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].

PART I FINANCIAL INFORMATION [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements.) The financial statements detail the company's financial position as of June 30, 2021, reflecting asset and liability growth from the TruCode acquisition, and strong revenue and net income increases for the six months ended June 30, 2021 Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | **Total Assets** | **$393,159** | **$326,272** | | Goodwill | $177,748 | $150,216 | | Intangible assets, net | $102,349 | $71,689 | | **Total Liabilities** | **$181,617** | **$126,272** | | Long-term debt, net | $112,632 | $73,360 | | **Total Stockholders' Equity** | **$211,542** | **$200,000** | Condensed Consolidated Statements of Income Highlights (in thousands, except per share data) | Metric | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :--- | :--- | :--- | | Total sales revenues | $136,538 | $129,306 | | Gross profit | $68,738 | $66,220 | | Operating income | $12,651 | $8,877 | | **Net income** | **$10,285** | **$5,854** | | **Net income per share—diluted** | **$0.70** | **$0.41** | Condensed Consolidated Statements of Cash Flows Highlights (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :--- | :--- | :--- | | Net cash provided by operating activities | $33,144 | $24,838 | | Net cash used in investing activities | ($64,587) | ($4,512) | | Net cash provided by (used in) financing activities | $37,903 | ($9,015) | - On May 12, 2021, the company acquired TruCode LLC for **$59.8 million** in cash (net of cash acquired) plus a potential contingent earnout payment of up to **$15.0 million**, adding **$37.1 million** in intangible assets and **$27.5 million** in goodwill[49](index=49&type=chunk)[50](index=50&type=chunk)[52](index=52&type=chunk) - During Q2 2021, a change in accounting estimate for capitalizing software development labor costs increased capitalized amounts by approximately **$2.0 million** for the three and six months ended June 30, 2021, with a corresponding decrease to product development costs[24](index=24&type=chunk)[61](index=61&type=chunk)[63](index=63&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=38&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations.) Management attributes Q2 2021 revenue growth to increased TruBridge revenues and the TruCode acquisition, while the ongoing shift to SaaS models impacts short-term revenue but strengthens recurring streams, and liquidity remains strong despite a temporary decline in bookings Results of Operations Comparison (Three Months Ended June 30) | (in thousands) | 2021 | 2020 | % Change | | :--- | :--- | :--- | :--- | | Total Revenues | $68,533 | $59,549 | 15.1% | | - System sales and support | $35,967 | $34,724 | 3.6% | | - TruBridge | $32,566 | $24,825 | 31.2% | | Gross Profit | $33,888 | $30,106 | 12.6% | | Operating Income | $7,738 | $2,745 | 181.9% | | Net Income | $6,141 | $1,764 | 248.1% | - The company's strategy focuses on cross-selling TruBridge services into its EHR customer base, expanding TruBridge's market share, and pursuing competitive EHR takeaways, with customer retention rates returning to the **mid-90th percentile range** in 2020 and H1 2021[146](index=146&type=chunk)[148](index=148&type=chunk)[150](index=150&type=chunk) - The shift to SaaS license models continues, with **68% of new acute care EHR installations in 2020 being SaaS**, up from **43% in 2019**, reducing upfront revenue but increasing long-term recurring revenue[157](index=157&type=chunk) - Total bookings for H1 2021 were **$25.3 million**, a decrease from **$39.3 million** in H1 2020, attributed by management to temporary headwinds including COVID-19 distractions, reorganization transitions, and a focus on lower-value regulatory purchases[232](index=232&type=chunk)[234](index=234&type=chunk) - As of June 30, 2021, the company had **$19.1 million** in cash and **$64.0 million** in remaining borrowing capacity under its revolving credit facility, with total outstanding debt at **$117.2 million**[216](index=216&type=chunk)[217](index=217&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=63&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk.) The company's primary market risk stems from interest rate fluctuations on its **$117.3 million** variable-rate debt, with a 100 basis point change impacting annual interest expense by approximately **$1.2 million**, and no derivative instruments are used to manage this risk - The company's main market risk is from interest rate changes on its **$117.3 million** of variable-rate debt outstanding as of June 30, 2021[240](index=240&type=chunk) - A **100 basis point (1%)** change in the interest rate would impact annual interest expense by approximately **$1.2 million**[240](index=240&type=chunk) [Item 4. Controls and Procedures](index=63&type=section&id=Item%204.%20Controls%20and%20Procedures.) Management concluded the company's disclosure controls were effective as of June 30, 2021, with ongoing integration of TruCode's policies and controls, and no other material changes to internal control over financial reporting were identified - 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[243](index=243&type=chunk) - Following the acquisition of TruCode in May 2021, the company is integrating policies and processes and will continue to evaluate the impact on internal controls[244](index=244&type=chunk) PART II OTHER INFORMATION [Item 1. Legal Proceedings](index=64&type=section&id=Item%201.%20Legal%20Proceedings.) The company is involved in routine litigation but is not currently engaged in any claims deemed material to its financial condition or results of operations - The company is not currently involved in any legal proceedings that are expected to have a **material impact** on its financial condition[247](index=247&type=chunk) [Item 1A. Risk Factors](index=64&type=section&id=Item%201A.%20Risk%20Factors.) 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, 2020, have occurred - No **material changes** to the risk factors disclosed in the company's 2020 Form 10-K have occurred[248](index=248&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=64&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds.) During Q2 2021, the company repurchased **5,331 shares** under its stock repurchase program, with approximately **$28.2 million** remaining available for future repurchases Equity Securities Repurchases (Q2 2021) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | April 2021 | 5,331 | $29.77 | | May 2021 | 0 | $0 | | June 2021 | 0 | $0 | | **Total** | **5,331** | **$29.77** | - As of June 30, 2021, approximately **$28.2 million** remained available for share repurchases under the existing program, which runs through September 3, 2022[249](index=249&type=chunk)[250](index=250&type=chunk) [Item 6. Exhibits](index=67&type=section&id=Item%206.%20Exhibits.) This section lists exhibits filed with the Form 10-Q, including the TruCode acquisition agreement and required certifications from the CEO and CFO

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 Non-accelerated filer ¨ Smaller reporting company ☐ FORM 10-Q ☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2021 ☐ 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 Ch ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED December 31, 2020 OR ☐ 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) | --- | --- | |----------------------------- ...

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, 2020 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to | --- | --- | |----------------------------------------------------------------------------------------------|---------------------------------------------| | | | | C ...

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, 2020 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to | --- | --- | |----------------------------------------------------------------------------------------------|-------------------------------------------------------| | | ...

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 March 31, 2020 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to | --- | --- | |----------------------------------------------------------------------------------------------|-------------------------------------------------------| | ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED December 31, 2019 OR ☐ 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) | --- | --- | |----------------------------- ...

[PART I. FINANCIAL INFORMATION](index=4&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section presents the company's unaudited condensed consolidated financial statements and management's analysis [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements, encompassing balance sheets, income, equity, cash flows, and detailed notes [Condensed Consolidated Balance Sheets (Unaudited)](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets%20(Unaudited)) This statement provides a snapshot of the company's assets, liabilities, and equity at specific points in time Balance Sheet Highlights (In thousands) | Metric | Sep 30, 2019 | Dec 31, 2018 | | :-------------------------------- | :----------- | :----------- | | Total Assets | $340,856 | $327,746 | | Total Liabilities | $168,825 | $167,963 | | Total Stockholders' Equity | $172,031 | $159,783 | [Condensed Consolidated Statements of Income (Unaudited)](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income%20(Unaudited)) This statement details the company's revenues, expenses, and net income over specific reporting periods Income Statement Highlights (In thousands, except per share data) | Metric | 3 Months Ended Sep 30, 2019 | 3 Months Ended Sep 30, 2018 | 9 Months Ended Sep 30, 2019 | 9 Months Ended Sep 30, 2018 | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Total Sales Revenues | $68,699 | $69,297 | $203,996 | $208,085 | | Gross Profit | $35,915 | $36,124 | $107,560 | $110,056 | | Operating Income | $6,007 | $5,361 | $15,670 | $15,236 | | Net Income | $4,135 | $5,749 | $9,241 | $10,044 | | Net Income Per Common Share—Basic | $0.29 | $0.41 | $0.65 | $0.72 | | Net Income Per Common Share—Diluted | $0.29 | $0.41 | $0.65 | $0.72 | | Dividends Declared Per Common Share | $0.10 | $0.10 | $0.30 | $0.30 | [Condensed Consolidated Statement of Stockholders' Equity (Unaudited)](index=7&type=section&id=Condensed%20Consolidated%20Statement%20of%20Stockholders'%20Equity%20(Unaudited)) This statement outlines changes in the company's equity, including net income, stock-based compensation, and dividends Stockholders' Equity Changes (In thousands) | Metric | 3 Months Ended Sep 30, 2019 | 3 Months Ended Sep 30, 2018 | 9 Months Ended Sep 30, 2019 | 9 Months Ended Sep 30, 2018 | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Balance at June 30 / Dec 31 | $167,159 (June 30, 2019) | $144,241 (June 30, 2018) | $159,783 (Dec 31, 2018) | $136,086 (Dec 31, 2017) | | Net income | $4,135 | $5,749 | $9,241 | $10,044 | | Stock-based compensation | $2,170 | $2,611 | $7,297 | $7,303 | | Dividends | $(1,436) | $(1,409) | $(4,293) | $(4,211) | | Balance at Sep 30 | $172,031 | $151,192 | $172,031 | $151,192 | [Condensed Consolidated Statements of Cash Flows (Unaudited)](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows%20(Unaudited)) This statement reports the cash generated and used by operating, investing, and financing activities Cash Flow Highlights (In thousands) | Activity | 9 Months Ended Sep 30, 2019 | 9 Months Ended Sep 30, 2018 | | :-------------------------------- | :-------------------------- | :-------------------------- | | Net cash provided by operating activities | $25,513 | $14,852 | | Net cash used in investing activities | $(12,403) | $(818) | | Net cash used in financing activities | $(14,854) | $(9,379) | | (Decrease) Increase in cash and cash equivalents | $(1,744) | $4,655 | | Cash and cash equivalents at end of period | $3,988 | $5,175 | [Notes to Condensed Consolidated Financial Statements (Unaudited)](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements%20(Unaudited)) These notes provide detailed information supporting the financial statements, covering accounting policies, revenue, business combinations, and segment performance - The financial statements are unaudited, prepared under SEC rules and U.S. GAAP, with condensed footnote disclosures[27](index=27&type=chunk)[28](index=28&type=chunk) - CPSI's consolidated entities include **TruBridge, Evident, Healthland Holding Inc. (HHI), and Get Real Health**[29](index=29&type=chunk) [1. BASIS OF PRESENTATION](index=9&type=section&id=1.%20BASIS%20OF%20PRESENTATION) This section outlines the accounting principles and consolidation scope for the financial statements - The financial statements are unaudited, prepared under SEC rules and U.S. GAAP, and include normal recurring adjustments[27](index=27&type=chunk) - CPSI's consolidated entities include TruBridge, Evident, Healthland Holding Inc. (HHI), and Get Real Health[29](index=29&type=chunk) [2. RECENT ACCOUNTING PRONOUNCEMENTS](index=9&type=section&id=2.%20RECENT%20ACCOUNTING%20PRONOUNCEMENTS) This section discusses the adoption and potential impact of new accounting standards on the financial statements - Adopted ASU 2016-02 (Leases) on January 1, 2019, increasing lease assets and liabilities by **$4.9 million**, with no significant impact on net earnings or cash flows[30](index=30&type=chunk) - ASU 2016-13 (Financial Instruments-Credit Losses) will be effective for the Company in Q1 2020, and its impact is currently being evaluated[31](index=31&type=chunk) [3. REVENUE RECOGNITION](index=9&type=section&id=3.%20REVENUE%20RECOGNITION) This section details the company's policies for recognizing revenue from system sales, support, and services - Revenue is recognized using the **5-step model under ASC 606**, upon transfer of control of products or services[33](index=33&type=chunk)[35](index=35&type=chunk) - System Sales and Support includes perpetual software licenses, installation, hardware, and recurring services; SaaS arrangements recognize revenue monthly[36](index=36&type=chunk)[37](index=37&type=chunk)[38](index=38&type=chunk)[39](index=39&type=chunk)[40](index=40&type=chunk)[41](index=41&type=chunk) - TruBridge provides business processing services (BPS) and professional IT services, with fees recognized over the contract period as services are performed[42](index=42&type=chunk)[43](index=43&type=chunk) Deferred Revenue (In thousands) | Metric | 9 Months Ended Sep 30, 2019 | 9 Months Ended Sep 30, 2018 | | :-------------------------------- | :-------------------------- | :-------------------------- | | Beginning balance | $10,201 | $9,937 | | Deferred revenue recorded | $13,888 | $15,847 | | Deferred revenue acquired | $430 | — | | Less deferred revenue recognized as revenue | $(15,863) | $(14,669) | | Ending balance | $8,656 | $11,115 | [4. BUSINESS COMBINATION](index=13&type=section&id=4.%20BUSINESS%20COMBINATION) This section details the acquisition of Get Real Health, including its purchase price allocation and financial contribution - Acquired Get Real Health on May 3, 2019, for **$10.8 million cash** (net of acquired cash) plus a contingent earnout of up to **$14.0 million**[52](index=52&type=chunk)[53](index=53&type=chunk) - The acquisition added patient outcomes and engagement technology solutions, strengthening CPSI's community healthcare position[52](index=52&type=chunk)[152](index=152&type=chunk) Preliminary Purchase Price Allocation (In thousands) | Asset/Liability | Allocation | | :-------------------------------- | :----------- | | Acquired cash | $159 | | Accounts receivable | $364 | | Prepaid expenses | $107 | | Property and equipment | $365 | | Operating lease asset | $1,285 | | Intangible assets | $7,890 | | Goodwill | $9,511 | | Accounts payable and accrued liabilities | $(594) | | Deferred taxes, net | $(1,480) | | Operating lease liability | $(1,285) | | Contingent consideration | $(5,000) | | Deferred revenue | $(430) | | Net assets acquired | $10,892 | - Get Real Health contributed **$0.7 million in revenue** and a pre-tax loss of **$1.4 million** for the nine months ended September 30, 2019[57](index=57&type=chunk) [5. PROPERTY AND EQUIPMENT](index=14&type=section&id=5.%20PROPERTY%20AND%20EQUIPMENT) This section provides a breakdown of the company's property and equipment, net of accumulated depreciation Property and Equipment, Net (In thousands) | Category | Sep 30, 2019 | Dec 31, 2018 | | :-------------------------------- | :----------- | :----------- | | Property and equipment, gross | $18,534 | $16,520 | | Less: accumulated depreciation | $(6,708) | $(5,645) | | Property and equipment, net | $11,826 | $10,875 | [6. OTHER ACCRUED LIABILITIES](index=16&type=section&id=6.%20OTHER%20ACCRUED%20LIABILITIES) This section details various accrued liabilities, including salaries, benefits, severance, and contingent consideration Other Accrued Liabilities (In thousands) | Category | Sep 30, 2019 | Dec 31, 2018 | | :-------------------------------- | :----------- | :----------- | | Salaries and benefits | $4,103 | $8,722 | | Severance | $647 | $992 | | Commissions | $794 | $830 | | Self-insurance reserves | $1,382 | $1,017 | | Contingent consideration | $5,000 | $206 | | Other | $575 | $452 | | Operating lease liabilities, current portion | $1,483 | — | | Total other accrued liabilities | $13,984 | $12,219 | [7. NET INCOME PER SHARE](index=16&type=section&id=7.%20NET%20INCOME%20PER%20SHARE) This section explains the calculation of basic and diluted net income per share, considering participating securities - Basic and diluted EPS are calculated using the **two-class method** due to unvested restricted stock awards being participating securities[67](index=67&type=chunk)[68](index=68&type=chunk) EPS Calculation (In thousands, except per share data) | Metric | 3 Months Ended Sep 30, 2019 | 3 Months Ended Sep 30, 2018 | 9 Months Ended Sep 30, 2019 | 9 Months Ended Sep 30, 2018 | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net income | $4,135 | $5,749 | $9,241 | $10,044 | | Net income attributable to common stockholders | $3,984 | $5,552 | $8,894 | $9,706 | | Basic EPS | $0.29 | $0.41 | $0.65 | $0.72 | | Diluted EPS | $0.29 | $0.41 | $0.65 | $0.72 | - Performance share awards for **200,709 shares** were not included in diluted EPS calculation for the periods as performance levels were not achieved[71](index=71&type=chunk) [8. INCOME TAXES](index=18&type=section&id=8.%20INCOME%20TAXES) This section discusses the company's effective tax rates and the impact of R&D credits on tax expense and benefit - Effective tax rate for Q3 2019 was **4% tax expense**, compared to a **54% tax benefit** for Q3 2018[73](index=73&type=chunk) - The Q3 2018 tax benefit was significantly impacted by an **81% benefit from R&D credits** due to the ASC 730 Safe Harbor Directive[73](index=73&type=chunk) - Effective tax rate for YTD 2019 increased to **15%** from **2%** for YTD 2018, primarily due to a **31% R&D credit benefit** in YTD 2018 from the ASC 730 Safe Harbor Directive[74](index=74&type=chunk) [9. STOCK-BASED COMPENSATION](index=18&type=section&id=9.%20STOCK-BASED%20COMPENSATION) This section details stock-based compensation expense and activity related to restricted stock awards Stock-Based Compensation Expense (In thousands) | Category | 3 Months Ended Sep 30, 2019 | 3 Months Ended Sep 30, 2018 | 9 Months Ended Sep 30, 2019 | 9 Months Ended Sep 30, 2018 | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Pre-tax stock-based compensation expense | $2,170 | $2,610 | $7,297 | $7,303 | | Net stock-based compensation expense | $1,693 | $2,036 | $5,692 | $5,696 | - Unrecognized compensation expense of **$11.2 million** related to unvested stock-based awards is expected to be recognized over a weighted-average period of **1.7 years**[75](index=75&type=chunk) Restricted Stock Activity (Shares) | Metric | 9 Months Ended Sep 30, 2019 | 9 Months Ended Sep 30, 2018 | | :-------------------------------- | :-------------------------- | :-------------------------- | | Unvested restricted stock outstanding at beginning of period | 475,132 | 309,195 | | Granted | 133,936 | 148,841 | | Performance share awards settled | 138,566 | 177,395 | | Vested | (221,775) | (153,424) | | Unvested restricted stock outstanding at end of period | 525,859 | 482,007 | [10. FINANCING RECEIVABLES](index=20&type=section&id=10.%20FINANCING%20RECEIVABLES) This section provides a breakdown of short-term payment plans and long-term financing arrangements, net of allowances Short-Term Payment Plans, Net (In thousands) | Metric | Sep 30, 2019 | Dec 31, 2018 | | :-------------------------------- | :----------- | :----------- | | Short-term payment plans, gross | $3,593 | $5,773 | | Less: allowance for losses | $(252) | $(404) | | Short-term payment plans, net | $3,341 | $5,369 | Long-Term Financing Arrangements, Net (In thousands) | Metric | Sep 30, 2019 | Dec 31, 2018 | | :-------------------------------- | :----------- | :----------- | | Long-term financing arrangements, gross | $32,947 | $34,841 | | Less: allowance for losses | $(2,044) | $(2,163) | | Less: unearned income | $(3,735) | $(3,725) | | Long-term financing arrangements, net | $27,168 | $28,953 | Allowance for Financing Credit Losses (In thousands) | Metric | Sep 30, 2019 | Dec 31, 2018 | | :-------------------------------- | :----------- | :----------- | | Balance at Beginning of Period | $2,567 | $3,244 | | Provision | $329 | $1,691 | | Charge-offs | $(600) | $(2,368) | | Recoveries | — | — | | Balance at End of Period | $2,296 | $2,567 | [11. INTANGIBLE ASSETS AND GOODWILL](index=23&type=section&id=11.%20INTANGIBLE%20ASSETS%20AND%20GOODWILL) This section presents the company's net intangible assets and goodwill, broken down by category and segment Net Intangible Assets (In thousands) | Category | Sep 30, 2019 | Dec 31, 2018 | | :-------------------------------- | :----------- | :----------- | | Customer Relationships | $59,714 | $62,824 | | Trademark | $7,884 | $8,287 | | Developed Technology | $18,379 | $15,115 | | Total Net Intangible Assets | $85,977 | $86,226 | Goodwill by Segment (In thousands) | Segment | Dec 31, 2018 | Goodwill Acquired | Sep 30, 2019 | | :-------------------------------- | :----------- | :---------------- | :----------- | | Acute Care EHR | $97,095 | — | $97,095 | | Post-acute Care EHR | $29,570 | — | $29,570 | | TruBridge | $13,784 | $9,511 | $23,295 | | Total Goodwill | $140,449 | $9,511 | $149,960 | [12. LONG-TERM DEBT](index=24&type=section&id=12.%20LONG-TERM%20DEBT) This section details the company's long-term debt, including term loans, revolving credit, and compliance with covenants Long-Term Debt (In thousands) | Category | Sep 30, 2019 | Dec 31, 2018 | | :-------------------------------- | :----------- | :----------- | | Term loan facility | $91,017 | $102,432 | | Revolving credit facility | $31,000 | $29,693 | | Finance lease obligation | — | $250 | | Debt obligations, net | $120,970 | $131,069 | | Less: current portion | $(8,430) | $(6,486) | | Long-term debt | $112,540 | $124,583 | - The Amended Credit Facilities bear variable interest rates (LIBOR or alternate base rate plus margin) and are secured by substantially all company assets[106](index=106&type=chunk)[108](index=108&type=chunk) - The company was in compliance with debt covenants (fixed charge coverage ratio, consolidated leverage ratio) as of September 30, 2019[112](index=112&type=chunk) - A **$7.0 million mandatory prepayment** on the Amended Term Loan Facility was made in Q1 2019 from 2018 excess cash flow[113](index=113&type=chunk) [13. OPERATING LEASES](index=26&type=section&id=13.%20OPERATING%20LEASES) This section provides information on operating lease assets, liabilities, remaining lease term, and discount rate Operating Lease Information (In thousands) | Metric | Sep 30, 2019 | | :-------------------------------- | :----------- | | Operating lease assets | $8,061 | | Total operating lease liabilities | $8,061 | | Weighted average remaining lease term | 7 years | | Weighted average discount rate | 5.1% | - Total rent expense for the nine months ended September 30, 2019, was **$1.6 million**, down from **$1.9 million** in 2018[118](index=118&type=chunk) [14. COMMITMENTS AND CONTINGENCIES](index=28&type=section&id=14.%20COMMITMENTS%20AND%20CONTINGENCIES) This section addresses the company's legal proceedings and other commitments, assessing their potential financial impact - The Company is involved in routine litigation but management does not believe it will have a material adverse effect on financial statements[120](index=120&type=chunk) [15. FAIR VALUE](index=28&type=section&id=15.%20FAIR%20VALUE) This section explains the classification of fair value measurements based on input observability levels - Fair value measurements are classified into **Level 1, 2, or 3** based on input observability[121](index=121&type=chunk)[122](index=122&type=chunk)[123](index=123&type=chunk) - Contingent consideration for Get Real Health (**$5.0 million**) is a **Level 3 measurement** based on unobservable inputs (EBITDA targets)[124](index=124&type=chunk)[125](index=125&type=chunk) - Contingent consideration for Rycan (**$206 thousand**) at Dec 31, 2018, was also a **Level 3 measurement**[126](index=126&type=chunk)[127](index=127&type=chunk) [16. SEGMENT REPORTING](index=30&type=section&id=16.%20SEGMENT%20REPORTING) This section provides financial data for the company's operating segments: Acute Care EHR, Post-acute Care EHR, and TruBridge - The company operates in three segments: **Acute Care EHR, Post-acute Care EHR, and TruBridge**[129](index=129&type=chunk) Segment Revenues and Gross Profits (In thousands) | Segment | 3 Months Ended Sep 30, 2019 (Revenue) | 3 Months Ended Sep 30, 2018 (Revenue) | 9 Months Ended Sep 30, 2019 (Revenue) | 9 Months Ended Sep 30, 2018 (Revenue) | 3 Months Ended Sep 30, 2019 (Gross Profit) | 3 Months Ended Sep 30, 2018 (Gross Profit) | 9 Months Ended Sep 30, 2019 (Gross Profit) | 9 Months Ended Sep 30, 2018 (Gross Profit) | | :-------------------------------- | :------------------------------------ | :------------------------------------ | :------------------------------------ | :------------------------------------ | :----------------------------------------- | :----------------------------------------- | :----------------------------------------- | :----------------------------------------- | | Acute Care EHR | $35,965 | $38,907 | $107,461 | $116,297 | $18,583 | $20,821 | $56,663 | $63,485 | | Post-acute Care EHR | $5,025 | $5,518 | $16,416 | $16,626 | $3,646 | $4,021 | $12,438 | $11,910 | | TruBridge | $27,709 | $24,872 | $80,119 | $75,162 | $13,686 | $11,282 | $38,459 | $34,661 | | Total | $68,699 | $69,297 | $203,996 | $208,085 | $35,915 | $36,124 | $107,560 | $110,056 | [17. SUBSEQUENT EVENTS](index=30&type=section&id=17.%20SUBSEQUENT%20EVENTS) This section discloses significant events occurring after the reporting period, such as dividend declarations - Declared a Q4 2019 dividend of **$0.10 per share**, payable November 29, 2019[131](index=131&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=32&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's analysis of financial performance, condition, and outlook, including revenues, expenses, liquidity, and strategy [Background](index=33&type=section&id=Background) This section introduces CPSI as a leading healthcare solutions provider for community hospitals and post-acute care facilities - CPSI is a leading provider of healthcare solutions for community hospitals and post-acute care facilities, operating through **Evident, AHT, TruBridge, and Get Real Health**[137](index=137&type=chunk)[138](index=138&type=chunk)[139](index=139&type=chunk) - The company serves approximately **1,000 acute care** and **3,300 post-acute care facilities**, primarily community hospitals with fewer than 200 beds[140](index=140&type=chunk) [Management Overview](index=33&type=section&id=Management%20Overview) This section outlines the company's long-term growth strategy, focusing on recurring revenue, customer retention, and margin improvement - Long-term growth strategy focuses on selling new and additional products/services to existing customers, cross-selling between segments, and retaining existing EHR customers[142](index=142&type=chunk) - Increasing value in developing the recurring revenue base, aided by customer retention and driving demand for technology solution subscriptions[143](index=143&type=chunk) - Margin improvement is bolstered by operating leverage from recurring services and cost containment; system sales shift revenue recognition to a monthly basis via financed sales and SaaS[144](index=144&type=chunk)[145](index=145&type=chunk)[149](index=149&type=chunk)[150](index=150&type=chunk)[151](index=151&type=chunk) - Acquired Get Real Health on May 3, 2019, to strengthen its position in community healthcare by offering new patient engagement solutions[152](index=152&type=chunk) [Results of Operations](index=35&type=section&id=Results%20of%20Operations) Total revenues for the nine months ended September 30, 2019, decreased by **2% to $204.0 million**, with net income decreasing by **$0.8 million** due to a higher effective tax rate [Three Months Ended September 30, 2019 Compared with Three Months Ended September 30, 2018](index=36&type=section&id=Three%20Months%20Ended%20September%2030,%202019%20Compared%20with%20Three%20Months%20Ended%20September%2030,%202018) This section compares the company's financial performance for the three months ended September 30, 2019, against the prior year - Total Revenues decreased by **$0.6 million (1%) to $68.7 million**[156](index=156&type=chunk) - System Sales and Support Revenues decreased by **$3.4 million (8%) to $41.0 million**, driven by a **$2.8 million (23%) decrease** in non-recurring revenues and a **$0.6 million (2%) decrease** in recurring revenues[158](index=158&type=chunk)[159](index=159&type=chunk) - TruBridge Revenues increased by **$2.8 million (11%) to $27.7 million**, primarily from accounts receivable management services, insurance services, and IT management services, with Get Real Health contributing **$0.5 million**[160](index=160&type=chunk) - Costs of Sales decreased by **$0.4 million (1%) to $32.8 million**, remaining flat at **48% of total revenues**[161](index=161&type=chunk) - Total Operating Expenses remained flat at **44% of revenues**, with decreases in sales and marketing and general and administrative, partially offset by increased amortization[166](index=166&type=chunk)[167](index=167&type=chunk)[168](index=168&type=chunk)[169](index=169&type=chunk)[170](index=170&type=chunk) - Net Income decreased by **$1.6 million (28%) to $4.1 million**, or **$0.29 per share**, primarily due to a higher effective tax rate[173](index=173&type=chunk)[174](index=174&type=chunk) [Nine Months Ended September 30, 2019 Compared with Nine Months Ended September 30, 2018](index=41&type=section&id=Nine%20Months%20Ended%20September%2030,%202019%20Compared%20with%20Nine%20Months%20Ended%20September%2030,%202018) This section compares the company's financial performance for the nine months ended September 30, 2019, against the prior year - Total Revenues decreased by **$4.1 million (2%) to $204.0 million**[176](index=176&type=chunk) - System Sales and Support Revenues decreased by **$9.0 million (7%) to $123.9 million**, primarily due to a **$6.1 million (17%) decrease** in non-recurring revenues and a **$3.0 million (3%) decrease** in recurring revenues[176](index=176&type=chunk)[177](index=177&type=chunk) - TruBridge Revenues increased by **$5.0 million (7%) to $80.1 million**, driven by growth in accounts receivable management, insurance, and IT management services, with Get Real Health contributing **$0.7 million**[178](index=178&type=chunk) - Costs of Sales decreased by **$1.6 million (2%) to $96.4 million**, remaining flat at **47% of total revenues**[180](index=180&type=chunk) - Total Operating Expenses decreased to **45% of revenues** from **46%**, with decreases in sales and marketing and general and administrative, partially offset by increased product development and amortization[184](index=184&type=chunk)[185](index=185&type=chunk)[186](index=186&type=chunk)[187](index=187&type=chunk)[188](index=188&type=chunk) - Net Income decreased by **$0.8 million (8%) to $9.2 million**, or **$0.65 per share**, primarily due to a higher effective tax rate[190](index=190&type=chunk)[193](index=193&type=chunk) [Liquidity and Capital Resources](index=43&type=section&id=Liquidity%20and%20Capital%20Resources) Liquidity is supported by cash, operating cash flows, and a revolving credit facility, with operating cash flow improving and financing cash used for debt and dividends [Sources of Liquidity](index=43&type=section&id=Sources%20of%20Liquidity) This section identifies the company's primary sources of liquidity, including cash and available credit facilities - Cash and cash equivalents: **$4.0 million** (Sep 30, 2019) vs. **$5.7 million** (Dec 31, 2018)[194](index=194&type=chunk) - Remaining borrowing capacity under Amended Revolving Credit Facility: **$19.0 million** (Sep 30, 2019) vs. **$20.3 million** (Dec 31, 2018)[194](index=194&type=chunk) - Total indebtedness outstanding under Amended Credit Facilities: **$122.0 million** (Sep 30, 2019)[195](index=195&type=chunk) - Used **$11.0 million** from revolving credit facility for Get Real Health acquisition[196](index=196&type=chunk) [Operating Cash Flow Activities](index=43&type=section&id=Operating%20Cash%20Flow%20Activities) This section analyzes the cash generated or used by the company's core operating activities - Net cash provided by operating activities increased by **$10.7 million to $25.5 million** for the nine months ended September 30, 2019, primarily due to more advantageous changes in working capital[197](index=197&type=chunk) - Working capital shifted from a net use of **$14.2 million** in YTD 2018 to a net use of **$2.9 million** in YTD 2019[197](index=197&type=chunk) [Investing Cash Flow Activities](index=43&type=section&id=Investing%20Cash%20Flow%20Activities) This section details cash flows related to the acquisition and disposal of long-term assets and investments - Net cash used in investing activities increased by **$11.6 million to $12.4 million** for the nine months ended September 30, 2019, primarily due to the **$10.9 million acquisition of Get Real Health**[198](index=198&type=chunk) [Financing Cash Flow Activities](index=44&type=section&id=Financing%20Cash%20Flow%20Activities) This section reports cash flows from debt, equity, and dividend transactions - Net cash used in financing activities was **$14.9 million** for YTD 2019, including **$10.4 million** in long-term debt principal payments and **$4.3 million** in dividends[200](index=200&type=chunk) - A **$7.0 million mandatory prepayment** on the Amended Term Loan Facility was made in Q1 2019[200](index=200&type=chunk) [Credit Agreement](index=44&type=section&id=Credit%20Agreement) This section outlines the terms of the company's credit facilities, including outstanding debt and covenant compliance - Outstanding debt: **$91.0 million Term Loan Facility** and **$31.0 million Revolving Credit Facility** as of Sep 30, 2019[202](index=202&type=chunk) - Quarterly principal payments for Term Loan Facility: **$1.46 million** through Sep 30, 2019; **$2.19 million** through Sep 30, 2021; **$2.93 million** through Sep 30, 2022; maturity on Oct 13, 2022[203](index=203&type=chunk) - The company was in compliance with all debt covenants as of September 30, 2019[205](index=205&type=chunk) [Backlog](index=45&type=section&id=Backlog) This section presents the company's twelve-month backlog for non-recurring system purchases and recurring payments Twelve-Month Backlog (In millions) | Category | Sep 30, 2019 | Sep 30, 2018 | | :-------------------------------- | :----------- | :----------- | | Non-recurring system purchases | ~$14 | ~$35 | | Recurring payments (support, Cloud EHR, TruBridge) | ~$231 | ~$225 | [Bookings](index=45&type=section&id=Bookings) This section provides a breakdown of bookings by segment for various reporting periods Bookings (In thousands) | Segment | 3 Months Ended Sep 30, 2019 | 3 Months Ended Sep 30, 2018 | 9 Months Ended Sep 30, 2019 | 9 Months Ended Sep 30, 2018 | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Acute Care EHR | $12,299 | $10,699 | $30,436 | $44,276 | | Post-acute Care EHR | $1,066 | $844 | $4,232 | $2,625 | | TruBridge | $10,248 | $7,302 | $17,572 | $17,492 | | Total Bookings | $23,613 | $18,845 | $52,240 | $64,393 | - Acute Care EHR bookings for YTD 2019 decreased by **$13.8 million (31%)** due to a lack of urgency from prospective customers following the end of the Meaningful Use era[210](index=210&type=chunk) - TruBridge bookings for Q3 2019 increased by **$2.9 million (40%)** due to expansion outside the traditional EHR customer base[212](index=212&type=chunk) [Off-Balance Sheet Arrangements](index=45&type=section&id=Off-Balance%20Sheet%20Arrangements) This section confirms the absence of any off-balance sheet arrangements as of the reporting date - The company had no off-balance sheet arrangements as of September 30, 2019[213](index=213&type=chunk) [Critical Accounting Policies and Estimates](index=46&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) This section addresses significant accounting policies and estimates that require management's judgment - No significant changes to critical accounting policies (revenue recognition, allowances for doubtful accounts and credit losses, and estimates) during the nine months ended September 30, 2019[216](index=216&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=46&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company's primary market risk exposure is to interest rate fluctuations, specifically the LIBOR rate, affecting its variable-rate long-term debt - Exposure to market risk primarily relates to changes in **LIBOR** on **$122.0 million** of outstanding variable-rate borrowings under Amended Credit Facilities[217](index=217&type=chunk) - A **100 basis point change** in interest rate would result in an annual change in interest expense of approximately **$1.3 million**[217](index=217&type=chunk) - The company does not use derivative financial instruments to manage interest rate risks[218](index=218&type=chunk) [Item 4. Controls and Procedures](index=46&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls and procedures were effective as of September 30, 2019, with no material impact from the Get Real Health acquisition or lease accounting standard adoption on internal controls - Disclosure controls and procedures were evaluated and deemed **effective at the reasonable assurance level** by management, including the CEO and CFO, as of September 30, 2019[220](index=220&type=chunk) - The Get Real Health acquisition did not materially affect internal control over financial reporting, and new controls for lease accounting standard adoption had no significant impact on overall internal controls[221](index=221&type=chunk) [PART II. OTHER INFORMATION](index=48&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section includes legal proceedings, risk factors, and other miscellaneous disclosures not covered in financial statements [Item 1. Legal Proceedings](index=48&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in routine litigation but does not anticipate any material adverse effects on its financial condition or results of operations - Involved in routine litigation in the ordinary course of business[224](index=224&type=chunk) - No material adverse effect on financial condition or results of operations is expected from current claims[224](index=224&type=chunk) [Item 1A. Risk Factors](index=48&type=section&id=Item%201A.%20Risk%20Factors) This section refers readers to the comprehensive discussion of risk factors in the company's Annual Report on Form 10-K for the year ended December 31, 2018 - Readers should refer to Part I, "Item 1A. Risk Factors" in the Annual Report on Form 10-K for the year ended December 31, 2018, for a detailed discussion of material business factors[225](index=225&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=48&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This item is not applicable to the current report - Not Applicable[227](index=227&type=chunk) [Item 3. Defaults Upon Senior Securities](index=48&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This item is not applicable to the current report - Not applicable[228](index=228&type=chunk) [Item 4. Mine Safety Disclosures](index=48&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the current report - Not applicable[229](index=229&type=chunk) [Item 5. Other Information](index=48&type=section&id=Item%205.%20Other%20Information) No other information is reported under this item - None[230](index=230&type=chunk) [Item 6. Exhibits](index=48&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed as part of the Form 10-Q, including corporate documents, certifications, and interactive data files - Includes certifications from the CEO and CFO (pursuant to Rule 13a-14(a) and 18 U.S.C. Section 1350)[231](index=231&type=chunk) - Includes Interactive Data Files for the Form 10-Q[231](index=231&type=chunk)