TruBridge(US:TBRG)2022-11-07 22:11PART I. FINANCIAL INFORMATION The unaudited condensed consolidated financial statements for the three and nine months ended September 30, 2022, show an increase in total assets to $438.0 million from $383.4 million at year-end 2021, primarily driven by acquisitions. Total liabilities also increased to $205.0 million from $160.8 million. For the nine months ended September 30, 2022, total revenues grew to $243.4 million from $206.6 million year-over-year, while net income remained relatively flat at $13.4 million. Net cash from operating activities decreased to $30.2 million from $34.5 million in the prior-year period Financial Statements The unaudited condensed consolidated financial statements for the three and nine months ended September 30, 2022, show an increase in total assets to $438.0 million from $383.4 million at year-end 2021, primarily driven by acquisitions. Total liabilities also increased to $205.0 million from $160.8 million. For the nine months ended September 30, 2022, total revenues grew to $243.4 million from $206.6 million year-over-year, while net income remained relatively flat at $13.4 million. Net cash from operating activities decreased to $30.2 million from $34.5 million in the prior-year period Condensed Consolidated Balance Sheets As of September 30, 2022, the company's total assets were $438.0 million, an increase from $383.4 million at December 31, 2021, primarily due to increases in Goodwill and Intangible assets from the HRG acquisition, while total liabilities rose to $205.0 million from $160.8 million, mainly from an increase in long-term debt to fund the acquisition, and total stockholders' equity increased to $233.0 million Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | Sep 30, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Total Assets | $437,995 | $383,350 | | Cash and cash equivalents | $15,558 | $11,431 | | Goodwill | $198,584 | $177,713 | | Intangible assets, net | $106,486 | $95,203 | | Total Liabilities | $205,037 | $160,778 | | Long-term debt, net of current portion | $137,174 | $94,966 | | Total stockholders' equity | $232,958 | $222,572 | Condensed Consolidated Statements of Income For the third quarter of 2022, total revenues increased to $82.8 million from $70.1 million in Q3 2021, driven by a 39% increase in TruBridge revenue, however, net income decreased to $2.2 million from $2.7 million due to higher costs of sales and operating expenses, while for the nine-month period, revenues grew 18% to $243.4 million, and net income saw a slight increase to $13.4 million from $13.0 million year-over-year Income Statement Summary (in thousands, except per share data) | Metric | Q3 2022 | Q3 2021 | Nine Months 2022 | Nine Months 2021 | | :--- | :--- | :--- | :--- | :--- | | Total sales revenues | $82,827 | $70,091 | $243,424 | $206,629 | | Gross profit | $38,018 | $35,289 | $117,283 | $104,030 | | Operating income | $4,943 | $4,531 | $18,517 | $17,183 | | Net income | $2,161 | $2,744 | $13,350 | $13,029 | | Net income per share—diluted | $0.15 | $0.19 | $0.91 | $0.89 | Condensed Consolidated Statements of Cash Flows For the nine months ended September 30, 2022, net cash provided by operating activities was $30.2 million, a decrease from $34.5 million in the same period of 2021, primarily due to unfavorable changes in working capital, while net cash used in investing activities was $58.4 million, mainly for the acquisition of HRG ($43.7 million) and software development ($14.6 million), and net cash provided by financing activities was $32.3 million, reflecting borrowings to fund the acquisition, partially offset by debt repayments and stock repurchases Cash Flow Summary (Nine Months Ended Sep 30, in thousands) | Activity | 2022 | 2021 | | :--- | :--- | :--- | | Net cash provided by operating activities | $30,211 | $34,474 | | Net cash used in investing activities | ($58,424) | ($66,996) | | Net cash provided by financing activities | $32,340 | $36,965 | | Increase in cash and cash equivalents | $4,127 | $4,443 | Notes to Condensed Consolidated Financial Statements Key notes detail the acquisition of Healthcare Resource Group (HRG) for $43.9 million in cash, which added $24.5 million in revenue for the nine-month period, with the company's three operating segments being TruBridge, Acute Care EHR, and Post-acute Care EHR, where TruBridge showed significant revenue growth, and long-term debt increased to $140.3 million to fund acquisitions, while the company also changed its accounting estimate for capitalizing software development labor costs, resulting in higher capitalized amounts - On March 1, 2022, the company acquired Healthcare Resource Group, Inc. (HRG) for net cash consideration of $43.9 million. The acquisition contributed approximately $24.5 million in revenues for the nine months ended September 30, 2022414246 - The company's operating segments are TruBridge, Acute Care EHR, and Post-acute Care EHR. For the nine months ended Sep 30, 2022, TruBridge revenues were $139.6M, Acute Care EHR revenues were $90.8M, and Post-acute Care EHR revenues were $13.1M105108 - In Q2 2021, the company changed its method for estimating labor costs for software development capitalization, which is accounted for prospectively. This change increased capitalized amounts by approximately $4.6 million for the year ended December 31, 20212057 - Total long-term debt obligations increased to $142.0 million as of September 30, 2022, from $100.4 million at year-end 2021, primarily due to borrowings under the revolving credit facility to fund the HRG acquisition88201 Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes the 18% revenue growth for the first nine months of 2022 to the acquisitions of TruCode and HRG, and organic growth in TruBridge services, while net income remained flat due to investments and increased interest expense, with the core strategy focusing on cross-selling TruBridge services, expanding its market share, and pursuing EHR takeaway opportunities, and a significant industry trend is the client shift from perpetual licenses to SaaS models, which impacts short-term revenue but is expected to benefit long-term growth, and the company's twelve-month backlog increased to $323 million from $278 million year-over-year Results of Operations For Q3 2022 vs. Q3 2021, revenues grew 18% to $82.8 million, driven by a 39% increase in TruBridge revenue, largely from the HRG acquisition ($9.9 million), however, net income fell to $2.2 million from $2.7 million due to higher costs, and for the nine-month period, revenues rose 18% to $243.4 million, with TruBridge revenue up 41% due to acquisitions and 11% organic growth, while System sales and support revenue declined 4% as customers shifted to SaaS models, and net income for the nine months was largely flat at $13.4 million Revenue by Segment - Q3 2022 vs Q3 2021 (in thousands) | Segment | Q3 2022 | Q3 2021 | Change (%) | | :--- | :--- | :--- | :--- | | TruBridge | $47,878 | $34,531 | +39% | | System sales and support | $34,949 | $35,560 | -2% | Revenue by Segment - Nine Months 2022 vs 2021 (in thousands) | Segment | Nine Months 2022 | Nine Months 2021 | Change (%) | | :--- | :--- | :--- | :--- | | TruBridge | $139,569 | $98,736 | +41% | | System sales and support | $103,855 | $107,893 | -4% | - The shift in customer preference to a SaaS license model continues, with 100% of new acute care EHR installations in the first nine months of 2022 being SaaS, compared to 63% in 2021. This reduces non-recurring revenue but increases recurring revenue over time130167 Liquidity and Capital Resources As of September 30, 2022, the company had $15.6 million in cash and $86.3 million available under its revolving credit facility, and in May 2022, the credit facilities were amended and increased to $230 million ($70M term loan, $160M revolver) to support growth, while operating cash flow for the nine-month period decreased to $30.2 million from $34.5 million year-over-year due to an increase in accounts receivable, and the company's twelve-month backlog grew to approximately $323 million, up from $272 million a year prior, driven by recurring revenue contracts - Principal sources of liquidity as of Sep 30, 2022, were $15.6 million in cash and $86.3 million in remaining borrowing capacity under the revolving credit facility196 Twelve-Month Backlog (in millions) | Backlog Type | Sep 30, 2022 | Sep 30, 2021 | | :--- | :--- | :--- | | Non-recurring system purchases | ~$7 | ~$6 | | Recurring payments | ~$316 | ~$272 | | Total | ~$323 | ~$278 | Bookings (in thousands) | Period | Nine Months 2022 | Nine Months 2021 | | :--- | :--- | :--- | | TruBridge | $37,260 | $22,009 | | System sales and support | $27,474 | $32,641 | | Total Bookings | $64,734 | $54,650 | Quantitative and Qualitative Disclosures about Market Risk The company's primary market risk exposure is related to interest rate fluctuations on its variable-rate debt, with $142.0 million in outstanding borrowings under credit facilities tied to the Secured Overnight Financing Rate (SOFR) as of September 30, 2022, where a hypothetical 100 basis point (1%) change in the interest rate would result in an approximate $1.4 million annual change in interest expense, and the company does not use derivative financial instruments to manage this risk - The company is exposed to interest rate risk on its $142.0 million of outstanding variable-rate debt216 - A 100 basis point change in interest rates would impact annual interest expense by approximately $1.4 million216 Controls and Procedures Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective at a reasonable assurance level as of September 30, 2022, and the company is in the process of integrating the internal controls of the newly acquired HRG business, which was excluded from the formal assessment for this period, with no other material changes to internal control over financial reporting identified during the quarter - The CEO and CFO concluded that disclosure controls and procedures are effective at the reasonable assurance level219 - The assessment of internal control over financial reporting excluded the recently acquired HRG business, as permitted by SEC guidance. HRG represented approximately 11% of total assets as of September 30, 2022220222 PART II. OTHER INFORMATION This section covers legal proceedings, risk factors, unregistered sales of equity securities, and exhibits Legal Proceedings 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 material legal proceedings outside the ordinary course of business224 Risk Factors 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 to risk factors were reported for the period225 Unregistered Sales of Equity Securities and Use of Proceeds During the third quarter of 2022, the company repurchased 133,520 shares of its common stock for approximately $4.0 million under its publicly announced stock repurchase program, and as of September 30, 2022, approximately $21.6 million remained available for future repurchases under the program, which was extended to September 4, 2024 Stock Repurchases (Q3 2022) | Metric | Value | | :--- | :--- | | Total Shares Purchased | 133,520 | | Average Price Paid per Share | $29.96 | | Value Remaining in Program | $21,561,995 | - On July 27, 2022, the Board of Directors extended the expiration date of the stock repurchase program to September 4, 2024226 Other Information There was no other information to report for this period - None229 Exhibits The report lists several exhibits filed, including amendments to agreements, employment contracts, and required certifications by the CEO and CFO under the Sarbanes-Oxley Act