CPSI Announces Fourth Quarter and Full Year 2022 Results
CPSI reported significant growth in their fourth quarter and full-year results for 2022. Fourth quarter revenue reached $83.2 million, a 12% increase from $74.0 million in 2021, largely driven by a 29% growth in TruBridge revenue cycle management (RCM) revenue, which accounted for 55% of total revenue. Full-year revenue also saw an increase to $326.6 million from $280.6 million. The company provided revenue guidance for 2023, expecting between $340 million and $350 million. CEO Chris Fowler emphasized the company's focus on innovation and new client acquisition, reflecting a retention rate exceeding 95%.
- Fourth quarter 2022 revenue grew to $83.2 million, up 12% from 2021.
- TruBridge RCM revenue rose by 29%, making up 55% of total revenue in Q4.
- Full year 2022 revenue increased to $326.6 million, up from $280.6 million.
- Bookings for Q4 2022 reached $24.7 million, compared to $15.6 million in Q4 2021.
- Company anticipates 2023 revenue in the range of $340 million to $350 million.
- Adjusted EBITDA decreased to $13.2 million in Q4 2022 from $14.3 million in Q4 2021.
- GAAP net income dropped to $2.5 million in Q4 2022 from $3.7 million in Q4 2021.
-
Fourth quarter 2022
TruBridge revenue cycle management (RCM) revenue grew by29% compared to fourth quarter 2021, now representing98% recurring revenue and55% of CPSI’s total revenue - Continued success in both winning new clients and cross-selling RCM solution
-
Full year 2023 revenue guidance between
and$340 million $350 million
“2022 was an important building year for CPSI as we worked to leverage the well-established organization to drive innovation and growth for the years ahead,” said
Fourth Quarter 2022
All comparisons are to the quarter ended
-
Bookings of
compared to$24.7 million $15.6 million -
Revenue of
compared to$83.2 million $74.0 million -
TruBridge RCM revenue of
represented$45.7 million 55% of CPSI’s total revenue, an increase of29%
-
TruBridge RCM revenue of
-
GAAP net income of
and non-GAAP net income of$2.5 million $8.7 million -
GAAP earnings per diluted share of
and non-GAAP earnings per diluted share of$0.17 $0.61 -
Adjusted EBITDA of
compared to$13.2 million $14.3 million
Full Year 2022
All comparisons are to the year ended
-
Bookings of
compared to$89.4 million $70.2 million -
Revenue of
compared to$326.6 million $280.6 million -
TruBridge RCM revenue of
represented$179.9 million 55% of CPSI’s total revenue, an increase of37%
-
TruBridge RCM revenue of
-
GAAP net income of
and non-GAAP net income of$15.9 million $37.0 million -
GAAP earnings per diluted share of
and non-GAAP earnings per diluted share of$1.08 $2.58 -
Adjusted EBITDA of
compared to$55.9 million $52.7 million -
Net debt of
$132.6 million
2023 Outlook
For full year 2023, the Company is providing an initial outlook of:
-
Revenue in the range of
to$340 million $350 million -
GAAP net income in the range of
to$11 million $15 million -
Adjusted EBITDA in the range of
to$59 million $63 million
Conference Call Information
CPSI will hold a live webcast to discuss fourth quarter and full year 2022 results today,
About CPSI
CPSI is a leading provider of healthcare solutions and services for community hospitals, their clinics and other healthcare systems. Founded in 1979, CPSI is the parent of six companies –
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: the impact of the ongoing COVID-19 pandemic and related economic disruptions which have materially affected CPSI’s revenue and could materially affect CPSI’s gross margin and income, as well as CPSI’s financial position and/or liquidity; federal, state and local government actions to address and contain the impact of COVID-19 and their impact on us and our hospital clients; operational disruptions and heightened cybersecurity risks due to a significant percentage of our workforce working remotely; 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; 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 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; 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; 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; 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; and other risk factors described from time to time in our public releases and reports filed with the
|
|||||||||||||||
Condensed Consolidated Statements of Income |
|||||||||||||||
(In '000s, except per share data) |
|||||||||||||||
(Unaudited) |
|||||||||||||||
|
|
|
|
|
|
|
|
||||||||
|
Three Months Ended |
|
Twelve Months Ended |
||||||||||||
|
|
2022 |
|
|
|
2021 |
|
|
|
2022 |
|
|
|
2021 |
|
Sales revenues: | |||||||||||||||
Revenue cycle | $ |
45,670 |
|
$ |
35,491 |
|
$ |
179,870 |
|
$ |
131,242 |
|
|||
Electronic health record |
|
35,968 |
|
|
35,217 |
|
|
139,823 |
|
|
143,109 |
|
|||
Patient engagement |
|
1,586 |
|
|
3,293 |
|
|
6,955 |
|
|
6,278 |
|
|||
Total sales revenues |
|
83,224 |
|
|
74,001 |
|
|
326,648 |
|
|
280,629 |
|
|||
Costs of sales: | |||||||||||||||
Revenue cycle |
|
25,941 |
|
|
17,907 |
|
|
97,010 |
|
|
66,015 |
|
|||
Electronic health record |
|
19,069 |
|
|
18,415 |
|
|
71,347 |
|
|
70,664 |
|
|||
Patient engagement |
|
1,062 |
|
|
827 |
|
|
3,856 |
|
|
3,068 |
|
|||
Total costs of sales |
|
46,072 |
|
|
37,149 |
|
|
172,213 |
|
|
139,747 |
|
|||
Gross profit |
|
37,152 |
|
|
36,852 |
|
|
154,435 |
|
|
140,882 |
|
|||
Operating expenses: | |||||||||||||||
Product development |
|
8,890 |
|
|
7,791 |
|
|
30,926 |
|
|
30,389 |
|
|||
Sales and marketing |
|
4,552 |
|
|
6,164 |
|
|
27,131 |
|
|
21,978 |
|
|||
General and administrative |
|
14,958 |
|
|
11,700 |
|
|
56,192 |
|
|
50,022 |
|
|||
Amortization of acquisition-related intangibles |
|
4,486 |
|
|
3,672 |
|
|
17,403 |
|
|
13,786 |
|
|||
Total operating expenses |
|
32,886 |
|
|
29,327 |
|
|
131,652 |
|
|
116,175 |
|
|||
Operating income |
|
4,266 |
|
|
7,525 |
|
|
22,783 |
|
|
24,707 |
|
|||
Other income (expense): | |||||||||||||||
Other income |
|
264 |
|
|
368 |
|
|
1,178 |
|
|
1,529 |
|
|||
(Loss) gain on contingent consideration |
|
(427 |
) |
|
- |
|
|
565 |
|
|
- |
|
|||
Loss on extinguishment of debt |
|
- |
|
|
- |
|
|
(125 |
) |
|
- |
|
|||
Interest expense |
|
(2,276 |
) |
|
(911 |
) |
|
(6,320 |
) |
|
(3,160 |
) |
|||
Total other income (expense) |
|
(2,439 |
) |
|
(543 |
) |
|
(4,702 |
) |
|
(1,631 |
) |
|||
Income before taxes |
|
1,827 |
|
|
6,982 |
|
|
18,081 |
|
|
23,076 |
|
|||
Provision for income taxes |
|
(690 |
) |
|
1,581 |
|
|
2,214 |
|
|
4,646 |
|
|||
Net income | $ |
2,517 |
|
$ |
5,401 |
|
$ |
15,867 |
|
$ |
18,430 |
|
|||
Net income per common share—basic | $ |
0.17 |
|
$ |
0.37 |
|
$ |
1.08 |
|
$ |
1.26 |
|
|||
Net income per common share—diluted | $ |
0.17 |
|
$ |
0.37 |
|
$ |
1.08 |
|
$ |
1.26 |
|
|||
Weighted average shares outstanding used in per common share computations: | |||||||||||||||
Basic |
|
14,210 |
|
|
14,332 |
|
|
14,356 |
|
|
14,290 |
|
|||
Diluted |
|
14,210 |
|
|
14,362 |
|
|
14,356 |
|
|
14,318 |
|
|
|||||||
Condensed Consolidated Balance Sheets |
|||||||
(In '000s, except per share data) |
|||||||
|
|
|
|
||||
|
(unaudited) |
|
(unaudited) |
||||
Assets | |||||||
Current assets | |||||||
Cash and cash equivalents | $ |
6,951 |
|
$ |
11,431 |
|
|
Accounts receivable, net of allowance for doubtful accounts of |
|
51,311 |
|
|
34,431 |
|
|
Financing receivables, current portion, net |
|
4,474 |
|
|
6,488 |
|
|
Inventories |
|
784 |
|
|
855 |
|
|
Prepaid income taxes |
|
701 |
|
|
4,599 |
|
|
Prepaid expenses and other |
|
10,338 |
|
|
11,194 |
|
|
Total current assets |
|
74,559 |
|
|
68,998 |
|
|
Property & equipment, net |
|
9,884 |
|
|
11,590 |
|
|
Software development costs, net |
|
27,257 |
|
|
11,644 |
|
|
Operating lease assets |
|
7,567 |
|
|
7,097 |
|
|
Financing receivables, net of current portion |
|
3,312 |
|
|
7,231 |
|
|
Other assets, net of current portion |
|
8,131 |
|
|
3,874 |
|
|
Intangible assets, net |
|
102,000 |
|
|
95,203 |
|
|
|
198,253 |
|
|
177,713 |
|
||
Total assets | $ |
430,963 |
|
$ |
383,350 |
|
|
Liabilities & Stockholders' Equity | |||||||
Current liabilities | |||||||
Accounts payable | $ |
7,035 |
|
$ |
8,079 |
|
|
Current portion of long-term debt |
|
3,141 |
|
|
4,394 |
|
|
Deferred revenue |
|
11,590 |
|
|
11,529 |
|
|
Accrued vacation |
|
6,214 |
|
|
5,262 |
|
|
Other accrued liabilities |
|
16,475 |
|
|
17,163 |
|
|
Total current liabilities |
|
44,455 |
|
|
46,427 |
|
|
Long-term debt, less current portion |
|
136,388 |
|
|
94,966 |
|
|
Operating lease liabilities, net of current portion |
|
5,651 |
|
|
5,505 |
|
|
Deferred tax liabilities |
|
12,758 |
|
|
13,880 |
|
|
Total liabilities |
|
199,252 |
|
|
160,778 |
|
|
Stockholders' Equity | |||||||
Common stock, |
|
15 |
|
|
15 |
|
|
|
(14,500 |
) |
|
(2,576 |
) |
||
Additional paid-in capital |
|
192,275 |
|
|
187,079 |
|
|
Retained earnings |
|
53,921 |
|
|
38,054 |
|
|
Total stockholders' equity |
|
231,711 |
|
|
222,572 |
|
|
Total liabilities and stockholders' equity | $ |
430,963 |
|
$ |
383,350 |
|
|
|||||||
Condensed Consolidated Statements of Cash Flows |
|||||||
(In '000s) |
|||||||
(Unaudited) |
|||||||
|
|
|
|
||||
|
Twelve Months Ended |
||||||
|
|
2022 |
|
|
|
2021 |
|
Operating activities: | |||||||
Net income | $ |
15,867 |
|
$ |
18,430 |
|
|
Adjustments to net income: | |||||||
Provision for bad debt |
|
992 |
|
|
2,592 |
|
|
Deferred taxes |
|
(6,688 |
) |
|
3,502 |
|
|
Stock-based compensation |
|
5,173 |
|
|
5,457 |
|
|
Depreciation |
|
2,443 |
|
|
2,156 |
|
|
Loss on extinguishment of debt |
|
125 |
|
|
- |
|
|
Amortization of acquisition-related intangibles |
|
17,403 |
|
|
13,786 |
|
|
Amortization of software development costs |
|
3,484 |
|
|
931 |
|
|
Amortization of deferred finance costs |
|
332 |
|
|
293 |
|
|
Gain on contingent consideration |
|
(565 |
) |
|
- |
|
|
Loss on disposal of PP&E |
|
- |
|
|
313 |
|
|
Changes in operating assets and liabilities: | |||||||
Accounts receivable |
|
(12,428 |
) |
|
(3,204 |
) |
|
Financing receivables |
|
6,144 |
|
|
8,098 |
|
|
Inventories |
|
71 |
|
|
229 |
|
|
Prepaid expenses and other |
|
(2,930 |
) |
|
(3,914 |
) |
|
Accounts payable |
|
(1,429 |
) |
|
(615 |
) |
|
Deferred revenue |
|
61 |
|
|
2,099 |
|
|
Other liabilities |
|
422 |
|
|
401 |
|
|
Prepaid income taxes |
|
3,898 |
|
|
(2,810 |
) |
|
Net cash provided by operating activities |
|
32,375 |
|
|
47,744 |
|
|
Investing activities: | |||||||
Purchase of business, net of cash received |
|
(43,364 |
) |
|
(59,634 |
) |
|
Investment in software development |
|
(19,097 |
) |
|
(9,365 |
) |
|
Purchases of property and equipment |
|
(270 |
) |
|
(920 |
) |
|
Net cash used in investing activities |
|
(62,731 |
) |
|
(69,919 |
) |
|
Financing activities: | |||||||
|
(11,924 |
) |
|
(1,315 |
) |
||
Proceeds from long-term debt |
|
575 |
|
|
- |
|
|
Payments of long-term debt principal |
|
(3,563 |
) |
|
(3,750 |
) |
|
Proceeds from revolving line of credit |
|
48,000 |
|
|
61,000 |
|
|
Payments of revolving line of credit |
|
(5,300 |
) |
|
(35,000 |
) |
|
Payments of contingent consideration |
|
(1,935 |
) |
|
- |
|
|
Proceeds from exercise of stock options |
|
23 |
|
|
- |
|
|
Net cash provided by (used in) financing activities |
|
25,876 |
|
|
20,935 |
|
|
Net decrease in cash and cash equivalents |
|
(4,480 |
) |
|
(1,240 |
) |
|
Cash and cash equivalents, beginning of period |
|
11,431 |
|
|
12,671 |
|
|
Cash and cash equivalents, end of period | $ |
6,951 |
|
$ |
11,431 |
|
|
|||||||||||
Consolidated Bookings |
|||||||||||
(In '000s) |
|||||||||||
|
|
|
|
|
|
|
|||||
|
|
Three Months Ended |
|
Twelve Months Ended |
|||||||
|
In '000s |
|
|
|
|
|
|||||
$ |
13,373 |
$ |
5,084 |
$ |
48,065 |
$ |
20,333 |
||||
EHR(2) |
|
10,678 |
|
8,232 |
|
38,152 |
|
40,873 |
|||
|
620 |
|
2,247 |
|
3,188 |
|
9,007 |
||||
Total | $ |
24,671 |
$ |
15,563 |
$ |
89,405 |
$ |
70,213 |
|||
(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). | ||||||||||
(3) |
Generally calculated as the total contract value. |
Bookings Composition | |||||||||||
(In '000s, except per share data) | |||||||||||
(Unaudited) | |||||||||||
Three Months Ended | Twelve Months Ended | ||||||||||
Revenue cycle | |||||||||||
Net new(1) | $ |
5,173 |
$ |
681 |
$ |
14,830 |
$ |
6,959 |
|||
Cross-sell(1) |
|
8,090 |
|
4,079 |
|
29,962 |
|
12,477 |
|||
TruCode |
|
110 |
|
324 |
|
3,273 |
|
897 |
|||
Electronic health record | |||||||||||
Non-subscription sales(2) |
|
4,181 |
|
2,436 |
|
16,870 |
|
12,581 |
|||
Subscription revenue(3) |
|
5,191 |
|
4,439 |
|
16,698 |
|
23,468 |
|||
Other |
|
1,306 |
|
1,357 |
|
4,584 |
|
4,824 |
|||
|
620 |
|
2,247 |
|
3,188 |
|
9,007 |
||||
Total | $ |
24,671 |
$ |
15,563 |
$ |
89,405 |
$ |
70,213 |
|||
(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, 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. |
|
|||||||
Acute Care EHR Net New License Mix |
|||||||
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Twelve Months Ended |
|||
|
|
|
|
|
|
|
|
SaaS(1) | 3 |
2 |
|
19 |
10 |
||
Perpetual license(2) | - |
- |
|
- |
7 |
||
|
|
|
|
|
|||
Total | 3 |
2 |
|
19 |
17 |
||
(1) |
Exhibits revenue attribution that is recurring in nature. | ||||||
(2) |
Exhibits revenue attribution that is nonrecurring in nature. |
|
|||||||||||
Electronic Health Record Revenue Composition |
|||||||||||
(In '000s) |
|||||||||||
(Unaudited) |
|||||||||||
|
|
|
|
|
|
|
|
||||
|
Three Months Ended |
|
Twelve Months Ended |
||||||||
|
2022 |
|
2021 |
|
2022 |
|
2021 |
||||
Recurring revenues - electronic health record | |||||||||||
Acute Care EHR | $ |
28,007 |
$ |
27,648 |
$ |
109,340 |
$ |
108,440 |
|||
Post-acute Care EHR |
|
3,879 |
|
4,070 |
|
15,384 |
|
16,472 |
|||
Total recurring revenues - system sales and support |
|
31,886 |
|
31,718 |
|
124,724 |
|
124,912 |
|||
Nonrecurring revenues - electronic health record | |||||||||||
Acute Care EHR |
|
3,672 |
|
3,154 |
|
13,138 |
|
16,939 |
|||
Post-acute Care EHR |
|
410 |
|
345 |
|
1,961 |
|
1,258 |
|||
Total nonrecurring revenues - system sales and support |
|
4,082 |
|
3,499 |
|
15,099 |
|
18,197 |
|||
Total system sales and support revenues | $ |
35,968 |
$ |
35,217 |
$ |
139,823 |
$ |
143,109 |
|
||||||||||||||
Client Net Patient Revenue (" |
||||||||||||||
(In millions) |
||||||||||||||
(Unaudited) |
||||||||||||||
|
|
|
|
|
|
|
|
|||||||
|
As of: |
|||||||||||||
|
|
|
|
|
|
|
|
|||||||
Client |
$ |
1,844 |
$ |
2,146 |
$ |
2,190 |
$ |
2,880 |
$ |
2,946 |
$ |
2,958 |
$ |
2,991 |
(1) Client |
|
|||||||||||
Adjusted EBITDA - by Segment |
|||||||||||
(In '000s) |
|||||||||||
|
|
|
|
|
|
||||||
|
Three Months Ended |
|
Twelve Months Ended |
||||||||
In '000s |
|
|
|
|
|
||||||
Revenue cycle | $ |
9,306 |
|
$ |
8,049 |
$ |
36,242 |
$ |
30,211 |
|
|
Electronic health record |
|
4,030 |
|
|
4,925 |
|
19,091 |
|
23,061 |
|
|
Patient engagement |
|
(108 |
) |
|
1,350 |
|
566 |
|
(595 |
) |
|
Total | $ |
13,228 |
|
$ |
14,324 |
$ |
55,899 |
$ |
52,677 |
|
|
|||||||||||||
Reconciliation of Non-GAAP Financial Measures |
|||||||||||||
(In '000s) |
|||||||||||||
(Unaudited) |
|||||||||||||
|
|
|
|
|
|
|
|
||||||
|
Three Months Ended |
|
Twelve Months Ended |
||||||||||
Adjusted EBITDA: | 2022 |
|
|
2021 |
|
2022 |
|
2021 |
|||||
Net income, as reported | $ |
2,517 |
|
$ |
5,401 |
$ |
15,867 |
|
$ |
18,430 |
|||
Deferred revenue and other acquisition-related adjustments |
|
- |
|
|
201 |
|
109 |
|
|
747 |
|||
Depreciation expense |
|
553 |
|
|
515 |
|
2,443 |
|
|
2,156 |
|||
Amortization of software development costs |
|
1,200 |
|
|
404 |
|
3,483 |
|
|
931 |
|||
Amortization of acquisition-related intangible assets |
|
4,486 |
|
|
3,672 |
|
17,403 |
|
|
13,786 |
|||
Stock-based compensation |
|
(111 |
) |
|
1,279 |
|
5,173 |
|
|
5,457 |
|||
Severance and other nonrecurring charges |
|
2,834 |
|
|
728 |
|
4,505 |
|
|
4,892 |
|||
Interest expense and other, net |
|
2,012 |
|
|
543 |
|
5,267 |
|
|
1,632 |
|||
Gain on contingent consideration |
|
427 |
|
|
- |
|
(565 |
) |
|
- |
|||
Provision for income taxes |
|
(690 |
) |
|
1,581 |
|
2,214 |
|
|
4,646 |
|||
Adjusted EBITDA | $ |
13,228 |
|
$ |
14,324 |
$ |
55,899 |
|
$ |
52,677 |
|
|||||||||||||||
Reconciliation of Non-GAAP Financial Measures |
|||||||||||||||
(In '000s, except per share data) |
|||||||||||||||
(Unaudited) |
|||||||||||||||
|
|
|
|
|
|
|
|
||||||||
|
Three Months Ended |
|
Twelve Months Ended |
||||||||||||
Non-GAAP Net Income and Non-GAAP EPS: |
|
2022 |
|
|
|
2021 |
|
|
|
2022 |
|
|
|
2021 |
|
Net income, as reported | $ |
2,517 |
|
$ |
5,401 |
|
$ |
15,867 |
|
$ |
18,430 |
|
|||
Pre-tax adjustments for Non-GAAP EPS: | |||||||||||||||
Deferred revenue and other acquisition-related adjustments |
|
- |
|
|
201 |
|
|
109 |
|
|
747 |
|
|||
Amortization of acquisition-related intangible assets |
|
4,486 |
|
|
3,672 |
|
|
17,403 |
|
|
13,786 |
|
|||
Stock-based compensation |
|
(111 |
) |
|
1,279 |
|
|
5,173 |
|
|
5,457 |
|
|||
Severance and other nonrecurring charges |
|
2,834 |
|
|
728 |
|
|
4,505 |
|
|
4,892 |
|
|||
Non-operating loss from lease termination (non-cash) |
|
- |
|
|
- |
|
|
- |
|
|
313 |
|
|||
Non-cash interest expense |
|
90 |
|
|
73 |
|
|
332 |
|
|
293 |
|
|||
Loss on extinguishment of debt |
|
- |
|
|
- |
|
|
125 |
|
|
- |
|
|||
After-tax adjustments for Non-GAAP EPS: | |||||||||||||||
Tax-effect of pre-tax adjustments, at |
|
(1,533 |
) |
|
(1,250 |
) |
|
(5,806 |
) |
|
(5,352 |
) |
|||
Tax shortfall (windfall) from stock-based compensation |
|
- |
|
|
- |
|
|
(112 |
) |
|
(84 |
) |
|||
Gain on contingent consideration |
|
427 |
|
|
- |
|
|
(565 |
) |
|
- |
|
|||
Non-GAAP net income | $ |
8,710 |
|
$ |
10,104 |
|
$ |
37,031 |
|
$ |
38,482 |
|
|||
Weighted average shares outstanding, diluted |
|
14,210 |
|
|
14,362 |
|
|
14,356 |
|
|
14,318 |
|
|||
Non-GAAP EPS | $ |
0.61 |
|
$ |
0.70 |
|
$ |
2.58 |
|
$ |
2.69 |
|
Explanation of Non-GAAP Financial Measures
We report our financial results in accordance with accounting principles generally accepted in
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:
- Adjusted EBITDA – Adjusted EBITDA consists of GAAP net income as reported and adjusts for (i) deferred revenue purchase accounting adjustments arising from purchase allocation adjustments related to business acquisitions; (ii) depreciation expense; (iii) amortization of software development costs; (iv) amortization of acquisition-related intangible assets; (v) stock-based compensation; (vi) severance and other non‑recurring charges; (vii) interest expense and other, net; (viii) gain on contingent consideration; and (ix) the provision for income taxes.
- Non-GAAP net income – Non-GAAP net income consists of GAAP net income as reported and adjusts for (i) deferred revenue purchase accounting adjustments arising from purchase allocation adjustments related to business acquisitions; (ii) amortization of acquisition-related intangible assets; (iii) stock-based compensation; (iv) severance and other non-recurring charges; (v) non-operating loss from lease termination (non-cash); (vi) non-cash interest expense; (vii) loss on extinguishment of debt and (viii) the total tax effect of items (i) through (vii). Adjustments to Non-GAAP net income also include the after-tax effect of the shortfall (windfall) from stock-based compensation and gain on contingent consideration.
- 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:
- Deferred revenue purchase accounting adjustments – Deferred revenue purchase accounting adjustments includes acquisition-related deferred revenue adjustments, which reflect the fair value adjustments to deferred revenues acquired in business acquisitions. The fair value of deferred revenue represents an amount equivalent to the estimated cost plus an appropriate profit margin, to perform services related to the acquiree’s software and product support, which assumes a legal obligation to do so, based on the deferred revenue balances as of the acquisition date. We add back deferred revenue and other adjustments for non-GAAP financial measures because we believe the inclusion of this amount directly correlates to the underlying performance of our operations.
- 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 charges – Non-recurring charges relate to certain severance and other charges incurred in connection with activities that are considered one-time. We exclude non-recurring expenses (primarily related to costs associated with our recent business transformation initiative and one-time lease terminations costs) 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-operating loss from lease termination (non-cash) – Non-operating loss from lease termination relates solely to the write-off of the remaining net book value of leasehold improvements and other property and equipment associated with operating leases terminated as a result of specific actions taken during the period. We exclude such non-operating lease termination losses 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 interest expense – Non-cash interest expense includes amortization of deferred debt issuance costs. We exclude non-cash interest expense 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 (windfall) from stock-based compensation – ASU 2016-09, Improvements to Employee Share-Based Payment Accounting, became effective for the Company during the third 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; and (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.
-
Gain on contingent consideration – The purchase agreement for our acquisition of TruCode in 2021 contained contingent consideration, or “earnout,” provisions whereby the previous shareholders of TruCode would receive additional consideration at the conclusion of a one-year period beginning on the acquisition date and ending on the first anniversary of the acquisition date, depending on the achievement of certain profitability targets. After the initial measurement period,
U.S. GAAP requires that any adjustments to the estimated fair value of this contingent liability, including upon final determination of amounts due, should be recorded in the relevant period’s earnings. We exclude gains on contingent consideration from non-GAAP financial measures because we believe (i) the amount of such gains in any specific period may not directly correlate to the underlying performance of our business operations and (ii) such gains can vary significantly between periods.
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.
View source version on businesswire.com: https://www.businesswire.com/news/home/20230214005792/en/
Chief Marketing Officer
Tracey.schroeder@cpsi.com
(251) 639-8100
Source: CPSI
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