CPSI Announces Fourth Quarter and Year-End 2017 Results

February 8, 2018 4:05 PM


Highlights for Fourth Quarter 2017:

CPSI (NASDAQ: CPSI), a community healthcare solutions company, today announced results for the fourth quarter and twelve months ended December 31, 2017.

The Company also announced that its Board of Directors has declared a quarterly cash dividend of $0.10 per share, payable on March 9, 2018, to stockholders of record as of the close of business on February 22, 2018.

Total revenues for the fourth quarter ended December 31, 2017, were $78.1 million, compared with total revenues of $64.6 million for the prior-year fourth quarter. Inclusive of a $28.0 million non-cash goodwill impairment charge related to the Company’s post-acute care business, net loss for the quarter ended December 31, 2017, was $21.5 million, or $1.57 per diluted share, compared with net income of $2.0 million, or $0.15 per diluted share, for the quarter ended December 31, 2016. Cash provided by operations for the fourth quarter was $5.3 million, compared with cash used by operations of $468,000 for the prior-year period.

Total revenues for the year ended December 31, 2017, were $276.9 million, compared with total revenues of $267.3 million for the prior year. Inclusive of the aforementioned non-cash goodwill impairment charge, net loss for the year ended December 31, 2017, was $17.4 million, or $1.27 per diluted share, compared with net income of $3.9 million, or $0.29 per diluted share, for the year ended December 31, 2016. Cash provided by operations for 2017 was $23.6 million, compared with $2.1 million for the prior year.

“Our fourth quarter financial performance was strong from both a revenue and non-GAAP earnings perspective,” said Boyd Douglas, president and chief executive officer of CPSI.

“Looking back over 2017, we are very proud of the continued affirmation that the value we bring to the community healthcare market is making a real difference. This past year, we launched the CPSI Rural Accountable Care Organization (ACO) program, experienced continued revenue growth with TruBridge and had record bookings performance in three of the four quarters. These bookings included a number of returning clients, and resulted in 10.5% bookings growth across our family of companies in 2017.

“These developments have helped to steady our operations and support CPSI and our family of companies as we continue to evolve. With our eye toward the long-term health and growth of our company, we also took important steps to enhance our corporate governance structure and strategy. With the addition of three new members in the fourth quarter, we have expanded the talent, financial expertise and industry experience of our board of directors. We look forward to 2018, as we are well positioned to capitalize on new growth opportunities that will help us deliver on our shared vision of creating healthier, financially stronger and more vibrant communities,” added Douglas.

Commenting on the Company’s financial performance for the quarter, Matt Chambless, chief financial officer of CPSI, stated, “Our continued execution around the meaningful use program and consistent success with TruBridge offerings propelled the fourth quarter to all-time highs in terms of revenues. These results translated into non-GAAP EPS and Adjusted EBITDA that were their highest level since our acquisition of Healthland in January 2016. These high marks in profitability were achieved despite elevated general and administrative expenses, including increased bad debt estimates for balance sheet risk related to financing receivables and increased health claims volumes and severity While accounting rules required us to record a non-cash goodwill impairment charge of $28.0 million related to our post-acute care business, and bookings volatility casted a bit of a shadow, we are proud of the fourth quarter’s results and excited about our trajectory as we enter 2018.

“Looking back on the year, we were able to deliver on our commitment of revenue and non-GAAP profitability growth for 2017 and make significant, smart changes to our capital allocation strategy that will allow for greater flexibility for investment in CPSI’s future growth,” said Chambless.

CPSI will hold a live webcast to discuss fourth quarter and year-end 2017 results today, Thursday, February 8, 2018, at 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 is a leading provider of healthcare solutions and services for community hospitals plus other healthcare systems and post-acute care facilities. Founded in 1979, CPSI is the parent of four companies – Evident, LLC, TruBridge, LLC, Healthland Inc. and American HealthTech, Inc. 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 and services for community hospitals and their affiliated clinics. TruBridge focuses on providing business, consulting and managed IT services along with its complete RCM solution for all care settings. Healthland provides integrated technology solutions and services to small rural and critical access hospitals. American HealthTech is one of the nation’s largest providers of financial and clinical technology solutions and services for post-acute care facilities. 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; our ability to successfully integrate the businesses of Healthland, American HealthTech and Rycan with our business and the inherent risks associated with any potential future acquisitions; our ability to remediate a material weakness in our internal control over financial reporting; 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.


Unaudited Condensed Consolidated Statements of Operations

(In thousands, except per share data)

Three Months EndedDecember 31,

Twelve Months EndedDecember 31,

2017 2016 2017 2016
Sales revenues:
System sales and support $ 54,998 $ 44,136 $ 188,261 $ 185,665
TruBridge 23,065 20,415 88,666 81,607
Total sales revenues 78,063 64,551 276,927 267,272
Costs of sales:
System sales and support 19,373 19,280 75,994 84,356
TruBridge 13,309 11,780 49,636 45,656
Total costs of sales 32,682 31,060 125,630 130,012
Gross profit 45,381 33,491 151,297 137,260
Operating expenses:
Product development 10,174 8,855 37,761 32,621
Sales and marketing 9,760 6,853 33,021 27,194
General and administrative 12,964 11,089 46,923 52,888
Amortization of acquisition-related intangibles 2,601 2,602 10,406 10,182
Goodwill impairment 28,000 - 28,000 -
Total operating expenses 63,499 29,399 156,111 122,885
Operating income (loss) (18,118 ) 4,092 (4,814 ) 14,375
Other income (expense):
Other income (expense) (1,175 ) 100 (933 ) 220
Interest expense (1,928 ) (1,781 ) (7,736 ) (6,609 )
Total other expense (3,103 ) (1,681 ) (8,669 ) (6,389 )
Income (loss) before taxes (21,221 ) 2,411 (13,483 ) 7,986
Provision for income taxes 316 410 3,933 4,053
Net income (loss) $ (21,537 ) $ 2,001 $ (17,416 ) $ 3,933
Net income (loss) per common share – basic and diluted $ (1.57 ) $ 0.15 $ (1.27 ) $ 0.29
Weighted average shares outstanding used in per common share computations – basic and diluted 13,450 13,347 13,419 13,255


Condensed Consolidated Balance Sheets

(In thousands, except per share data)

Dec. 31,2017

Dec. 31,2016

Current assets:
Cash and cash equivalents $ 520 $ 2,220
Accounts receivable, net of allowance for doubtful accounts of $2,654 and $2,370, respectively 38,061 31,812
Financing receivables, current portion, net 15,055 5,459
Inventories 1,417 1,697
Prepaid income taxes - 567
Prepaid expenses and other 2,824 2,794
Total current assets 57,877 44,549
Property and equipment, net 11,692 13,439
Financing receivables, net of current portion 11,485 5,595
Intangible assets, net 96,713 107,118
Goodwill 140,449 168,449
Total assets $ 318,216 $ 339,150
Current liabilities:
Accounts payable $ 7,620 $ 6,841
Current portion of long-term debt 5,820 5,817
Deferred revenue 8,707 5,840
Accrued vacation 3,794 3,650
Income taxes payable 810 -
Other accrued liabilities 14,098 8,797
Total current liabilities 40,849 30,945
Long-term debt, less current portion 136,614 146,989
Deferred tax liabilities 4,667 3,246
Total liabilities 182,130 181,180
Stockholders’ equity:
Common stock, $0.001 par value; 30,000 shares authorized; 13,760 and 13,533 shares issued and outstanding, respectively 14 13
Additional paid-in capital 155,078 147,911
Retained earnings (19,006 ) 10,046
Total stockholders’ equity 136,086 157,970
Total liabilities and stockholders’ equity $ 318,216 $ 339,150


Unaudited Condensed Consolidated Statements of Cash Flows

(In thousands)

Twelve Months EndedDecember 31,

2017 2016
Operating activities:
Net income (loss) $ (17,416 ) $ 3,933
Adjustments to net income (loss):
Provision for bad debt 3,421 2,259
Deferred taxes 1,421 3,672
Stock-based compensation 7,166 5,366
Excess tax benefit from stock-based compensation - (210 )
Depreciation 2,473 3,062
Intangible amortization 10,406 10,182
Amortization of deferred finance costs 645 673
Goodwill impairment 28,000 -
Loss on extinguishment of debt 1,340 -
Changes in operating assets and liabilities:
Accounts receivable (7,847 ) (3,927 )
Financing receivables (17,308 ) 1,514
Inventories 280 14
Prepaid expenses and other (30 ) 1,787
Accounts payable 779 (5,588 )
Deferred revenue 2,867 (13,662 )
Other liabilities 6,069 (7,250 )
Prepaid income taxes 1,377 280
Net cash provided by operating activities 23,643 2,105
Investing activities:
Purchases of property and equipment (726 ) (39 )
Purchase of business, net of cash received - (162,611 )
Sale of investments - 10,861
Net cash used in investing activities (726 ) (151,789 )
Financing activities:
Dividends paid (11,636 ) (25,092 )
Proceeds from long-term debt 777 156,397
Payments of long-term debt (13,134 ) (5,196 )
Payments of contingent consideration (625 ) (500 )
Proceeds from stock option exercise 1 1,134
Excess tax benefit from stock-based compensation - 210
Net cash provided by (used in) financing activities (24,617 ) 126,953
Net decrease in cash and cash equivalents (1,700 ) (22,731 )
Cash and cash equivalents, beginning of period 2,220 24,951
Cash and cash equivalents, end of period $ 520 $ 2,220


Unaudited Other Supplemental Information

Consolidated Bookings

(In thousands)

Three Months EndedDecember 31,

Twelve Months EndedDecember 31,

2017 2016 2017 2016
System sales and support(1) $ 14,284 $ 22,861 $ 77,482 $ 76,306
TruBridge(2) 5,511 7,761 31,435 22,299
Total $ 19,795 $ 30,622 $ 108,917 $ 98,605
(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).


Unaudited Reconciliation of Non-GAAP Financial Measures

(In thousands)

Adjusted EBITDA

Three Months EndedDecember 31,

Twelve Months EndedDecember 31,

2017 2016 2017 2016
Net income (loss), as reported $ (21,537 ) $ 2,001 $ (17,416 ) $ 3,933
Deferred revenue and other acquisition-related adjustments - - - 2,226
Depreciation expense 528 640 2,473 3,062
Amortization of acquisition-related intangible assets 2,601 2,601 10,406 10,182
Stock-based compensation 2,146 1,343 7,166 5,366
Transaction-related costs 3 77 27 8,164
Non-recurring severance 91 - 2,353 -
Goodwill impairment charges 28,000 - 28,000 -
Interest expense and other, net 3,103 1,682 8,669 6,389
Provision for income taxes 316 410 3,933 4,053
Adjusted EBITDA $ 15,251 $ 8,754 $ 45,611 $ 43,375

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 $0.6 million and $6.0 million, respectively, for the three and twelve months ended December 31, 2017, compared to effectively zero and $5.0 million for the three and twelve months ended December 31, 2016.


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,
2017 2016 2017 2016
Net income (loss), as reported $ (21,537 ) $ 2,001 $ (17,416 ) $ 3,933
Pre-tax adjustments for Non-GAAP EPS:

Deferred revenue and other acquisition-related adjustments

- - - 2,226
Amortization of acquisition-related intangible assets 2,601 2,601 10,406 10,182
Stock-based compensation 2,146 1,343 7,166 5,366
Transaction-related costs 3 77 27 8,164
Non-recurring severance 91 - 2,353 -
Non-cash interest expense 98 172 645 673
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 35% (2,198 ) (1,468 ) (7,678 ) (9,314 )
Tax-effect of non-deductible transaction-related costs - - - 1,410
Tax shortfall from stock-based compensation 72 - 1,155 -
Tax reform effects (1,890 ) - (1,890 ) -
Valuation allowance for state NOLs (304 ) (304 )
Non-GAAP net income $ 8,422 $ 4,726 $ 23,804 $ 22,640
Weighted average shares outstanding, diluted 13,450 13,347 13,419 13,255
Non-GAAP EPS $ 0.63 $ 0.35 $ 1.77 $ 1.71

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:

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

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.


Tracey Schroeder, 251-639-8100

Chief Marketing Officer


Source: CPSI


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