CPSI Announces Fourth Quarter and Year-End 2018 Results

MOBILE, Ala.–(BUSINESS WIRE)–CPSI (NASDAQ: CPSI):

Highlights for Fourth Quarter 2018:

  • Revenues of $72.3 million;
  • TruBridge bookings of $7.8 million;
  • Backlog of $257 million;
  • Total bookings of $23.6 million;
  • GAAP net income of $7.6 million and non-GAAP net income of $10.7
    million;
  • Adjusted EBITDA of $15.3 million;
  • Cash provided by operations of $9.1 million;
  • GAAP earnings per diluted share of $ 0.54 and non-GAAP earnings per
    diluted share of $0.78; and
  • Quarterly dividend of $0.10 per share.

CPSI (NASDAQ: CPSI), a community healthcare solutions company, today
announced results for the fourth quarter and twelve months ended
December 31, 2018.

The Company also announced that its Board of Directors has declared a
quarterly cash dividend of $0.10 per share, payable on March 18, 2019,
to stockholders of record as of the close of business on March 1, 2019.

Total revenues for the fourth quarter ended December 31, 2018, were
$72.3 million, compared with total revenues of $78.1 million for the
prior-year fourth quarter. GAAP net income for the quarter ended
December 31, 2018, was $7.6 million, or $0.54 per diluted share,
compared with a net loss of $21.5 million, or $1.57 per diluted share,
for the quarter ended December 31, 2017. The fourth quarter of 2017
included a $28.0 million non-cash goodwill impairment charge related to
the Company’s post-acute care business. Cash provided by operations for
the fourth quarter of 2018 was $9.1 million, compared with $5.3 million
for the prior-year period.

“CPSI closed out 2018 with a solid performance in the fourth quarter,”
said Boyd Douglas, president and chief executive officer of CPSI. “We
are especially pleased with the greater than 40% increase in fourth
quarter bookings for our services business, TruBridge. The healthy
installation schedule for our acute care electronic health record (EHR)
systems, decent add-on sales and stable net new bookings this quarter
all contributed to a strong finish for 2018.”

Commenting on the Company’s financial performance for the quarter, Matt
Chambless, chief financial officer of CPSI, stated, “The fourth quarter
was one of milestones for CPSI, with nearly all profitability metrics at
or near their highest points since bringing Healthland and AHT into our
family of companies. Strength in cash flows allowed for aggressive
de-leveraging, resulting in a final leverage ratio that was effectively
at our target. Looking forward, we are committed to continuing to
deliver value to our EHR clients, harvesting additional growth
opportunities with TruBridge, and using the flexibility of our improved
leverage profile to pursue more opportunistic uses of capital, all while
continuing to ensure that we are making the best use of our resources.”

CPSI will hold a live webcast to discuss fourth quarter and year-end
2018 results today, Friday, February 15, 2019, at 9:30 a.m. Eastern
time. A 30-day online replay will be available approximately one hour
following the conclusion of the live webcast. To listen to the live
webcast or access the replay, visit the Company’s website, www.cpsi.com.

About CPSI

CPSI is a leading provider of healthcare solutions and services for
community hospitals, their clinics and post-acute care facilities.
Founded in 1979, CPSI is the parent of three companies – Evident, LLC,
American HealthTech, Inc. and TruBridge, LLC. Our combined companies are
focused on helping improve the health of the communities we serve,
connecting communities for a better patient care experience, and
improving the financial operations of our customers. Evident provides
comprehensive EHR solutions for community hospitals and their affiliated
clinics. American HealthTech is one of the nation’s largest providers of
EHR solutions and services for post-acute care facilities. TruBridge
focuses on providing business, consulting and managed IT services, along
with its complete RCM solution for all care settings. 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; 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
December 31,
Twelve Months Ended
December 31,
2018     2017 2018     2017
Sales revenues:
System sales and support $ 47,242 $ 54,998 $ 180,164 $ 188,261
TruBridge   25,085     23,065     100,247     88,666  
Total sales revenues 72,327 78,063 280,411 276,927
 
Costs of sales:
System sales and support 18,445 20,551 75,984 80,018
TruBridge   14,198     13,309     54,699     49,636  
Total costs of sales   32,643     33,860     130,683     129,654  
 
Gross profit 39,684 44,203 149,728 147,273
 
Operating expenses:
Product development 8,995 8,996 36,371 33,737
Sales and marketing 7,935 9,760 30,713 33,021
General and administrative 10,514 12,964 47,275 46,923
Amortization of acquisition-related

intangibles

2,592 2,601 10,487 10,406
Goodwill impairment       28,000         28,000  
Total operating expenses   30,036     62,321     124,846     152,087  
 
Operating income (loss) 9,648 (18,118 ) 24,882 (4,814 )
 
Other income (expense):
Other income (expense) 210 (1,175 ) 803 407
Interest expense   (1,963 )   (1,928 )   (7,577 )   (9,076 )
Total other expense   (1,753 )   (3,103 )   (6,774 )   (8,669 )
 
Income (loss) before taxes 7,895 (21,221 ) 18,108 (13,483 )
Provision for income taxes   307     316     476     3,933  
Net income (loss) $ 7,588   $ (21,537 ) $ 17,632   $ (17,416 )
 
Net income (loss) per common share – basic

and diluted

$ 0.54   $ (1.57 ) $ 1.26   $ (1.27 )
 
Weighted average shares outstanding used

in per common share computations:

Basic 13,606 13,450 13,561 13,419
Diluted 13,630 13,450 13,568 13,419
 
 
 
COMPUTER PROGRAMS AND SYSTEMS, INC.

Condensed Consolidated Balance Sheets

(In thousands, except per share data)

 
   

Dec. 31,
2018

   

Dec. 31,
2017

(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 5,732 $ 520
Accounts receivable, net of allowance for doubtful accounts of
$2,124 and $2,654, respectively
40,474 38,061
Financing receivables, current portion, net 15,059 15,055
Inventories 1,498 1,417
Prepaid income taxes 2,120
Prepaid expenses and other   5,055     2,824  
Total current assets 69,938 57,877
 
Property and equipment, net 10,875 11,692
Financing receivables, net of current portion 19,263 11,485
Other assets, net of current portion 995
Intangible assets, net 86,226 96,713
Goodwill   140,449     140,449  
Total assets $ 327,746   $ 318,216  
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 5,668 $ 7,620
Current portion of long-term debt 6,486 5,820
Deferred revenue 10,201 8,707
Accrued vacation 3,929 3,794
Income taxes payable 810
Other accrued liabilities   12,219     14,098  
Total current liabilities 38,503 40,849
 
Long-term debt, less current portion 124,583 136,614
Deferred tax liabilities   4,877     4,667  
Total liabilities 167,963 182,130
 
Stockholders’ Equity:
Common stock, $0.001 par value per share; 30,000 shares authorized;
14,083 and 13,760 shares issued and outstanding
14 14
Additional paid-in capital 164,793 155,078
Retained earnings   (5,024 )   (19,006 )
Total stockholders’ equity   159,783     136,086  
Total liabilities and stockholders’ equity $ 327,746   $ 318,216  
 
 
 
COMPUTER PROGRAMS AND SYSTEMS, INC.

Unaudited Condensed Consolidated Statements of Cash Flows

(In thousands)

 
    Twelve Months Ended

December 31,

2018     2017
Operating activities:
Net income (loss) $ 17,632 $ (17,416 )
Adjustments to net income (loss):
Provision for bad debt 3,176 3,421
Deferred taxes (364 ) 1,421
Stock-based compensation 9,715 7,166
Depreciation 1,795 2,473
Intangible amortization 10,487 10,406
Amortization of deferred finance costs 345 645
Goodwill impairment 28,000
Loss on extinguishment of debt 1,340
Changes in operating assets and liabilities:
Accounts receivable (3,898 ) (7,847 )
Financing receivables (9,473 ) (17,308 )
Inventories (81 ) 280
Prepaid expenses and other 549 (30 )
Accounts payable (1,952 ) 779
Deferred revenue 264 2,867
Other liabilities (1,336 ) 6,069
Income taxes payable   (2,930 )   1,377  
Net cash provided by operating activities 23,929 23,643
 
Investing activities:
Purchases of property and equipment   (978 )   (726 )
Net cash used in investing activities (978 ) (726 )
 
Financing activities:
Dividends paid (5,620 ) (11,636 )
Proceeds from long-term debt 7,300 777
Payments of long-term debt (19,010 ) (13,134 )
Payments of contingent consideration (409 ) (625 )
Proceeds from exercise of stock options       1  
Net cash used in financing activities (17,739 ) (24,617 )
 
Net increase (decrease) in cash and cash equivalents 5,212 (1,700 )
 
Cash and cash equivalents, beginning of period   520     2,220  
Cash and cash equivalents, end of period $ 5,732   $ 520  
 
 
 
COMPUTER PROGRAMS AND SYSTEMS, INC.

Unaudited Other Supplemental Information

Consolidated Bookings

(In thousands)

       
Three Months Ended

December 31,

Twelve Months Ended

December 31,

2018     2017 2018     2017
System sales and support(1) $ 15,863 $ 14,284 $ 62,764 $ 77,482
TruBridge(2)   7,752   5,511   25,244   31,435
Total $ 23,615 $ 19,795 $ 88,008 $ 108,917
 
(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
December 31,
Twelve Months Ended
December 31,
2018     2017 2018     2017
Net income (loss), as reported $ 7,588 $ (21,537 ) $ 17,632 $ (17,416 )
Depreciation expense 379 528 1,795 2,473
Amortization of acquisition-related intangible assets 2,592 2,601 10,487 10,406
Stock-based compensation 2,412 2,146 9,715 7,166
Severance and other non-recurring charges 270 94 1,186 2,380
Goodwill impairment charges 28,000 28,000
Interest expense and other, net 1,753 3,103 6,774 8,669
Provision for income taxes   307   316     476   3,933  
Adjusted EBITDA $ 15,301 $ 15,251   $ 48,065 $ 45,611  
 
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 $0.9 million
and $3.3 million for the three and twelve months ended December 31,
2018, respectively, compared with $0.6 million and $6.0 million for
the three and twelve months ended December 31, 2017, respectively.
 
 
 
COMPUTER PROGRAMS AND SYSTEMS, INC.

Unaudited Reconciliation of Non-GAAP Financial Measures

(In thousands, except per share data)

       
Non-GAAP Net Income and Non-GAAP

Earnings Per Share (“EPS”)

Three Months Ended
December 31,
Twelve Months Ended
December 31,
2018     2017 2018     2017
Net income (loss), as reported $ 7,588 $ (21,537 ) $ 17,632 $ (17,416 )
Pre-tax adjustments for Non-GAAP EPS:
Amortization of acquisition-related intangible assets 2,592 2,601 10,487 10,406
Stock-based compensation 2,412 2,146 9,715 7,166
Severance and other non-recurring charges 270 94 1,186 2,380
Non-cash interest expense 86 98 345 645
Loss on extinguishment of debt 1,340 1,340
Goodwill impairment charges 28,000 28,000
After-tax adjustments for Non-GAAP EPS:
Tax-effect of pre-tax adjustments, at 21% and 35%, respectively (1,126 ) (2,198 ) (4,564 ) (7,678 )
Tax shortfall from stock-based compensation 2 72 396 1,155
Tax reform effects (1,890 ) (1,890 )
Valuation allowance for state NOLs   (1,149 )   (304 )   (1,149 )   (304 )
Non-GAAP net income $ 10,675   $ 8,422   $ 34,048   $ 23,804  
Weighted average shares outstanding, diluted   13,630     13,450     13,568     13,419  
Non-GAAP EPS $ 0.78   $ 0.63   $ 2.51   $ 1.77  
 
 

Explanation of Non-GAAP Financial Measures

We report our financial results in accordance with accounting principles
generally accepted in the United States of America, or “GAAP.” However,
management believes that, in order to properly understand our short-term
and long-term financial and operational trends, investors may wish to
consider the impact of certain non-cash or non-recurring items, when
used as a supplement to financial performance measures that are prepared
in accordance with GAAP. These items result from facts and circumstances
that vary in frequency and impact on continuing operations. Management
uses these non-GAAP financial measures in order to evaluate the
operating performance of the Company and compare it against past
periods, make operating decisions, and serve as a basis for strategic
planning. These non-GAAP financial measures provide management with
additional means to understand and evaluate the operating results and
trends in our ongoing business by eliminating certain non-cash expenses
and other items that management believes might otherwise make
comparisons of our ongoing business with prior periods more difficult,
obscure trends in ongoing operations, or reduce management’s ability to
make useful forecasts. In addition, management understands that some
investors and financial analysts find these non-GAAP financial measures
helpful in analyzing our financial and operational performance and
comparing this performance to our peers and competitors.

As such, to supplement the GAAP information provided, we present in this
press release the following non-GAAP financial measures: Adjusted
EBITDA, Non-GAAP net income, and Non-GAAP earnings per share (“EPS”).

We calculate each of these non-GAAP financial measures as follows:

  • Adjusted EBITDA – Adjusted EBITDA
    consists of GAAP net income (loss) as reported and adjusts for (i)
    depreciation; (ii) amortization of acquisition-related intangible
    assets; (iii) stock-based compensation; (iv) severance and other
    non-recurring expenses; (v) goodwill impairment charges; (vi) interest
    expense and other, net; and (vii) the provision for income taxes.
  • Non-GAAP net income – Non-GAAP net income
    consists of GAAP net income (loss) as reported and adjusts for (i)
    amortization of acquisition-related intangible assets; (ii)
    stock-based compensation; (iii) severance and other non-recurring
    expenses; (iv) non-cash charges to interest expense; (v) loss on
    extinguishment of debt; (vi) goodwill impairment charges; and (vii)
    the total tax effect of items (i) through (vi). Adjustments to
    Non-GAAP net income also include the after-tax effect of the shortfall
    from stock-based compensation, recent tax reform legislation, and
    changes in valuation allowances for certain state NOLs acquired in the
    Healthland acquisition.
  • Non-GAAP EPS – Non-GAAP EPS consists of
    Non-GAAP net income, as defined above, divided by weighted average
    shares outstanding (diluted) in the applicable period.

Certain of the items excluded or adjusted to arrive at these non-GAAP
financial measures are described below:

  • Amortization of acquisition-related intangible
    assets
    – Acquisition-related amortization expense is a non-cash
    expense arising primarily from the acquisition of intangible assets in
    connection with acquisitions or investments. We exclude
    acquisition-related amortization expense from non-GAAP financial
    measures because we believe (i) the amount of such expenses in any
    specific period may not directly correlate to the underlying
    performance of our business operations and (ii) such expenses can vary
    significantly between periods as a result of new acquisitions and full
    amortization of previously acquired intangible assets. Investors
    should note that the use of these intangible assets contributed to
    revenue in the periods presented and will contribute to future revenue
    generation, and the related amortization expense will recur in future
    periods.
  • Stock-based compensation – Stock-based
    compensation expense is a non-cash expense arising from the grant of
    stock-based awards. We exclude stock-based compensation expense from
    non-GAAP financial measures because we believe (i) the amount of such
    expenses in any specific period may not directly correlate to the
    underlying performance of our business operations and (ii) such
    expenses can vary significantly between periods as a result of the
    timing and valuation of grants of new stock-based awards, including
    grants in connection with acquisitions. Investors should note that
    stock-based compensation is a key incentive offered to employees whose
    efforts contributed to the operating results in the periods presented
    and are expected to contribute to operating results in future periods,
    and such expense will recur in future periods.
  • Severance and other non-recurring expenses
    Non-recurring expenses relate to certain severance and other charges
    incurred in connection with activities that are considered one-time.
    We exclude non-recurring expenses and transaction-related costs from
    non-GAAP financial measures because we believe (i) the amount of such
    expenses in any specific period may not directly correlate to the
    underlying performance of our business operations and (ii) such
    expenses can vary significantly between periods.
  • Goodwill impairment charges – Goodwill
    impairment charges are non-cash expenses that are the result of annual
    (and, if necessary, more frequently than annual) impairment tests
    required by GAAP. These impairment tests are required to be on a
    per-reporting-unit basis, with our accounting policy elections
    resulting in any impairment being the result of the reporting unit
    carrying value exceeding the estimated fair value. We exclude these
    non-cash goodwill impairment charges because we believe (i) such items
    are largely non-recurring in nature and (ii) the amount of such
    expenses in any specific period may not directly correlate to the
    underlying performance of our business operations.
  • Non-cash charges to interest expense and other
    – Non-cash charges to interest expense and other includes amortization
    of deferred debt issuance costs. We exclude non-cash charges to
    interest expense and other from non-GAAP financial measures because we
    believe these non-cash amounts relate to specific transactions and, as
    such, may not directly correlate to the underlying performance of our
    business operations.
  • Tax shortfall (excess tax benefit) from
    stock-based compensation
     – ASU 2016-09, Improvements
    to Employee Share-Based Payment Accounting
    , became effective for
    the Company during the first quarter of 2017 and changes the treatment
    of tax shortfall and excess tax benefits arising from stock-based
    compensation arrangements. Prior to ASU 2016-09, these amounts were
    recorded as an increase (for excess benefits) or decrease (for
    shortfalls) to additional paid-in capital. With the adoption of ASU
    2016-09, these amounts are now captured in the period’s income tax
    expense. We exclude this component of income tax expense from non-GAAP
    financial measures because we believe (i) the amount of such expenses
    or benefits in any specific period may not directly correlate to the
    underlying performance of our business operations; (ii) such expenses
    or benefits can vary significantly between periods as a result of the
    valuation of grants of new stock-based awards, the timing of vesting
    of awards, and periodic movements in the fair value of our common
    stock; and (iii) excluding these amounts assists in the comparability
    between current period results and results during periods prior to the
    adoption of ASU 2016-09.

Contacts

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

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