CPSI(CPSI) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION This part details the company's financial performance and condition, including statements, notes, management's analysis, market risks, and internal controls Item 1. Financial Statements This section presents the unaudited condensed consolidated financial statements of TruBridge, Inc. for the periods ended June 30, 2025, and December 31, 2024, including balance sheets, statements of operations, comprehensive income (loss), stockholders' equity, and cash flows, along with detailed notes explaining accounting policies, segment reporting changes, revenue recognition, and other financial details Condensed Consolidated Balance Sheets (Unaudited) – June 30, 2025 and December 31, 2024 This statement provides a snapshot of the company's assets, liabilities, and equity at specific points in time Property and Equipment, Net (in thousands) | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------------------------------- | :----------------------------- | :------------------------------- | | Total Assets | $390,151 | $394,432 | | Total Liabilities | $216,978 | $225,737 | | Total Stockholders' Equity | $173,173 | $168,695 | - Total assets decreased by $4.281 million from December 31, 2024, to June 30, 2025, while total liabilities decreased by $8.759 million, and total stockholders' equity increased by $4.478 million[10] Condensed Consolidated Statements of Operations (Unaudited) – Three and Six Months Ended June 30, 2025 and 2024 This statement details the company's revenues, expenses, and net income or loss over specific periods Property and Equipment, Net (in thousands) | Metric (in thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :-------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Total Revenues | $85,729 | $85,600 | $172,937 | $169,717 | | Operating Income (Loss) | $3,627 | $(2,149) | $11,787 | $(2,737) | | Net Income (Loss) | $2,580 | $(4,388) | $3,039 | $(6,242) | | Basic EPS | $0.17 | $(0.29) | $0.20 | $(0.42) | - For the three months ended June 30, 2025, net income was $2.580 million, a significant improvement from a net loss of $4.388 million in the prior year period. For the six months ended June 30, 2025, net income was $3.039 million, compared to a net loss of $6.242 million in the prior year period[12] Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited) - Three and Six Months Ended June 30, 2025 and 2024 This statement presents net income or loss and other comprehensive income or loss components for the reporting periods Property and Equipment, Net (in thousands) | Metric (in thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :-------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net Income (Loss) | $2,580 | $(4,388) | $3,039 | $(6,242) | | Foreign currency translation adjustment | $(12) | $(5) | $(18) | $108 | | Comprehensive Income (Loss) | $2,568 | $(4,393) | $3,021 | $(6,134) | - Comprehensive income for the three months ended June 30, 2025, was $2.568 million, a substantial increase from a comprehensive loss of $4.393 million in the same period last year. For the six months ended June 30, 2025, comprehensive income was $3.021 million, compared to a comprehensive loss of $6.134 million in the prior year period[13] Condensed Consolidated Statements of Stockholders' Equity (Unaudited) – Three and Six Months Ended June 30, 2025 and 2024 This statement details changes in equity accounts, including net income, stock-based compensation, and treasury stock transactions Property and Equipment, Net (in thousands) | Metric (in thousands) | Balance at March 31, 2025 | Balance at June 30, 2025 | Balance at December 31, 2024 | Balance at June 30, 2025 | | :-------------------- | :------------------------ | :----------------------- | :--------------------------- | :----------------------- | | Total Stockholders' Equity | $168,508 | $173,173 | $168,695 | $173,173 | | Net Income (Loss) | N/A | $2,580 | N/A | $3,039 | | Stock-based compensation | N/A | $2,097 | N/A | $3,310 | | Treasury stock acquired | N/A | $0 | N/A | $(1,853) | - Total stockholders' equity increased from $168.508 million at March 31, 2025, to $173.173 million at June 30, 2025, driven by net income and stock-based compensation. For the six months ended June 30, 2025, treasury stock acquisitions amounted to $1.853 million[15] Condensed Consolidated Statements of Cash Flows (Unaudited) – Six Months Ended June 30, 2025 and 2024 This statement summarizes cash inflows and outflows from operating, investing, and financing activities over the period Property and Equipment, Net (in thousands) | Metric (in thousands) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :-------------------- | :--------------------------- | :--------------------------- | | Net cash provided by operating activities | $14,517 | $11,730 | | Net cash (used in) provided by investing activities | $(6,959) | $11,116 | | Net cash used in financing activities | $(7,603) | $(18,944) | | Cash and cash equivalents at end of period | $12,279 | $7,709 | - Net cash provided by operating activities increased by $2.787 million YoY for the six months ended June 30, 2025. Investing activities shifted from providing $11.116 million in cash in 2024 to using $6.959 million in 2025, primarily due to the sale of AHT in 2024. Financing activities used less cash in 2025 ($7.603 million) compared to 2024 ($18.944 million)[17] Notes to Condensed Consolidated Financial Statements (Unaudited) This section provides detailed explanations of the accounting policies, significant transactions, and other financial disclosures 1. BASIS OF PRESENTATION This note outlines the accounting principles and reporting framework used for the financial statements - The unaudited condensed consolidated financial statements are prepared in accordance with SEC rules and U.S. GAAP, including normal recurring adjustments. They should be read with the 2024 Annual Report on Form 10-K[19][20] - The Company realigned its reporting structure in May 2024, changing from three segments (RCM, EHR, Patient Engagement) to two (Financial Health, Patient Care). Patient Engagement results were transitioned into the EHR segment, now called Patient Care. Prior segment information has been recast[22] - The Company corrected improperly recognized revenue from 2024, assessing it as immaterial to prior periods. Adjustments were made to the condensed consolidated financial statements for the three and six months ended June 30, 2024, impacting revenue, operating income, net income, and stockholders' equity[23][24][25] 2. RECENT ACCOUNTING PRONOUNCEMENTS This note discusses new accounting standards and their potential impact on the company's financial reporting - ASU 2023-09 (Income Taxes) is effective for fiscal years beginning after December 15, 2024, requiring disaggregated tax rate reconciliation and income taxes paid by jurisdiction. The Company will adopt it for the annual period ending December 31, 2025[28] - ASU 2024-03 (Expense Disaggregation Disclosures) is effective for fiscal years beginning after December 15, 2026, requiring additional disclosure of certain costs and expenses. The Company is evaluating its impact[29] 3. REVENUE RECOGNITION This note details the company's policies and methods for recognizing revenue from various service and product offerings - Revenue is recognized using the 5-step ASC 606 model. Financial Health services (RCM, IT services, SaaS, time-based licenses) recognize revenue over the contract period or upon delivery. Patient Care services (perpetual/time-based licenses, SaaS, hardware, implementation) recognize revenue based on service provision, delivery, or module completion[30][32][33][34][35][37][39] Revenues Disaggregated by Category (in thousands) | Category | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :-------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Total recurring revenues | $81,437 | $79,933 | $164,148 | $160,592 | | Total non-recurring revenues | $4,292 | $5,667 | $8,789 | $9,125 | | Total revenues | $85,729 | $85,600 | $172,937 | $169,717 | - Deferred revenue represents invoiced amounts for uncompleted services. The ending balance of deferred revenue was $9.368 million at June 30, 2025, compared to $9.842 million at June 30, 2024[42][43] Costs to Obtain and Fulfill Contracts (in thousands) | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :-------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Costs to obtain and fulfill contracts capitalized | $1,937 | $1,727 | $3,800 | $3,430 | | Less costs to obtain and fulfill contracts recognized as expense | $(1,566) | $(1,765) | $(3,429) | $(3,649) | | Ending balance | $12,958 | $12,896 | $12,958 | $12,896 | 4. BUSINESS COMBINATIONS AND DISPOSITIONS This note describes the company's acquisition and divestiture activities, including the sale of American HealthTech, Inc - On January 16, 2024, TruBridge sold American HealthTech, Inc. (AHT) for an aggregate purchase price of $25.0 million, with a net payment of approximately $21.4 million at closing after adjustments and escrow holdbacks. A transition services agreement (TSA) was entered into, extended for an additional 120 days on July 17, 2025[48][49][50] - The Company recorded a $0.1 million gain on sale for AHT for the six months ended June 30, 2025, compared to a $1.3 million gain in the prior year period. AHT's pretax loss included in consolidated statements was $0 for 2025, down from $0.241 million in 2024[51][52] 5. PROPERTY AND EQUIPMENT This note provides details on the company's tangible assets, including their net book value and changes over time Property and Equipment, Net (in thousands) | Category | June 30, 2025 | December 31, 2024 | | :-------------------- | :------------ | :---------------- | | Property and equipment, gross | $12,687 | $11,819 | | Less: accumulated depreciation | $(10,128) | $(9,525) | | Property and equipment, net | $2,559 | $2,294 | - Net property and equipment increased by $0.265 million from December 31, 2024, to June 30, 2025. Assets held for sale, primarily land and a building in Mobile, Alabama, were valued at $0.4 million at June 30, 2025, down from $0.6 million at December 31, 2024. A portion of these assets was sold for $0.3 million on April 9, 2025[53][55] 6. SOFTWARE DEVELOPMENT This note outlines the company's accounting policies for capitalizing and amortizing software development costs - Software development costs are capitalized from the completion of the preliminary project phase until general release and amortized on a straight-line basis over an estimated useful life of five years. R&D and maintenance costs are expensed as incurred[56] Software Development Costs, Net (in thousands) | Category | June 30, 2025 | December 31, 2024 | | :-------------------- | :------------ | :---------------- | | Software development costs | $72,885 | $68,805 | | Less: accumulated amortization | $(29,568) | $(27,331) | | Software development costs, net | $43,317 | $41,474 | 7. OTHER ACCRUED LIABILITIES This note details various accrued liabilities, including salaries, benefits, severance, and interest Other Accrued Liabilities (in thousands) | Category | June 30, 2025 | December 31, 2024 | | :-------------------- | :------------ | :---------------- | | Salaries and benefits | $6,260 | $9,050 | | Severance | $930 | $1,702 | | Commissions | $1,138 | $1,191 | | Accrued interest | $1,913 | $2,314 | | Operating lease liabilities, current portion | $924 | $944 | | Other | $1,137 | $793 | | Total Other accrued liabilities | $12,302 | $15,994 | - Total other accrued liabilities decreased by $3.692 million from December 31, 2024, to June 30, 2025, primarily due to decreases in salaries and benefits, severance, and accrued interest[58] 8. NET INCOME (LOSS) PER SHARE This note explains the calculation of basic and diluted earnings per share, considering common stock and equity awards - Basic and diluted EPS are calculated using the two-class method due to unvested restricted stock awards. Diluted EPS uses the more dilutive of the two-class or treasury stock method[59][60] Basic and Diluted EPS (in thousands, except per share data) | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :-------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net income (loss) attributable to common stockholders | $2,495 | $(4,200) | $2,933 | $(6,025) | | Basic EPS | $0.17 | $(0.29) | $0.20 | $(0.42) | | Diluted EPS | $0.17 | $(0.29) | $0.20 | $(0.42) | - Performance share awards totaling 491,342 shares were not included in diluted EPS calculations for the three and six months ended June 30, 2025, as threshold performance levels were not met[61] 9. INCOME TAXES This note provides information on the company's effective tax rate, tax benefits, and deferred tax assets - The estimated annual effective tax rate (ETR) for the three months ended June 30, 2025, was (269.6)%, compared to 30.3% for the prior year, primarily due to changes in forecasted pre-tax income and valuation allowance. For the six months, ETR was 45.9% in 2025 vs. 34.6% in 2024, driven by increased federal and state valuation allowance and decreased windfall tax benefit[63][65] - The Company recognized an income tax benefit of $(1.9) million for the three months ended June 30, 2025, and an expense of $2.6 million for the six months ended June 30, 2025[64] - Management assesses deferred tax assets based on future taxable income, with cumulative losses being a significant negative objective evidence. The 'One Big Beautiful Bill Act' signed on July 4, 2025, is being evaluated for its impact on the ETR and cash tax position[66][68] 10. STOCK-BASED COMPENSATION AND EQUITY This note details stock-based compensation expenses, unrecognized compensation, and share repurchase activities Stock-Based Compensation Expense (in thousands) | Category | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :-------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Pre-tax stock-based compensation expense | $2,097 | $1,501 | $3,310 | $2,300 | | Net stock-based compensation expense | $1,657 | $1,186 | $2,615 | $1,817 | - As of June 30, 2025, $12.4 million of unrecognized compensation expense related to unvested and unearned stock-based awards is expected to be recognized over a weighted-average period of 2.1 years[69] - The Company repurchased 65,787 shares during the six months ended June 30, 2025, to fund tax withholdings related to restricted stock vesting, compared to 42,979 shares in the prior year period[79] - The Common Stock Rights Agreement, which classified Rights as a liability, was terminated on February 11, 2025, with all Rights expiring on February 12, 2025, as the exercise conditions were not met[80][82][83][84] 11. FINANCING RECEIVABLES This note provides details on short-term payment plans and long-term financing arrangements, including credit loss allowances Short-Term Payment Plans, Net (in thousands) | Category | June 30, 2025 | December 31, 2024 | | :-------------------- | :------------ | :---------------- | | Short-term payment plans, gross | $2,150 | $1,521 | | Less: allowance for credit losses | $(108) | $(76) | | Short-term payment plans, net | $2,042 | $1,445 | Long-Term Financing Arrangements, Net (in thousands) | Category | June 30, 2025 | December 31, 2024 | | :-------------------- | :------------ | :---------------- | | Long-term financing arrangements, gross | $1,559 | $4,100 | | Less: allowance for credit losses | $(710) | $(362) | | Less: unearned income | $(142) | $(288) | | Long-term financing arrangements, net | $707 | $3,450 | - The allowance for credit losses for financing receivables increased from $0.438 million at December 31, 2024, to $0.818 million at June 30, 2025. All past due financing receivables are reclassified to trade accounts receivable and placed on non-accrual status[88][89][90] 12. INTANGIBLE ASSETS AND GOODWILL This note details the company's intangible assets and goodwill, including their carrying values and impairment assessment policies Net Intangible Assets (in thousands) | Category | June 30, 2025 | December 31, 2024 | | :-------------------- | :------------ | :---------------- | | Customer Relationships | $61,391 | $66,210 | | Trademark | $0 | $0 | | Developed Technology | $8,606 | $9,723 | | Non Compete Agreements | $611 | $774 | | Total Net Intangible Assets | $70,608 | $76,707 | - Total net intangible assets decreased by $6.099 million from December 31, 2024, to June 30, 2025. The weighted average remaining useful life for total intangible assets is 7.6 years as of June 30, 2025[92][93] Goodwill Carrying Value by Segment (in thousands) | Segment | December 31, 2024 | June 30, 2025 | | :-------------------- | :---------------- | :------------ | | Financial Health | $79,748 | $79,748 | | Patient Care | $92,825 | $92,825 | | Total Carrying Value | $172,573 | $172,573 | - Goodwill carrying value remained constant at $172.573 million for both June 30, 2025, and December 31, 2024. Goodwill is evaluated for impairment annually on October 1 or more frequently if indicators are present[93] 13. LONG-TERM DEBT This note provides information on the company's long-term debt, including credit facilities, interest rates, and covenant compliance Long-Term Debt (in thousands) | Category | June 30, 2025 | December 31, 2024 | | :-------------------- | :------------ | :---------------- | | Term loan facility | $54,625 | $56,375 | | Revolving credit facility | $112,416 | $116,415 | | Debt obligation, net | $166,088 | $171,578 | | Long-term debt | $163,108 | $168,598 | - Total long-term debt decreased by $5.490 million from December 31, 2024, to June 30, 2025. The credit facilities (term loan and revolving credit) mature on May 2, 2027, and bear interest at a rate based on Adjusted SOFR or an alternate base rate, plus an applicable margin[94][96][97] - The Company was in compliance with financial covenants, including a maximum consolidated net leverage ratio of 3.50:1.00, as of June 30, 2025. The required fixed charge coverage ratio reverted to 1.25:1.00 for fiscal quarters March 31, 2025, and thereafter[100][101] 14. OPERATING LEASES This note details the company's operating lease assets and liabilities, including lease terms and discount rates Operating Lease Information (in thousands) | Category | June 30, 2025 | December 31, 2024 | | :-------------------- | :------------ | :---------------- | | Operating lease right-of-use assets | $2,617 | $3,092 | | Total operating lease liabilities | $2,751 | $3,237 | | Weighted average remaining lease term (years) | 3.2 | 3.6 | | Weighted average discount rate | 4.1% | 4.1% | - Total lease expense for the six months ended June 30, 2025, was $0.5 million, down from $0.6 million in the prior year. Cash paid for operating leases was $0.5 million for the six months ended June 30, 2025, also down from $0.6 million in the prior year[107][108] 15. COMMITMENTS AND CONTINGENCIES This note describes the company's legal proceedings and other commitments, assessing their potential financial impact - The Company is involved in legal proceedings in the normal course of business but does not expect them to have a material adverse effect on its business, financial condition, results of operations, or liquidity[109] 16. FAIR VALUE This note explains the framework for measuring the fair value of assets and liabilities - Fair value measurement framework classifies assets and liabilities into Level 1 (quoted market prices), Level 2 (observable market-based inputs), and Level 3 (unobservable inputs)[110][111] 17. SEGMENT REPORTING This note outlines the company's operating segments, their realignment, and how performance is measured - In May 2024, the Company realigned its reporting structure to two segments: Financial Health (formerly RCM) and Patient Care (formerly EHR, now including Patient Engagement). The CEO uses revenues and Adjusted EBITDA to assess segment performance[113][114][115] - Adjusted EBITDA is a non-GAAP measure that adjusts net income (loss) for depreciation, amortization, stock-based compensation, severance, interest, gains on sales, and income taxes[116] Segment Revenues and Adjusted EBITDA (in thousands) | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :-------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Financial Health Revenues | $54,284 | $54,509 | $110,417 | $107,948 | | Patient Care Revenues | $31,445 | $31,091 | $62,520 | $61,769 | | Total Revenues | $85,729 | $85,600 | $172,937 | $169,717 | | Financial Health Adjusted EBITDA | $7,092 | $8,209 | $18,373 | $15,006 | | Patient Care Adjusted EBITDA | $6,651 | $5,235 | $13,601 | $8,762 | | Total Adjusted EBITDA | $13,743 | $13,444 | $31,974 | $23,768 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the Company's financial performance, condition, and future outlook. It covers strategic shifts towards Financial Health services, the impact of industry dynamics, changes in license model preferences, margin optimization efforts, and a detailed comparison of financial results for the three and six months ended June 30, 2025, versus 2024 Background This section provides an overview of TruBridge, Inc.'s strategic shift and its healthcare technology solutions - TruBridge, Inc. (formerly Computer Programs and Systems, Inc.) has shifted its strategic focus from EHR to Revenue Cycle Management (RCM), with Financial Health revenues comprising 64% of consolidated revenue in 2024. The Company provides healthcare technology solutions and services for rural and community hospitals[129][130] - The Financial Health segment offers business management, consulting, and managed IT services, including RCM solutions. The Patient Care segment provides acute care EHR solutions and patient engagement technology[132][133] Management Overview This section outlines the company's strategic direction, including AI integration, industry dynamics, and margin optimization efforts Strategy This section details the company's core strategy for revenue growth, customer retention, and market expansion - The core strategy is to achieve long-term revenue growth by cross-selling Financial Health services to existing Patient Care customers, expanding Financial Health market share, and pursuing competitive Patient Care opportunities. Acquisitions are also considered for strategic goals[136] - Patient Care customer retention is crucial for long-term growth, with a retention rate of 94.5% in the last twelve months (97.7% for the flagship TruBridge EHR product). Efforts include enhanced support, proactive monitoring, and in-application experience software[137][138] - The Company aims to maintain and grow its recurring revenue base by driving demand for existing technology subscriptions and expanding Financial Health services beyond the Patient Care customer base[139] Artificial Intelligence This section highlights the company's commitment to leveraging generative AI in healthcare delivery and its participation in TRAIN - TruBridge is committed to leveraging generative AI in healthcare delivery, participating in TRAIN (Trustworthy and Responsible AI Network) to shape governance and controls for safe AI implementation. Innovation teams are conducting pilots and discussing integrations with strategic partners[141] Industry Dynamics This section discusses the impact of U.S. regulatory changes and national health initiatives on the healthcare industry - The healthcare industry is significantly affected by U.S. regulatory and national health initiatives, including changes to provider reimbursement and a shift towards value-based care. This pressure encourages adoption of healthcare IT to reduce costs and improve quality[142][143] - The 'One Big Beautiful Bill Act' (OBBBA), enacted in July 2025, is expected to impact healthcare providers through changes to Medicaid and the Affordable Care Act, potentially leading to reduced funding and increased regulatory burdens. The full effects are still being evaluated[144] Patient Care License Model Preferences This section explains the shift in customer demand from perpetual licenses to SaaS models for Patient Care technology solutions - Customer demand for Patient Care technology solutions has shifted dramatically from perpetual licenses to Software as a Service (SaaS) models. SaaS made up 100% of new Patient Care installations during 2022 and the first six months of 2025, up from 12% in 2018[146][147] - This shift to SaaS reduces short-term revenue growth and profitability but benefits long-term recurring revenue and profitability. The reduced frequency of new financing arrangements for perpetual licenses has substantially decreased financing receivables in 2024 and H1 2025[147][148] Margin Optimization Efforts This section describes the company's initiatives to improve cost structure and operating efficiencies through realignment and automation - Margin optimization efforts include organizational realignment, expanded use of offshore resources, and automation to improve cost structure and operating efficiencies. A reduction in force and the Scaled Agile Framework® have been implemented in EHR product development[149][150] - Expanded utilization of offshore resources, particularly through the Viewgol acquisition, aims to provide meaningful efficiencies and per-unit cost savings, addressing wage inflation pressures in the Financial Health business[151][152] Results of Operations This section provides a detailed comparison of the company's financial performance for the three and six months ended June 30, 2025, versus 2024 Three Months Ended June 30, 2025 Compared with Three Months Ended June 30, 2024 This section analyzes the financial performance for the second quarter of 2025 compared to the same period in 2024 Revenues This section details the revenue performance across Financial Health and Patient Care segments for the three-month period | Segment | 3 Months Ended June 30, 2025 (in thousands) | 3 Months Ended June 30, 2024 (in thousands) | Change (in thousands) | Change (%) | | :-------------------- | :-------------------------------- | :-------------------------------- | :-------------------- | :--------- | | Financial Health | $54,284 | $54,509 | $(225) | -0.4% | | Patient Care | $31,445 | $31,091 | $354 | 1.1% | | Total Revenues | $85,729 | $85,600 | $129 | 0.2% | - Total revenues increased slightly by $0.1 million. Financial Health revenues decreased due to customer attrition, partially offset by new bookings. Patient Care revenues increased by 1% due to SaaS growth, despite the sunset of the Centriq product[157][158][159] Costs of Revenues (exclusive of amortization and depreciation) This section analyzes the changes in direct costs associated with generating revenue for the three-month period | Segment | 3 Months Ended June 30, 2025 (in thousands) | 3 Months Ended June 30, 2024 (in thousands) | Change (in thousands) | Change (%) | | :-------------------- | :-------------------------------- | :-------------------------------- | :-------------------- | :--------- | | Financial Health | $29,308 | $30,269 | $(961) | -3.2% | | Patient Care | $11,962 | $13,073 | $(1,111) | -8.5% | | Total Costs of Revenues | $41,270 | $43,342 | $(2,072) | -4.8% | - Total costs of revenues decreased by $2.1 million, falling to 48% of total revenues from 51% in the prior year. This was driven by reductions in domestic labor costs in Financial Health and decreased hardware/software expenses in Patient Care[160][161][162] Product Development This section reviews the expenses incurred for product development activities during the three-month period | Metric | 3 Months Ended June 30, 2025 (in thousands) | 3 Months Ended June 30, 2024 (in thousands) | Change (in thousands) | Change (%) | | :-------------------- | :-------------------------------- | :-------------------------------- | :-------------------- | :--------- | | Product development expenses | $8,113 | $8,207 | $(94) | -1.1% | - Product development expenses remained flat, decreasing by $0.094 million compared to the second quarter of 2024[163] Sales and Marketing This section examines the sales and marketing expenditures for the three-month period | Metric | 3 Months Ended June 30, 2025 (in thousands) | 3 Months Ended June 30, 2024 (in thousands) | Change (in thousands) | Change (%) | | :-------------------- | :-------------------------------- | :-------------------------------- | :-------------------- | :--------- | | Sales and marketing costs | $8,041 | $7,815 | $226 | 2.9% | - Sales and marketing costs increased by $0.2 million, or 3%, due to increased marketing program costs and a delayed annual sales summit[164] General and Administrative This section analyzes general and administrative expenses, including payroll and nonrecurring costs, for the three-month period | Metric | 3 Months Ended June 30, 2025 (in thousands) | 3 Months Ended June 30, 2024 (in thousands) | Change (in thousands) | Change (%) | | :-------------------- | :-------------------------------- | :-------------------------------- | :-------------------- | :--------- | | General and administrative expenses | $18,076 | $18,878 | $(802) | -4.3% | - General and administrative expenses decreased by $0.8 million, or 4%, primarily due to lower severance and nonrecurring costs, partially offset by increased payroll and administrative expenses[165] Amortization & Depreciation This section details the amortization and depreciation expenses for the three-month period, including impacts from product sunsets | Metric | 3 Months Ended June 30, 2025 (in thousands) | 3 Months Ended June 30, 2024 (in thousands) | Change (in thousands) | Change (%) | | :-------------------- | :-------------------------------- | :-------------------------------- | :-------------------- | :--------- | | Amortization | $6,290 | $9,107 | $(2,817) | -30.9% | | Depreciation | $312 | $400 | $(88) | -22.0% | | Total Amortization & Depreciation | $6,602 | $9,507 | $(2,905) | -30.6% | - Combined amortization and depreciation expense decreased by $2.9 million, or 31%, primarily due to $2.9 million of accelerated amortization of software development costs related to a product sunset in Q2 2024[166] Total Other Expense This section reviews the total other expenses, primarily focusing on changes in interest expense, for the three-month period | Metric | 3 Months Ended June 30, 2025 (in thousands) | 3 Months Ended June 30, 2024 (in thousands) | Change (in thousands) | Change (%) | | :-------------------- | :-------------------------------- | :-------------------------------- | :-------------------- | :--------- | | Total other expense | $(2,929) | $(4,151) | $1,222 | -29.4% | - Total other expense decreased by $1.2 million, driven by a reduction in interest expense due to a lower outstanding balance on the revolving credit facility and a reduced interest rate[167] Income (Loss) Before Taxes This section analyzes the company's pre-tax income or loss for the three-month period | Metric | 3 Months Ended June 30, 2025 (in thousands) | 3 Months Ended June 30, 2024 (in thousands) | Change (in thousands) | Change (%) | | :-------------------- | :-------------------------------- | :-------------------------------- | :-------------------- | :--------- | | Income (loss) before taxes | $698 | $(6,300) | $6,998 | -111.1% | - Income before taxes increased by $7.0 million, moving from a loss of $6.3 million in Q2 2024 to an income of $0.7 million in Q2 2025[168] Provision for (Benefit from) Income Taxes This section details the income tax provision or benefit recognized for the three-month period | Metric | 3 Months Ended June 30, 2025 (in thousands) | 3 Months Ended June 30, 2024 (in thousands) | Change (in thousands) | Change (%) | | :-------------------- | :-------------------------------- | :-------------------------------- | :-------------------- | :--------- | | Provision for (benefit from) income taxes | $(1,882) | $(1,912) | $30 | -1.6% | - The Company recognized a $1.9 million tax benefit in Q2 2025, primarily due to changes in the estimated annual effective tax rate from revised forecasted pre-tax income and valuation allowance[169] Net Income (Loss) This section presents the company's net income or loss and earnings per share for the three-month period | Metric | 3 Months Ended June 30, 2025 (in thousands) | 3 Months Ended June 30, 2024 (in thousands) | Change (in thousands) | Change (%) | | :-------------------- | :-------------------------------- | :-------------------------------- | :-------------------- | :--------- | | Net income (loss) | $2,580 | $(4,388) | $6,968 | -158.8% | | Basic and Diluted EPS | $0.17 | $(0.29) | $0.46 | -158.6% | - Net income increased by $7.0 million to $2.6 million, or $0.17 per share, in Q2 2025, compared to a net loss of $4.4 million, or $0.29 per share, in Q2 2024[171] Six Months Ended June 30, 2025 Compared with Six Months Ended June 30, 2024 This section analyzes the financial performance for the first half of 2025 compared to the same period in 2024 Revenues This section details the revenue performance across Financial Health and Patient Care segments for the six-month period | Segment | 6 Months Ended June 30, 2025 (in thousands) | 6 Months Ended June 30, 2024 (in thousands) | Change (in thousands) | Change (%) | | :-------------------- | :-------------------------------- | :-------------------------------- | :-------------------- | :--------- | | Financial Health | $108,586 | $104,914 | $3,672 | 3.5% | | Patient Care | $55,562 | $55,678 | $(116) | -0.2% | | Total Revenues | $172,937 | $169,717 | $3,220 | 1.9% | - Total revenues increased by $3.2 million, or 2%. Financial Health revenues grew by 2% due to new bookings, while Patient Care revenues increased by 1% despite the AHT divestiture and Centriq product sunset[172][173][174] Costs of Revenues (exclusive of amortization and depreciation) This section analyzes the changes in direct costs associated with generating revenue for the six-month period | Segment | 6 Months Ended June 30, 2025 (in thousands) | 6 Months Ended June 30, 2024 (in thousands) | Change (in thousands) | Change (%) | | :-------------------- | :-------------------------------- | :-------------------------------- | :-------------------- | :--------- | | Financial Health | $56,499 | $59,866 | $(3,367) | -5.6% | | Patient Care | $24,284 | $25,237 | $(953) | -3.8% | | Total Costs of Revenues | $80,783 | $85,103 | $(4,320) | -5.1% | - Total costs of revenues decreased by $4.3 million, or 5%, falling to 47% of total revenues from 50% in the prior year. This was driven by reductions in domestic labor costs in Financial Health and decreased software/payroll expenses in Patient Care due to cost optimization[175][176] Product Development This section reviews the expenses incurred for product development activities during the six-month period | Metric | 6 Months Ended June 30, 2025 (in thousands) | 6 Months Ended June 30, 2024 (in thousands) | Change (in thousands) | Change (%) | | :-------------------- | :-------------------------------- | :-------------------------------- | :-------------------- | :--------- | | Product development expenses | $16,360 | $18,894 | $(2,534) | -13.4% | - Product development costs decreased by $2.5 million, or 13%, primarily due to labor savings from the 2024 cost optimization initiative[177] Sales and Marketing This section examines the sales and marketing expenditures for the six-month period | Metric | 6 Months Ended June 30, 2025 (in thousands) | 6 Months Ended June 30, 2024 (in thousands) | Change (in thousands) | Change (%) | | :-------------------- | :-------------------------------- | :-------------------------------- | :-------------------- | :--------- | | Sales and marketing costs | $13,450 | $14,408 | $(958) | -6.6% | - Sales and marketing costs decreased by $1.0 million, or 7%, driven by lower commissions, partially offset by higher marketing program costs[178] General and Administrative This section analyzes general and administrative expenses, including payroll and professional fees, for the six-month period | Metric | 6 Months Ended June 30, 2025 (in thousands) | 6 Months Ended June 30, 2024 (in thousands) | Change (in thousands) | Change (%) | | :-------------------- | :-------------------------------- | :-------------------------------- | :-------------------- | :--------- | | General and administrative expenses | $37,540 | $38,274 | $(734) | -1.9% | - General and administrative expenses decreased by $0.7 million, or 2%, primarily due to lower severance and nonrecurring costs, partially offset by increased payroll and professional service fees[179] Amortization & Depreciation This section details the amortization and depreciation expenses for the six-month period, including impacts from product sunsets | Metric | 6 Months Ended June 30, 2025 (in thousands) | 6 Months Ended June 30, 2024 (in thousands) | Change (in thousands) | Change (%) | | :-------------------- | :-------------------------------- | :-------------------------------- | :-------------------- | :--------- | | Amortization | $12,414 | $14,975 | $(2,561) | -17.1% | | Depreciation | $603 | $800 | $(197) | -24.6% | | Total Amortization & Depreciation | $13,017 | $15,775 | $(2,758) | -17.5% | - Combined amortization and depreciation expense decreased by $2.8 million, or 17%, primarily due to $2.9 million of accelerated amortization of software development costs related to a product sunset in Q2 2024[180] Total Other Expense This section reviews the total other expenses, including interest expense and gains on sales, for the six-month period | Metric | 6 Months Ended June 30, 2025 (in thousands) | 6 Months Ended June 30, 2024 (in thousands) | Change (in thousands) | Change (%) | | :-------------------- | :-------------------------------- | :-------------------------------- | :-------------------- | :--------- | | Total other expense | $(6,167) | $(6,801) | $634 | -9.3% | - Total other expense decreased by $0.6 million, driven by reduced interest expense, partially offset by a $1.2 million gain on the sale of AHT in Q1 2024[181] Income (Loss) Before Taxes This section analyzes the company's pre-tax income or loss for the six-month period | Metric | 6 Months Ended June 30, 2025 (in thousands) | 6 Months Ended June 30, 2024 (in thousands) | Change (in thousands) | Change (%) | | :-------------------- | :-------------------------------- | :-------------------------------- | :-------------------- | :--------- | | Income (loss) before taxes | $5,620 | $(9,538) | $15,158 | -158.9% | - Income before taxes increased by $15.2 million, moving from a loss of $9.5 million in H1 2024 to an income of $5.6 million in H1 2025[182] Provision for (Benefit from) Income Taxes This section details the income tax provision or benefit recognized for the six-month period | Metric | 6 Months Ended June 30, 2025 (in thousands) | 6 Months Ended June 30, 2024 (in thousands) | Change (in thousands) | Change (%) | | :-------------------- | :-------------------------------- | :-------------------------------- | :-------------------- | :--------- | | Provision for (benefit from) income taxes | $2,581 | $(3,296) | $5,877 | -178.3% | - The effective tax rate for H1 2025 was 45.9%, up from 34.6% in H1 2024, primarily due to an increase in the federal and state valuation allowance on deferred tax assets[183] Net Income (Loss) This section presents the company's net income or loss and earnings per share for the six-month period | Metric | 6 Months Ended June 30, 2025 (in thousands) | 6 Months Ended June 30, 2024 (in thousands) | Change (in thousands) | Change (%) | | :-------------------- | :-------------------------------- | :-------------------------------- | :-------------------- | :--------- | | Net income (loss) | $3,039 | $(6,242) | $9,281 | -148.7% | | Basic and Diluted EPS | $0.20 | $(0.42) | $0.62 | -147.6% | - Net income for H1 2025 increased by $9.3 million to $3.0 million, or $0.20 per share, compared to a net loss of $6.2 million, or $0.42 per share, in H1 2024[185] Supplemental Segment Information This section provides additional details on the financial performance of the company's operating segments Segment Revenues This section details the revenue contributions from the Financial Health and Patient Care segments | Segment | 3 Months Ended June 30, 2025 (in thousands) | 3 Months Ended June 30, 2024 (in thousands) | Change (in thousands) | Change (%) | | :-------------------- | :-------------------------------- | :-------------------------------- | :-------------------- | :--------- | | Financial Health | $54,284 | $54,509 | $(225) | 0% | | Patient Care | $31,445 | $31,091 | $354 | 1% | | Total revenues | $85,729 | $85,600 | $129 | 0% | | Segment | 6 Months Ended June 30, 2025 (in thousands) | 6 Months Ended June 30, 2024 (in thousands) | Change (in thousands) | Change (%) | | :-------------------- | :-------------------------------- | :-------------------------------- | :-------------------- | :--------- | | Financial Health | $110,417 | $107,948 | $2,469 | 2% | | Patient Care | $62,520 | $61,769 | $751 | 1% | | Total revenues | $172,937 | $169,717 | $3,220 | 1% | - Financial Health revenues remained flat for the three months ended June 30, 2025, but increased by 2% for the six-month period. Patient Care revenues increased by 1% for both periods[188] Segment Adjusted EBITDA - Three Months Ended June 30, 2025 Compared with Three Months Ended June 30, 2024 This section analyzes the Adjusted EBITDA performance of each segment for the three-month period | Segment | 3 Months Ended June 30, 2025 (in thousands) | 3 Months Ended June 30, 2024 (in thousands) | Change (in thousands) | Change (%) | | :-------------------- | :-------------------------------- | :-------------------------------- | :-------------------- | :--------- | | Financial Health | $7,092 | $8,209 | $(1,117) | -14% | | Patient Care | $6,651 | $5,235 | $1,416 | 27% | | Total Adjusted EBITDA | $13,743 | $13,444 | $299 | 2% | - Financial Health Adjusted EBITDA decreased by 14% due to customer attrition and increased costs, partially offset by reduced domestic labor. Patient Care Adjusted EBITDA increased by 27% due to SaaS revenue growth and decreased hardware/software expenses[191][192] Segment Adjusted EBITDA - Six Months Ended June 30, 2025 Compared with Six Months Ended June 30, 2024 This section analyzes the Adjusted EBITDA performance of each segment for the six-month period | Segment | 6 Months Ended June 30, 2025 (in thousands) | 6 Months Ended June 30, 2024 (in thousands) | Change (in thousands) | Change (%) | | :-------------------- | :-------------------------------- | :-------------------------------- | :-------------------- | :--------- | | Financial Health | $18,373 | $15,006 | $3,367 | 22% | | Patient Care | $13,601 | $8,762 | $4,839 | 55% | | Total Adjusted EBITDA | $31,974 | $23,768 | $8,206 | 1% | - Financial Health Adjusted EBITDA increased by 22% due to new bookings growth and reduced domestic labor costs. Patient Care Adjusted EBITDA increased by 55% due to higher installation/SaaS revenues and decreased software/payroll costs[193][194] Liquidity and Capital Resources This section discusses the company's ability to meet its short-term and long-term financial obligations Sources of Liquidity This section identifies the primary sources of funds available to the company, including credit facilities and cash - As of June 30, 2025, the Company had $167.0 million in outstanding indebtedness under credit facilities, $12.3 million in cash and cash equivalents, and $47.6 million in remaining borrowing capacity under its revolving credit facility[195][196] - The Company believes these sources, combined with future operating cash flows, are adequate for the next twelve months. Incremental payments of $14.0 million were made on credit facilities since Q1 2024, including $4.0 million on the revolving credit facility in H1 2025[196][197] Operating Cash Flow Activities This section details the cash generated or used by the company's core business operations | Metric | 6 Months Ended June 30, 2025 (in thousands) | 6 Months Ended June 30, 2024 (in thousands) | Change (in thousands) | Change (%) | | :-------------------- | :-------------------------------- | :-------------------------------- | :-------------------- | :--------- | | Net cash provided by operating activities | $14,517 | $11,730 | $2,787 | 23.8% | - Net cash provided by operating activities increased by $2.8 million, primarily due to increased net income and a decrease in deferred taxes[198] Investing Cash Flow Activities This section describes cash flows related to the acquisition and disposal of long-term assets and investments | Metric | 6 Months Ended June 30, 2025 (in thousands) | 6 Months Ended June 30, 2024 (in thousands) | Change (in thousands) | Change (%) | | :-------------------- | :-------------------------------- | :-------------------------------- | :-------------------- | :--------- | | Net cash (used in) provided by investing activities | $(6,959) | $11,116 | $(18,075) | -162.6% | - Net cash used in investing activities was $7.0 million, a decrease of $18.1 million from the prior year, primarily due to the $21.4 million cash inflow from the AHT sale in H1 2024 and increased property and equipment purchases in H1 2025[199] Financing Cash Flow Activities This section outlines cash flows from debt, equity, and dividend transactions | Metric | 6 Months Ended June 30, 2025 (in thousands) | 6 Months Ended June 30, 2024 (in thousands) | Change (in thousands) | Change (%) | | :-------------------- | :-------------------------------- | :-------------------------------- | :-------------------- | :--------- | | Net cash used in financing activities | $(7,603) | $(18,944) | $11,341 | -59.9% | - Net cash used in financing activities decreased by $11.3 million. In H1 2025, $21.1 million was used for debt principal payments and $1.9 million for treasury stock purchases, partially offset by $15.4 million in revolving credit borrowings[200] Credit Agreement This section provides details on the company's credit facilities, outstanding balances, and repayment terms - As of June 30, 2025, $54.6 million was outstanding under the term loan facility and $112.4 million under the revolving credit facility. The revolving credit facility had an average interest rate of 7.06%[201] - Term loan principal payments of approximately $0.9 million are due quarterly through March 31, 2027, with maturity on May 2, 2027. The credit facilities are secured by substantially all of the Company's and its guarantors' assets[202][203] Backlog This section presents the company's backlog of non-recurring system purchases and recurring payments | Category | June 30, 2025 (in thousands) | June 30, 2024 (in thousands) | | :-------------------- | :----------------------------- | :----------------------------- | | Non-recurring system purchases | $2,600 | $10,000 | | Recurring payments (support, maintenance, RCM) | $322,800 | $318,000 | - Twelve-month backlog for non-recurring system purchases decreased significantly from $10.0 million in 2024 to $2.6 million in 2025. Recurring payments backlog increased from $318.0 million to $322.8 million[204] Bookings This section details the total bookings for Financial Health and Patient Care segments over the reporting periods | Segment | 3 Months Ended June 30, 2025 (in thousands) | 3 Months Ended June 30, 2024 (in thousands) | 6 Months Ended June 30, 2025 (in thousands) | 6 Months Ended June 30, 2024 (in thousands) | | :-------------------- | :-------------------------------- | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Financial Health | $13,705 | $13,458 | $26,485 | $27,849 | | Patient Care | $11,908 | $9,832 | $21,109 | $19,010 | | Total bookings | $25,613 | $23,290 | $47,594 | $46,859 | - Total bookings increased by $2.3 million (10%) for the three months and $0.7 million (1.6%) for the six months ended June 30, 2025. Patient Care bookings saw a 21% increase in Q2 2025, driven by a 96% increase in net-new bookings[205][208] Annual Contract Value This section introduces the new Annual Contract Value (ACV) methodology for reporting bookings - Effective January 2025, bookings will also be reported on an Annual Contract Value (ACV) basis, representing newly contracted revenue expected over a twelve-month period. The Company will transition fully to ACV in 2026[211] Bookings using ACV Methodology (in thousands) | Segment | 3 Months Ended June 30, 2025 | 6 Months Ended June 30, 2025 | | :-------------------- | :--------------------------- | :--------------------------- | | Financial Health | $13,705 | $26,485 | | Patient Care | $5,921 | $10,480 | | Total bookings | $19,626 | $36,965 | Critical Accounting Policies and Estimates This section highlights the key accounting policies and estimates that require significant management judgment - Key accounting policies and estimates include revenue recognition, allowance for credit losses, business combinations (including purchased intangible assets), and software development costs. No significant changes occurred during the six months ended June 30, 2025[214][215] Item 3. Quantitative and Qualitative Disclosures about Market Risk The Company's primary market risk exposure is to fluctuations in the Secured Overnight Financing Rate (SOFR) on its variable-interest credit facilities. A 100 basis point change in interest rates would impact annual interest expense by approximately $1.7 million - The Company's market risk is primarily related to SOFR fluctuations on its $167.0 million outstanding borrowings under credit facilities. A 100 basis point change in interest rates would result in an approximate $1.7 million change in annual interest expense[216] - The Company does not hold investments or use derivative financial instruments to manage interest rate risks[217] Item 4. Controls and Procedures Management concluded that the Company's disclosure controls and procedures were not effective as of June 30, 2025, due to a material weakness in internal control over financial reporting related to revenue transaction recording. Remediation efforts are underway, including implementing contract lifecycle management tools and strengthening the finance team Evaluation of Disclosure Controls and Procedures This section presents management's conclusion on the effectiveness of the company's disclosure controls and procedures - As of June 30, 2025, the CEO and CFO concluded that the Company's disclosure controls and procedures were not effective at the reasonable assurance level[219] Material Weakness in Internal Control over Financial Reporting This section identifies a material weakness in internal control over financial reporting related to revenue transaction recording - A material weakness existed as of December 31, 2024, and continued through June 30, 2025, due to ineffective process-level control over revenue transaction recording. This weakness did not result in material misstatements but could create a reasonable possibility of undetected material misstatements[221][222][223] Management's Remediation Efforts This section outlines the steps being taken by management to address the identified material weakness - The Company is redesigning and implementing additional controls, including customer contract lifecycle management tools and strengthening the finance team, to address the material weakness. The effectiveness of these efforts will be assessed over time[224][225][226] Changes in Internal Control over Financial Reporting This section reports on any changes in internal control over financial reporting during the quarter - Except for the ongoing remediation activities, there were no other changes in internal control over financial reporting during the quarter ended June 30, 2025, that materially affected or are reasonably likely to materially affect the Company's internal control over financial reporting[227] PART II. OTHER INFORMATION This part includes legal proceedings, risk factors, equity security sales, and other required disclosures Item 1. Legal Proceedings The Company is involved in routine legal proceedings but does not anticipate any material adverse effects on its business, financial condition, results of operations, or liquidity from current or threatened litigation - The Company is not currently a party to any material litigation or legal proceedings and is unaware of any pending or threatened litigation that could have a material adverse effect on its business, operating results, financial condition, or cash flows[229] Item 1A. Risk Factors The healthcare industry faces significant uncertainty due to changing legislation and government regulation, which could materially impact the Company's hospital clients and its own business. The recently enacted 'One Big Beautiful Bill Act' (OBBBA) is expected to reduce Medicaid spending and modify eligibility rules, potentially decreasing insured patients and reimbursement levels, thereby affecting demand for the Company's products and services - Significant legislative and regulatory uncertainty in the healthcare industry, including changes to reimbursement rates and payment programs, may adversely affect the Company's hospital clients and its business[231][232][233] - The 'One Big Beautiful Bill Act' (OBBBA), signed into law on July 4, 2025, is expected to reduce federal Medicaid spending by an estimated $1 trillion from 2025-2034, impose work requirements, and increase