CPSI HOW YOU BENEFIT WHO WE ARE RESOURCES INVESTORS CAREERS CONTACT News CPSI Announces Third Quarter 2021 Results Highlights for Third Quarter 2021: Revenues of $70.1 million; GAAP net income of $2.7 million and non-GAAP net income of $8.5 million; GAAP earnings per diluted share of $0.19 and non-GAAP earnings per diluted share of $0.59; Adjusted EBITDA of $12.2 million; Bookings of $29.3 million; Cash provided by operations of $1.3 million; and Net debt of $98.1 million MOBILE, ALA.(November 9, 2021) – CPSI (NASDAQ: CPSI), a community healthcare solutions company, today announced results for the third quarter and nine months ended September 30, 2021. Total revenues for the quarter ended September 30, 2021, were $70.1 million, compared with total revenues of $68.3 million for the prior-year third quarter. GAAP net income for the quarter ended September 30, 2021, was $2.7 million, or $0.19 per diluted share, compared with $5.3 million, or $0.36 per diluted share, for the quarter ended September 30, 2020. Cash provided by operations for the third quarter of 2021 was $1.3 million, compared with $8.1 million for the prior-year quarter. Net debt at September 30, 2021, was $98.1 million compared to $77.9 million at the end of the prior-year period. Total revenues for the nine months ended September 30, 2021, were $206.6 million, compared with total revenues of $197.6 million for the prior-year period. GAAP net income for the nine months ended September 30, 2021, was $13.0 million, or $0.89 per diluted share, compared with $11.1 million, or $0.77 per diluted share, for the nine months ended September 30, 2020. Cash provided by operations for the first nine months of 2021 was $34.5 million, compared with $33.0 million for the prior-year period. Boyd Douglas, president and chief executive officer of CPSI, stated, “After encountering headwinds in the sales process during the first half of the year, our third quarter performance was underscored by a strong rebound in bookings of $29.3 million. With a higher than historical percentage of Software as a Service (SaaS) revenue in the sales mix, we are very pleased with the continued expansion of recurring revenue.” Commenting on the Company’s financial performance for the third quarter of 2021, Matt Chambless, chief financial officer of CPSI, stated, “We continue to make meaningful progress towards our strategic initiatives, spurred by TruBridge’s ability to generate both organic and inorganic revenue growth and a transformative shift in electronic health record (EHR) license mix. Together, these factors pushed total recurring revenues, which now make up over 91% of total revenues, to another record level.” “We are laser focused on providing sizeable shareholder returns over the next three years culminating in an end-goal of achieving $80 million in adjusted EBITDA in 2024. Since launching the strategic transformation underway across CPSI, we have been consistently executing on this aggressive, yet obtainable plan, and our progress to date is aligned to that end,” added Douglas. CPSI will hold a live webcast to discuss its third quarter 2021 results today, Tuesday, November 9, 2021, at 4:30 p.m. Eastern time. A 30-day online replay will be available approximately one hour following the conclusion of the live webcast. To listen to the live webcast or access the replay, visit the Company’s website, www.cpsi.com. About CPSI CPSI is a leading provider of healthcare solutions and services for community hospitals, their clinics and post-acute care facilities. Founded in 1979, CPSI is the parent of five companies – Evident, LLC, American HealthTech, Inc., TruBridge, LLC, iNetXperts, Corp. d/b/a Get Real Health and TruCode LLC. Our combined companies are focused on helping improve the health of the communities we serve, connecting communities for a better patient care experience, and improving the financial operations of our customers. Evident provides comprehensive EHR solutions for community hospitals and their affiliated clinics. American HealthTech is one of the nation’s largest providers of EHR solutions and services for post-acute care facilities. TruBridge focuses on providing business, consulting and managed IT services, along with its complete RCM solution, for all care settings. Get Real Health focuses on solutions aimed at improving patient engagement for individuals and healthcare providers. TruCode provides medical coding software that enables complete and accurate code assignment for optimal reimbursement. For more information, visit www.cpsi.com. Computer Programs Systems, Inc. Condensed Consolidated Statements of Income (in '000s, except per share data) (unaudited) Three Months Ended September 30, Nine Months Ended September 30, 2021 2020 2021 2020 Sales revenues: System sales and support $ 35,560 $ 40,388 $ 107,893 $ 116,297 TruBridge 34,531 27,945 98,736 81,342 Total sales revenues 70,091 68,333 206,629 197,639 Costs of sales: System sales and support 17,425 17,628 52,250 51,901 TruBridge 17,377 15,287 50,349 44,100 Total costs of sales 34,802 32,915 102,599 96,001 Gross profit 35,289 35,418 104,030 101,638 Operating expenses: Product development 7,700 8,549 22,598 25,190 Sales and marketing 5,200 6,359 15,813 18,526 General and administrative 14,184 11,440 38,322 34,242 Amortization of acquisition-related intangibles 3,674 2,866 10,114 8,599 Total operating expenses 30,758 29,214 86,847 86,557 Operating income 4,531 6,204 17,183 15,081 Other income (expense): Other income 123 916 1,160 1,241 Loss on extinguishment of debt - - - (202) Interest expense (825) (850) (2,249) (2,832) Total other income (expense) (702) 66 (1,089) (1,793) Income before taxes $ 3,829 $ 6,270 $ 16,094 $ 13,288 Provision for income taxes 1,085 1,002 3,065 2,165 Net income $ 2,744 $ 5,268 $ 13,029 $ 11,123 Net income per common share—basic $ 0.19 $ 0.36 $ 0.89 $ 0.77 Net income per common share—diluted $ 0.19 $ 0.36 $ 0.89 $ 0.77 Weighted average shares outstanding used in per common share computations: Basic 14,334 14,095 14,276 14,022 Diluted 14,342 14,095 14,303 14,022 Computer Programs and Systems, Inc. Condensed Consolidated Balance Sheets (in '000s, except per share data) September 30, 2021 (unaudited) Dec. 31, 2020 Assets Current assets Cash and cash equivalents $ 17,114 $ 12,671 Accounts receivable, net of allowance for doubtful accounts of $1,604 and $1,701, respectively 30,542 32,414 Financing receivables, current portion, net 7,277 10,821 Inventories 1,151 1,084 Prepaid income taxes 4,056 1,789 Prepaid expenses and other 10,837 8,365 Total current assets 70,977 67,144 Property & equipment, net 12,100 13,139 Software development costs, net 9,130 3,210 Operating lease assets 7,424 6,610 Financing receivables, net of current portion 8,471 11,477 Other assets, net of current portion 3,209 2,787 Intangible assets, net 98,875 71,689 Goodwill 177,196 150,216 Total assets $ 387,382 $ 326,272 Liabilities & Stockholders' Equity Current liabilities Accounts payable $ 5,454 $ 7,716 Current portion of long-term debt 3,926 3,457 Deferred revenue 10,844 8,130 Accrued vacation 5,145 5,353 Other accrued liabilities 16,245 12,786 Total current liabilities 41,614 37,442 Long-term debt, less current portion 111,298 73,360 Operating lease liabilities, net of current portion 5,800 5,092 Deferred tax liabilities 12,684 10,378 Total liabilities 171,396 126,272 Stockholders' Equity Common stock, $0.001 par value; 30,000 shares authorized; 14,734 and 14,511 shares issued 15 15 Treasury stock, 86 and 47 shares (2,483) (1,261) Additional paid-in capital 185,801 181,622 Retained earnings 32,653 19,624 Total stockholders' equity 215,986 200,000 Total liabilities and stockholders' equity $ 387,382 $ 326,272 Computer Programs and Systems, Inc. Condensed Consolidated Statements of Cash Flows (in '000s, except per share data) (unaudited) Nine Months Ended September 30, 2021 2020 Operating activities: Net income $ 13,029 $ 11,123 Adjustments to net income: Provision for bad debt 2,080 2,695 Deferred taxes 2,306 1,060 Stock-based compensation 4,178 5,174 Depreciation 1,641 1,334 Amortization of acquisition-related intangibles 10,114 8,599 Amortization of software development costs 527 79 Amortization of deferred finance costs 220 242 Loss on extinguishment of debt 202 Loss on disposal of property and equipment 313 Changes in operating assets and liabilities: Accounts receivable 1,304 3,490 Financing receivables 5,962 2,701 Inventories (67) 136 Prepaid expenses and other (2,892) (1,765) Accounts payable (2,723) (817) Deferred revenue 1,414 (1,174) Other liabilities (665) 553 Prepaid income taxes (2,267) (651) Net cash provided by operating activities 34,474 32,981 Investing activities: Purchase of business, net of cash received (59,634) Investment in software development (6,447) (2,356) Purchases of property and equipment (915) (3,241) Net cash used in investing activities (66,996) (5,597) Financing activities: Dividends paid (4,338) Treasury stock purchases (1,222) Payments of long-term debt principal (2,813) (3,132) Proceeds from long-term debt 67 Proceeds from revolving line of credit 61,000 Payments of revolving line of credit (20,000) (15,561) Net cash provided by (used in) financing activities 36,965 (22,964) Net increase in cash and cash equivalents $ 4,443 $ 4,420 Cash and cash equivalents, beginning of period 12,671 7,357 Cash and cash equivalents, end of period $ 17,114 $ 11,777 Computer Programs and Systems, Inc. Consolidated Bookings (in '000s) Three Months Ended Nine Months Ended 9/30/2021 9/30/2020 9/30/2021 9/30/2020 System sales and support(1) $ 16,249 $ 13,715 $ 32,641 $ 37,646 TruBridge(2) 13,073 7,760 22,009 23,176 Total $ 29,322 $ 21,475 $ 54,650 $ 60,822 (1) Generally calculated as the total contract price (for system sales) and annualized contract value (for support). (2) Generally calculated as the total contract price (for non-recurring, project-related amounts) and annualized contract value (for recurring amounts). Computer Programs and Systems, Inc. Consolidated Bookings (in '000s) Three Months Ended Nine Months Ended 9/30/2021 9/30/2020 9/30/2021 9/30/2020 System sales and support Non-subscription sales(1) $ 6,642 $ 6,163 $ 13,858 $ 21,002 Subscription revenue(2) 8,724 6,557 15,316 13,656 Other 883 995 3,467 2,988 TruBridge Net new(3) 4,794 2,997 6,278 6,811 Cross-sell(3) 2,824 4,301 8,398 15,315 Get Real Health 5,352 462 6,760 1,050 TruCode 103 - 573 - Total $ 29,322 $ 21,475 $ 54,650 $ 60,822 (1) Represents nonrecurring revenues that generally exhibit a timeframe for bookings-to-revenue conversion of five to six months following contract execution. (2) Represents recurring revenues to be recognized on a monthly basis over a weighted-average contract period of five years, with a start date in the next 12 months and an average timeframe for commencement of bookings-to-revenue conversion of five to six months following contract execution. (3) “Net new” represents bookings from outside the Company’s core EHR client base, and “Cross-sell” represents bookings from existing EHR customers. In each case, generally comprised of recurring revenues to be recognized ratably over a one-year period and an average timeframe for commencement of bookings-to-revenue conversion of four to six months following contract execution. Computer Programs and Systems, Inc. Acute Care EHR Net New License Mix Three Months Ended Nine Months Ended 9/30/2021 9/30/2020 9/30/2021 9/30/2020 SaaS(1) 2 3 8 14 Perpetual license(2) 3 5 6 8 Total 5 8 14 22 Exhibit revenue attribution that is recurring in nature. Exhibit revenue attribution that is nonrecurring in nature. Computer Programs and Systems, Inc. Reconciliation of Non-GAAP Financial Measures (in '000s) (unaudited) Three Months Ended September 30, Nine Months Ended September 30, Adjusted EBITDA: 2021 2020 2021 2020 Net income, as reported $ 2,744 $ 5,268 $ 13,029 $ 11,123 Deferred revenue and other acquisition-related adjustments 388 - 546 - Depreciation expense 525 442 1,641 1,334 Amortization of software development costs 262 24 527 79 Amortization of acquisition-related intangible assets 3,674 2,866 10,114 8,599 Stock-based compensation 1,700 1,564 4,178 5,174 Severance and other nonrecurring charges 1,157 711 4,164 816 Interest expense and other, net 702 (66) 1,089 1,793 Provision for income taxes 1,085 1,002 3,065 2,165 Adjusted EBITDA $ 12,237 $ 11,811 $ 38,353 $ 31,083 Computer Programs and Systems, Inc. Reconciliation of Non-GAAP Financial Measures (in '000s, except per share data) (unaudited) Three Months Ended September 30, Nine Months Ended September 30, Non-GAAP Net Income and Non-GAAP EPS: 2021 2020 2021 2020 Net income, as reported $ 2,744 $ 5,268 $ 13,029 $ 11,123 Pre-tax adjustments for Non-GAAP EPS: Deferred revenue and other acquisition-related adjustments 388 - 546 - Amortization of acquisition-related intangible assets 3,674 2,866 10,114 8,599 Stock-based compensation 1,700 1,564 4,178 5,174 Severance and other nonrecurring charges 1,157 711 4,164 816 Non-operating loss from lease termination (non-cash) 313 - 313 - Non-cash interest expense 73 73 220 242 Loss on extinguishment of debt - - - 202 After-tax adjustments for Non-GAAP EPS: Tax-effect of pre-tax adjustments, at 21% (1,534) (1,095) (4,102) (3,157) Tax shortfall (windfall) from stock-based compensation - - (84) 299 Non-GAAP net income $ 8,515 $ 9,387 $ 28,378 $ 23,298 Weighted average shares outstanding, diluted 14,342 14,095 14,303 14,022 Non-GAAP EPS $ 0.59 $ 0.67 $ 1.98 $ 1.66 Explanation of Non-GAAP Financial Measures We report our financial results in accordance with accounting principles generally accepted in the United States of America, or “GAAP.” However, management believes that, in order to properly understand our short-term and long-term financial and operational trends, investors may wish to consider the impact of certain non-cash or non-recurring items, when used as a supplement to financial performance measures that are prepared in accordance with GAAP. These items result from facts and circumstances that vary in frequency and impact on continuing operations. Management uses these non-GAAP financial measures in order to evaluate the operating performance of the Company and compare it against past periods, make operating decisions, and serve as a basis for strategic planning. These non-GAAP financial measures provide management with additional means to understand and evaluate the operating results and trends in our ongoing business by eliminating certain non-cash expenses and other items that management believes might otherwise make comparisons of our ongoing business with prior periods more difficult, obscure trends in ongoing operations, or reduce management’s ability to make useful forecasts. In addition, management understands that some investors and financial analysts find these non-GAAP financial measures helpful in analyzing our financial and operational performance and comparing this performance to our peers and competitors. As such, to supplement the GAAP information provided, we present in this press release and during the live webcast discussing our financial results the following nonGAAP financial measures: Adjusted EBITDA, Non-GAAP net income, and Non-GAAP earnings per share (“EPS”). We calculate each of these non-GAAP financial measures as follows: Adjusted EBITDA – Adjusted EBITDA consists of GAAP net income as reported and adjusts for (i) deferred revenue and other adjustments arising from purchase allocation adjustments related to business acquisitions; (ii) depreciation expense; (iii) amortization of software development costs; (vi) amortization of acquisition-related intangible assets; (v) stock-based compensation; (vi) severance and other nonrecurring charges; (vii) interest expense and other, net; and (viii) the provision for income taxes. Non-GAAP net income – Non-GAAP net income consists of GAAP net income as reported and adjusts for (i) deferred revenue and other adjustments arising from purchase allocation adjustments related to business acquisitions; (ii) amortization of acquisition-related intangible assets; (iii) stock-based compensation; (iv) severance and other non-recurring charges; (v) non-operating loss from lease termination (non-cash); (vi) non-cash interest expense; (vii) loss on extinguishment of debt; and (viii) the total tax effect of items (i) through (vii). Adjustments to Non-GAAP net income also include the after-tax effect of the shortfall (windfall) from stock-based compensation. Non-GAAP EPS – Non-GAAP EPS consists of Non-GAAP net income, as defined above, divided by weighted average shares outstanding (diluted) in the applicable period. Certain of the items excluded or adjusted to arrive at these non-GAAP financial measures are described below: Deferred revenue and other adjustments - Deferred revenue and other adjustments includes acquisition-related deferred revenue adjustments, which reflect the fair value adjustments to deferred revenues acquired in business acquisitions. The fair value of deferred revenue represents an amount equivalent to the estimated cost plus an appropriate profit margin, to perform services related to the acquiree’s software and product support, which assumes a legal obligation to do so, based on the deferred revenue balances as of the acquisition date. We add back deferred revenue and other adjustments for non-GAAP financial measures because we believe the inclusion of this amount directly correlates to the underlying performance of our operations. Amortization of acquisition-related intangible assets – Acquisition-related amortization expense is a non-cash expense arising primarily from the acquisition of intangible assets in connection with acquisitions or investments. We exclude acquisition-related amortization expense from non-GAAP financial measures because we believe (i) the amount of such expenses in any specific period may not directly correlate to the underlying performance of our business operations and (ii) such expenses can vary significantly between periods as a result of new acquisitions and full amortization of previously acquired intangible assets. Investors should note that the use of these intangible assets contributed to revenue in the periods presented and will contribute to future revenue generation, and the related amortization expense will recur in future periods. Stock-based compensation – Stock-based compensation expense is a non-cash expense arising from the grant of stock-based awards. We exclude stock-based compensation expense from non-GAAP financial measures because we believe (i) the amount of such expenses in any specific period may not directly correlate to the underlying performance of our business operations and (ii) such expenses can vary significantly between periods as a result of the timing and valuation of grants of new stock-based awards, including grants in connection with acquisitions. Investors should note that stock-based compensation is a key incentive offered to employees whose efforts contributed to the operating results in the periods presented and are expected to contribute to operating results in future periods, and such expense will recur in future periods. Severance and other non-recurring charges – Non-recurring charges relate to certain severance and other charges incurred in connection with activities that are considered one-time. We exclude non-recurring expenses (primarily related to costs associated with our recent business transformation initiative and one-time lease terminations costs) and transaction-related costs from non-GAAP financial measures because we believe (i) the amount of such expenses in any specific period may not directly correlate to the underlying performance of our business operations and (ii) such expenses can vary significantly between periods. Non-operating loss from lease termination (non-cash) – Non-operating loss from lease termination relates solely to the write-off of the remaining net book value of leasehold improvements and other property and equipment associated with operating leases terminated as a result of specific actions taken during the period. We exclude such non-operating lease termination losses from non-GAAP financial measures because we believe (i) the amount of such expenses in any specific period may not directly correlate to the underlying performance of our business operations and (ii) such expenses can vary significantly between periods. Non-cash interest expense – Non-cash interest expense includes amortization of deferred debt issuance costs. We exclude non-cash interest expense from non-GAAP financial measures because we believe these non-cash amounts relate to specific transactions and, as such, may not directly correlate to the underlying performance of our business operations. Tax shortfall (excess tax benefit) from stock-based compensation – ASU 2016-09, Improvements to Employee Share-Based Payment Accounting, became effective for the Company during the first quarter of 2017 and changes the treatment of tax shortfall and excess tax benefits arising from stockbased compensation arrangements. Prior to ASU 2016-09, these amounts were recorded as an increase (for excess benefits) or decrease (for shortfalls) to additional paid-in capital. With the adoption of ASU 2016-09, these amounts are now captured in the period’s income tax expense. We exclude this component of income tax expense from non-GAAP financial measures because we believe (i) the amount of such expenses or benefits in any specific period may not directly correlate to the underlying performance of our business operations; and (ii) such expenses or benefits can vary significantly between periods as a result of the valuation of grants of new stock-based awards, the timing of vesting of awards, and periodic movements in the fair value of our common stock. Management considers these non-GAAP financial measures to be important indicators of our operational strength and performance of our business and a good measure of our historical operating trends, in particular the extent to which ongoing operations impact our overall financial performance. In addition, management may use Adjusted EBITDA, Non-GAAP net income and/or Non-GAAP EPS to measure the achievement of performance objectives under the Company’s stock and cash incentive programs. Note, however, that these non-GAAP financial measures are performance measures only, and they do not provide any measure of cash flow or liquidity. Non-GAAP financial measures are not alternatives for measures of financial performance prepared in accordance with GAAP and may be different from similarly titled non-GAAP measures presented by other companies, limiting their usefulness as comparative measures. Non-GAAP financial measures have limitations in that they do not reflect all of the amounts associated with our results of operations as determined in accordance with GAAP. Additionally, there is no certainty that we will not incur expenses in the future that are similar to those excluded in the calculations of the non-GAAP financial measures presented in this press release. Investors and potential investors are encouraged to review the “Unaudited Reconciliation of NonGAAP Financial Measures” above. CONTACT Tracey Schroeder Chief Marketing Officer Tracey.schroeder@cpsi.com (251) 639-8100 The CPSI family of companies Follow us Facebook Twitter LinkedIn How You Benefit Acute & Ambulatory Post-Acute Patient Engagement Business, Consulting and IT Services Who We Are Executive Management and Board Members Our History Resources News Product Certification Details Investors HIPAA Legal Privacy Careers Contact ©2021 CPSI. All rights reserved.