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.
- Bookings of $16.2 million compared to $20.5 million
- Total revenue of $82.7 million compared to $82.8 million
- Revenue Cycle Management (RCM) revenue of $46.6 million
compared to $46.9 million
- RCM revenue represented 58.2 % of CPSI’s total recurring
revenue and 56.3% of CPSI’s total revenue
- GAAP net loss of $(3.6) million and non-GAAP net income of $6.3
million
- GAAP loss per diluted share of $(0.24) and non-GAAP earnings
per diluted share of $0.45
- Adjusted EBITDA of $9.7 million compared to $13.3 million
- Cash provided by operations of $3.1 million during the three
months ended September 30, 2023
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:
- Revenue of $337 million to $342 million, a decrease from the
prior guidance of $340 million to $350 million
- Adjusted EBITDA of $47 million to $49 million, a decrease from
the prior guidance of $52.5 million to $54.5 million
- Non-GAAP net income of $24.5 million to $26.5 million, a
decrease from the prior guidance of $25.6 million to $27.6
million
__________________________
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:
- 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 (vi). 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/20231108470768/en/
Tracey Schroeder Chief Marketing Officer
Tracey.schroeder@cpsi.com (251) 639-8100
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