements to reflect events or developments after the date of this press release.

 

Computer Programs and Systems, Inc.

Condensed Consolidated Statements of Income

(In '000s, except per share data)

(Unaudited)

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

2023

 

2022

 

2023

 

2022

Revenues
RCM

$

46,582

 

$

46,875

 

$

142,973

 

$

134,200

 

EHR

 

34,493

 

 

34,949

 

 

104,651

 

 

103,855

 

Patient engagement

 

1,637

 

 

1,003

 

 

5,943

 

 

5,369

 

Total revenues

 

82,712

 

 

82,827

 

 

253,567

 

 

243,424

 

 
Expenses
Costs of revenue (exclusive of amortization and depreciation)
RCM

 

27,159

 

 

25,289

 

 

81,461

 

 

71,068

 

EHR

 

15,655

 

 

17,103

 

 

47,894

 

 

48,164

 

Patient engagement

 

1,049

 

 

901

 

 

2,818

 

 

2,795

 

Total costs of revenue (exclusive of amortization and depreciation)

 

43,863

 

 

43,293

 

 

132,173

 

 

122,027

 

Product development

 

9,778

 

 

7,987

 

 

26,899

 

 

22,897

 

Sales and marketing

 

6,818

 

 

7,309

 

 

21,906

 

 

22,578

 

General and administrative

 

20,961

 

 

13,163

 

 

54,471

 

 

40,315

 

Amortization

 

6,208

 

 

5,510

 

 

17,549

 

 

15,200

 

Depreciation

 

297

 

 

622

 

 

1,392

 

 

1,890

 

Total expenses

 

87,925

 

 

77,884

 

 

254,390

 

 

224,907

 

 
Operating income (loss)

 

(5,213

)

 

4,943

 

 

(823

)

 

18,517

 

 
Other income (expense):
Other income

 

224

 

 

355

 

 

569

 

 

914

 

Gain (loss) on contingent consideration

 

-

 

 

(589

)

 

-

 

 

992

 

Loss on extinguishment of debt

 

-

 

 

-

 

 

-

 

 

(125

)

Interest expense

 

(3,071

)

 

(1,771

)

 

(8,405

)

 

(4,044

)

Total other income (expense)

 

(2,847

)

 

(2,005

)

 

(7,836

)

 

(2,263

)

 
Income (loss) before taxes

 

(8,060

)

 

2,938

 

 

(8,659

)

 

16,254

 

 
Provision (benefit) for income taxes

 

(4,498

)

 

777

 

 

(5,344

)

 

2,904

 

 
Net income (loss)

$

(3,562

)

$

2,161

 

$

(3,315

)

$

13,350

 

 
Net income (loss) per common share—basic

$

(0.24

)

$

0.15

 

$

(0.23

)

$

0.91

 

Net income (loss) per common share—diluted

$

(0.24

)

$

0.15

 

$

(0.23

)

$

0.91

 

 
Computer Programs and Systems, Inc.
Condensed Consolidated Balance Sheets
(In '000s, except per share data)
 
September 30, 2023
(unaudited)		 Dec. 31, 2022
Assets
Current assets
Cash and cash equivalents

$

1,473

 

$

6,951

 

Accounts receivable (net of allowance for expected credit losses of $3,323 and $2,854, respectively)

 

59,024

 

 

51,311

 

Financing receivables, current portion (net of allowance for expected credit losses of $319 and $223, respectively)

 

4,251

 

 

4,474

 

Inventories

 

941

 

 

784

 

Prepaid income taxes

 

-

 

 

701

 

Prepaid expenses and other

 

13,111

 

 

10,338

 

Total current assets

 

78,800

 

 

74,559

 

 
Property & equipment, net

 

8,707

 

 

9,884

 

Software development costs, net

 

39,732

 

 

27,257

 

Operating lease assets

 

5,138

 

 

7,567

 

Financing receivables, net of current portion (net of allowance for expected credit losses of $121 and $326, respectively)

 

1,615

 

 

3,312

 

Other assets, net of current portion

 

7,330

 

 

8,131

 

Intangible assets, net

 

89,956

 

 

102,000

 

Goodwill

 

198,253

 

 

198,253

 

Total assets

$

429,531

 

$

430,963

 

 
Liabilities & Stockholders' Equity
Current liabilities
Accounts payable

$

13,368

 

$

7,035

 

Current portion of long-term debt

 

3,141

 

 

3,141

 

Deferred revenue

 

8,806

 

 

11,590

 

Accrued vacation

 

6,040

 

 

6,214

 

Income taxes payable

 

316

 

 

-

 

Other accrued liabilities

 

23,121

 

 

16,475

 

Total current liabilities

 

54,792

 

 

44,455

 

 
Long-term debt, net of current portion

 

138,748

 

 

136,388

 

Operating lease liabilities, net of current portion

 

3,421

 

 

5,651

 

Deferred tax liabilities

 

4,587

 

 

12,758

 

Total liabilities

 

201,548

 

 

199,252

 

 
Stockholders' Equity
Common stock, $0.001 par value; 30,000 shares authorized; 15,121 and 14,913 shares issued, respectively

 

15

 

 

15

 

Treasury stock, 572 and 483 shares, respectively

 

(17,075

)

 

(14,500

)

Additional paid-in capital

 

194,437

 

 

192,275

 

Retained earnings

 

50,606

 

 

53,921

 

Total stockholders' equity

 

227,983

 

 

231,711

 

 
Total liabilities and stockholders' equity

$

429,531

 

$

430,963

 

 

Computer Programs and Systems, Inc.

Condensed Consolidated Statements of Cash Flows

(In '000s)

(Unaudited)

 

Nine Months Ended September 30,

2023

2022

Operating activities:
Net income (loss)

$

(3,315

)

$

13,350

 

Adjustments to net income (loss):
Provision for credit losses

 

810

 

 

1,202

 

Deferred taxes

 

(8,171

)

 

(3,073

)

Stock-based compensation

 

2,162

 

 

5,284

 

Depreciation

 

1,392

 

 

1,890

 

Loss on extinguishment of debt

 

-

 

 

125

 

Amortization of acquisition-related intangibles

 

12,043

 

 

12,917

 

Amortization of software development costs

 

5,506

 

 

2,283

 

Amortization of deferred finance costs

 

269

 

 

242

 

Gain on contingent consideration

 

-

 

 

(992

)

Non-cash operating lease costs

 

1,478

 

 

-

 

Loss on disposal of PP&E

 

117

 

 

-

 

Changes in operating assets and liabilities:
Accounts receivable

 

(8,632

)

 

(6,877

)

Financing receivables

 

2,029

 

 

4,598

 

Inventories

 

(157

)

 

(899

)

Prepaid expenses and other

 

(1,972

)

 

(1,982

)

Accounts payable

 

6,333

 

 

(988

)

Deferred revenue

 

(2,784

)

 

726

 

Operating lease liabilities

 

(1,462

)

 

-

 

Other liabilities

 

6,656

 

 

(1,239

)

Prepaid income taxes

 

1,017

 

 

3,644

 

Net cash provided by operating activities

 

13,319

 

 

30,211

 

 
Investing activities:
Purchase of business, net of cash acquired

 

-

 

 

(43,696

)

Investment in software development

 

(17,981

)

 

(14,594

)

Purchases of property and equipment

 

(332

)

 

(134

)

Net cash used in investing activities

 

(18,313

)

 

(58,424

)

 
Financing activities:
Treasury stock purchases

 

(2,575

)

 

(8,248

)

Proceeds from long-term debt

 

-

 

 

575

 

Payments of long-term debt principal

 

(2,625

)

 

(2,687

)

Proceeds from revolving line of credit

 

9,716

 

 

48,000

 

Payments of revolving line of credit

 

(5,000

)

 

(5,300

)

Net cash provided by (used in) financing activities

 

(484

)

 

32,340

 

 
Increase (decrease) in cash and cash equivalents

 

(5,478

)

 

4,127

 

 
Cash and cash equivalents, beginning of period

 

6,951

 

 

11,431

 

Cash and cash equivalents, end of period

$

1,473

 

$

15,558

 

 

Computer Programs and Systems, Inc.

Consolidated Bookings

(In '000s)

 

Three Months Ended September 30,

Nine Months Ended September 30,

In '000s

2023

2022

2023

2022

RCM(1)

$

9,080

$

11,272

$

34,828

$

34,692

EHR(2)

 

6,507

 

9,006

 

22,258

 

27,474

Patient engagement(1)

 

661

 

260

 

2,004

 

2,568

 
Total

$

16,248

$

20,538

$

59,090

$

64,734

 

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

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

 

Computer Programs and Systems, Inc.

Bookings Composition

(In '000s, except per share data)

(Unaudited)

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

2023

2022

 

2023

2022

RCM
Net new(1)

$

3,491

$

897

$

11,107

$

9,657

Cross-sell(1)

 

4,248

 

10,059

 

20,116

 

21,866

TruCode

 

1,341

 

316

 

3,605

 

3,163

EHR
Non-subscription sales(2)

 

2,711

 

4,550

 

10,822

 

12,689

Subscription revenue(3)

 

2,526

 

3,053

 

8,141

 

11,507

Other

 

1,270

 

1,403

 

3,295

 

3,278

Patient engagement

 

661

 

260

 

2,004

 

2,574

 
Total

$

16,248

$

20,538

$

59,090

$

64,734

 

(1)“Net new” represents bookings from outside the Company’s core EHR client base, and “Cross-sell” represents bookings from existing EHR customers. In each case, 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.

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

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

 
Computer Programs and Systems, Inc.
Electronic Health Record (EHR)Revenue Composition
(In '000s)
(Unaudited)
 
Three Months Ended September 30, Nine Months Ended September 30,

2023

2022

2023

2022

Recurring revenues - EHR
Acute Care EHR

$

27,925

$

27,237

$

83,886

$

81,333

Post-acute Care EHR

 

3,594

 

3,817

 

11,230

 

11,504

Total recurring revenues - EHR

 

31,519

 

31,054

 

95,116

 

92,837

 
Nonrecurring revenues - EHR
Acute Care EHR

 

2,624

 

3,500

 

8,460

 

9,467

Post-acute Care EHR

 

350

 

395

 

1,075

 

1,551

Total nonrecurring revenues - EHR

 

2,974

 

3,895

 

9,535

 

11,018

 
Total EHR revenues

$

34,493

$

34,949

$

104,651

$

103,855

 

Computer Programs and Systems, Inc.

Client Net Patient Revenue ("NPR")

(In millions)

(Unaudited)

 

 

 

 

 

 

 

As of:

 

9/30/2022

12/31/2022

3/31/2023

6/30/2023

9/30/2023

Client NPR(1)

$

2,958

$

2,991

$

3,033

$

3,205

$

3,469

 
 
(1)Client NPR defined as the aggregate annual net patient revenue for hospital customers contracted for our full-service revenue cycle outsourcing solution.
 

Computer Programs and Systems, Inc.

Adjusted EBITDA - by Segment

(In '000s)

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

In '000s

2023

2022

 

2023

2022

RCM

$

4,623

 

$

8,750

 

$

18,205

 

$

26,395

 

EHR

 

5,669

 

 

5,751

 

 

17,394

 

 

17,621

 

Patient engagement

 

(570

)

 

(1,152

)

 

(6

)

 

(1,345

)

 
Total

$

9,722

 

$

13,349

 

$

35,593

 

$

42,671

 

Computer Programs and Systems, Inc.

Reconciliation of Non-GAAP Financial Measures

(In '000s)

(Unaudited)

Three Months Ended September 30,

 

Nine Months Ended September 30,

Adjusted EBITDA:

2023

 

2022

 

2023

 

2022

Net income (loss), as reported

$

(3,562

)

$

2,161

$

(3,315

)

$

13,350

 

 
Deferred revenue and other purchase accounting-related adjustments

 

-

 

 

-

 

-

 

 

109

 

Depreciation expense

 

297

 

 

622

 

1,392

 

 

1,890

 

Amortization of software development costs

 

2,194

 

 

1,024

 

5,506

 

 

2,283

 

Amortization of acquisition-related intangibles

 

4,014

 

 

4,486

 

12,043

 

 

12,917

 

Stock-based compensation

 

1,038

 

 

1,864

 

2,162

 

 

5,284

 

Severance and other nonrecurring charges

 

7,392

 

 

410

 

15,313

 

 

1,671

 

Interest expense and other, net

 

2,847

 

 

1,416

 

7,836

 

 

3,255

 

(Gain) loss on contingent consideration

 

-

 

 

589

 

-

 

 

(992

)

Provision (benefit) for income taxes

 

(4,498

)

 

777

 

(5,344

)

 

2,904

 

 
Total Adjusted EBITDA

$

9,722

 

$

13,349

$

35,593

 

$

42,671

 

 

Computer Programs and Systems, Inc.

Reconciliation of Non-GAAP Financial Measures

(In '000s, except per share data)

(Unaudited)

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

Non-GAAP Net Income and Non-GAAP EPS:

2023

 

2022

 

2023

 

2022

Net income (loss), as reported

$

(3,562

)

$

2,161

 

$

(3,315

)

$

13,350

 

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

 

-

 

 

-

 

 

-

 

 

109

 

Amortization of acquisition-related intangible assets

 

4,014

 

 

4,486

 

 

12,043

 

 

12,917

 

Stock-based compensation

 

1,038

 

 

1,864

 

 

2,162

 

 

5,284

 

Severance and other nonrecurring charges

 

7,392

 

 

410

 

 

15,313

 

 

1,671

 

Non-cash interest expense

 

90

 

 

90

 

 

270

 

 

242

 

Loss on extinguishment of debt

 

-

 

 

-

 

 

-

 

 

125

 

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

 

(2,632

)

 

(1,439

)

 

(6,255

)

 

(4,273

)

Tax shortfall (windfall) from stock-based compensation

 

8

 

 

-

 

 

65

 

 

(112

)

(Gain) loss on contingent consideration

 

-

 

 

589

 

 

-

 

 

(992

)

 
Non-GAAP net income

$

6,348

 

$

8,161

 

$

20,283

 

$

28,321

 

 
Weighted average shares outstanding, diluted

 

14,205

 

 

14,365

 

 

14,181

 

 

14,405

 

 
Non-GAAP EPS

$

0.45

 

$

0.57

 

$

1.43

 

$

1.97

 

 

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.

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

Source: CPSI