CPSI (NASDAQ: CPSI), a healthcare solutions company, today
announced results for the second quarter ended June 30, 2023.
Second Quarter 2023 Financial Overview
All comparisons are to the quarter ended June 30, 2022, unless
otherwise noted.
- Bookings of $21.9 million compared to $23.8 million
- Total revenue of $84.6 million compared to $82.7 million
- RCM revenue of $47.8 million compared to $46.8 million
- RCM revenue represented 58.2% of CPSI’s total recurring revenue
and 56.4% of CPSI’s total revenue
- GAAP net loss of $(2.8) million and non-GAAP net income of $5.7
million
- GAAP loss per diluted share of $(0.20) and non-GAAP earnings
per diluted share of $0.40
- Adjusted EBITDA of $11.2 million compared to $13.2 million
- Cash provided by operations of $717,000 during the three months
ended June 30, 2023
Chris Fowler, chief executive officer of CPSI, said, “This was a
challenging quarter for CPSI. We are undergoing a significant and
transformative change as an organization. The results we expect to
ultimately come from the meaningful initiatives we have put in
place over the past several quarters have not come to fruition just
yet.
“Despite the headwinds we faced in the second quarter, we
continued to grow our pipeline, saw further stabilization of our
electronic health record (EHR) customer base, and underwent
necessary measures to best position CPSI for the future. Our
topline guidance for the year remains unchanged, but we have
updated our expectations for adjusted EBITDA to reflect the impact
from outsized expenses in 2023. I know we are in a stronger
position today than when I stepped into this role, and I remain
confident that this year will be an important one as we establish a
foothold for the future of CPSI,” added Fowler.
Financial Outlook1
For the full year 2023, the Company expects:
- Revenue of $340 million to $350 million, unchanged from prior
guidance
- Adjusted EBITDA of $52.5 million to $54.5 million, a decrease
from the prior guidance of $59 million to $63 million
- Non-GAAP net income of $25.6 million to $27.6 million (no prior
guidance)
______________________________________
1
Excluding revenues, the Company does not
reconcile Adjusted EBITDA or non-GAAP net income to the
corresponding GAAP financial measures, as certain items that impact
such GAAP financial measures 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 second quarter 2023 results today, Wednesday, August 9,
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 June 30,
Six Months Ended June 30,
2023
2022
2023
2022
Sales revenues: RCM
$
47,760
$
46,814
$
96,391
$
87,325
EHR
34,967
34,143
70,158
68,905
Patient engagement
1,895
1,769
4,306
4,367
Total sales revenues
84,622
82,726
170,855
160,597
56.4
%
56.6
%
Costs of sales: RCM
27,119
25,382
54,302
45,780
EHR
15,891
15,721
32,239
31,061
Patient engagement
1,123
950
1,769
1,893
Total costs of sales
44,133
42,053
88,310
78,734
Gross profit
40,489
40,673
82,545
81,863
Operating expenses: Product development
10,595
8,107
20,434
16,169
Sales and marketing
8,132
8,226
15,089
15,269
General and administrative
19,654
14,994
34,604
28,421
Amortization of acquisition-related intangibles
4,014
4,758
8,029
8,430
Total operating expenses
42,395
36,085
78,156
68,289
Operating income (loss)
(1,906
)
4,588
4,389
13,574
Other income (expense): Other income
78
278
346
435
Gain on contingent consideration
-
330
-
1,580
Loss on extinguishment of debt
-
(125
)
-
(125
)
Interest expense
(2,664
)
(1,232
)
(5,334
)
(2,149
)
Total other income (expense)
(2,586
)
(749
)
(4,988
)
(259
)
Income (loss) before taxes
(4,492
)
3,839
(599
)
13,315
Provision (benefit) for income taxes
(1,655
)
763
(846
)
2,126
Net income (loss)
$
(2,837
)
$
3,076
$
247
$
11,189
Net income (loss) per common share—basic
$
(0.20
)
$
0.21
$
0.02
$
0.76
Net income (loss) per common share—diluted
$
(0.20
)
$
0.21
$
0.02
$
0.76
Computer Programs and Systems,
Inc.
Condensed Consolidated Balance
Sheets
(In '000s, except per share
data)
June 30, 2023
(unaudited)
Dec. 31, 2022
Assets Current assets Cash and cash equivalents
$
7,246
$
6,951
Accounts receivable, net of allowance for expected credit losses of
$2,796 and $2,854, respectively
54,889
51,311
Financing receivables, current portion (net of allowance for
expected credit losses of $111 and $223, respectively)
4,670
4,474
Inventories
962
784
Prepaid income taxes
1,811
701
Prepaid expenses and other
12,891
10,338
Total current assets
82,469
74,559
Property & equipment, net
8,744
9,884
Software development costs, net
36,088
27,257
Operating lease assets
5,421
7,567
Financing receivables, net of current portion (net of allowance for
expected credit losses of $392 and $326, respectively)
2,223
3,312
Other assets, net of current portion
7,595
8,131
Intangible assets, net
93,971
102,000
Goodwill
198,253
198,253
Total assets
$
434,764
$
430,963
Liabilities & Stockholders' Equity Current
liabilities Accounts payable
$
14,483
$
7,035
Current portion of long-term debt
3,141
3,141
Deferred revenue
9,885
11,590
Accrued vacation
6,581
6,214
Other accrued liabilities
13,667
16,475
Total current liabilities
47,757
44,455
Long-term debt, net of current portion
141,420
136,388
Operating lease liabilities, net of current portion
3,812
5,651
Deferred tax liabilities
11,225
12,758
Total liabilities
204,214
199,252
Stockholders' Equity Common stock, $0.001 par value; 30,000
shares authorized; 15,099 and 14,913 shares issued, respectively
15
15
Treasury stock, 570 and 483 shares, respectively
(17,032
)
(14,500
)
Additional paid-in capital
193,399
192,275
Retained earnings
54,168
53,921
Total stockholders' equity
230,550
231,711
Total liabilities and stockholders' equity
$
434,764
$
430,963
Computer Programs and Systems,
Inc.
Condensed Consolidated Statements
of Cash Flows
(In '000s)
(Unaudited)
Six Months Ended June 30,
2023
2022
Operating activities: Net income
$
247
$
11,189
Adjustments to net income: Provision for credit losses
181
1,202
Deferred taxes
(1,533
)
(724
)
Stock-based compensation
1,124
3,420
Depreciation
1,095
1,269
Loss on extinguishment of debt
-
125
Amortization of acquisition-related intangibles
8,029
8,430
Amortization of software development costs
3,312
1,259
Amortization of deferred finance costs
180
152
Gain on contingent consideration
-
(1,580
)
Non-cash operating lease costs
1,211
940
Loss on disposal of PP&E
117
-
Changes in operating assets and liabilities: Accounts receivable
(3,806
)
(9,934
)
Financing receivables
940
3,376
Inventories
(178
)
(273
)
Prepaid expenses and other
(2,017
)
(4,547
)
Accounts payable
7,448
(469
)
Deferred revenue
(1,705
)
2,625
Operating lease liabilities
(1,067
)
(940
)
Other liabilities
(2,278
)
1,126
Prepaid income taxes
(1,110
)
2,457
Net cash provided by operating activities
10,190
19,103
Investing activities: Purchase of business, net of
cash acquired
-
(43,814
)
Investment in software development
(12,143
)
(8,739
)
Purchases of property and equipment
(72
)
(88
)
Net cash used in investing activities
(12,215
)
(52,641
)
Financing activities: Treasury stock purchases
(2,532
)
(4,248
)
Proceeds from long-term debt
-
575
Payments of long-term debt principal
(1,750
)
(1,813
)
Proceeds from revolving line of credit
11,602
48,000
Payments of revolving line of credit
(5,000
)
(5,300
)
Net cash provided by (used in) financing activities
2,320
37,214
Net increase in cash and cash equivalents
295
3,676
Cash and cash equivalents, beginning of period
6,951
11,431
Cash and cash equivalents, end of period
$
7,246
$
15,107
Computer Programs and Systems,
Inc.
Consolidated Bookings
(In '000s)
Three Months Ended
Six Months Ended
In '000s
6/30/2023
6/30/2022
6/30/2023
6/30/2022
RCM(1)
$
13,648
$
14,847
$
25,748
$
23,414
EHR(2)
7,433
8,222
15,751
18,468
Patient engagement(1)
867
730
1,343
2,314
Total
$
21,948
$
23,799
$
42,842
$
44,196
(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
Six Months Ended
6/30/2023
6/30/2022
6/30/2023
6/30/2022
RCM Net new(1)
$
3,196
$
4,404
$
7,616
$
8,760
Cross-sell(1)
10,122
7,734
15,868
11,807
TruCode
330
2,709
2,264
2,847
EHR Non-subscription sales(2)
4,047
4,873
8,111
8,139
Subscription revenue(3)
2,408
2,383
5,615
8,454
Other
978
966
2,025
1,875
Patient engagement
867
730
1,343
2,314
Total
$
21,948
$
23,799
$
42,842
$
44,196
(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 June 30,
Six Months Ended June 30,
2023
2022
2023
2022
Recurring revenues - EHR Acute Care EHR
$
28,349
$
26,732
$
55,962
$
54,097
Post-acute Care EHR
3,729
3,792
7,636
7,687
Total recurring revenues - EHR
32,078
30,524
63,598
61,784
Nonrecurring revenues - EHR Acute Care EHR
2,544
2,939
5,835
5,966
Post-acute Care EHR
345
680
725
1,155
Total nonrecurring revenues - EHR
2,889
3,619
6,560
7,121
Total EHR revenues
$
34,967
$
34,143
$
70,158
$
68,905
Computer Programs and Systems,
Inc.
Client Net Patient Revenue
("NPR")
(In millions)
(Unaudited)
As of:
3/31/2022
6/30/2022
9/30/2022
12/31/2022
3/31/2023
6/30/2023
Client NPR(1)
$
2,880
$
2,946
$
2,958
$
2,991
$
3,033
$
3,205
(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
Six Months Ended
In '000s
6/30/2023
6/30/2022
6/30/2023
6/30/2022
RCM
$
5,682
$
8,064
$
13,580
$
17,645
EHR
5,568
5,707
11,725
11,870
Patient engagement
(23
)
(602
)
564
(192
)
Total
$
11,227
$
13,169
$
25,869
$
29,323
Computer Programs and Systems,
Inc.
Reconciliation of Non-GAAP
Financial Measures
(In '000s)
(Unaudited)
Three Months Ended June 30,
Six Months Ended June 30,
Adjusted EBITDA:
2023
2022
2023
2022
Net income (loss), as reported
$
(2,837
)
$
3,076
$
247
$
11,189
Deferred revenue and other purchase accounting-related
adjustments
-
30
-
109
Depreciation expense
597
690
1,095
1,269
Amortization of software development costs
1,826
733
3,312
1,259
Amortization of acquisition-related intangibles
4,014
4,758
8,029
8,430
Stock-based compensation
(123
)
1,703
1,124
3,420
Severance and other nonrecurring charges
6,819
667
7,920
1,262
Interest expense and other, net
2,586
1,079
4,988
1,839
Gain on contingent consideration
-
(330
)
-
(1,580
)
Provision (benefit) for income taxes
(1,655
)
763
(846
)
2,126
Total Adjusted EBITDA
$
11,227
$
13,169
$
25,869
$
29,323
Computer Programs and Systems,
Inc.
Reconciliation of Non-GAAP
Financial Measures
(In '000s, except per share
data)
(Unaudited)
Three Months Ended June 30,
Six Months Ended June 30,
Non-GAAP Net Income and Non-GAAP EPS:
2023
2022
2023
2022
Net income (loss), as reported
$
(2,837
)
$
3,076
$
247
$
11,189
Pre-tax adjustments for Non-GAAP EPS: Deferred revenue and
other purchase accounting-related adjustments
-
30
-
109
Amortization of acquisition-related intangible assets
4,014
4,758
8,029
8,430
Stock-based compensation
(123
)
1,703
1,124
3,420
Severance and other nonrecurring charges
6,819
667
7,920
1,262
Non-cash interest expense
90
79
180
152
Loss on extinguishment of debt
-
125
-
125
After-tax adjustments for Non-GAAP EPS: Tax-effect of pre-tax
adjustments, at 21%
(2,268
)
(1,546
)
(3,623
)
(2,835
)
Tax shortfall (windfall) from stock-based compensation
7
-
57
(112
)
Gain on contingent consideration
-
(330
)
-
(1,580
)
Non-GAAP net income
$
5,702
$
8,562
$
13,934
$
20,160
Weighted average shares outstanding, diluted
14,200
14,469
14,168
14,425
Non-GAAP EPS
$
0.40
$
0.59
$
0.98
$
1.40
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:
- Adjusted EBITDA – Adjusted EBITDA
consists of GAAP net income as reported and adjusts for (i)
deferred revenue purchase and other 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 intangibles; (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 and other 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-cash interest expense; (vi) loss on
extinguishment of debt and (vii) the total tax effect of items (i)
through (v). 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 and other 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
intangibles – 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 nonrecurring
charges – Non-recurring charges relate to certain severance
and other charges incurred in connection with activities that are
considered non-recurring. We exclude non-recurring expenses
(primarily related to costs associated with our recent business
transformation initiative 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 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/20230809463619/en/
Tracey Schroeder Chief Marketing Officer
Tracey.schroeder@cpsi.com (251) 639-8100
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