CPSI (NASDAQ: CPSI), a healthcare solutions company, today
announced results for the fourth quarter and year ended December
31, 2023.
Fourth Quarter 2023 Financial Overview All comparisons
are to the fourth quarter ended December 31, 2022, unless otherwise
noted.
- Bookings of $26.0 million compared to $24.7 million
- Total revenue of $85.9 million compared to $83.2 million
- Revenue Cycle Management (RCM) revenue of $51.0 million
compared to $45.7 million
- RCM revenue represented 60.7% of CPSI’s total recurring revenue
and 59.3% of CPSI’s total revenue
- GAAP loss per diluted share of $(2.92) and non-GAAP earnings
per diluted share of $0.36
- Adjusted EBITDA of $12.0 million compared to $13.2 million
Full Year 2023 Financial Overview All comparisons are to
the year ended December 31, 2022, unless otherwise noted.
- Bookings of $85.1 million compared to $89.4 million
- Total revenue of $339.4 million compared to $326.6 million
- Revenue Cycle Management (RCM) revenue of $193.9 million
compared to $179.9 million
- RCM revenue represented 58.9% of CPSI’s total recurring revenue
and 57.1% of CPSI’s total revenue
- GAAP loss per diluted share of $(3.15) and non-GAAP earnings
per diluted share of $1.79
- Adjusted EBITDA of $47.6 million compared to $55.9 million
“Despite the challenges we faced in 2023, we were able to finish
out the year with a strong fourth quarter in terms of revenue
performance, and we kicked off 2024 with the exciting news
announcing our imminent rebrand to TruBridge,” said Chris Fowler,
chief executive officer of CPSI. “Unifying our identity under this
brand reflects our transformation as an organization that is
leveraging its strengths and expertise to deliver a more cohesive
and comprehensive suite of solutions to our customers.
“We believe that the investments we made to enhance our business
over the past few quarters will provide us with a strong foundation
from which to grow. We see a significant opportunity ahead to
improve the financial health of our community hospital partners,
and we are confident that our recent acquisition of Viewgol has
only strengthened our position in the market. We look forward to
seizing this opportunity and making further progress throughout
2024.”
First Quarter 2024 Financial Outlook1 For the first
quarter 2024, the Company is providing an initial outlook of:
- Revenue in the range of $82 million to $84 million
- Adjusted EBITDA of $8.5 million to $9.5 million
2024 Financial Outlook1 For the full year 2024, the
Company is providing an initial outlook of:
- Revenue in the range of $340 million to $350 million
- Adjusted EBITDA of $45 million to $50 million
Conference Call Information CPSI will hold a live webcast
to discuss fourth quarter and full year 2023 results today,
Thursday, February 29, 2024, 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 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.
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.
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 September 30, 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 December
31,
Twelve Months Ended December
31,
2023
2022
2023
2022
Revenues RCM
$
50,956
$
45,670
$
193,929
$
179,870
EHR
33,412
35,968
138,063
139,823
Patient engagement
1,500
1,586
7,443
6,955
Total revenues
85,868
83,224
339,435
326,648
Expenses Costs of revenue (exclusive of
amortization and depreciation) RCM
28,731
25,956
110,192
97,024
EHR
14,153
17,497
62,048
65,661
Patient engagement
810
1,061
3,628
3,856
Total costs of revenue (exclusive of amortization and depreciation)
43,694
44,514
175,868
166,541
Product development
10,347
9,001
37,246
31,898
Sales and marketing
6,143
4,553
28,049
27,131
General and administrative
21,682
14,650
76,153
54,965
Amortization
6,974
5,687
24,522
20,887
Depreciation
554
553
1,946
2,443
Impairment of goodwill
35,913
-
35,913
-
Impairment of trademark intangibles
2,342
-
2,342
-
Total expenses
127,649
78,958
382,039
303,865
Operating income (loss)
(41,781
)
4,266
(42,604
)
22,783
Other income (expense): Other income
176
264
745
1,178
Gain (loss) on contingent consideration
-
(427
)
-
565
Loss on extinguishment of debt
-
-
-
(125
)
Interest expense
(4,116
)
(2,276
)
(12,521
)
(6,320
)
Total other income (expense)
(3,940
)
(2,439
)
(11,776
)
(4,702
)
Income (loss) before taxes
(45,721
)
1,827
(54,380
)
18,081
Provision (benefit) for income taxes
(3,247
)
(690
)
(8,591
)
2,214
Net income (loss) (1)
$
(42,474
)
$
2,517
$
(45,789
)
$
15,867
Net income (loss) per common share—basic
$
(2.92
)
$
0.17
$
(3.15
)
$
1.08
Net income (loss) per common share—diluted
$
(2.92
)
$
0.17
$
(3.15
)
$
1.08
Weighted average shares outstanding used in per common
share computations: Basic
14,205
14,210
14,187
14,356
Diluted
14,205
14,210
14,187
14,356
(1) In connection with the Company’s disposition of AHT in
January 2024 and other factors, management is finalizing certain
line items in the financial statements included herein, primarily
related to the amount of goodwill impairment. Any change to the
amount of goodwill impairment set forth in this earnings release
(and the corresponding impact on related line items) is not
expected to be material. The final amount of goodwill impairment
and the amounts of impacted line items for fiscal year 2023 will be
reflected in the Company’s Annual Report on Form 10-K for the year
ended December 31, 2023. Any change to the amounts for the fourth
quarter of 2023 will be provided on the Investor Relations portion
of the Company’s website.
Computer Programs and Systems,
Inc.
Condensed Consolidated Balance
Sheets
(In '000s, except per share
data)
December 31, 2023
(unaudited)
December 31, 2022
Assets Current assets Cash and cash equivalents
$
3,848
$
6,951
Accounts receivable, net of allowance for expected credit losses of
$3,631 and $2,854, respectively
59,723
51,311
Financing receivables, current portion (net of allowance for
expected credit losses of $319 and $223, respectively)
3,997
4,474
Inventories
475
784
Prepaid income taxes
1,628
701
Prepaid expenses and other
15,807
10,338
Assets of held for sale disposal group
25,754
-
Total current assets
111,232
74,559
Property & equipment, net
8,974
9,884
Software development costs, net
39,139
27,257
Operating lease assets
5,192
7,567
Financing receivables, net of current portion (net of allowance for
expected credit losses of $97 and $326, respectively)
1,226
3,312
Other assets, net of current portion
7,314
8,131
Intangible assets, net
89,213
102,000
Goodwill
171,909
198,253
Total assets
$
434,199
$
430,963
Liabilities & Stockholders' Equity Current
liabilities Accounts payable
$
10,133
$
7,035
Current portion of long-term debt
3,141
3,141
Deferred revenue
8,677
11,590
Accrued vacation
5,410
6,214
Liabilities of held for sale disposal group
754
-
Other accrued liabilities
19,892
16,475
Total current liabilities
48,007
44,455
Long-term debt, net of current portion
195,270
136,388
Operating lease liabilities, net of current portion
3,074
5,651
Deferred tax liabilities
1,230
12,758
Total liabilities
247,581
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
195,546
192,275
Retained earnings
8,132
53,921
Total stockholders' equity
186,618
231,711
Total liabilities and stockholders' equity
$
434,199
$
430,963
Computer Programs and Systems,
Inc.
Condensed Consolidated Statements
of Cash Flows
(In '000s)
(Unaudited)
Twelve Months Ended December
31,
2023
2022
Operating activities: Net income (loss)
$
(45,789
)
$
15,867
Adjustments to net income: Provision for credit losses
1,920
992
Deferred taxes
(11,305
)
(6,688
)
Stock-based compensation
3,271
5,173
Depreciation
1,946
2,443
Loss on extinguishment of debt
-
125
Amortization of acquisition-related intangibles
16,426
17,403
Amortization of software development costs
8,096
3,484
Amortization of deferred finance costs
359
332
Impairment of goodwill
35,913
-
Impairment of trademark intangibles
2,342
-
Gain on contingent consideration
-
(565
)
Non-cash operating lease costs
1,602
-
Loss on disposal of PP&E
117
-
Changes in operating assets and liabilities: Accounts receivable
(11,319
)
(12,428
)
Financing receivables
2,659
6,144
Inventories
309
71
Prepaid expenses and other
(4,554
)
(2,930
)
Accounts payable
3,075
(1,429
)
Deferred revenue
(2,913
)
61
Operating lease liabilities
(2,063
)
-
Other liabilities
1,894
422
Prepaid income taxes
(927
)
3,898
Net cash provided by operating activities
1,059
32,375
Investing activities: Purchase of business, net of
cash acquired
(36,705
)
(43,364
)
Investment in software development
(23,059
)
(19,097
)
Purchases of property and equipment
(346
)
(270
)
Net cash used in investing activities
(60,110
)
(62,731
)
Financing activities: Treasury stock purchases
(2,575
)
(11,924
)
Proceeds from long-term debt
-
575
Payments of long-term debt principal
(3,500
)
(3,563
)
Proceeds from revolving line of credit
67,023
48,000
Payments of revolving line of credit
(5,000
)
(5,300
)
Payments of contingent consideration
-
(1,935
)
Proceeds from exercise of stock options
-
23
Net cash provided by (used in) financing activities
55,948
25,876
Decrease in cash and cash equivalents
(3,103
)
(4,480
)
Cash and cash equivalents, beginning of period
6,951
11,431
Cash and cash equivalents, end of period
$
3,848
$
6,951
Computer Programs and Systems,
Inc.
Consolidated Bookings
(In '000s)
Three Months Ended December
31,
Twelve Months Ended December
31,
In '000s
2023
2022
2023
2022
RCM(1)
$
14,158
$
13,373
$
48,986
$
48,065
EHR(2)
10,888
10,678
33,143
38,152
Patient engagement(1)
969
620
2,973
3,188
Total
$
26,015
$
24,671
$
85,102
$
89,405
(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 December
31,
Twelve Months Ended December
31,
2023
2022
2023
2022
RCM Net new(1)
$
7,130
$
5,173
$
18,237
$
14,830
Cross-sell(1)
6,310
8,090
26,426
29,956
TruCode
718
110
4,323
3,273
EHR Non-subscription sales(2)
3,725
4,181
14,544
16,870
Subscription revenue(3)
5,596
5,191
13,737
16,698
Other
1,567
1,306
4,862
4,584
Patient engagement
969
620
2,973
3,194
Total
$
26,015
$
24,671
$
85,102
$
89,405
(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.
Adjusted EBITDA - by Segment
(In '000s)
Three Months Ended December
31,
Twelve Months Ended December
31,
In '000s
2023
2022
2023
2022
RCM
$
6,596
$
8,824
$
24,800
$
35,219
EHR
5,506
4,886
22,900
22,507
Patient engagement
(118
)
(482
)
(124
)
(1,827
)
Total
$
11,984
$
13,228
$
47,576
$
55,899
Computer Programs and Systems,
Inc.
Reconciliation of Non-GAAP
Financial Measures
(In '000s)
(Unaudited)
Three Months Ended December
31,
Twelve Months Ended December
31,
Adjusted EBITDA:
2023
2022
2023
2022
Net income (loss), as reported
$
(42,474
)
$
2,517
$
(45,789
)
$
15,867
Net Income Margin
(49.5
%)
3.0
%
(13.5
%)
4.9
%
Deferred revenue and other purchase accounting-related
adjustments
-
-
-
109
Depreciation expense
554
553
1,946
2,443
Amortization of software development costs
2,591
1,200
8,096
3,483
Amortization of acquisition-related intangibles
4,383
4,486
16,426
17,403
Impairment of goodwill
35,913
-
35,913
-
Impairment of trademark intangibles
2,342
-
2,342
-
Stock-based compensation
1,108
(111
)
3,271
5,173
Severance and other nonrecurring charges
6,874
2,834
22,186
4,505
Interest expense and other, net
3,940
2,012
11,776
5,267
Loss (gain) on contingent consideration
-
427
-
(565
)
Provision (benefit) for income taxes
(3,247
)
(690
)
(8,591
)
2,214
Total Adjusted
EBITDA
$
11,984
$
13,228
$
47,576
$
55,899
Adjusted EBITDA Margin
14.0
%
15.9
%
14.0
%
17.1
%
Computer Programs and Systems,
Inc.
Reconciliation of Non-GAAP
Financial Measures
(In '000s, except per share
data)
(Unaudited)
Three Months Ended December
31,
Twelve Months Ended December
31,
Non-GAAP Net Income and Non-GAAP EPS:
2023
2022
2023
2022
Net income (loss), as reported
$
(42,474
)
$
2,517
$
(45,789
)
$
15,867
Pre-tax adjustments for Non-GAAP EPS: Deferred revenue and
other purchase accounting-related adjustments
-
-
-
109
Amortization of acquisition-related intangible assets
4,383
4,486
16,426
17,403
Stock-based compensation
1,108
(111
)
3,271
5,173
Severance and other nonrecurring charges
6,874
2,834
22,186
4,505
Non-cash interest expense
90
90
359
332
Loss on extinguishment of debt
-
-
-
125
Impairment of trademark intangibles
2,342
-
2,342
-
Impairment of goodwill
35,913
-
35,913
-
After-tax adjustments for Non-GAAP EPS: Tax-effect of pre-tax
adjustments, at 21%
(3,107
)
(1,533
)
(9,363
)
(5,806
)
Tax shortfall (windfall) from stock-based compensation
-
-
65
(112
)
Loss (gain) on contingent consideration
-
427
-
(565
)
Non-GAAP net
income
$
5,129
$
8,710
$
25,410
$
37,031
Weighted average shares outstanding, diluted
14,205
14,210
14,187
14,356
Non-GAAP EPS
$
0.36
$
0.61
$
1.79
$
2.58
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, Adjusted EBITDA Margin, 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) impairment of goodwill; (vi)
impairment of trademark intangibles; (vii) stock-based
compensation; (viii) severance and other non‑recurring charges;
(ix) interest expense and other, net; (x) gain on contingent
consideration; and (xi) the provision for income taxes.
- Adjusted EBITDA Margin – Adjusted
EBITDA Margin is calculated as Adjusted EBITDA, as defined above,
divided by total revenue.
- 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; (vii) impairment of trademark intangible
assets; (viii) impairment of goodwill; and (ix) 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.
- Impairment of goodwill – 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.
- Impairment of trademark
intangibles – Impairment charges are non-cash expenses that
are the result of tests required by GAAP whenever events or
circumstances indicate that the carrying amount of the asset may
not be recoverable. We exclude these non-cash 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.
- 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.
- (Loss) 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/20240229293532/en/
Tracey Schroeder Chief Marketing Officer
Tracey.schroeder@cpsi.com (251) 639-8100
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