CPSI Announces First Quarter 2019 Results

Highlights for First Quarter 2019:

• Revenues of $69.1 million;
• GAAP net income of $3.4 million and non-GAAP net income of $8.4
  million;
• Adjusted EBITDA of $12.5 million;
• Cash provided by operations of $7.9 million;
• GAAP earnings per diluted share of $0.24 and non-GAAP earnings per
  diluted share of $0.62; and
• Quarterly dividend of $0.10 per share.

MOBILE, Ala.–(BUSINESS WIRE)–lt;a href=”https://twitter.com/search?q=%24CPSI&src=ctag” target=”_blank”gt;$CPSIlt;/agt;–CPSI (NASDAQ: CPSI), a community healthcare solutions company, today
announced results for the first quarter ended March 31, 2019.

The Company also announced that its Board of Directors has declared a
quarterly cash dividend of $0.10 per share, payable on May 31, 2019, to
stockholders of record as of the close of business on May 16, 2019.

Total revenues for the first quarter ended March 31, 2019, were $69.1
million, compared with total revenues of $70.9 million for the
prior-year first quarter. GAAP net income for the quarter ended
March 31, 2019, was $3.4 million, or $0.24 per diluted share, compared
with $4.0 million, or $0.29 per diluted share, for the quarter ended
March 31, 2018. Cash provided by operations for the first quarter of
2019 was $7.9 million, compared with $3.1 million for the prior-year
period.

“Our earnings results for the first quarter of 2019 reflect on-going
initiatives to improve our operating efficiencies,” said Boyd Douglas,
president and chief executive officer of CPSI. “While overall bookings
were light this quarter, the sales pipeline for TruBridge services and
competitive takeaway sales of electronic health record (EHR) systems in
the acute-care market remains healthy.”

Commenting on the Company’s financial performance for the quarter, Matt
Chambless, chief financial officer of CPSI, stated, “The efforts we’ve
undertaken over the past twelve months to right-size our cost structure
by more than $10 million have been well-timed, mitigating revenue
fluctuation to achieve an increase in non-GAAP EPS of 5.0% over the
first quarter of 2018. We continuously look for ways to optimize our
resources and have identified an incremental $3 million of annual cost
savings that we have largely already executed against. Lastly, the
strong operating cash flow this quarter also allowed for further
deleveraging, enhancing the flexibility in our capital structure.”

Douglas added, “Looking ahead, our previously announced agreement to
acquire Get Real Health will help accelerate our entry into the patient
engagement market, expand cross-sell opportunities into our client base,
and drive incremental cost savings in 2019 associated with development
and third-party costs.”

CPSI will hold a live webcast to discuss first quarter 2019 results
today, Thursday, May 2, 2019, 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 three companies – Evident, LLC,
American HealthTech, Inc. and TruBridge, 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. For more
information, visit www.cpsi.com.

Forward-Looking Statements

This press release contains forward-looking statements within the
meaning of the “safe harbor” provisions of the Private Securities
Litigation Reform Act of 1995. These forward-looking statements can be
identified generally by the use of forward-looking terminology and words
such as “expects,” “anticipates,” “estimates,” “believes,” “predicts,”
“intends,” “plans,” “potential,” “may,” “continue,” “should,” “will” and
words of comparable meaning. Without limiting the generality of the
preceding statement, all statements in this press release relating to
estimated and projected earnings, leverage ratio, margins, costs,
expenditures, cash flows, growth rates, the Company’s level of
recurring and non-recurring revenue and backlog, the Company’s
shareholder returns and future financial results are forward-looking
statements. We caution investors that any such forward-looking
statements are only predictions and are not guarantees of future
performance. Certain risks, uncertainties and other factors may cause
actual results to differ materially from those projected in the
forward-looking statements. Such factors may include: overall business
and economic conditions affecting the healthcare industry, including the
effects of the federal healthcare reform legislation enacted in 2010,
and implementing regulations, on the businesses of our hospital
customers; government regulation of our products and services and the
healthcare and health insurance industries, including changes in
healthcare policy affecting Medicare and Medicaid
reimbursement rates and qualifying technological standards; changes
in customer purchasing priorities, capital expenditures and demand for
information technology systems; saturation of our target market and
hospital consolidations; general economic conditions, including changes
in the financial and credit markets that may affect the availability and
cost of credit to us or our customers; our substantial indebtedness, and
our ability to incur additional indebtedness in the future; our
potential inability to generate sufficient cash in order to meet our
debt service obligations; restrictions on our current and future
operations because of the terms of our senior secured credit facilities;
market risks related to interest rate changes; competition with
companies that have greater financial, technical and marketing resources
than we have; failure to develop new technology and products in response
to market demands; failure of our products to function properly
resulting in claims for medical and other losses; breaches of security
and viruses in our systems resulting in customer claims against us and
harm to our reputation; failure to maintain customer satisfaction
through new product releases free of undetected errors or problems;
failure to convince customers to migrate to current or future releases
of our products; interruptions in our power supply and/or
telecommunications capabilities, including those caused by natural
disaster; our ability to attract and retain qualified client service and
support personnel; failure to properly manage growth in new markets we
may enter; misappropriation of our intellectual property rights and
potential intellectual property claims and litigation against us;
changes in accounting principles generally accepted in the United
States; significant charges to earnings if our goodwill or intangible
assets become impaired; fluctuations in quarterly financial performance
due to, among other factors, timing of customer installations; and other
risk factors described from time to time in our public releases and
reports filed with the Securities and Exchange Commission,
including, but not limited to, our most recent Annual Report on Form
10-K. Relative to our dividend policy, the payment of cash dividends is
subject to the discretion of our Board of Directors and will be
determined in light of then-current conditions, including our earnings,
our leverage, our operations, our financial conditions, our capital
requirements and other factors deemed relevant by our Board of
Directors. In the future, our Board of Directors may change our dividend
policy, including the frequency or amount of any dividend, in light of
then-existing conditions. We also caution investors that the
forward-looking information described herein represents our outlook only
as of this date, and we undertake no obligation to update or revise any
forward-looking statements to reflect events or developments after the
date of this press release.

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 the following non-GAAP 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 (loss) as reported and adjusts for (i)
  depreciation; (ii) amortization of acquisition-related intangible
  assets; (iii) stock-based compensation; (iv) severance and other
  non-recurring expenses; (v) interest expense and other, net; and (vi)
  the provision for income taxes.
• Non-GAAP net income – Non-GAAP net income
  consists of GAAP net income (loss) as reported and adjusts for (i)
  amortization of acquisition-related intangible assets; (ii)
  stock-based compensation; (iii) severance and other non-recurring
  expenses; (iv) non-cash charges to interest expense; and (v) the total
  tax effect of items (i) through (vi). Adjustments to Non-GAAP net
  income also include the after-tax effect of the shortfall from
  stock-based compensation, recent tax reform legislation, and changes
  in valuation allowances for certain state NOLs acquired in the
  Healthland acquisition.
• 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:

• 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 expenses –
  Non-recurring expenses relate to certain severance and other charges
  incurred in connection with activities that are considered one-time.
  We exclude non-recurring expenses 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-cash charges to interest expense and other
  – Non-cash charges to interest expense and other includes amortization
  of deferred debt issuance costs. We exclude non-cash charges to
  interest expense and other 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 stock-based
  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; (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; and (iii) excluding these amounts assists in the comparability
  between current period results and results during periods prior to the
  adoption of ASU 2016-09.
• Tax reform effects – The enactment of the
  Tax Cuts and Jobs Act on December 22, 2017 resulted in a one-time
  adjustment to deferred tax positions carried on our balance sheet to
  reflect the reduced federal tax rate at which these temporary items
  are expected to reverse, with a resulting non-recurring impact to that
  period’s income tax expense. We exclude tax reform’s effects on income
  tax expense from non-GAAP net income because we believe such amounts
  (i) are nonrecurring in nature and (ii) are not indicative of that
  period’s underlying performance or ongoing operations.

• Valuation allowance for state NOLs – As
  part of the Healthland acquisition, we acquired certain state NOLs for
  which a valuation allowance was established in purchase accounting
  related to states which do not permit consolidated returns and for
  which projected taxable income results in a conclusion that some of
  these NOLs will expire unused. We exclude the impact on our periodic
  income tax expense arising from changes in these valuation allowances
  as we believe such amounts (i) are nonrecurring in nature and (ii) are
  not indicative of that period’s underlying performance or ongoing
  operations.

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.

Contacts

Tracey Schroeder
Chief Marketing Officer
Tracey.schroeder@cpsi.com
(251)
639-8100

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