COMPUTER PROGRAMS & SYSTEMS INC Management’s report and analysis of financial condition and operating results. (Form 10-Q)

0
You should read the following discussion and analysis of our financial condition
and results of operations together with the unaudited condensed consolidated
financial statements and related notes appearing elsewhere herein.

This discussion and analysis 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 report relating to estimated and projected earnings, margins,
costs, expenditures, cash flows, growth rates 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:

Risks Related to Our Industry
•the ongoing COVID-19 pandemic and related economic disruption;
•saturation of our target market and hospital consolidations;
•unfavorable economic or market conditions that may cause a decline in spending
for information technology and services;
•significant legislative and regulatory uncertainty in the healthcare industry;
•exposure to liability for failure to comply with regulatory requirements;

Risks Related to Our Business
•competition with companies that have greater financial, technical and marketing
resources than we have;
•potential future acquisitions that may be expensive, time consuming, and
subject to other inherent risks;
•our ability to attract and retain qualified client service and support
personnel;
•disruption from periodic restructuring of our sales force;
•our potential inability to manage our growth in the new markets we may enter;
•exposure to numerous and often conflicting laws, regulations, policies,
standards or other requirements through our international business activities;
•potential litigation against us;
•our use of offshore third-party resources;

Risks Related to Our Products and Services
•potential failure to develop new products or enhance current products that keep
pace with market demands;
•exposure to claims if our products fail to provide accurate and timely
information for clinical decision-making;
•exposure to claims for breaches of security and viruses in our systems;
•undetected errors or problems in new products or enhancements;
•our potential inability to convince customers to migrate to current or future
releases of our products;
•failure to maintain our margins and service rates;
•increase in the percentage of total revenues represented by service revenues,
which have lower gross margins;
•exposure to liability in the event we provide inaccurate claims data to payors;
•exposure to liability claims arising out of the licensing of our software and
provision of services;
•dependence on licenses of rights, products and services from third parties;
•a failure to protect our intellectual property rights;
•exposure to significant license fees or damages for intellectual property
infringement;
•service interruptions resulting from loss of power and/or telecommunications
capabilities;

Risks Related to Our Indebtedness
•our potential inability to secure additional financing on favorable terms to
meet our future capital needs;
•substantial indebtedness that may adversely affect our business operations;
•our ability to incur substantially more debt;
•pressures on cash flow to service our outstanding debt;
•restrictive terms of our credit agreement on our current and future operations;

Risks Related to Our Common Stock and Other General Risks • changes and interpretations of financial accounting issues that govern the measurement of our performance;

                                       26
--------------------------------------------------------------------------------
•the potential for our goodwill or intangible assets to become impaired;
•quarterly fluctuations in our financial results due to various factors;
•volatility in our stock price;
•failure to maintain effective internal control over financial reporting;
•lack of employment or non-competition agreements with most of our key
personnel;
•inherent limitations in our internal control over financial reporting;
•vulnerability to significant damage from natural disasters; and
•exposure to market risk related to interest rate changes.

Additional information regarding these and other factors that could cause the forward-looking statements to differ from actual future results is set forth under the heading “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended. December 31, 2021.

Background

CPSI is a leading provider of healthcare solutions and services for community
hospitals and other healthcare systems and post-acute care facilities. Founded
in 1979, CPSI offers its products and services through six companies -
TruBridge, LLC ("TruBridge"), Evident, LLC ("Evident"), American HealthTech,
Inc. ("AHT"), iNetXperts, Corp. d/b/a Get Real Health ("Get Real Health"),
TruCode LLC ("TruCode"), and Healthcare Resource Group, Inc. ("HRG"). These
combined companies are focused on improving the health of the communities we
serve, connecting communities for a better patient care experience, and
improving the financial operations of our clients. The individual contributions
of each of these companies towards this combined focus are as follows:

•TruBridge provides business management, consulting, and managed IT services
along with its complete revenue cycle management ("RCM") solution for all care
settings, regardless of their primary healthcare information solutions provider.

• Evident, which is our acute care EHR reporting segment, provides comprehensive electronic health record (“EHR”) solutions for acute care, Thrive and
Centriqand related services for community hospitals and their medical clinics.

• AHT, which is our post-acute care EHR reporting segment, provides a comprehensive post-acute care EHR solution and associated services for skilled nursing and assisted living facilities.

• Get Real Health, included in our TruBridge segment, provides technology solutions to improve patient outcomes and engagement strategies with healthcare providers.

•TruCode, included in our TruBridge segment, provides configurable knowledge-based software that gives coders, CDI specialists, and auditors the flexibility to code based on their knowledge, preferences, and experience.

•HRG, included within our TruBridge segment, provides customized RCM solutions
and consulting services that enable hospitals and clinics to improve efficiency,
profitability, and patient satisfaction.

Our companies currently support acute care facilities and post-acute care
facilities with a geographically diverse customer mix within the domestic
community healthcare market. Our target market for our TruBridge services
includes community hospitals with fewer than 600 acute care beds. Our target
market for our acute care solutions includes community hospitals with fewer than
200 acute care beds. Our primary focus within this defined target market is on
hospitals with fewer than 100 beds, which comprise approximately 98% of our
acute care hospital EHR client base. The target market for our post-acute care
solutions consists of approximately 15,500 skilled nursing facilities that are
either independently owned or part of a larger management group with multiple
facilities.

See Note 17 to the condensed consolidated financial statements included herein for additional information on our three reportable segments.

Management Overview

Strategy

Our core strategy is to achieve meaningful long-term revenue growth by
cross-selling TruBridge services into our existing EHR customer base, expanding
TruBridge market share with sales to new community hospitals and larger health
systems, and pursuing competitive EHR takeaway opportunities in the acute and
post-acute markets. We may also seek to grow through acquisitions of businesses,
technologies or products if we determine that such acquisitions are likely to
help us meet our strategic goals.


                                       27
--------------------------------------------------------------------------------
The opportunity to cross-sell TruBridge services is greatest within our Acute
Care EHR customer base. As such, retention of existing Acute Care EHR customers
is a key component of our long-term growth strategy by protecting this base of
potential TruBridge customers, while at the same time serving as a leading
indicator of our market position and stability of revenues and cash flows.

We determine retention rates by reference to the amount of beginning-of-period
Acute Care EHR recurring revenues that have not been lost due to customer
attrition from our production environment customer base. Production environment
customers are those that are using our applications to document live patient
encounters, as opposed to legacy environment customers that have view-only
access to historical patient records. Historically, these retention rates had
consistently remained in the mid-to-high 90th percentile ranges and have not
materially deviated from this range during 2021 or the first six months of 2022.

As we pursue meaningful long-term revenue growth by leveraging TruBridge as a
growth agent, we are placing ever-increasing value in further developing our
already significant recurring revenue base to further stabilize our revenues and
cash flows. As such, maintaining and growing recurring revenues are key
components of our long-term growth strategy, aided by the aforementioned focus
on customer retention. This includes a renewed focus on driving demand for
subscriptions for our existing technology solutions and expanding the footprint
for TruBridge services beyond our EHR customer base.

While the combination of revenue growth and operating leverage results in increased margin realization, we are also looking to increase margins through specific cost containment measures, where appropriate, while continuing to take advantage of opportunities for greater operational efficiency. However, in the immediate term, we expect additional pressure on margins as customers continue to transition from perpetual license agreements to “software as a service” agreements, as described below.

Industry dynamics

Turbulence in the U.S. and worldwide economies and financial markets impacts
almost all industries. While the healthcare industry is not immune to economic
cycles, we believe it is more significantly affected by U.S. regulatory and
national health initiatives. In recent years, there have been significant
changes to provider reimbursement by the U.S. federal government, followed by
commercial payers and state governments. There is increasing pressure on
healthcare organizations to reduce costs and increase quality while replacing
the fee-for-service reimbursement model in part by enrolling in an advanced
payment model that incentivizes high-quality, cost effective-care via
value-based reimbursement. This pressure could further encourage adoption of
healthcare IT and increase demand for business management, consulting, and
managed IT services, as the future success of these healthcare providers is
greatly dependent upon their ability to engage patient populations and to
coordinate patient care across a multitude of settings, while optimizing
operating efficiency along the way.

Additionally, healthcare organizations with a large dependency on Medicare and
Medicaid populations, such as community hospitals, have been affected by the
challenging financial condition of the federal government and many state
governments and government programs. Accordingly, we recognize that prospective
hospital clients often do not have the necessary capital to make investments in
information technology while those with the necessary capital have become more
selective in their investments. Despite these challenges, we believe healthcare
IT will be an area of continued investment due to its unique potential to
improve safety and efficiency and reduce costs while meeting current and future
regulatory, compliance and government reimbursement requirements.

Licensing Model Preferences

Much of the variability in our periodic revenues and profitability has been and
will continue to be due to changing demand for different license models for our
technology solutions, with variability in operating cash flows further impacted
by the financing decisions within those license models. Our technology solutions
are generally deployed in one of two license models: (1) perpetual licenses, for
which the related revenue is recognized effectively upon installation, and (2)
"Software as a Service" or "SaaS" arrangements, including our Cloud Electronic
Health Record ("Cloud EHR") offering, which generally result in revenue being
recognized monthly as the services are provided over the term of the
arrangement.

The overwhelming majority of our historical installations have been under a
perpetual license model, but new customer demand has dramatically shifted
towards a SaaS license model in the past several years. SaaS license models made
up 12% of annual new acute care EHR installations in 2018, increasing to 63%
during 2021 and 100% for the first six months of 2022. These SaaS offerings are
becoming increasingly attractive to our clients because this configuration
allows them to obtain access to advanced software products without a significant
initial capital outlay. We expect this trend to continue for the foreseeable
future, with the resulting impact on the Company's financial statements being
reduced system sales revenues in the period of installation in exchange for
increased recurring periodic revenues (reflected in system sales and support
revenues) over the term of the SaaS arrangement. This naturally places downward
pressure on short-term revenue growth and profitability metrics, but benefits
long-term revenue growth and profitability which, in our view, is consistent
with our goal of delivering long-term shareholder value.


                                       28
--------------------------------------------------------------------------------
For customers electing to purchase our technology solutions under a perpetual
license, we have historically made financing arrangements available on a
case-by-case basis, depending on the various aspects of the proposed contract
and customer attributes. These financing arrangements continue to comprise the
majority of our perpetual license installations, and include short-term payment
plans and longer-term lease financing through us or third-party financing
companies. The aforementioned shift in customer preference towards SaaS
arrangements has significantly reduced the frequency of new financing
arrangements for customer purchases under a perpetual license. When combined
with scheduled payments on existing financing arrangements, the reduced
frequency of new financing arrangements has resulted in a substantial reduction
in financing receivables during 2021 and the first six months of 2022.

For those perpetual license clients not seeking a financing arrangement, the
payment schedule of the typical contract is structured to provide for a
scheduling deposit due at contract signing, with the remainder of the contracted
fees due at various stages of the installation process (delivery of hardware,
installation of software and commencement of training, and satisfactory
completion of a monthly accounting cycle or end-of-month operation by each
respective application, as applicable).

Margin optimization efforts

Our core growth strategy includes an element geared towards margin optimization
by identifying opportunities to further improve our cost structure by executing
against initiatives related to organizational realignment, expanded use of
offshore partnerships and the use of automation to increase the efficiency and
value of our associates' efforts.

Regarding the organizational realignment, on February 1, 2021, we committed to a
reduction in force that resulted in the termination of approximately 1.0% of our
workforce (21 employees). The reduction in force was a component of a broader
strategic review of the Company's operations that was intended to more
effectively align our resources with business priorities. Substantially all of
the employees impacted by the reduction in force exited the Company in the first
quarter of 2021, with the last of the impacted employees exiting in the third
quarter of 2021. The Company incurred expenses of approximately $2.7 million
related to the reduction in force. These expenses consisted of one-time
termination benefits to the affected employees, including but not limited to
severance payments, healthcare benefits, and payments for accrued vacation time.
As a result of the reduction in force, the Company realized approximately $3.9
million in annual savings compared to prior expense levels.

The remaining margin optimization initiatives of enhanced leveraging of offshore
partnerships and automation have commenced and, to date, have provided
meaningful efficiencies to our operations, particularly within TruBridge. As a
service organization, TruBridge's cost structure is heavily dependent upon human
capital, subjecting TruBridge to the complexities and risks associated with this
resource. Chief among these complexities and risks is the ever-present pressure
of wage inflation, which has recently become a reality as national and
international economies recover from the economic downturn caused by the
COVID-19 pandemic and has compelled the Company to make compensation adjustments
that are outside of historical norms. We believe that our efforts towards margin
optimization are well-timed, enabling a rapid response to actual or expected
wage inflation in order to preserve TruBridge gross margins, but we cannot
guarantee that these efforts will fully eliminate any related margin
deterioration.

In addition to wage inflation, we are party to contracts with certain third-party suppliers and vendors that allow for annual inflation-indexed price adjustments. As we continually seek to proactively manage controllable expenses, inflationary pressure on costs could lead to margin erosion.

Labor Capitalization

During the second quarter of 2021, our ongoing monitoring activities associated
with the capitalization of software development costs and the related
correlation between capitalization rates and operational metrics designed to
reflect the distribution of work revealed that our then-current labor
capitalization methodology did not fully reflect all of the critical activities
necessary to develop software assets. Consequently, during the second quarter of
2021, we elected to change our method of estimating the labor costs incurred in
developing software assets requiring capitalization under ASC 350-40, Internal
Use of Software. Prior to this change, we estimated the associated labor costs
using an estimated time-equivalent for workload metrics commonly utilized within
agile software development environments. With this change, we now estimate these
labor costs using the distribution of these agile workload metrics between
capitalizable and non-capitalizable units of work. We believe this change is
preferable as the new methodology better estimates capitalizable labor costs and
is consistent with industry best practices. We have determined that this change
in accounting for software development costs is a change in accounting estimate
effected by a change in accounting principle and, as such, has been accounted
for on a prospective basis. In connection with this change, we capitalized $8.8
million of software development costs during 2021. We estimate that the effect
of this change was to increase capitalized amounts by approximately $4.6 million
during 2021 with a corresponding decrease to product development costs. The
additional capitalized amounts will be amortized over an average of 5 years,
leading to increased amortization expense in future years.


                                       29
--------------------------------------------------------------------------------





COVID-19

The impact of the COVID-19 pandemic on our operations has been broad-sweeping,
most notably causing severe deterioration in United States community hospital
patient volumes that negatively impacted the revenues, gross margins, and income
of our TruBridge service offerings. While patient volumes have continued to
recover and are largely in line with pre-COVID-19 levels, the impact of the
COVID-19 pandemic is fluid and continues to evolve. We cannot predict the extent
to which our business, results of operations, financial condition or liquidity
will ultimately be impacted, including as a result of macro-economic impacts to
the global supply chain, labor shortages, and inflationary pressures. However,
we continue to assess its impact on our business and continue to actively manage
our response. For further details on the potential impact of COVID-19 on our
business, refer to "Risk Factors," in Part I, Item 1A of our Annual Report on
Form 10-K for the fiscal year ended December 31, 2021.

Operating results

During the first six months of 2022, we generated revenues of $160.6 million
from the sale of our products and services, compared to $136.5 million during
the first six months of 2021, an increase of 18% that is due to the combination
of inorganic growth through our recent acquisitions of TruCode and HRG and
organic growth for TruBridge as revenue cycle solutions continue to gain
traction in the domestic healthcare landscape. This increase in revenues is the
primary driver behind the corresponding increase in net income, which increased
by $0.9 to $11.2 million for the first six months of 2022 from the prior-year
period. Net cash provided by operating activities decreased by $14.0 million,
from $33.1 million during the first six months of 2021 to $19.1 million during
the first six months of 2022, primarily due to less cash-advantageous changes in
working capital, most notably as it relates to expansion in accounts receivable.


                                       30
--------------------------------------------------------------------------------

The following table shows certain items included in our results of operations for the three and six months ended June 30, 2022 and 2021, expressed as a percentage of our total revenues for these periods:

                                                        Three Months Ended June 30,                                                       Six Months Ended June 30,
                                                 2022                                    2021                                    2022                                     2021
(In thousands)                        Amount               % Sales            Amount             % Sales              Amount               % Sales            Amount             % Sales
INCOME DATA:
Sales revenues:
TruBridge                        $      48,583                58.7  %       $ 32,566                47.5  %       $     91,692                57.1  %       $ 64,205                 47.0  %
System sales and support:
Acute Care EHR                          29,671                35.9  %         31,562                46.1  %             60,063                37.4  %         63,452                 46.5  %
Post-acute Care EHR                      4,472                 5.4  %          4,405                 6.4  %              8,842                 5.5  %          8,881                  6.5  %
Total System sales and support          34,143                41.3  %         35,967                52.5  %             68,905                42.9  %         72,333                 53.0  %
Total sales revenues                    82,726                 100  %         68,533                 100  %            160,597                 100  %        136,538                  100  %
Costs of sales:
TruBridge                               26,346                31.8  %         17,196                25.1  %             47,700                29.7  %         32,975                 24.2  %
System sales and support:
Acute Care EHR                          15,447                18.7  %         16,233                23.7  %             30,793                19.2  %         32,445                 23.8  %
Post-acute Care EHR                      1,529                 1.8  %          1,216                 1.8  %              2,866                 1.8  %          2,380                  1.7  %
Total System sales and support          16,976                20.5  %         17,449                25.5  %             33,659                21.0  %         34,825                 25.5  %
Total costs of sales                    43,322                52.4  %         34,645                50.6  %             81,359                50.7  %         67,800                 49.7  %
Gross profit                            39,404                47.6  %         33,888                49.4  %             79,238                49.3  %         68,738                 50.3  %
Operating expenses:
Product development                      7,094                 8.6  %          6,469                 9.4  %             14,214                 8.9  %         14,899                 10.9  %
Sales and marketing                      8,227                 9.9  %          5,312                 7.8  %             15,269                 9.5  %         10,613                  7.8  %
General and administrative              14,737                17.8  %         10,986                16.0  %             27,751                17.3  %         24,135                 17.7  %
Amortization of
acquisition-related intangibles          4,758                 5.8  %          3,383                 4.9  %              8,430                 5.2  %          6,440                  4.7  %
Total operating expenses                34,816                42.1  %         26,150                38.2  %             65,664                40.9  %         56,087                 41.1  %
Operating income                         4,588                 5.5  %          7,738                11.3  %             13,574                 8.5  %         12,651                  9.3  %
Other income (expense):
Other income                               278                 0.3  %            224                 0.3  %                435                 0.3  %          1,038                  0.8  %
Gain on contingent consideration           330                 0.4  %              -                   -  %              1,580                 1.0  %              -                    -  %
Loss on extinguishment of debt            (125)               (0.2) %              -                   -  %               (125)               (0.1) %              -                    -  %
Interest expense                        (1,232)               (1.5) %           (797)               (1.2) %             (2,149)               (1.3) %         (1,424)                (1.0) %
Total other income (expense)              (749)               (0.9) %           (573)               (0.8) %               (259)               (0.2) %           (386)                (0.3) %
Income before taxes                      3,839                 4.6  %          7,165                10.5  %             13,315                 8.3  %         12,265                  9.0  %
Provision for income taxes                 763                 0.9  %          1,024                 1.5  %              2,126                 1.3  %          1,980                  1.5  %
Net income                       $       3,076                 3.7  %       $  6,141                 9.0  %       $     11,189                 7.0  %       $ 10,285                  7.5  %

Three months completed June 30, 2022 Compared to the three months ended June 30, 2021

Revenue

Total revenue for the three months ended June 30, 2022 increased by $14.2 millioni.e. approximately 21%, compared to the three months ended June 30, 2021.

TruBridge revenues increased by $16.0 million, or 49%, compared to the second
quarter of 2021, as acquisition-fueled growth added to the organic growth of our
revenue cycle service and patient engagement offerings. TruCode, acquired in May
2021, contributed $3.3 million of revenues during the second quarter of 2022,
compared to only $1.5 million of revenues during the


                                       31
--------------------------------------------------------------------------------
second quarter of 2021, which reflects only a partial-quarter's activity. Our
acquisition of HRG in March 2022 provided further inorganic revenue growth,
contributing $10.8 million of revenues during the second quarter of 2022. We
have also experienced substantial organic revenue growth, as our hospital
clients operate in an environment typified by rising costs and increased
complexity and are increasingly seeking to alleviate themselves of the
ever-increasing administrative burden of operating their own business office
functions. This increasing demand for services, coupled with the positive impact
of improving hospital patient volumes on TruBridge revenues, resulted in revenue
increases of $2.1 million, or 18%, for our accounts receivable management
services and $0.4 million, or 16%, for our medical coding services. Other
sources of organic revenue growth included GRH, where escalating demand for
patient engagement solutions caused related revenues to more than double from
the second quarter of 2021, an increase of $0.9 million.

System sales and support revenues decreased by $1.8 million, or 5%, compared to
the second quarter of 2021. System sales and support revenues were comprised of
the following during the respective periods:
                                                                       Three Months Ended June 30,
(In thousands)                                                           2022                  2021
Recurring system sales and support revenues (1)
Acute Care EHR                                                     $       26,732          $  26,807
Post-acute Care EHR                                                         3,792              4,170
Total recurring system sales and support revenues                          30,524             30,977

Non-recurring system sales and support revenue (2) Acute Care EHR

                                                              2,939              4,755
Post-acute Care EHR                                                           680                235
Total non-recurring system sales and support revenues                       3,619              4,990
Total system sales and support revenue                             $       

34 143 $35,967

(1) Mainly includes support and maintenance, third-party subscriptions and SaaS revenues.

(2) Comprised primarily of install revenue from the sale of our acute care and post-acute care EHR solutions and related applications under a perpetual (non-subscription) license model.


Recurring system sales and support revenues decreased by $0.5 million, or 1%,
compared to the second quarter of 2021. Acute Care EHR recurring revenues were
effectively flat from the second quarter of 2021, decreasing less than $0.1
million. Post-acute Care EHR recurring revenues decreased $0.4 million, or 9%,
due to the loss of certain significant customers during early 2022.

Non-recurring system sales and support revenues decreased by $1.4 million, or
27%, compared to the second quarter of 2021. Acute Care EHR non-recurring
revenues decreased by $1.8 million compared to the second quarter of 2021, due
mostly to a decrease in the number of perpetual license installations of our
Acute Care EHR solutions. We installed our Acute Care EHR solutions at seven new
hospital clients during the second quarter of 2022 (all of which are under SaaS
arrangements, resulting in revenue being recognized ratably over the contract
term) compared to five new hospital clients during the second quarter of 2021
(four under a SaaS arrangement). This decrease in perpetual license activity for
new hospital installations resulted in a $0.7 million decrease in revenues from
the second quarter of 2021. High penetration rates within our Acute Care EHR
customer base for our suite of complementary applications resulted in a $0.7
million decrease in the related revenues from add-on sales, while
project-specific development revenues decreased $0.4 million due to the
conclusion of those arrangements. Lastly, Post-acute Care EHR nonrecurring
revenues increased by $0.4 million compared to the second quarter of 2021 due to
a temporarily beneficial shift in license mix, with more perpetual license
installations in the second quarter of 2022 compared to the second quarter of
2021.

Costs of Sales

Total costs of sales increased by $8.7 million, or 25%, compared to the second
quarter of 2021. As a percentage of total revenues, costs of sales increased to
52% of revenues during the second quarter of 2022 compared to 51% during the
second quarter of 2021.


                                       32
--------------------------------------------------------------------------------
Our costs associated with TruBridge sales and support increased by $9.2 million,
or 53%, compared to the second quarter of 2021, primarily driven by our recent
acquisitions of TruCode and HRG, which contributed total expenses of $0.8
million and $7.7 million, respectively, to the second quarter of 2022.
Comparatively, the second quarter of 2021 included only $0.6 million of expenses
associated with TruCode, representing a partial-quarter's activity. The
remaining cost increases for TruBridge are organic in nature, caused by resource
expansion necessitated by the growing customer base and improved patient
volumes. The gross margin on these services decreased slightly to 46% in the
second quarter of 2022 compared to 47% in the second quarter of 2021 due to the
addition of HRG, which is mostly comprised of lower margin services.

Costs of Acute Care EHR system sales and support decreased by $0.8 million, or
5%, compared to the second quarter of 2021, as the continuing shift in customer
preferences towards a SaaS license model resulted in increased capitalization of
contract fulfillment costs. Additionally, labor costs have decreased due to
natural workforce attrition and reduced incentive compensation expense. The
gross margin on Acute Care EHR system sales and support decreased slightly to
48% in the second quarter of 2022, compared to 49% in the second quarter of
2021, as the decrease in revenues outpaced the related decrease in costs of
sales.

Costs of Post-acute Care EHR system sales and support increased by $0.3 million,
or 26%, compared to the second quarter of 2021, with increased labor and travel
costs comprising the majority of the increase. The gross margin on Post-acute
Care EHR system sales and support decreased to 66% in the second quarter of
2022, compared to 72% in the second quarter of 2021, as the increase in costs of
sales outpaced the related increase in revenues.

Product development

Product development expenses consist primarily of compensation and other
employee-related costs (including stock-based compensation) and infrastructure
costs incurred, but not capitalized, for new product development and product
enhancements. Product development costs increased by $0.6 million, or 10%,
compared to the second quarter of 2021, due mostly to increased costs associated
with our public cloud strategy. Combined, our recent acquisitions of TruCode and
HRG resulted in $0.5 million of product development expenses during the second
quarter of 2022, compared to only $0.2 million during the second quarter of
2021.

Sales and Marketing

Sales and marketing costs increased by $2.9 million, or 55%, compared to the
second quarter of 2021. The second quarter of 2022 marked the return of our
in-person National Client Conference, which had migrated to virtual-only
sessions since the onset of the COVID-19 pandemic, resulting in incremental
expense of $0.9 million. Resource expansion resulted in a $0.2 million increase
in payroll costs and an improved sales environment resulted in a $0.3 million
increase in commission expenses. Marketing program costs increased $0.4 million
due to more aggressive marketing of our solutions and services combined with
specific campaigns to increase brand awareness for our portfolio of companies.
Lastly, our recent acquisitions of TruCode and HRG resulted in combined sales
and marketing expense of $0.6 million during the second quarter of 2022,
compared to only $0.1 million during the second quarter of 2021.

General and administrative

General and administrative expenses increased by $3.8 million, or 34%, compared
to the second quarter of 2021. Our general and administrative expenses include
the employee benefits costs related to our entire employee base of more than
2,400 individuals. Recent growth in the overall size of our employee base,
combined with volatility in employee health claims severity, drove employee
benefits costs to increase by $2.2 million over the second quarter of 2021.
Similarly, increasing scale caused legal and accounting costs to increase by
$0.4 million. Combined, our recent acquisitions of TruCode and HRG resulted in
$1.2 million of general and administrative expenses during the second quarter of
2022, compared to only $0.2 million during the second quarter of 2021.

Amortization of acquisition-related intangible assets

The amortization expense associated with acquisition-related intangible assets increased by $1.4 millionor 41%, compared to the second quarter of 2021, mainly due to the amortization of intangible assets acquired during the acquisitions of TruCode and HRG.

Total operating expenses

Total operating expenses increased by $8.7 millionor 33%, compared to the second quarter of 2021. As a percentage of total revenues, total operating expenses increased to 42% of revenues in the second quarter of 2022, compared to 38% in the second quarter of 2021.

                                       33
--------------------------------------------------------------------------------





Total Other Income (Expense)

Total other income (expense) increased to expense of $0.7 million during the
second quarter of 2022 compared to expense of $0.6 million during the second
quarter of 2021, due mostly to a $0.6 million increase in interest expense
caused by a rising interest rate environment and a higher level of funded debt.
This increased interest expense was partially offset by a $0.3 million gain on
contingent consideration. Our acquisition of TruCode in May 2021 included a
contingent earnout payment of up to $15 million tied to TruCode's earnings
before interest, tax, depreciation, and amortization ("EBITDA") (subject to
certain pro-forma adjustments) for the twelve month period concluding on the
anniversary date of the acquisition (the "earnout period"). During the second
quarter of 2022, we reduced our estimate of the eventual earnout payment as our
estimates of TruCode's earnings over the earnout period have declined since the
date of acquisition.

Income Before Taxes

Due to the above factors, pre-tax profit decreased by $3.3 million in the second quarter of 2022 compared to the second quarter of 2021.

Provision for income taxes

Our effective tax rate for the three months ended June 30, 2022 increased to
19.9% from 14.3% for the three months ended June 30, 2021. Our effective tax
rate during the second quarter of 2021 benefited from changing estimates
regarding certain state effective tax rates, with no such changes in estimated
rates during the second quarter of 2022.

Net revenue

Net income for the second quarter of 2022 decreased by $3.1 million to $3.1
million, or $0.21 per basic and diluted share, compared with net income of $6.1
million, or $0.42 per basic and diluted share, for the second quarter of 2021.
Net income represented 3.7% of revenue for the second quarter of 2022, compared
to 9.0% of revenue for the second quarter of 2021.

Semester completed June 30, 2022 Compared to the half-years closed June 30, 2021

Revenue

Total revenue for the first half of 2022 increased by $24.1 millioni.e. around 18%, compared to the first six months of 2021.

TruBridge revenues increased by $27.5 million, or 43%, compared to the first six
months 2021, as acquisition-fueled growth added to the organic growth of our
revenue cycle service and patient engagement offerings. TruCode, acquired in May
2021, contributed $6.6 million of revenues during the first six months of 2022,
compared to only $1.5 million of revenues during the first six months of 2021,
which reflects less than two months' activity. Our acquisition of HRG in March
2022 provided further inorganic revenue growth, contributing $14.6 million of
revenues during the first six months of 2022. We have also experienced
substantial organic revenue growth, as our hospital clients operate in an
environment typified by rising costs and increased complexity and are
increasingly seeking to alleviate themselves of the ever-increasing
administrative burden of operating their own business office functions. This
increasing demand for services, coupled with the positive impact of improving
hospital patient volumes on TruBridge revenues, resulted in revenue increases of
$4.1 million, or 17%, for our accounts receivable management services and $0.8
million, or 15%, for our medical coding services. Other sources of organic
revenue growth included GRH, where escalating demand for patient engagement
solutions caused related revenues to more than double from the first six months
of 2021, an increase of $2.3 million.


                                       34
--------------------------------------------------------------------------------
System sales and support revenues decreased by $3.4 million, or 5%, compared to
the first six months of 2021. System sales and support revenues were comprised
of the following during the respective periods:
                                                                        Six Months Ended June 30,
(In thousands)                                                           2022                  2021
Recurring system sales and support revenues (1)
Acute Care EHR                                                     $       54,097          $  54,017
Post-acute Care EHR                                                         7,687              8,392
Total recurring system sales and support revenues                          61,784             62,409

Non-recurring system sales and support revenue (2) Acute Care EHR

                                                              5,966              9,435
Post-acute Care EHR                                                         1,155                489
Total non-recurring system sales and support revenues                       7,121              9,924
Total system sales and support revenue                             $       

68,905 $72,333

(1) Mainly includes support and maintenance, third-party subscriptions and SaaS revenues.

(2) Comprised primarily of install revenue from the sale of our acute care and post-acute care EHR solutions and related applications under a perpetual (non-subscription) license model.


Recurring system sales and support revenues decreased by $0.6 million, or 1%,
compared to the first six months of 2021. Acute Care EHR recurring revenues were
effectively flat from the first six months of 2021, increasing less than $0.1
million. Post-acute Care EHR recurring revenues decreased by $0.7 million, or
8%, due to the loss of certain significant customers during early 2022.

Non-recurring system sales and support revenues decreased by $2.8 million, or
28%, compared to the first six months of 2021. Acute Care EHR non-recurring
revenues decreased by $3.5 million compared to the first six months of 2021, due
mostly to a decrease in the number of perpetual license installations of our
Acute Care EHR solutions. We installed our Acute Care EHR solutions at ten new
hospital clients during the first six months of 2022 (all of which are under
SaaS arrangements, resulting in revenue being recognized ratably over the
contract term) compared to ten new hospital clients during the first six months
of 2021 (six under a SaaS arrangement). Post-acute Care EHR nonrecurring
revenues increased by $0.7 million compared to the first six months of 2021 due
to a temporarily beneficial shift in license mix.

Costs of sales

Total costs of sales increased by $13.6 million, or 20%, compared to the first
six months of 2021. As a percentage of total revenues, costs of sales increased
to 51% of revenues during the first six months of 2022 compared to 50% during
the first six months of 2021.

Our costs associated with TruBridge sales and support increased by $14.7
million, or 45%, compared to the first six months of 2021, primarily driven by
our recent acquisitions of TruCode and HRG, which contributed total expenses of
$1.7 million and $10.3 million, respectively, to the first six months of 2022.
Comparatively, the first six months of 2021 included only $0.6 million of
expenses associated with TruCode, which reflects less than two months' activity.
The remaining cost increases for TruBridge are organic in nature, caused by
resource expansion necessitated by the growing customer base and improved
patient volumes. The gross margin on these services decreased slightly to 48% in
the first six months of 2022 compared to 49% in the first six months of 2021 due
to the addition of HRG, which is mostly comprised of lower margin services.

Costs of Acute Care EHR system sales and support decreased by $1.7 million, or
5%, compared to the first six months of 2021, as the continuing shift in
customer preferences towards a SaaS license model resulted in increased
capitalization of contract fulfillment costs. Additionally, labor costs have
decreased due to natural workforce attrition and reduced incentive compensation
expense. The gross margin on Acute Care EHR system sales and support remained
flat at 49% for each of the comparative periods.

Costs of Post-acute Care EHR system sales and support increased by $0.5 million,
or 20%, compared to the first six months of 2021, with increased labor and
travel costs comprising the majority of the increase. The gross margin on
Post-acute Care EHR system sales and support decreased to 68% in the first six
months of 2022, compared to 73% in the first six months of 2021, as the increase
in costs of sales outpaced the related increase in revenues.


                                       35
--------------------------------------------------------------------------------





Product Development

Product development costs decreased by $0.7 million, or 5%, compared to the
first six months of 2021, with the primary driver being a $4.7 million, or 115%,
increase in product development labor capitalization pursuant to the
aforementioned change in our method of estimating the labor costs incurred in
developing software assets requiring capitalization under ASC 350-40, Internal
Use Software. This increased capitalization rate was partially offset by
increased amortization of the related assets and increased costs related to our
public cloud strategy. Combined, our recent acquisitions of TruCode and HRG
resulted in $0.9 million of product development expenses during the first six
months of 2022, compared to only $0.2 million during the first six months of
2021.

Sales and Marketing

Sales and marketing costs increased by $4.7 million, or 44%, compared to the
first six months of 2021. The first six months of 2022 marked the return of our
in-person National Client Conference, which had migrated to virtual-only
sessions since the onset of the COVID-19 pandemic, resulting in incremental
expense of $0.9 million. Resource expansion resulted in a $0.4 million increase
in payroll costs and an improved sales environment resulted in a $0.8 million
increase in commission expenses. Similarly, travel costs have increased $0.2
million as travel patterns return to pre-COVID-19 levels. Marketing program
costs increased $0.6 million due to more aggressive marketing of our solutions
and services combined with specific campaigns to increase brand awareness for
our portfolio of companies. Improved confidence in achievement of long-term
incentive targets resutled in an increase in stock-based compensation costs of
$0.4 million. Lastly, our recent acquisitions of TruCode and HRG resulted in
combined sales and marketing expense of $1.0 million during the first six months
of 2022, compared to only $0.1 million during the first six months of 2021.

General and administrative

General and administrative expenses increased by $3.6 million, or 15%, compared
to the first six months of 2021. Volatility in employee health claims coupled
with an expanding employee base resulted in a $2.5 million increase in employee
benefits costs while expanding resources drove payroll to an increase of $0.6
million and improved confidence in achievement of long-term incentive targets
resutled in an increase in stock-based compensation costs of $0.6 million.
Combined, our recent acquisitions of TruCode and HRG resulted in $1.9 million of
general and administrative expenses during the first six months of 2022,
compared to only $0.2 million during the first six months of 2021. These
increases in general and administrative expenses were partially offset by a
decrease of $1.8 million in severance costs as the aforementioned margin
optimization efforts resulted in a significant reduction-in-force during the
first six months of 2021, with no initiatives of such scale during the first six
months of 2022.

Amortization of acquisition-related intangible assets

The amortization expense associated with acquisition-related intangible assets increased by $2.0 millionor 31%, compared to the first half of 2021, mainly due to the amortization of intangible assets acquired during the acquisitions of TruCode and HRG.

Total operating expenses

Total operating expenses increased by $9.6 millionor 17%, compared to the first six months of 2021. As a percentage of total revenues, total operating expenses remained relatively stable at 41% during each of the comparative periods.

Total other income (expenses)

Total other income (expense) decreased slightly to expense of $0.3 million
during the first six months of 2022 compared to expense of $0.4 million during
the first six months of 2021. Our acquisition of TruCode in May 2021 included a
contingent earnout payment of up to $15 million tied to TruCode's earnings
before interest, tax, depreciation, and amortization ("EBITDA") (subject to
certain pro-forma adjustments) for the twelve month period concluding on the
anniversary date of the acquisition (the "earnout period"). During the first six
months of 2022, $1.6 million of the original $2.5 million contingent
consideration estimated in determining the purchase price was reversed as our
estimates of TruCode's earnings over the earnout period were less than estimated
at the date of acquisition. This gain on contingent consideration was partially
offset by increased interest expense, caused by a rising interest rate
environment and a higher level of funded debt, and decreased other income as
interest income on our portfolio of financing receivables has decreased with the
corresponding decrease in the asset class balances.


                                       36
--------------------------------------------------------------------------------





Income Before Taxes

Due to the above factors, pre-tax profit increased by $1.1 million in the first half of 2022 compared to the first half of 2021.

Provision for income taxes

Our effective tax rate for the six months ended June 30, 2022 remained relatively unchanged from the effective tax rate for the six months ended June 30, 2021decreasing slightly to 16.0% from 16.1%.

Net revenue

Net income for the first six months of 2022 increased by $0.9 million to $11.2
million, or $0.76 per basic and diluted share, compared with net income of $10.3
million, or $0.71 per basic and $0.70 per diluted share, for the first six
months of 2021. Net income represented 7% of revenue for the first six months of
2022, compared to 8% of revenue for the first six months of 2021.

Additional segment information

Our reportable segments have been determined in accordance with ASC 280 – Segment Reporting. We have three operating segments to present: TruBridge, Acute Care EHR and Post-Acute Care EHR. We evaluate each of our three operating segments based on segment revenue and segment adjusted EBITDA.

Adjusted EBITDA consists of GAAP net income as reported and adjusts for (i)
deferred revenue purchase accounting adjustments arising from purchase
allocation adjustments related to business acquisitions; (ii) depreciation
expense; (iii) amortization of software development costs; (iv) amortization of
acquisition-related intangible assets; (v) stock-based compensation; (vi)
severance and other non-recurring charges; (vii) interest expense and other,
net; (viii) gain on contingent consideration; and (ix) the provision for income
taxes. The segment measurements provided to and evaluated by the chief operating
decision makers ("CODM") are described in Note 17. These results should be
considered in addition to, and not as a substitute for, results reported in
accordance with GAAP.

The following table presents a summary of the revenues and adjusted EBITDA of
our three operating segments for the three and six months ended June 30, 2022
and 2021:

                                      Three Months Ended June 30,                      Change                      Six Months Ended June 30,                       Change
                                        2022                 2021                $                %                  2022                2021                $                %
(In thousands)
Revenues by segment:
TruBridge                         $       48,583          $ 32,566          $ 16,017               49  %       $      91,692          $ 64,205          $ 27,487               43  %
Acute Care EHR                            29,671            31,562            (1,891)              (6) %              60,063            63,452            (3,389)              (5) %
Post-acute Care EHR                        4,472             4,405                67                2  %               8,842             8,881               (39)               -  %

Adjusted EBITDA by segment:
TruBridge                         $        8,744          $  6,860          $  1,884               27  %       $      19,549          $ 13,378          $  6,171               46  %
Acute Care EHR                             4,311             6,190            (1,879)             (30) %               9,332            10,876            (1,544)             (14) %
Post-acute Care EHR                          114             1,242            (1,128)             (91) %                 442             1,862            (1,420)             (76) %


Segment Revenues

Refer to the corresponding discussion of revenues for each of our reportable
segments previously provided under the Revenues heading of this Management's
Discussion and Analysis. There are no intersegment revenues to be eliminated in
computing segment revenue.

Segment adjusted EBITDA – Three months ended June 30, 2022 Compared to the three months ended June 30, 2021

TruBridge adjusted EBITDA increased by $1.9 million, or 27%, compared to the
second quarter of 2021. Revenue growth of of 49% was partially offset by a 143
basis point decrease in gross margins, as growth materialized from lower-margin,
resource-intensive service lines. This decrease in gross margins combined with
expanded operating expenses to limit adjusted EBITDA growth in light of this
dramatic increase in revenues.


                                       37
--------------------------------------------------------------------------------

Acute Care EHR Adjusted EBITDA decreased by $1.9 million, or 30%. The aforementioned decrease in non-recurring revenue resulted in a $1.1 million decline in gross profit, while the recovery of our National Customer Conference and higher benefit costs resulted in higher operating expenses.

Post-Acute Care EHR Adjusted EBITDA decreased by $1.1 millionor 91%, as revenues were effectively flat over the comparative periods, while labor and travel costs increased costs of sales and our product development resources experienced an adverse trend from capitalizable project workload to support functions, resulting in increased operating costs. expenses.

Segment adjusted EBITDA – Half-year ended June 30, 2022 Compared to the half-years closed June 30, 2021

TruBridge adjusted EBITDA increased by $6.2 million, or 46%, compared to the
first six months of 2021. With costs of sales increasing in proportion with the
increase in revenues, adjusted EBITDA expansion was driven by moderate operating
leverage that allowed for a more efficient use of operating expense functions in
the first six months of 2022 compared to the first six months of 2021.

Acute Care EHR Adjusted EBITDA decreased by $1.5 millionor 14% as gross margins fell only 14 basis points, but overall operating costs remained relatively unchanged as improved labor cap rates drove lower expenses of product development, primarily offsetting increased costs associated with our sales and marketing efforts (including the resumption of our operations the person
National Customer Conference) and rising benefit costs.

Post-acute Care EHR adjusted EBITDA decreased by $1.4 million, or 76%. Despite
only a slight decrease in related revenues, adjusted EBITDA suffered from the
aforementioned gross margin compression of our post-acute care EHR business and
increased operating expenses as our product development resources experienced an
unfavorable shift in workload mix away from capitalizable projects and towards
support functions.

Cash and capital resources

The Company's liquidity and capital resources were not materially impacted by
COVID-19 and related economic conditions during the six months ended June 30,
2022. For further discussion regarding the potential future impacts of COVID-19
and related economic conditions on the Company's liquidity and capital
resources, see "COVID-19" in this Management's Discussion and Analysis of
Financial Condition and Results of Operations and Part I, "Item 1A. Risk
Factors" in our Annual Report on Form 10-K for the year ended December 31, 2021.

Sources of liquidity

As of June 30, 2022, our principal sources of liquidity consisted of cash and
cash equivalents of $15.1 million and our remaining borrowing capacity under the
revolving credit facility of $86.3 million, compared to $11.4 million of cash
and cash equivalents and $79.0 million of remaining borrowing capacity under the
revolving credit facility as of December 31, 2021. In conjunction with our
acquisition of HHI in January 2016, we entered into a syndicated credit
agreement which provided for a $125 million term loan facility and a $50 million
revolving credit facility. On June 16, 2020, we entered into an Amended and
Restated Credit Agreement that increased the aggregate principal amount of our
credit facilities to $185 million, including a $75 million term loan facility
and a $110 million revolving credit facility. On May 2, 2022, we entered into a
First Amendment to the Amended and Restated Credit Agreement that further
increased the aggregate principal amount of our credit facilities to $260
million, which includes a $70 million term loan facility and a $160 million
revolving credit facility.

As of June 30, 2022, we had $142.8 million in principal amount of indebtedness
outstanding under the credit facilities. In addition, we had operating lease
liabilities totaling approximately $8.3 million payable over the next eight
years. We believe that our cash and cash equivalents of $15.1 million as of
June 30, 2022, the future operating cash flows of the combined entity, and our
remaining borrowing capacity under the revolving credit facility of $86.3
million as of June 30, 2022, taken together, provide adequate resources to fund
ongoing cash requirements for the next twelve months and beyond. We cannot
provide assurance that our actual cash requirements will not be greater than we
expect as of the date of filing of this Form 10-Q. If sources of liquidity are
not available or if we cannot generate sufficient cash flow from operations
during the next twelve months, we may be required to obtain additional sources
of funds through additional operational improvements, capital market
transactions, asset sales or financing from third parties, a combination thereof
or otherwise. We cannot provide assurance that these additional sources of funds
will be available or, if available, would have reasonable terms.

Operating cash activities

Net cash provided by operating activities decreased by $14.0 million from $33.1
million provided by operations for the six months ended June 30, 2021 to $19.1
million provided by operations for the six months ended June 30, 2022. The
decrease in


                                       38
--------------------------------------------------------------------------------
cash flows provided by operations is primarily due to disadvantageous changes in
working capital, most notably as it relates to an expansion in accounts
receivable. Accounts receivable contracted during the first six months of 2021,
resulting in a benefit to operating cash flows of $1.1 million. Comparatively,
accounts receivable expanded significantly during the first six months of 2022
due to revenue growth and timing of customer payments, resulting in an $11.1
million detrimental impact to operating cash flows.

Investing Cash Flow Activities

Net cash used in investing activities decreased by $11.9 million, with $52.6
million used in the six months ended June 30, 2022 compared to $64.6 million
used during the six months ended June 30, 2021. We completed our $43.8 million
acquisition of HRG during the first quarter of 2022. The HRG acquisition was
funded through a draw of $48.0 million on our credit facilities. Conversely, we
completed our $59.8 million acquisition of TruCode during the second quarter of
2021. In addition, cash outflows for the investment in software development
increased from $4.1 million during the first six months of 2021 to $8.7 million
during the first six months of 2022 due to the aforementioned change in
methodology for estimating labor costs eligible for capitalization.

Financing of treasury activities

During the six months ended June 30, 2022, our financing activities were a net
source of cash in the amount of $37.2 million, as $48.0 million in borrowings
from our revolving line of credit were partially offset by long-term debt
principal payments of $7.1 million and $4.2 million used to repurchase shares of
our common stock, which are treated as treasury stock. Financing activities were
a net source of cash in the amount of $37.9 million during the six months ended
June 30, 2021, as $61.0 million in borrowings from our revolving line of credit
were partially offset by long-term debt principal payments of $21.9 million and
$1.2 million used to repurchase shares of our common stock.

On September 4, 2020, our Board of Directors approved a stock repurchase program
to repurchase up to $30.0 million in aggregate amount of the Company's
outstanding shares of common stock through open market purchases,
privately-negotiated transactions, or otherwise in compliance with Rule 10b-18
under the Securities Exchange Act of 1934, as amended. On July 27, 2022, our
Board of Directors extended the expiration of the stock repurchase program to
September 24, 2024. These shares may be purchased from time to time throughout
the duration of the stock repurchase program depending upon market conditions.
Our ability to repurchase shares is subject to compliance with the terms of our
Amended and Restated Credit Agreement. Concurrent with the authorization of this
stock repurchase program, the Board of Directors opted to indefinitely suspend
all quarterly dividends.

credit agreement

As of June 30, 2022, we had $69.1 million in principal amount outstanding under
the term loan facility and $73.7 million million in principal amount outstanding
under the revolving credit facility. Each of our credit facilities continues to
bear interest at a rate per annum equal to an applicable margin plus, at our
option, either (1) the Adjusted SOFR rate for the relevant interest period,
subject to a floor of 0.50%, (2) an alternate base rate determined by reference
to the greater of (a) the prime lending rate of Regions, (b) the federal funds
rate for the relevant interest period plus one half of one percent per annum and
(c) the one month SOFR rate, subject to the aforementioned floor, plus one
percent per annum, or (3) a combination of (1) and (2). The applicable margin
range for SOFR loans and the letter of credit fee ranges from 1.8% to 3.0%. The
applicable margin range for base rate loans ranges from 0.8% to 2.0%, in each
case based on the Company's consolidated net leverage ratio.

Principal payments with respect to the term loan facility are due on the last
day of each fiscal quarter beginning June 30, 2022, with quarterly principal
payments of approximately $0.9 million through March 31, 2027, with maturity on
May 2, 2027 or or such earlier date as the obligations under the Amended and
Restated Credit Agreement as amended by the First Amendment become due and
payable pursuant to the terms of such agreement. Any principal outstanding under
the revolving credit facility is due and payable on the maturity date.

Our credit facilities are secured pursuant to the Amended and Restated Credit
Agreement, dated as of June 16, 2020, among the parties identified as obligors
therein and Regions, as collateral agent, on a first priority basis by a
security interest in substantially all of the tangible and intangible assets
(subject to certain exceptions) of the Company and certain subsidiaries of the
Company, as guarantors (collectively, the "Subsidiary Guarantors"), including
certain registered intellectual property and the capital stock of certain of the
Company's direct and indirect subsidiaries. Our obligations under the Amended
and Restated Credit Agreement are also guaranteed by the Subsidiary Guarantors.

The First Amendment provides incremental facility capacity of $75 million,
subject to certain conditions. The Amended and Restated Credit Agreement, as
amended by the First Amendment, includes a number of restrictive covenants that,
among other things and in each case subject to certain exceptions and baskets,
impose operating and financial restrictions on the Company


                                       39
--------------------------------------------------------------------------------
and the Subsidiary Guarantors, including the ability to incur additional debt;
incur liens and encumbrances; make certain restricted payments, including paying
dividends on the Company's equity securities or payments to redeem, repurchase,
or retire the Company's equity securities (which are subject to our compliance,
on a pro forma basis to give effect to the restricted payment, with the fixed
charge coverage ratio and consolidated net leverage ratio described below);
enter into certain restrictive agreements; make investments, loans and
acquisitions; merge or consolidate with any other person; dispose of assets;
enter into sale and leaseback transactions; engage in transactions with
affiliates; and materially alter the business we conduct. The First Amendment
requires the Company to maintain a minimum fixed charge coverage ratio of
1.25:1.00 throughout the duration of such agreement. Under the First Amendment,
the Company is required to comply with a maximum consolidated net leverage ratio
of 3.75:1.00 for each quarter through March 31, 2023, after which time the
maximum consolidated net leverage ratio will be 3.50:1.00. Further, under the
First Amendment, in connection with any acquisition by the Company exceeding $25
million, the Company may elect to increase the maximum permitted consolidated
net leverage ratio for the fiscal quarter in which the acquisition occurs and
each of the following three fiscal quarters by 0.50:1.00 above the otherwise
permitted maximum. If the consolidated net leverage ratio is less than
2.50:1:00, there is no limit on incremental facilities. The Amended and Restated
Credit Agreement also contains customary representations and warranties,
affirmative covenants and events of default. We believe that we were in
compliance with the covenants contained in such agreement as of June 30, 2022.

The First Amendment removed the requirement that the Company mandatorily prepay
the credit facilities with excess cash flow generated during the prior fiscal
year. The Company is permitted to voluntarily prepay the credit facilities at
any time without penalty, subject to customary "breakage" costs with respect to
prepayments of SOFR rate loans made on a day other than the last day of any
applicable interest period.

Back

Backlog consists of revenues we reasonably expect to recognize over the next
twelve months under all existing contracts, including those with remaining
performance obligations that have original expected durations of one year or
less and those with fees that are variable in which we estimate future revenues.
The revenues to be recognized may relate to a combination of one-time fees for
system sales and recurring fees for support and maintenance and TruBridge
services. As of June 30, 2022, we had a twelve-month backlog of approximately $6
million in connection with non-recurring system purchases and approximately
$321 million in connection with recurring payments under support and
maintenance, Cloud EHR contracts, and TruBridge services, $34 million of which
was attributable to HRG. As of June 30, 2021, we had a twelve-month backlog of
approximately $8 million in connection with non-recurring system purchases and
approximately $259 million in connection with recurring payments under support
and maintenance, Cloud EHR contracts, and TruBridge services.

Reservations

Bookings is a key operational metric used by management to assess the relative
success of our sales generation efforts, and were as follows for the three and
six months ended June 30, 2022 and 2021:
                                              Three Months Ended June 30,               Six Months Ended June 30,
(In thousands)                                  2022                2021                 2022                 2021
TruBridge (1)                              $    15,577          $   6,249                 25,728              8,936
System sales and support (2)
Acute Care EHR                                   7,497              9,697          $      16,583          $  15,139
Post-acute Care EHR                                725                605                  1,885              1,253
Total system sales and support                   8,222             10,302                 18,468             16,392
Total bookings                             $    23,799          $  16,551          $      44,196          $  25,328
(1) Generally calculated as the total contract price (for non-recurring, project-related amounts) and annualized
contract value (for recurring amounts).
(2) Generally calculated as the total contract price (for system sales) and annualized contract value (for support).



Sales activities during the first six months of 2021 suffered from a number of
incremental headwinds, chief among them being (a) COVID-19 related distractions,
including increased infection rates for certain geographies and widespread focus
on eventual vaccine rollouts, (b) reorganization transitions related to our
February 2021 reduction-in-force, and (c) lower-value regulatory purchases
required by the Centers for Medicare and Medicaid Services' Hospital Price
Transparency mandate requiring hospitals to provide clear, accessible pricing
information online. These topics disproportionately dominated sales discussions
and resources. Such headwinds began dissipating during the third quarter of
2021, resulting in overall bookings growth during the second quarter of 2022 of
$7.2 million, or 44%, over the second quarter of 2021.


                                       40
--------------------------------------------------------------------------------
TruBridge bookings during the second quarter of 2022 increased by $9.3 million,
or 149%, over the second quarter of 2021 as the aforementioned improvement in
the sales environment drove bookings from our existing EHR customer base to an
increase of $4.2 million, or 90%. Bookings were further supported by large
contract signings for encoder solutions from our recently-acquired TruCode
business and sales execution from our recent acquisition of HRG, resulting in a
$5.1 million, or more than 300% increase in bookings from hospitals outside of
our EHR customer base. These same dynamics have resulted in TruBridge bookings
for the first six months of 2022 increasing $16.8 million, or nearly 190% over
the first six months of 2021.

Acute Care EHR bookings during the second quarter of 2022 decreased by $2.2
million, or 23%, from the second quarter of 2021. This decrease is attributed to
general volatility in bookings for add-on applications to existing customers.
Acute Care EHR bookings for the first six months of 2022 increased by $1.4
million, or 10%, over the first six months of 2021, due mostly to the
aforementioned improvement in the sales environment.

Post-acute Care EHR bookings increased by $0.1 million, or 20%, over the second
quarter of 2021 and $0.6 million, or 50%, over the first six months of 2021 as
the improved sales environment worked in tandem with recent product innovations
designed to improve the competitive position of our AHT products.

Significant Accounting Policies and Estimates

Our Management Discussion and Analysis is based upon our condensed consolidated
financial statements, which have been prepared in accordance with U.S. GAAP. The
preparation of these financial statements requires us to make subjective or
complex judgments that may affect the reported financial condition and results
of operations. We base our estimates on historical experience and other
assumptions that we believe to be reasonable under the circumstances, the
results of which form the basis for making judgments about the reported values
of assets, liabilities, revenues, expenses and other financial amounts that are
not readily apparent from other sources. Actual results may differ from these
estimates and these estimates may differ under different assumptions or
conditions. We continually evaluate the information used to make these estimates
as our business and the economic environment changes.

In our Annual Report on Form 10-K for the year ended December 31, 2021, we
identified our critical accounting polices and estimates related to revenue
recognition, allowance for credit losses, income taxes, business combinations,
including purchased intangible assets, and software development costs. There
have been no significant changes to these critical accounting policies during
the six months ended June 30, 2022.


                                       41

————————————————– ——————————

© Edgar Online, source Previews

Share.

Comments are closed.