TruBridge(TBRG) - 2023 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Financial Statements Q1 2023 financial statements show 11% revenue growth from RCM, but net income significantly decreased due to higher costs and interest expense - Commencing in Q4 2022, the company realigned its reportable segments to Revenue Cycle Management (RCM), EHR, and Patient Engagement, with prior periods recast for comparability[21] Condensed Consolidated Balance Sheets As of March 31, 2023, total assets increased to $436.8 million, liabilities to $203.3 million, and stockholders' equity to $233.6 million Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Total Current Assets | $82,300 | $74,559 | | Software development costs, net | $32,004 | $27,257 | | Total Assets | $436,847 | $430,963 | | Total Current Liabilities | $49,149 | $44,455 | | Long-term debt, net | $135,603 | $136,388 | | Total Liabilities | $203,289 | $199,252 | | Total Stockholders' Equity | $233,558 | $231,711 | Condensed Consolidated Statements of Income Q1 2023 total sales revenues increased to $86.2 million, but net income significantly dropped to $3.1 million due to higher costs and increased interest expense Q1 2023 vs Q1 2022 Income Statement (in thousands, except per share data) | Metric | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Total Sales Revenues | $86,233 | $77,871 | | Gross Profit | $42,056 | $41,190 | | Operating Income | $6,295 | $8,986 | | Interest Expense | ($2,669) | ($917) | | Net Income | $3,084 | $8,113 | | Diluted EPS | $0.21 | $0.55 | Condensed Consolidated Statements of Cash Flows Net cash from operations decreased to $9.5 million in Q1 2023, while investing activities used $6.2 million and financing activities used $3.4 million Cash Flow Summary (in thousands) | Activity | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $9,473 | $11,817 | | Net cash used in investing activities | ($6,249) | ($47,680) | | Net cash (used in) provided by financing activities | ($3,359) | $40,413 | | (Decrease) increase in cash | ($135) | $4,550 | Notes to Condensed Consolidated Financial Statements Key notes detail the HRG acquisition, SaaS model shift, credit facility, segment changes, and ongoing legal and SEC accounting inquiries - The company acquired Healthcare Resource Group (HRG) on March 1, 2022, for $43.6 million net cash, adding $24.2 million in intangible assets and $20.8 million in goodwill[49][50][52] - The company faces a qui tam complaint alleging False Claims Act violations and an SEC subpoena from November 2, 2022, regarding accounting matters including revenue recognition and goodwill impairment[98][191] - Customer preference has shifted to a SaaS license model, comprising 100% of new acute care EHR installations in 2022 and Q1 2023, increasing recurring revenue[75] Segment Revenues and Adjusted EBITDA (in thousands) | Segment | Revenue Q1 2023 | Revenue Q1 2022 | Adj. EBITDA Q1 2023 | Adj. EBITDA Q1 2022 | | :--- | :--- | :--- | :--- | :--- | | RCM | $48,631 | $40,511 | $7,898 | $9,581 | | EHR | $35,191 | $34,763 | $6,157 | $6,163 | | Patient Engagement | $2,411 | $2,597 | $588 | $409 | | Total | $86,233 | $77,871 | $14,643 | $16,153 | Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes 11% revenue growth to HRG acquisition and RCM organic growth, with net income decline due to increased costs and interest Results of Operations Q1 2023 total revenues increased 11% to $86.2 million driven by RCM, but gross margin declined and pre-tax income fell due to higher costs and interest - RCM revenues increased by $8.1 million (20%) year-over-year, with HRG acquisition contributing $6.1 million and organic growth adding $2.0 million[144] - General and administrative expenses increased by $1.5 million (11%), primarily due to a $1.3 million rise in employee health benefit costs from switching to a fully-insured plan[152] - Product development costs rose by $1.8 million (22%) due to increased public cloud migration costs and higher capitalized software amortization[150] - Total other expense was $2.4 million, driven by a $1.8 million increase in interest expense and the absence of a $1.3 million gain on contingent consideration from the prior year[155] Liquidity and Capital Resources As of March 31, 2023, liquidity included $6.8 million cash and $86.3 million available credit, with $140.2 million total debt outstanding - As of March 31, 2023, the company held $6.8 million in cash and $86.3 million in remaining revolving credit facility capacity[166] - The company's $230 million credit facility includes a $70 million term loan and $160 million revolving credit, with $140.2 million outstanding as of March 31, 2023[166][167] - The stock repurchase program was extended to September 4, 2024, with $16.5 million remaining for repurchases, while quarterly dividends remain suspended[71][171] Backlog and Bookings As of March 31, 2023, the twelve-month backlog was $332 million, with Q1 2023 bookings at $20.9 million, driven by 41% RCM growth Twelve-Month Backlog (in millions) | Backlog Type | March 31, 2023 | March 31, 2022 | | :--- | :--- | :--- | | Non-recurring system purchases | ~$8 | ~$6 | | Recurring support, maintenance & RCM | ~$324 | ~$324 | Bookings by Segment (in thousands) | Segment | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | RCM | $12,100 | $8,573 | | EHR | $8,318 | $10,246 | | Patient engagement | $476 | $1,578 | | Total Bookings | $20,894 | $20,397 | Quantitative and Qualitative Disclosures about Market Risk Primary market risk is interest rate fluctuation on $140.2 million variable-rate debt, where a 100 basis point change impacts annual interest expense by $1.4 million - The company is exposed to interest rate risk on $140.2 million of outstanding borrowings, where a 100 basis point change impacts annual interest expense by approximately $1.4 million[185] Controls and Procedures Management concluded disclosure controls and procedures were effective as of March 31, 2023, with no material changes to internal control over financial reporting - The CEO and CFO concluded that disclosure controls and procedures are effective at a reasonable assurance level as of the period end[187] - No material changes to internal control over financial reporting occurred during the quarter ended March 31, 2023[188] PART II. OTHER INFORMATION Legal Proceedings The company is cooperating with an SEC subpoena regarding accounting matters and defending a qui tam complaint alleging False Claims Act violations - On November 2, 2022, the company received an SEC subpoena related to accounting matters from May 1, 2019, onwards, and is cooperating with the investigation[191] - The company is defending against a qui tam complaint alleging False Claims Act violations, which it believes are without merit[98][190] Risk Factors No material changes to 10-K risk factors, except for revisions to economic decline and a new risk regarding potential adverse impact of bank failures - A new risk factor was added concerning the potential adverse impact of bank failures, noting cash deposits may exceed FDIC insurance limits[194][195] - The risk factor related to economic conditions was updated to include the potential negative impact of a U.S. government shutdown or debt ceiling failure on customer spending[193] Unregistered Sales of Equity Securities and Use of Proceeds During Q1 2023, the company repurchased 85,884 shares at $28.92 average, with $16.5 million remaining for future repurchases Share Repurchases for Q1 2023 | Description | Shares | Average Price Paid | | :--- | :--- | :--- | | Total Shares Purchased | 85,884 | $28.92 | | Purchased as Part of Public Plan | 49,789 | - | | Purchased for Tax Withholdings | 36,095 | - |