Costs to obtain and fulfill contracts related to SaaS and RCM arrangements are included within the "Prepaid expenses and other" and "Other assets, net of current portion" line items on our condensed consolidated balance sheets. The allocation of the purchase price paid for HRG was as follows: | --- | --- | --- | --- | --- | |------------------------------------------------------|-------|-------------------------|-------|-----------------------------| | (In thousands) \nSalaries and benefits | $ | June 30, 2 ...

Computer Programs and Systems, Inc. (NASDAQ:CPSI) Q1 2023 Earnings Conference Call May 9, 2023 8:30 AM ET Company Participants Dru Anderson - Corporate Communications Christopher Fowler - President and CEO Matt Chambless - CFO Conference Call Participants Stephanie Davis - SVB Jeffrey Garro - Stephens George Hill - Deutsche Bank Dru Anderson Good morning and welcome to the CPSI First Quarter 2023 Earnings Conference Call. Leading today's call are Chris Fowler, President and Chief Executive Officer and Matt ...

FORM 10-Q ☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to (251) 639-8100 (Registrant's Telephone Number, Including Area Code) Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing ...

Part I [Business Overview](index=7&type=section&id=Item%201.%20Business) CPSI provides healthcare solutions and services to community hospitals, operating through RCM, EHR, and Patient Engagement segments with a focus on cross-selling and market expansion - CPSI is the parent company of six entities: Evident, American HealthTech (AHT), TruBridge, Get Real Health, TruCode, and Healthcare Resource Group (HRG)[503](index=503&type=chunk) - The company operates in three reportable segments as of Q4 2022: RCM, EHR, and Patient Engagement, representing a change from the previous structure[481](index=481&type=chunk)[504](index=504&type=chunk)[450](index=450&type=chunk) - The primary target market includes community hospitals with fewer than 400 beds, with approximately **98%** of its acute care hospital EHR customer base having fewer than 100 beds[505](index=505&type=chunk)[8](index=8&type=chunk) - The core growth strategy involves cross-selling RCM solutions into its EHR client base and expanding RCM market share with new hospital sales[491](index=491&type=chunk)[514](index=514&type=chunk) [Products and Services](index=10&type=section&id=Our%20Products%20and%20Services) CPSI offers comprehensive healthcare solutions across Revenue Cycle Management, Electronic Health Records, and Patient Engagement segments - **Revenue Cycle Management (RCM):** Offered through TruBridge, HRG, and TruCode, this segment provides business management, consulting, managed IT services, and a complete RCM solution, including claim scrubbing, denial management, accounts receivable management, and medical coding software[494](index=494&type=chunk)[521](index=521&type=chunk)[498](index=498&type=chunk) - **Electronic Health Records (EHR):** Offered through Evident (acute care) and AHT (post-acute care), with acute care solutions (Thrive and Centriq) providing integrated systems for patient management, clinical functions, and financial accounting, while post-acute solutions focus on care and financial management for long-term care facilities[528](index=528&type=chunk)[560](index=560&type=chunk)[504](index=504&type=chunk) - **Patient Engagement:** Offered through Get Real Health, this segment provides a digital platform (InstantPHR and CHBase) to improve patient outcomes and engagement by integrating data from various sources into a single view for patients and clinicians[604](index=604&type=chunk)[566](index=566&type=chunk)[493](index=493&type=chunk) [Software Development](index=16&type=section&id=Software%20Development) The company capitalizes software development labor costs from the preliminary project phase until general release, with a five-year estimated useful life Software Development Costs (in millions) | Year | Total Expense | Capitalized Costs | | :--- | :--- | :--- | | 2022 | $30.9 | $19.1 | | 2021 | $30.4 | $9.4 | | 2020 | $33.5 | $3.3 | - The company capitalizes labor costs for software development from the preliminary project phase until general release, with an estimated useful life of five years for capitalized software[4](index=4&type=chunk) [Competition](index=19&type=section&id=Competition) CPSI faces intense competition across its Acute Care EHR, RCM, Post-Acute Care EHR, and Patient Engagement segments from various industry players - **Acute Care EHR:** Primary competitors include Cerner Corporation, Meditech, and MEDHOST, Inc., with secondary competitors such as N. Harris Computer Corporation and Epic Systems Corporation[617](index=617&type=chunk)[96](index=96&type=chunk) - **RCM Solutions:** Principal competitors include RelayHealth, SSI Group, Quadax, Change Healthcare, Availity, and Navicure[15](index=15&type=chunk) - **Post-Acute Care EHR:** Main competitors are PointClickCare Corporation and MatrixCare, Inc[16](index=16&type=chunk)[646](index=646&type=chunk) - **Patient Engagement:** Competitors include Relay Health, Get Well Network/Healthloop, and eClinicalWorks Patient Portal[75](index=75&type=chunk)[618](index=618&type=chunk) [Human Capital](index=23&type=section&id=Human%20Capital) CPSI employs approximately 2,500 individuals, primarily remote, focusing on internal talent development, external hires, and diversity initiatives - As of December 31, 2022, the company had approximately **2,500 employees**, most of whom work remotely, with none covered by a collective bargaining agreement[654](index=654&type=chunk) - The company focuses on diversity and inclusion through its employee-led council, "Team IDEA," launched in 2020, which conducted over 20 employee engagement events in 2022[598](index=598&type=chunk) - CPSI's talent strategy involves developing talent internally and supplementing with external hires, leveraging remote work to expand its talent pool geographically and enhance diversity[626](index=626&type=chunk) [Risk Factors](index=26&type=section&id=Item%201A.%20Risk%20Factors) The company identifies several risks across its industry, business operations, products, and financial structure, including public health crises, market saturation, regulatory changes, competition, technology development, security breaches, talent retention, substantial indebtedness, and restrictive debt covenants [Industry Risks](index=26&type=section&id=Risks%20Related%20to%20Our%20Industry) The healthcare industry presents risks such as public health crises, market saturation, evolving regulations, and intense competition - Public health crises, like the COVID-19 pandemic, can disrupt operations, decrease patient volumes for customers, and impact the financial health of the company and its clients[60](index=60&type=chunk)[30](index=30&type=chunk) - The target market of hospitals with fewer than 200 beds is limited, and industry consolidation could reduce the potential client base and increase pricing pressure[61](index=61&type=chunk)[62](index=62&type=chunk) - The healthcare industry is subject to significant and evolving regulation (e.g., HIPAA, HITECH, 21st Century Cures Act), and failure to comply could result in liability, adverse publicity, and increased costs[36](index=36&type=chunk)[66](index=66&type=chunk)[39](index=39&type=chunk) - The company faces intense competition from firms with greater financial, technical, and marketing resources, which could lead to loss of clients and lower prices[43](index=43&type=chunk)[97](index=97&type=chunk) [Business Risks](index=31&type=section&id=Risks%20Related%20to%20Our%20Business) Business risks include the impact of transitioning to a SaaS model, challenges with future acquisitions, difficulties in talent retention, and complexities of international operations - The transition to a subscription-based recurring revenue model (SaaS) may adversely affect near-term revenue growth and results of operations due to changes in revenue recognition timing[73](index=73&type=chunk)[95](index=95&type=chunk) - Future acquisitions carry inherent risks, including failure to achieve synergies, significant integration costs, and potential dilution or incurrence of debt[76](index=76&type=chunk)[98](index=98&type=chunk)[647](index=647&type=chunk) - The inability to attract and retain qualified personnel, particularly for client service and support, could negatively impact client satisfaction and growth[77](index=77&type=chunk)[99](index=99&type=chunk) - International business activities expose the company to conflicting laws, data residency requirements, and other risks inherent in global operations[81](index=81&type=chunk)[101](index=101&type=chunk)[119](index=119&type=chunk) [Product and Service Risks](index=34&type=section&id=Risks%20Related%20to%20Our%20Products%20and%20Services) Product and service risks encompass the need for continuous innovation, potential for product failures, cybersecurity threats, and reliance on third-party technology - Failure to develop new products or enhance existing ones in response to rapid technological change and market demands could harm the company's competitive position[85](index=85&type=chunk)[105](index=105&type=chunk)[122](index=122&type=chunk) - Product failures or inaccurate data from clinical decision-support products could lead to client claims, substantial costs, and reputational damage[87](index=87&type=chunk)[106](index=106&type=chunk) - Security breaches, viruses, or cyber-attacks (e.g., ransomware, DDoS) could jeopardize confidential patient data, leading to client claims, loss of market perception, and business disruption[88](index=88&type=chunk)[107](index=107&type=chunk)[124](index=124&type=chunk) - The company is dependent on technology licensed from third parties, and disruptions or infringement claims related to this technology could force discontinuation or delay of product shipments[145](index=145&type=chunk)[131](index=131&type=chunk) [Indebtedness Risks](index=38&type=section&id=Risks%20Related%20to%20Our%20Indebtedness) The company's substantial indebtedness and restrictive debt covenants pose significant financial risks, limiting operational flexibility and increasing default potential - As of December 31, 2022, the company had approximately **$141.1 million** in principal amount of indebtedness, which could make it vulnerable to adverse economic conditions and limit operational flexibility[156](index=156&type=chunk)[141](index=141&type=chunk) - The credit agreement contains restrictive covenants that limit the company's ability to, among other things, incur additional debt, pay dividends, make acquisitions, and dispose of assets[162](index=162&type=chunk)[181](index=181&type=chunk)[183](index=183&type=chunk) - A breach of covenants could result in default, causing lenders to declare all outstanding borrowings immediately due and payable and to foreclose on pledged assets[165](index=165&type=chunk) [Legal Proceedings](index=46&type=section&id=Item%203.%20Legal%20Proceedings) The company is cooperating with an SEC subpoena received on November 2, 2022, regarding accounting matters, including revenue recognition and goodwill impairment testing, with an unpredictable outcome - On November 2, 2022, the company received a subpoena from the SEC concerning accounting matters such as revenue recognition and goodwill impairment testing for the period starting May 1, 2019[222](index=222&type=chunk) - The company is cooperating with the SEC investigation and cannot predict its timing or outcome[222](index=222&type=chunk) Part II [Market for Common Equity and Related Matters](index=47&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) CPSI's common stock trades on NASDAQ, and the company has a stock repurchase program authorized for up to **$30.0 million**, while quarterly dividends were indefinitely suspended in September 2020 - The Board of Directors indefinitely suspended all quarterly dividends on September 4, 2020, concurrent with authorizing a stock repurchase program[225](index=225&type=chunk) - A stock repurchase program of up to **$30.0 million** was approved and later extended to September 4, 2024, with approximately **$17.9 million** remaining available for repurchase as of December 31, 2022[201](index=201&type=chunk)[226](index=226&type=chunk)[747](index=747&type=chunk) Share Repurchases in Q4 2022 | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | Oct 2022 | 42,000 | $29.27 | | Nov 2022 | 42,345 | $28.79 | | Dec 2022 | 44,037 | $27.83 | | **Total** | **128,382** | **$28.62** | [Management's Discussion and Analysis (MD&A)](index=48&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) In 2022, total revenues increased **16%** to **$326.6 million**, driven by acquisitions and RCM segment growth, though net income decreased due to higher costs and interest expense, while liquidity is supported by cash, operating cash flow, and an expanded revolving credit facility [Results of Operations](index=52&type=section&id=Results%20of%20Operations) Total sales revenues increased in 2022, primarily driven by RCM segment growth from acquisitions and organic expansion, while net income decreased due to higher operating costs and interest expense Financial Performance Summary (in thousands) | Metric | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Total Sales Revenues | $326,648 | $280,629 | $264,488 | | Gross Profit | $154,435 | $140,882 | $136,246 | | Operating Income | $22,783 | $24,707 | $21,054 | | Net Income | $15,867 | $18,430 | $14,246 | | Diluted EPS | $1.08 | $1.26 | $0.98 | - **2022 vs. 2021:** - **RCM revenues** increased by **$48.6 million (37%)**, primarily due to the acquisitions of TruCode (**$13.8 million** revenue in 2022) and HRG (**$34.1 million** revenue in 2022), plus **$8.1 million** in organic growth[242](index=242&type=chunk)[244](index=244&type=chunk)[245](index=245&type=chunk) - **EHR revenues** decreased by **$3.3 million (2%)**, as a decline in non-recurring perpetual license installations offset a slight increase in recurring SaaS revenue[280](index=280&type=chunk) - **Net income** decreased by **$2.6 million**, impacted by higher costs of sales from the lower-margin HRG acquisition, increased sales & marketing expenses, and a **$3.2 million** rise in interest expense[242](index=242&type=chunk)[244](index=244&type=chunk)[245](index=245&type=chunk)[280](index=280&type=chunk) - **2021 vs. 2020:** - **RCM revenues** grew by **$23.8 million (22%)**, driven by the TruCode acquisition (**$7.4 million**) and organic growth from increased demand for services[284](index=284&type=chunk)[311](index=311&type=chunk) - **EHR revenues** decreased by **$9.8 million (6%)**, mainly due to a **$12.9 million** drop in non-recurring revenues as customer preference shifted from perpetual licenses to SaaS arrangements[257](index=257&type=chunk)[320](index=320&type=chunk) - **Net income** increased by **$4.2 million**, benefiting from higher RCM gross margins and lower operating expenses, partly due to a change in capitalizing product development labor[284](index=284&type=chunk)[311](index=311&type=chunk)[257](index=257&type=chunk)[320](index=320&type=chunk) [Liquidity and Capital Resources](index=59&type=section&id=Liquidity%20and%20Capital%20Resources) As of December 31, 2022, liquidity was supported by **$7.0 million** in cash and **$86.3 million** available under the revolving credit facility, which was amended and increased to **$230 million** in May 2022 - As of Dec 31, 2022, principal sources of liquidity were **$7.0 million** in cash and **$86.3 million** available under the revolving credit facility[299](index=299&type=chunk) - Net cash from operating activities decreased to **$32.4 million** in 2022 from **$47.7 million** in 2021, primarily due to a **$16.9 million** expansion in accounts receivable and changes in deferred tax treatment for R&D expenses[300](index=300&type=chunk) - Net cash used in investing activities was **$62.7 million** in 2022, mainly for the **$43.4 million** acquisition of HRG and **$19.1 million** in capitalized software development[326](index=326&type=chunk) - In May 2022, the company amended its credit agreement, increasing total facilities to **$230 million** (**$70 million** term loan, **$160 million** revolver) and transitioning the benchmark interest rate from LIBOR to SOFR[299](index=299&type=chunk)[711](index=711&type=chunk) [Bookings](index=61&type=section&id=Bookings) RCM bookings increased **136%** in 2022 due to strong demand and the HRG acquisition, while EHR bookings decreased **7%** due to a challenging sales environment Bookings by Segment (in thousands) | Segment | 2022 | 2021 | | :--- | :--- | :--- | | RCM | $48,065 | $20,333 | | EHR | $38,152 | $40,873 | | Patient Engagement | $3,188 | $9,007 | | **Total Bookings** | **$89,405** | **$70,213** | - RCM bookings increased **136%** in 2022, driven by strong demand for outsourced RCM services both within the existing EHR customer base and from new clients, enhanced by the HRG acquisition[331](index=331&type=chunk) - EHR bookings decreased **7%** in 2022 due to a challenging sales environment for new Acute Care EHR systems[360](index=360&type=chunk) [Critical Accounting Policies and Estimates](index=62&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) Key accounting policies involve revenue recognition under ASC 606, annual goodwill impairment testing, and changes in software development cost capitalization - **Revenue Recognition:** The company uses the 5-step model under ASC 606, requiring significant judgment in determining standalone selling prices (SSP) and identifying distinct performance obligations[363](index=363&type=chunk)[820](index=820&type=chunk) - **Goodwill Impairment:** Goodwill is tested annually on October 1, with the fair value of Acute Care EHR and Post-acute EHR reporting units exceeding carrying values by **13%** and **24%** respectively, indicating a heightened risk of future impairment if operating results decline[369](index=369&type=chunk)[372](index=372&type=chunk) - **Software Development Costs:** In Q2 2021, the company changed its estimation method for capitalizing labor costs, resulting in an increase of approximately **$4.6 million** in capitalized amounts for 2021, treated as a change in accounting estimate[213](index=213&type=chunk)[672](index=672&type=chunk) [Financial Statements and Supplementary Data](index=65&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) The consolidated financial statements provide the company's financial position, results of operations, and cash flows, with notes detailing business combinations, segment reporting changes, intangible assets, goodwill, and long-term debt, supported by an unqualified auditor's opinion [Consolidated Financial Statements](index=71&type=section&id=Consolidated%20Financial%20Statements) The consolidated financial statements present the company's financial position, results of operations, and cash flows for the three years ended December 31, 2022 Consolidated Balance Sheet Data (in thousands) | Account | Dec 31, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $6,951 | $11,431 | | Total current assets | $74,559 | $68,998 | | Goodwill | $198,253 | $177,713 | | **Total assets** | **$430,963** | **$383,350** | | **Liabilities & Equity** | | | | Total current liabilities | $44,455 | $46,427 | | Long-term debt, net | $136,388 | $94,966 | | **Total liabilities** | **$199,252** | **$160,778** | | **Total stockholders' equity** | **$231,711** | **$222,572** | Consolidated Statement of Cash Flows Data (in thousands) | Activity | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | $32,375 | $47,744 | $49,142 | | Net cash used in investing activities | ($62,731) | ($69,919) | ($6,664) | | Net cash provided by (used in) financing activities | $25,876 | $20,935 | ($37,164) | | **Net (decrease) in cash** | **($4,480)** | **($1,240)** | **$5,314** | [Notes to Consolidated Financial Statements](index=76&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Notes to the financial statements detail business combinations, intangible assets, goodwill, long-term debt, and the realignment of segment reporting - **Business Combinations (Note 3):** The company acquired Healthcare Resource Group (HRG) on March 1, 2022, for net cash of **$43.9 million**, adding **$20.8 million** in goodwill, and TruCode on May 12, 2021, for net cash of **$59.9 million** plus a contingent earnout, adding **$27.3 million** in goodwill[860](index=860&type=chunk)[851](index=851&type=chunk)[864](index=864&type=chunk) - **Intangible Assets and Goodwill (Note 12):** As of Dec 31, 2022, net intangible assets were **$102.0 million** and goodwill was **$198.3 million**, with no impairment recorded in 2022, 2021, or 2020[707](index=707&type=chunk)[693](index=693&type=chunk) - **Long-Term Debt (Note 13):** As of Dec 31, 2022, total debt obligations were **$141.1 million**, consisting of a **$67.4 million** term loan and **$73.7 million** on the revolving credit facility, with an interest rate of **6.39%**[710](index=710&type=chunk) - **Segment Reporting (Note 18):** In Q4 2022, the company realigned its segments to RCM, EHR, and Patient Engagement, with management now evaluating performance based on revenues and adjusted EBITDA, and prior period data recast accordingly[402](index=402&type=chunk)[755](index=755&type=chunk)

Computer Programs and Systems, Inc. (NASDAQ:CPSI) Q4 2022 Earnings Conference Call February 14, 2023 4:30 PM ET Company Participants Dru Anderson - Corporate Communications Christopher Fowler - CEO and President Matt Chambless - CFO Conference Call Participants George Hill - Deutsche Bank Stephanie Davis - SVB Securities Operator Greetings and welcome to CPSI Fourth Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2022 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number: 000-49796 Delaware 74-3032373 (State or Other Jurisdiction of Incorporation or Organization)(I.R.S. Employer Identification No.) 54 St. Emanue ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2022 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number: 000-49796 COMPUTER PROGRAMS AND SYSTEMS, INC. (Exact Name of Registrant as Specified in Its Charter) Delaware 74-3032373 (State or Other Jurisdicti ...

PART I. FINANCIAL INFORMATION [Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) In Q1 2022, the company reported total revenues of $77.9 million, a 15% increase year-over-year, with net income rising to $8.1 million, primarily driven by TruBridge segment growth and strategic acquisitions Condensed Consolidated Statements of Income (Unaudited) | Indicator (In thousands, except per share data) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--- | :--- | :--- | | **Total sales revenues** | **$77,871** | **$68,005** | | Gross profit | $39,815 | $34,850 | | Operating income | $8,986 | $4,914 | | **Net income** | **$8,113** | **$4,144** | | Net income per common share—diluted | $0.55 | $0.28 | Condensed Consolidated Balance Sheets (Unaudited) | Indicator (In thousands) | March 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Cash and cash equivalents | $15,981 | $11,431 | | **Total assets** | **$440,330** | **$383,350** | | Long-term debt, net of current portion | $136,633 | $94,966 | | **Total liabilities** | **$209,578** | **$160,778** | | **Total stockholders' equity** | **$230,752** | **$222,572** | Condensed Consolidated Statements of Cash Flows (Unaudited) | Indicator (In thousands) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--- | :--- | :--- | | **Net cash provided by operating activities** | **$11,817** | **$13,710** | | Net cash used in investing activities | ($47,680) | ($1,365) | | Net cash provided by (used in) financing activities | $40,413 | ($7,000) | | **Increase in cash and cash equivalents** | **$4,550** | **$5,345** | [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements%20(Unaudited)) The notes detail financial statement presentation, including a Q2 2021 accounting estimate change, the **$43.4 million** HRG acquisition, and a May 2022 credit facility amendment - In Q2 2021, the company changed its method for estimating labor costs for software development capitalization, moving to a methodology based on the distribution of agile workload metrics, considered a change in accounting estimate applied prospectively[21](index=21&type=chunk)[64](index=64&type=chunk) - On March 1, 2022, the company acquired Healthcare Resource Group, Inc. (HRG) for a net cash consideration of **$43.4 million**, with preliminary purchase price allocation including **$20.4 million** to goodwill and **$24.2 million** to intangible assets[45](index=45&type=chunk)[46](index=46&type=chunk)[48](index=48&type=chunk) - The company's revenue recognition is based on ASC 606, with TruBridge revenue recognized as services are performed, and System Sales revenue recognized upon implementation for perpetual licenses or monthly for SaaS over the contract term[25](index=25&type=chunk)[28](index=28&type=chunk)[31](index=31&type=chunk)[35](index=35&type=chunk) Segment Revenues and Adjusted EBITDA (Q1 2022 vs Q1 2021) | Segment (In thousands) | Revenues Q1 2022 | Revenues Q1 2021 | Adjusted EBITDA Q1 2022 | Adjusted EBITDA Q1 2021 | | :--- | :--- | :--- | :--- | :--- | | TruBridge | $43,108 | $31,639 | $10,789 | $6,520 | | Acute Care EHR | $30,392 | $31,890 | $5,032 | $4,684 | | Post-acute Care EHR | $4,371 | $4,476 | $332 | $620 | | **Total** | **$77,871** | **$68,005** | **$16,153** | **$11,824** | - On May 2, 2022, the company amended its credit agreement, increasing the revolving credit facility from **$110 million to $160 million**, extending the maturity date to May 2, 2027, and transitioning the benchmark interest rate from LIBOR to SOFR[136](index=136&type=chunk)[137](index=137&type=chunk)[140](index=140&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=41&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes Q1 2022's **15%** revenue growth to acquisitions and TruBridge's organic expansion, noting a strategic shift to SaaS models and strong liquidity - The company's core strategy is to drive long-term revenue growth by cross-selling TruBridge services into its EHR customer base, expanding TruBridge's market share, and pursuing competitive EHR takeaway opportunities[160](index=160&type=chunk) - There is a dramatic shift in customer preference from perpetual license models to SaaS arrangements, with SaaS installations for new acute care EHRs growing from **12% in 2018 to 63% in 2021 and 100% in Q1 2022**, which reduces upfront revenue but increases long-term recurring revenue[169](index=169&type=chunk) Revenue Breakdown (Q1 2022 vs Q1 2021) | Revenue Source (In thousands) | Q1 2022 | Q1 2021 | Change | Change % | | :--- | :--- | :--- | :--- | :--- | | TruBridge | $43,108 | $31,639 | +$11,469 | +36% | | System sales and support | $34,763 | $36,366 | -$1,603 | -4% | | **Total sales revenues** | **$77,871** | **$68,005** | **+$9,866** | **+15%** | - TruBridge revenue increased by **36% YoY**, driven by organic growth in accounts receivable management, insurance, and medical coding services, as well as **$3.4 million** from the TruCode acquisition and **$3.8 million** from the HRG acquisition[192](index=192&type=chunk) Bookings (Q1 2022 vs Q1 2021) | Segment (In thousands) | Q1 2022 | Q1 2021 | Change % | | :--- | :--- | :--- | :--- | | TruBridge | $10,151 | $2,687 | +278% | | System sales and support | $10,246 | $6,090 | +68% | | **Total bookings** | **$20,397** | **$8,777** | **+132%** | - As of March 31, 2022, the company had a twelve-month backlog of approximately **$330 million**, consisting of **$6 million** from non-recurring system purchases and **$324 million** from recurring services, a significant increase from the **$258 million** total backlog a year prior[236](index=236&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=65&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company's primary market risk is interest rate fluctuations on its **$142.4 million** variable-rate debt, with a **100-basis-point change** impacting annual interest expense by **$1.4 million** - The primary market risk is from interest rate changes on the **$142.4 million of outstanding variable-rate borrowings** under its credit facilities as of March 31, 2022[245](index=245&type=chunk) - A hypothetical **100 basis point (1%) change** in the interest rate would result in an approximate **$1.4 million change** in annual interest expense[245](index=245&type=chunk) - The company acknowledges the upcoming cessation of LIBOR publication after June 30, 2023, and the uncertainty regarding the transition to alternative reference rates, which could impact borrowing costs[246](index=246&type=chunk) [Controls and Procedures](index=65&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded the company's disclosure controls and procedures were effective as of March 31, 2022, with ongoing integration of newly acquired HRG policies and no other material internal control changes - Based on an evaluation as of the end of the period, the CEO and CFO concluded that the company's disclosure controls and procedures are effective at the reasonable assurance level[249](index=249&type=chunk) - Following the acquisition of HRG on March 1, 2022, the company is in the process of integrating its policies and controls, with no other changes materially affecting, or reasonably likely to materially affect, the company's internal control over financial reporting[250](index=250&type=chunk) PART II. OTHER INFORMATION [Legal Proceedings](index=66&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in routine litigation arising in the ordinary course of business but is not currently involved in any claims considered material to its financial condition or results of operations - The company is not currently involved in any legal proceedings outside the ordinary course of business that are material to its financial condition or results of operations[254](index=254&type=chunk) [Risk Factors](index=66&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2021 - No material changes have been made to the risk factors disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2021[255](index=255&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=66&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) In Q1 2022, the company repurchased **50,720 shares** for tax withholdings, with approximately **$28.1 million** remaining available under the stock repurchase program Equity Repurchases in Q1 2022 | Period | Total Number of Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | Jan 2022 | 0 | N/A | | Feb 2022 | 19,448 | $29.83 | | Mar 2022 | 31,272 | $34.22 | | **Total** | **50,720** | **$32.54** | - The **50,720 shares** repurchased were to fund required tax withholdings for vested restricted stock and did not reduce the authority under the publicly announced stock repurchase program[256](index=256&type=chunk) - As of March 31, 2022, approximately **$28.1 million** remained available for repurchase under the stock repurchase program authorized through September 3, 2022[88](index=88&type=chunk)[256](index=256&type=chunk) [Defaults Upon Senior Securities](index=66&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) Not applicable [Mine Safety Disclosures](index=66&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) Not applicable [Other Information](index=68&type=section&id=Item%205.%20Other%20Information) None [Exhibits](index=69&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including the Stock Purchase Agreement for the HRG acquisition and certifications by the CEO and CFO as required by the Sarbanes-Oxley Act - Key exhibits filed include the Stock Purchase Agreement for the Healthcare Resource Group, Inc. acquisition and CEO/CFO certifications pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act[264](index=264&type=chunk)

Part I [Business](index=6&type=section&id=Item%201.%20Business) CPSI provides healthcare solutions for community hospitals and post-acute care facilities, with **$280.6 million** in 2021 revenues - CPSI provides healthcare solutions through six companies: Evident, TruBridge, American HealthTech (AHT), Get Real Health, TruCode, and Healthcare Resource Group (HRG)[21](index=21&type=chunk) Company Segments and Offerings | Segment/Company | Business Focus | | :--- | :--- | | **Evident** (Acute Care EHR) | Comprehensive EHR solutions (Thrive, Centriq) for community hospitals | | **AHT** (Post-acute Care EHR) | EHR solutions for skilled nursing and assisted living facilities | | **TruBridge** | Business management, consulting, managed IT, and Revenue Cycle Management (RCM) services | | **Get Real Health** | Patient engagement technology solutions | | **TruCode** | Cloud-based medical coding solutions | | **HRG** | Specialized RCM solutions (acquired March 1, 2022) | Fiscal Year 2021 Revenue | Metric | Value (USD) | | :--- | :--- | | 2021 Revenues | $280.6 million | [Overview](index=6&type=section&id=Overview) CPSI targets community hospitals (under 200 beds) and skilled nursing facilities, generating **$280.6 million** in 2021 revenues - The company's target market for acute care solutions is community hospitals with fewer than 200 beds, primarily focusing on those under 100 beds, which constitute **98%** of its acute care hospital EHR customer base[25](index=25&type=chunk) - The target market for post-acute care solutions includes approximately **15,500** skilled nursing facilities[25](index=25&type=chunk) [Industry Dynamics](index=6&type=section&id=Industry%20Dynamics) The U.S. healthcare industry faces significant challenges from COVID-19, regulatory changes, and the shift to value-based care - The COVID-19 pandemic has created historic financial and operational pressures for hospitals, including high costs for patient surges, supply chain disruptions, and revenue loss from lower non-emergent care volumes[27](index=27&type=chunk) - The company's community hospital clients are heavily impacted by changes in Medicare and Medicaid programs, which are under pressure due to federal and state budget constraints[31](index=31&type=chunk)[32](index=32&type=chunk) - The ARRA's 'meaningful use' program, now called 'Promoting Interoperability', drove significant add-on sales from 2017-2019, but the passing of the October 1, 2019 compliance deadline reduced these revenue opportunities in 2020 and 2021[38](index=38&type=chunk) - In response to the pandemic-driven demand for virtual care, the company accelerated the release of its 'Talk With Your Doc' telehealth portal in April 2020, providing it free to customers through 2021[42](index=42&type=chunk) [Strategy](index=9&type=section&id=Strategy) CPSI's strategy focuses on Core Growth, Margin Optimization, and Digital Innovation, supported by debt reduction and share repurchases - The company's transformation initiative focuses on Core Growth (cross-selling TruBridge, EHR takeaways), Margin Optimization (modernizing business for cost savings), and Digital Innovation (patient engagement, analytics)[44](index=44&type=chunk)[45](index=45&type=chunk)[46](index=46&type=chunk) - CPSI has shifted its capital allocation strategy to enhance flexibility, evidenced by reducing total bank debt from **$143.5 million** in 2017 to **$100.4 million** in 2021, increasing revolving credit availability, and replacing quarterly dividends with a **$30.0 million** stock repurchase program[55](index=55&type=chunk)[57](index=57&type=chunk) - The company is exploring new revenue streams by targeting ambulatory surgery centers, behavioral health facilities, and expanding its inpatient EHR product into the Canadian market[59](index=59&type=chunk) [Our Products and Services](index=10&type=section&id=Our%20Products%20and%20Services) CPSI provides comprehensive EHR, RCM, and patient engagement solutions via subsidiaries, including a Cloud EHR (SaaS) option - Evident offers two main acute care EHR platforms: Thrive, a fully integrated system, and Centriq, a web-based platform with an intuitive user interface[65](index=65&type=chunk)[66](index=66&type=chunk)[73](index=73&type=chunk) - AHT provides integrated software solutions for the post-acute care industry, focusing on care management and financial/enterprise management for long-term care facilities[79](index=79&type=chunk) - TruBridge offers a suite of RCM products and services, managed IT services, patient engagement solutions through its Get Real Health acquisition, and encoder solutions through its TruCode acquisition[94](index=94&type=chunk)[101](index=101&type=chunk)[103](index=103&type=chunk) - The company offers a Cloud EHR (SaaS) option, allowing customers to access advanced EHR capabilities for a monthly fee without a large initial capital outlay[88](index=88&type=chunk) [Software Development](index=16&type=section&id=Software%20Development) The company continuously invests in product enhancements, capitalizing software development costs amortized over five years Software Development Costs (in millions) | Year | Capitalized Costs | Total R&D Expenditures | | :--- | :--- | :--- | | 2021 | $9.4 | $30.4 | | 2020 | $3.3 | $33.5 | | 2019 | $0.0 | $36.9 | [Clients, Sales and Marketing](index=17&type=section&id=Clients%2C%20Sales%20and%20Marketing) CPSI targets community hospitals and long-term care facilities, cross-selling TruBridge services into its EHR client base - The primary growth strategy for the TruBridge business is to leverage established sales relationships to cross-sell services into the substantial acute and post-acute EHR client base[118](index=118&type=chunk) Revenue by Geography (in thousands) | Region | 2021 | 2020 | 2019 | | :--- | :--- | :--- | :--- | | Domestic | $274,521 | $257,883 | $270,966 | | International | $6,108 | $6,605 | $3,668 | | **Total** | **$280,629** | **$264,488** | **$274,634** | [Backlog](index=18&type=section&id=Backlog) The company's twelve-month backlog shows increased recurring services and decreased non-recurring system purchases in 2021 Twelve-Month Revenue Backlog (in millions) | Backlog Type | Dec 31, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | Non-recurring system purchases | ~$5 | ~$10 | | Recurring support, maintenance & TruBridge | ~$281 | ~$242 | [Competition](index=19&type=section&id=Competition) CPSI competes in a dynamic market based on product features, service quality, and price across acute care, post-acute care, and RCM segments - **Acute Care EHR Competitors:** Cerner, Meditech, and MEDHOST are principal competitors, with Allscripts and Epic Systems as secondary competitors in larger hospital markets[131](index=131&type=chunk)[132](index=132&type=chunk) - **Post-acute Care EHR Competitors:** PointClickCare Corporation and MatrixCare, Inc. are the main competitors[134](index=134&type=chunk) - **Business/RCM Services Competitors:** Key competitors include Resolution Health, Ensemble Health Partners, nThrive, RelayHealth, and Change Healthcare[135](index=135&type=chunk) [Human Capital](index=22&type=section&id=Human%20Capital) CPSI had approximately **2,000** employees in 2021, focusing on talent retention, DEI, and competitive compensation, with COVID-19 safety measures - As of December 31, 2021, the company had approximately **2,000** employees, with the majority located in Alabama, Mississippi, Pennsylvania, and Minnesota[153](index=153&type=chunk) - The company launched its Inclusion, Diversity, Equity Alliance ("Team IDEA") in 2020 to strengthen engagement on DEI initiatives[160](index=160&type=chunk) - The company's COVID-19 response included forming an internal taskforce, hosting on-site vaccine clinics, and offering paid time off for vaccinations[156](index=156&type=chunk)[157](index=157&type=chunk) [Risk Factors](index=25&type=section&id=Item%201A.%20Risk%20Factors) The company faces diverse risks including COVID-19 impacts, market competition, regulatory uncertainty, system failures, and substantial indebtedness - **Industry Risk:** The ongoing COVID-19 pandemic could materially affect revenue, gross margin, and income due to decreased patient volumes at client hospitals and disruptions to new EHR system installations[185](index=185&type=chunk)[186](index=186&type=chunk) - **Business Risk:** The company faces competition from companies with greater financial, technical, and marketing resources, which could lead to loss of clients or downward pressure on prices[228](index=228&type=chunk) - **Product Risk:** Breaches of security, viruses, or other cyber attacks could result in client claims, harm to reputation, and loss of clients, as healthcare information is a prime target for attackers[261](index=261&type=chunk)[262](index=262&type=chunk) - **Indebtedness Risk:** As of December 31, 2021, the company had approximately **$100.4 million** of indebtedness, which could make it difficult to satisfy obligations and limit operational flexibility[293](index=293&type=chunk)[294](index=294&type=chunk)[295](index=295&type=chunk) [Properties](index=43&type=section&id=Item%202.%20Properties) The company's corporate campus in Mobile, Alabama, has **135,500 square feet** of office space on **16.5 acres**, plus leased facilities - The company's principal executive office and corporate campus are located in Mobile, Alabama, consisting of approximately **135,500 square feet** of office space on a **16.5-acre** campus[335](index=335&type=chunk) [Legal Proceedings](index=43&type=section&id=Item%203.%20Legal%20Proceedings) The company is involved in routine litigation but has no claims considered material to its financial condition or results of operations Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=44&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) CPSI's common stock is on NASDAQ, with dividends suspended and a **$30.0 million** stock repurchase program initiated in 2020 - On September 4, 2020, the Board of Directors indefinitely suspended quarterly dividends and authorized a stock repurchase program of up to **$30.0 million**[341](index=341&type=chunk)[342](index=342&type=chunk) Equity Repurchases (Q4 2021) | Period | Total Shares Purchased | Average Price Paid per Share ($) | | :--- | :--- | :--- | | Oct 2021 | — | — | | Nov 2021 | 3,134 | 29.68 | | Dec 2021 | — | — | | **Total** | **3,134** | **29.68** | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=45&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) CPSI's 2021 revenues increased **6%** to **$280.6 million**, driven by TruBridge growth, with net income rising to **$18.4 million** despite decreased operating cash flow 2021 Financial Highlights vs. 2020 | Metric | 2021 | 2020 | Change | | :--- | :--- | :--- | :--- | | Total Revenues | $280.6M | $264.5M | +6% | | Net Income | $18.4M | $14.2M | +$4.2M | | Net Cash from Operations | $47.7M | $49.1M | -$1.4M | - The shift in customer preference to a SaaS license model continued, with SaaS installations representing **63%** of new acute care EHR installations in 2021, compared to **68%** in 2020 and **43%** in 2019[363](index=363&type=chunk) - A reduction in force in February 2021, impacting **1.0%** of the workforce, is expected to realize approximately **$3.9 million** in annual savings[367](index=367&type=chunk) - A change in the method for estimating capitalized software development labor costs resulted in an increase of approximately **$4.6 million** in capitalized amounts during 2021[370](index=370&type=chunk) [Results of Operations](index=50&type=section&id=Results%20of%20Operations) Total revenues increased **6%** to **$280.6 million** in 2021, driven by TruBridge growth, leading to increased operating and net income Revenue Breakdown by Segment (2021 vs 2020, in millions) | Revenue Source | 2021 | 2020 | % Change | | :--- | :--- | :--- | :--- | | System sales and support | $143.1 | $153.0 | -6.5% | | TruBridge | $137.5 | $111.5 | +23.3% | | **Total sales revenues** | **$280.6** | **$264.5** | **+6.1%** | - TruBridge revenues increased by **$26.0 million (23%)**, driven by improving hospital patient volumes and the May 2021 acquisition of TruCode, which contributed **$7.4 million**[387](index=387&type=chunk) - Non-recurring system sales and support revenues decreased by **$12.9 million (41%)**, primarily due to a decline in new non-SaaS customer implementations and fewer add-on application sales[387](index=387&type=chunk) - Product development expenses decreased by **$3.1 million (9%)**, mainly due to a **$5.5 million** increase in capitalized labor costs following a change in estimation methodology[394](index=394&type=chunk) - The effective income tax rate decreased to **20%** in 2021 from **24%** in 2020, primarily due to lower provision-to-return adjustments and decreased tax shortfalls from stock-based compensation[402](index=402&type=chunk) [Liquidity and Capital Resources](index=53&type=section&id=Liquidity%20and%20Capital%20Resources) As of December 31, 2021, CPSI had **$11.4 million** cash, **$79.0 million** credit availability, **$100.4 million** debt, and decreased operating cash flow Liquidity Position (as of Dec 31, 2021) | Item | Amount (USD) | | :--- | :--- | | Cash and cash equivalents | $11.4 million | | Remaining borrowing capacity | $79.0 million | | Outstanding indebtedness | $100.4 million | Cash Flow Summary (2021 vs 2020, in millions) | Cash Flow Activity | 2021 | 2020 | | :--- | :--- | :--- | | Net cash from Operating | $47.7 | $49.1 | | Net cash used in Investing | ($69.9) | ($6.7) | | Net cash from/(used in) Financing | $20.9 | ($37.0) | - The acquisition of HRG on March 1, 2022, was funded by an additional **$48 million** draw on the revolving credit facility, increasing total indebtedness to approximately **$148.4 million**[294](index=294&type=chunk)[406](index=406&type=chunk) [Bookings](index=55&type=section&id=Bookings) Total bookings for 2021 decreased **14%** to **$70.2 million**, primarily due to first-half headwinds and declining core EHR client bookings Bookings by Segment (in thousands) | Segment | 2021 | 2020 | | :--- | :--- | :--- | | Acute Care EHR | $37,633 | $42,449 | | Post-acute Care EHR | $3,240 | $6,341 | | TruBridge | $29,340 | $33,238 | | **Total Bookings** | **$70,213** | **$82,028** | - Bookings in the first half of 2021 were negatively impacted by COVID-19 distractions, reorganization transitions, and a focus on lower-value regulatory purchases[420](index=420&type=chunk) [Critical Accounting Policies and Estimates](index=56&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) Key accounting estimates include revenue recognition, credit losses, goodwill valuation, and capitalized software costs, with heightened impairment risk for Acute Care EHR - Revenue recognition requires significant judgment in identifying distinct performance obligations and determining standalone selling prices (SSP), often using the residual method for bundled software and services[442](index=442&type=chunk)[443](index=443&type=chunk) - The company tests goodwill for impairment annually on October 1, and as of the 2021 test, the fair value of the Acute Care EHR reporting unit exceeded its carrying value by **23%**, indicating a heightened risk of future impairment if operating results decline[458](index=458&type=chunk) - Software development costs for SaaS solutions are capitalized under ASC 350-40, with direct labor costs capitalized after the preliminary project phase and amortized over an estimated five-year life[461](index=461&type=chunk) [Financial Statements and Supplementary Data](index=60&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents consolidated financial statements for 2021, 2020, and 2019, including balance sheets, income statements, cash flows, and auditor reports Consolidated Statement of Operations Highlights (Year ended Dec 31, in thousands) | Line Item | 2021 | 2020 | 2019 | | :--- | :--- | :--- | :--- | | Total sales revenues | $280,629 | $264,488 | $274,634 | | Gross profit | $140,882 | $136,246 | $144,145 | | Operating income | $24,707 | $21,054 | $24,583 | | Net income | $18,430 | $14,246 | $20,468 | | Diluted EPS | $1.26 | $0.98 | $1.43 | Consolidated Balance Sheet Highlights (As of Dec 31, in thousands) | Line Item | 2021 | 2020 | | :--- | :--- | :--- | | Total current assets | $68,998 | $67,144 | | Total assets | $383,350 | $326,272 | | Total current liabilities | $46,427 | $37,442 | | Total liabilities | $160,778 | $126,272 | | Total stockholders' equity | $222,572 | $200,000 | Consolidated Statement of Cash Flows Highlights (Year ended Dec 31, in thousands) | Line Item | 2021 | 2020 | 2019 | | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | $47,744 | $49,142 | $43,602 | | Net cash used in investing activities | ($69,919) | ($6,664) | ($12,493) | | Net cash provided by (used in) financing activities | $20,935 | ($37,164) | ($29,484) | [Controls and Procedures](index=99&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded disclosure controls were effective as of December 31, 2021, with ongoing integration of TruCode's internal controls - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report[676](index=676&type=chunk) Part III [Directors, Executive Compensation, Security Ownership, and Accountant Fees](index=101&type=section&id=Item%2010%2C%2011%2C%2012%2C%2013%2C%2014) Information for these items is incorporated by reference from the company's definitive Proxy Statement for the 2022 Annual Meeting - The information for Items 10, 11, 12, 13, and 14 is incorporated by reference from the 2022 Proxy Statement[687](index=687&type=chunk)[688](index=688&type=chunk)[690](index=690&type=chunk)[691](index=691&type=chunk)[692](index=692&type=chunk) Part IV [Exhibits and Financial Statement Schedules](index=103&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists financial statements, schedules, and exhibits filed as part of the Form 10-K, with financial statements in Part II, Item 8

Customer Preferences and Market Trends - The company reported a significant shift in customer preferences towards the "Software as a Service" (SaaS) model, with 68% of new acute care EHR installations in 2020 being SaaS, up from 43% in 2019 and 12% in 2018[158]. - The healthcare IT market is expected to grow due to increasing pressure on healthcare organizations to reduce costs and improve quality, which may drive demand for the company's business management and consulting services[154]. - The company recognizes the ongoing risks related to the COVID-19 pandemic, market saturation, and competition from companies with greater resources[136]. Financial Performance - In the first nine months of 2021, the company generated revenues of $206.6 million, a 5% increase from $197.6 million in the same period of 2020, primarily due to improved hospital patient volumes[172]. - Operating income for the first nine months of 2021 was $17.2 million, compared to $15.1 million in the same period of 2020, reflecting improved profitability[172]. - Net income for the first nine months of 2021 was $13.0 million, an increase of $1.9 million from $11.1 million in the same period of 2020[172]. Revenue and Cost Dynamics - The company anticipates incremental margin pressure in the near term due to the transition from perpetual license arrangements to SaaS arrangements, which typically result in lower initial revenues but higher recurring revenues over time[152]. - Total revenues for Q3 2021 increased by $1.8 million, or approximately 3%, compared to Q3 2020[175]. - Total costs of sales increased by $1.9 million, or 6%, to $17.8 million in Q3 2021, with costs representing 50% of total revenues[180]. Operational Changes and Strategies - The company expects to realize approximately $3.9 million in annual savings from a reduction in force that terminated about 1.0% of its workforce, incurring expenses of approximately $2.7 million related to this action[161]. - The company engaged a consulting firm to assess its growth strategy, confirming the focus on cross-selling TruBridge services and pursuing competitive EHR opportunities in the acute and post-acute markets[151]. - The company aims to stabilize revenues and cash flows by leveraging TruBridge services as a growth agent, emphasizing the importance of maintaining and growing its recurring revenue base[150]. Impact of COVID-19 - The company expects continued negative impacts from COVID-19 on patient volumes and revenues, particularly affecting TruBridge service offerings[166]. - Cash collections have been delayed due to COVID-19, impacting the company's liquidity and cash flows from operating activities[170]. - The federal government allocated $175 billion through the CARES Act Provider Relief Fund to assist healthcare providers, with $10 billion specifically targeted for rural providers, which is significant for the company's client base[170]. Bookings and Backlog - Total bookings for the third quarter of 2021 increased by $7.8 million, or 37%, compared to the third quarter of 2020, reaching $29.322 million[233]. - Acute Care EHR bookings in the third quarter of 2021 rose by $3.8 million, or 33%, compared to the same period in 2020, totaling $15.298 million[234]. - As of September 30, 2021, the twelve-month backlog included approximately $6 million in non-recurring system purchases and approximately $272 million in recurring payments[231]. Cost Management and Expenses - Total operating expenses increased by $1.5 million, or 5%, to $19.5 million in Q3 2021, representing 44% of total revenues[188]. - General and administrative expenses increased by $4.1 million, or 12%, compared to the first nine months of 2020, mainly due to $2.5 million in severance costs and $0.9 million in transaction-related costs from the TruCode acquisition[210]. - Sales and marketing costs decreased by $2.7 million, or 15%, compared to the first nine months of 2020, driven by reduced payroll and commission expenses[207]. Capitalization and Investments - The company capitalized software development costs of $2.4 million and $6.4 million during the three and nine months ended September 30, 2021, respectively, with an estimated increase in capitalized amounts of approximately $1.1 million and $3.0 million due to a change in accounting methodology[162]. - Net cash used in investing activities increased by $61.4 million, totaling $67.0 million for the nine months ended September 30, 2021, largely due to the acquisition of TruCode[222]. Debt and Interest Rate Exposure - The company had $117.3 million of outstanding borrowings under credit facilities as of September 30, 2021, exposing it to interest rate fluctuations[243]. - A 100 basis point change in interest rates on borrowings would result in a change in interest expense of approximately $1.2 million annually[243]. - The transition from LIBOR to alternative reference rates could adversely impact the company's borrowing costs[244].