CPSI(CPSI) - 2021 Q2 - Quarterly Report

PART I FINANCIAL INFORMATION Item 1. Financial Statements 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][50][52] - 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][61][63] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 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][148][150] - 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] - 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][234] - 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][217] Item 3. Quantitative and Qualitative Disclosures about Market Risk 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] - A 100 basis point (1%) change in the interest rate would impact annual interest expense by approximately $1.2 million[240] Item 4. Controls and Procedures 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] - 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] PART II OTHER INFORMATION Item 1. Legal Proceedings 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] Item 1A. Risk Factors 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] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 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][250] Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including the TruCode acquisition agreement and required certifications from the CEO and CFO