Business Overview

Founded in 1979, CPSI has a long history of providing comprehensive acute care EHR solutions and related services for community hospitals, their physician clinics, and skilled nursing and assisted living facilities. In recent years, the company has expanded its offerings to include a suite of RCM services, including accounts receivable management, private pay services, insurance services, medical coding, electronic billing, statement processing, payroll processing, and contract management.

CPSI operates its business in three reportable segments: RCM, EHR, and Patient Engagement. The RCM segment focuses on providing business management, consulting, and managed IT services, along with its complete RCM solution for all care settings, regardless of their primary healthcare information solutions provider. The EHR segment provides comprehensive acute care EHR solutions and related services for community hospitals, their physician clinics, and skilled nursing and assisted living facilities. The Patient Engagement segment offers comprehensive patient engagement and empowerment technology solutions through its Get Real Health subsidiary to improve patient outcomes and engagement strategies with care providers.

CPSI's target market for its RCM, EHR, and Patient Engagement solutions includes community hospitals with fewer than 400 acute care beds and their clinics, as well as independent or small to medium-sized chains of skilled nursing facilities. Notably, 98% of the company's acute care hospital EHR customer base is comprised of hospitals with fewer than 100 beds.

Financials

For the full year 2023, CPSI reported annual revenue of $326.6 million and net income of $15.9 million. The company's annual operating cash flow was $32.4 million, and its annual free cash flow was $13.0 million.

In the fourth quarter of 2023, CPSI generated revenue of $85.9 million, with RCM accounting for 59% of total revenue and crossing the $50 million threshold for the first time. The company's RCM segment, including the recent acquisition of Viewgol, LLC, grew by 9% year-over-year in the fourth quarter. However, the EHR segment experienced a decline, primarily due to the impact of sunsetting the Centric platform.

CPSI's fourth quarter 2023 adjusted EBITDA was $12.0 million, representing a 14% adjusted EBITDA margin, a decrease of 190 basis points year-over-year. The decline in adjusted EBITDA margin was primarily due to increased investments in sales and marketing, cloud migration, and technology resources for future growth, partially offset by savings associated with the company's voluntary employment retirement program and lower bonus accruals.

Liquidity

As of December 31, 2023, CPSI had a cash balance of $3.8 million and net debt of $194.5 million. The company's credit facilities, which were recently amended, provide for a $70 million term loan facility and a $160 million revolving credit facility, with the ability to access an additional $75 million in incremental facility capacity, subject to certain conditions.

CPSI's capital allocation strategy has been focused on strategic acquisitions, such as the October 2023 acquisition of Viewgol, LLC, a provider of ambulatory RCM analytics and complementary outsourcing services. The company has also been actively managing its capital structure, including the recent divestiture of its American HealthTech, Inc. (AHT) subsidiary, which allowed CPSI to focus more acutely on its core market of small to midsized hospitals.

Guidance and Outlook

For the first quarter of 2024, CPSI expects revenue to be in the range of $82 million to $84 million and adjusted EBITDA to be between $8.5 million and $9.5 million. For the full year 2024, the company expects revenue of $340 million to $350 million and adjusted EBITDA of $45 million to $50 million.

The company's guidance assumes the impact of the AHT divestiture, with only 15 days of AHT revenue and EBITDA contribution included in the first quarter of 2024. Additionally, the full-year 2024 guidance includes a contribution of less than $20 million in revenue and approximately $4.5 million in adjusted EBITDA from the Viewgol acquisition.

CPSI has taken a conservative approach to its 2024 bookings guidance, assuming relatively flat performance compared to 2023, excluding the impact of AHT and Viewgol. The company expects the first quarter to be the lowest of the year in terms of bookings and adjusted EBITDA margin, with improvements throughout the year as the benefits from the Viewgol integration, vendor savings, and increased offshore workforce utilization are realized.

Risks and Challenges

CPSI faces several risks and challenges in its transformation, including the ongoing shift in customer preferences towards subscription-based "Software as a Service" (SaaS) arrangements, which can create short-term pressure on revenue and profitability metrics. The company also faces competition from larger healthcare IT providers, as well as the potential for regulatory changes in the healthcare industry that could impact its customer base.

Additionally, CPSI's integration of the Viewgol acquisition and the transition to a more globally distributed workforce may present operational and financial challenges in the near term, as the company works to maintain service levels for its existing customers while scaling its offshore capabilities.

Conclusion

CPSI, soon to be known as TruBridge, Inc., is a healthcare technology and services company that has undergone a significant transformation in recent years, shifting its strategic focus towards the growing RCM services market. The company's comprehensive suite of RCM, EHR, and Patient Engagement solutions cater to the needs of community hospitals and other healthcare providers, positioning it as a valuable partner in an evolving healthcare landscape.

Despite the challenges of the ongoing transformation, CPSI's strong market position, diversified revenue streams, and strategic initiatives, such as the Viewgol acquisition and the AHT divestiture, suggest a promising outlook for the company's future growth and profitability. As the company continues to execute on its strategic priorities and leverage its technological capabilities, investors may find CPSI's story compelling as it solidifies its position as a leading provider of healthcare technology and services.

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