TruBridge(US:TBRG)2019-05-08 19:59markdown [PART I. FINANCIAL INFORMATION](index=4&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) Q1 2019 revenues were $69.1 million, with net income of $3.4 million and operating cash flow of $7.9 million [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets increased to **$329.8 million** due to new lease accounting, while liabilities decreased and equity rose to **$164.2 million** Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2019 | December 31, 2018 | | :--- | :--- | :--- | | **Total Assets** | **$329,839** | **$327,746** | | Cash and cash equivalents | $4,409 | $5,732 | | Goodwill | $140,449 | $140,449 | | **Total Liabilities** | **$165,598** | **$167,963** | | Long-term debt, net | $115,448 | $124,583 | | **Total Stockholders' Equity** | **$164,241** | **$159,783** | - The company adopted a new lease accounting standard (ASU 2016-02) on January 1, 2019, resulting in the recognition of **$5.9 million** in operating lease assets and **$5.9 million** in operating lease liabilities[12](index=12&type=chunk)[25](index=25&type=chunk)[79](index=79&type=chunk) [Condensed Consolidated Statements of Income](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) Q1 2019 revenues decreased to **$69.1 million**, resulting in lower operating income and net income of **$3.4 million** Q1 2019 vs Q1 2018 Income Statement (in thousands, except per share data) | Metric | Q1 2019 | Q1 2018 | | :--- | :--- | :--- | | Total sales revenues | $69,141 | $70,882 | | Gross profit | $37,115 | $39,085 | | Operating income | $6,048 | $7,648 | | Net income | $3,444 | $3,967 | | Net income per share—diluted | $0.24 | $0.29 | | Dividends declared per common share | $0.10 | $0.10 | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Operating cash flow significantly increased to **$7.9 million**, while financing activities used **$8.7 million**, ending with **$4.4 million** cash Q1 2019 vs Q1 2018 Cash Flow Summary (in thousands) | Activity | Q1 2019 | Q1 2018 | | :--- | :--- | :--- | | Net cash provided by operating activities | $7,888 | $3,125 | | Net cash used in investing activities | ($473) | ($60) | | Net cash used in financing activities | ($8,738) | ($1,858) | | **Increase (decrease) in cash** | **($1,323)** | **$1,207** | | **Cash and cash equivalents at end of period** | **$4,409** | **$1,727** | [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Notes cover new lease accounting, segment performance, a reduced effective tax rate of **23.3%**, and the Get Real Health acquisition - The company adopted ASU 2016-02, Leases, on January 1, 2019, which resulted in the recognition of lease assets and liabilities of **$4.9 million** on the balance sheet without impacting net earnings or cash flows[25](index=25&type=chunk) - The effective tax rate for Q1 2019 decreased to **23.3%** from **32.4%** YoY, primarily due to increased R&D tax credits and a decrease in tax shortfalls related to stock-based compensation[48](index=48&type=chunk) - On May 3, 2019, the company acquired Get Real Health for a total consideration of **$11 million** in cash, plus a potential earnout payment of up to **$14 million**[92](index=92&type=chunk) Segment Revenue and Gross Profit (in thousands) | Segment | Q1 2019 Revenue | Q1 2018 Revenue | Q1 2019 Gross Profit | Q1 2018 Gross Profit | | :--- | :--- | :--- | :--- | :--- | | Acute Care EHR | $37,448 | $40,182 | $20,382 | $23,426 | | Post-acute Care EHR | $5,799 | $5,569 | $4,528 | $3,908 | | TruBridge | $25,894 | $25,131 | $12,205 | $11,751 | | **Total** | **$69,141** | **$70,882** | **$37,115** | **$39,085** | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=29&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Q1 2019 revenue declined **2%** due to EHR installations, offset by TruBridge growth, with bookings down **37%** and solid liquidity - The company's long-term growth strategy is dependent on selling new and additional products to its existing customer base, with a focus on cross-selling opportunities between its Acute Care EHR, Post-acute Care EHR, and TruBridge segments[100](index=100&type=chunk) - An increasing prevalence of SaaS arrangements is expected to continue, which reduces upfront system sales revenues in exchange for increased recurring periodic revenues over the contract term[109](index=109&type=chunk) - On May 3, 2019, the company acquired Get Real Health to strengthen its patient engagement solutions, financed with an **$11.0 million** draw on its revolving credit facility[110](index=110&type=chunk)[136](index=136&type=chunk) [Results of Operations](index=31&type=section&id=Results%20of%20Operations) Total revenues decreased **2%** to **$69.1 million**, with system sales down, TruBridge up **3%**, and a lower effective tax rate of **23.3%** Revenue Breakdown (in thousands) | Revenue Category | Q1 2019 | Q1 2018 | Change | Change % | | :--- | :--- | :--- | :--- | :--- | | System sales and support | $43,247 | $45,751 | ($2,504) | -5% | | - Recurring | $31,867 | $32,965 | ($1,098) | -3% | | - Non-recurring | $11,380 | $12,786 | ($1,406) | -11% | | TruBridge | $25,894 | $25,131 | $763 | 3% | | **Total Revenues** | **$69,141** | **$70,882** | **($1,741)** | **-2%** | - General and administrative expenses decreased by **$0.5 million**, primarily due to **$2.5 million** in savings from changes in employee health benefits, partially offset by a **$1.1 million** increase in acquisition-related costs and a **$0.6 million** increase in bad debt expense[127](index=127&type=chunk) - The effective tax rate decreased from **32.4%** to **23.3%** YoY, driven by increased R&D tax credits under the ASC 730 Safe Harbor Directive and lower tax shortfalls from stock-based compensation[131](index=131&type=chunk) [Liquidity and Capital Resources](index=34&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains solid liquidity with **$4.4 million** cash and **$20.3 million** credit, supported by strong operating cash flow of **$7.9 million** - Principal sources of liquidity as of March 31, 2019, were **$4.4 million** in cash and **$20.3 million** in remaining borrowing capacity under the Amended Revolving Credit Facility[133](index=133&type=chunk) - Net cash from operating activities increased by **$4.8 million** YoY, from **$3.1 million** to **$7.9 million**, mainly due to more advantageous changes in working capital, particularly accounts and financing receivables[112](index=112&type=chunk)[137](index=137&type=chunk) - A mandatory prepayment of **$7.0 million** was made on the Amended Term Loan Facility during Q1 2019 related to excess cash flow generated in 2018[78](index=78&type=chunk)[139](index=139&type=chunk) [Backlog and Bookings](index=38&type=section&id=Backlog%20and%20Bookings) Twelve-month backlog decreased to **$244 million**, and total bookings fell **37%** to **$13.9 million**, primarily due to Acute Care EHR Bookings by Segment (in thousands) | Segment | Q1 2019 Bookings | Q1 2018 Bookings | Change % | | :--- | :--- | :--- | :--- | | Acute Care EHR | $8,285 | $17,505 | -53% | | Post-acute Care EHR | $1,431 | $727 | +97% | | TruBridge | $4,228 | $3,818 | +11% | | **Total Bookings** | **$13,944** | **$22,050** | **-37%** | - The 12-month backlog as of March 31, 2019, consisted of approximately **$17 million** in non-recurring system purchases and **$227 million** in recurring payments, compared to **$35 million** and **$230 million**, respectively, as of March 31, 2018[146](index=146&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=39&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company's primary market risk is interest rate fluctuations on its **$125.1 million** variable-rate debt - The company is exposed to interest rate risk on its **$125.1 million** of outstanding variable-rate borrowings[155](index=155&type=chunk) - A one hundred basis point change in the interest rate would impact annual interest expense by approximately **$1.3 million**[155](index=155&type=chunk) [Controls and Procedures](index=39&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls were effective, with no material changes to internal controls except for new lease accounting standards - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the period[158](index=158&type=chunk) - No material changes were made to internal control over financial reporting in Q1 2019, though new controls were implemented related to the adoption of the new lease accounting standard[159](index=159&type=chunk) [PART II. OTHER INFORMATION](index=40&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Legal Proceedings](index=40&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in routine litigation but reports no material legal proceedings impacting its financial condition - The company reports no material legal proceedings outside the ordinary course of business[161](index=161&type=chunk) [Risk Factors](index=40&type=section&id=Item%201A.%20Risk%20Factors) No material changes to risk factors were reported since the December 31, 2018 Annual Report on Form 10-K - The report refers to the risk factors discussed in the Annual Report on Form 10-K for the year ended December 31, 2018, indicating no material updates[162](index=162&type=chunk) [Exhibits](index=40&type=section&id=Item%206.%20Exhibits) Key exhibits filed include the Get Real Health acquisition agreement and CEO/CFO certifications - Key exhibits filed include the Stock Purchase Agreement for the Get Real Health acquisition and CEO/CFO certifications[169](index=169&type=chunk)