Press release

CPSI Announces Fourth Quarter and Year-End 2020 Results

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CPSI (NASDAQ: CPSI), a community healthcare solutions company, today announced results for the fourth quarter and year ended December 31, 2020.

Total revenues for the quarter ended December 31, 2020, were $66.8 million, compared with total revenues of $70.6 million for the prior-year fourth quarter. GAAP net income for the quarter ended December 31, 2020, was $3.1 million, or $0.22 per diluted share, compared with $11.2 million, or $0.78 per diluted share, for the quarter ended December 31, 2019. Cash provided by operations for the fourth quarter of 2020 was $16.2 million, compared with $18.1 million for the prior-year quarter. Net debt at December 31, 2020, was $64.1 million.

Total revenues for the year ended December 31, 2020, were $264.5 million, compared with total revenues of $274.6 million for the prior year. GAAP net income for the year ended December 31, 2020, was $14.2 million, or $0.98 per diluted share, compared with $20.5 million, or $1.43 per diluted share, for the year ended December 31, 2019. Cash provided by operations for 2020 was $49.1 million, compared with $43.6 million for the prior year.

Commenting on the Company’s financial performance for the fourth quarter of 2020, Matt Chambless, chief financial officer of CPSI, stated, “The fourth quarter ended with solid metrics across the board, especially considering the lingering effect of the pandemic on patient volumes and a higher concentration of Software as a Service (SaaS) implementations for our Thrive solution. Mostly notably, the quarter’s $16.2 million of operating cash flows were the third highest in Company history, allowing for 13% annual growth in operating cash flows despite the pandemic’s headwinds. We are proud of our execution during this disruptive year, and we believe that we are well positioned for future growth and increasing shareholder value. With a comfortable leverage profile, ample capacity to deploy capital, and a realistic plan for significant top and bottom line growth, we are ready to capitalize on a more favorable post-COVID environment.

“Looking forward, the Company expects to achieve three-year annual organic recurring revenue growth of 5% to 8%. The continued growth of TruBridge among both existing and new customers will continue to be our primary catalyst for recurring revenue growth, supported by an accelerating shift in software and support revenues from license to SaaS. For 2021, we expect recurring revenue growth at the higher end of that 5% to 8% range, with total expected revenues of $270 to $280 million. GAAP net margin is expected to be 6.5% to 7.5%, and Adjusted EBITDA margin is expected to be 16.5% to 17.5% as we anticipate incremental margin pressure from the continued SaaS transition.”

Boyd Douglas, president and chief executive officer of CPSI, stated, “We have turned our attention to a journey of transformation that will drive long-term sustainability and exciting growth for CPSI. Over the past several months, we collaborated with a premier consulting group to review our strategy and growth opportunities. As a result, we are focused on modernizing our business and achieving great success in a post-COVID world both in the current markets we serve and by reaching adjacent markets through innovation. The core growth component of this transformation plan is highlighted by TruBridge cross sales, net new TruBridge sales, the continued retention of our valuable EHR client base and cost optimization. This aggressive, yet obtainable, plan is intended to provide sizeable shareholder returns over the next three to four years culminating in an end-goal of achieving $80 million in Adjusted EBITDA in 2024.”

CPSI will hold a live webcast to discuss fourth quarter 2020 results today, Tuesday, February 9, 2021, at 4:30 p.m. Eastern time. A 30-day online replay will be available approximately one hour following the conclusion of the live webcast. To listen to the live webcast or access the replay, visit the Company’s website, www.cpsi.com.

About CPSI

CPSI is a leading provider of healthcare solutions and services for community hospitals, their clinics and post-acute care facilities. Founded in 1979, CPSI is the parent of four companies – Evident, LLC, American HealthTech, Inc., TruBridge, LLC and iNetXperts, Corp. d/b/a Get Real Health. Our combined companies are focused on helping improve the health of the communities we serve, connecting communities for a better patient care experience, and improving the financial operations of our customers. Evident provides comprehensive EHR solutions for community hospitals and their affiliated clinics. American HealthTech is one of the nation’s largest providers of EHR solutions and services for post-acute care facilities. TruBridge focuses on providing business, consulting and managed IT services, along with its complete RCM solution, for all care settings. Get Real Health focuses on solutions aimed at improving patient engagement for individuals and healthcare providers. 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 the Company’s future financial and operational 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: the global pandemic related to the novel coronavirus COVID-19 (including the rate of spread, duration and geographic coverage of the COVID-19 pandemic, the rate and extent to which the virus mutates, the status of testing capabilities, the development, distribution, and efficacy of vaccines for COVID-19 or any mutant strains and the development and effectiveness of therapeutic remedies), which has decreased our hospital customers’ patient volumes and negatively impacted our variable revenues, and could negatively impact our gross margins and income, as well as our financial position and/or liquidity; federal, state and local government actions to address and contain the impact of COVID-19 and their impact on us and our hospital clients; operational disruptions and heightened cybersecurity risks due to a significant percentage of our workforce working remotely; 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 and Quarterly Report on Form 10-Q. 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.

 
Computer Programs and Systems, Inc.
Condensed Consolidated Statements of Income
(In ‘000s, except per share data)
(Unaudited)
         
 

Three Months Ended December 31,

 

Twelve Months Ended December 31,

 

2020

 

2019

 

2020

 

2019

Sales revenues:        
System sales and support  

$

36,657

 

 

$

41,475

 

 

$

152,954

 

 

$

165,352

 

TruBridge  

 

30,192

 

 

 

29,163

 

 

 

111,534

 

 

 

109,282

 

Total sales revenues  

 

66,849

 

 

 

70,638

 

 

 

264,488

 

 

 

274,634

 

         
Costs of sales:        
System sales and support  

 

17,460

 

 

 

19,102

 

 

 

69,361

 

 

 

73,872

 

TruBridge  

 

14,781

 

 

 

14,956

 

 

 

58,881

 

 

 

56,617

 

Total costs of sales  

 

32,241

 

 

 

34,058

 

 

 

128,242

 

 

 

130,489

 

         
Gross profit  

 

34,608

 

 

 

36,580

 

 

 

136,246

 

 

 

144,145

 

         
Operating expenses:        
Product development  

 

8,265

 

 

 

9,178

 

 

 

33,457

 

 

 

36,861

 

Sales and marketing  

 

5,661

 

 

 

6,612

 

 

 

24,185

 

 

 

27,774

 

General and administrative  

 

11,886

 

 

 

9,012

 

 

 

46,129

 

 

 

43,921

 

Amortization of acquisition-related intangibles  

 

2,822

 

 

 

2,866

 

 

 

11,421

 

 

 

11,006

 

Total operating expenses  

 

28,634

 

 

 

27,668

 

 

 

115,192

 

 

 

119,562

 

         
Operating income  

 

5,974

 

 

 

8,912

 

 

 

21,054

 

 

 

24,583

 

         
Other income (expense):        
Other income  

 

252

 

 

 

272

 

 

 

1,494

 

 

 

807

 

Gain on contingent consideration  

 

 

 

 

5,000

 

 

 

 

 

 

5,000

 

Loss on extinguishment of debt  

 

 

 

 

 

 

 

(202

)

 

 

 

Interest expense  

 

(730

)

 

 

(1,425

)

 

 

(3,562

)

 

 

(6,694

)

Total other income (expense)  

 

(478

)

 

 

3,847

 

 

 

(2,270

)

 

 

(887

)

         
Income before taxes  

 

5,496

 

 

 

12,759

 

 

 

18,784

 

 

 

23,696

 

         
Provision for income taxes  

 

2,373

 

 

 

1,533

 

 

 

4,538

 

 

 

3,228

 

         
Net income  

$

3,123

 

 

$

11,226

 

 

$

14,246

 

 

$

20,468

 

         
Net income per common share—basic  

$

0.22

 

 

$

0.78

 

 

$

0.98

 

 

$

1.43

 

Net income per common share—diluted  

$

0.22

 

 

$

0.78

 

 

$

0.98

 

 

$

1.43

 

         
Weighted average shares outstanding        
used in per common share computations:        
Basic  

 

14,086

 

 

 

13,830

 

 

 

14,038

 

 

 

13,778

 

Diluted  

 

14,086

 

 

 

13,830

 

 

 

14,038

 

 

 

13,778

 

Computer Programs and Systems, Inc.
Condensed Consolidated Balance Sheets
(In ‘000s, except per share data)
     
  December 31,
2020
(unaudited)
  Dec. 31, 2019
Assets    
Current assets    
Cash and cash equivalents  

$

12,671

 

 

$

7,357

Accounts receivable, net of allowance for doubtful accounts of $1,701 and $2,078, respectively  

 

32,414

 

 

 

38,819

Financing receivables, current portion, net  

 

10,821

 

 

 

12,032

Inventories  

 

1,084

 

 

 

1,426

Prepaid income taxes  

 

1,789

 

 

 

1,337

Prepaid expenses and other  

 

8,365

 

 

 

5,861

Total current assets  

 

67,144

 

 

 

66,832

     
Property & equipment, net  

 

13,139

 

 

 

11,593

Software development costs, net  

 

3,210

 

 

 

Operating lease assets  

 

6,610

 

 

 

7,800

Financing receivables, net of current portion  

 

11,477

 

 

 

18,267

Other assets, net of current portion  

 

2,787

 

 

 

1,771

Intangible assets, net  

 

71,689

 

 

 

83,110

Goodwill  

 

150,216

 

 

 

150,216

Total assets  

$

326,272

 

 

$

339,589

     
Liabilities & Stockholders’ Equity    
Current liabilities    
Accounts payable  

$

7,716

 

 

$

8,804

Current portion of long-term debt  

 

3,457

 

 

 

8,430

Deferred revenue  

 

8,130

 

 

 

8,628

Accrued vacation  

 

5,353

 

 

 

4,301

Other accrued liabilities  

 

12,786

 

 

 

11,767

Total current liabilities  

 

37,442

 

 

 

41,930

     
Long-term debt, less current portion  

 

73,360

 

 

 

99,433

Operating lease liabilities, net of current portion  

 

5,092

 

 

 

6,256

Deferred tax liabilities  

 

10,378

 

 

 

7,623

Total liabilities  

 

126,272

 

 

 

155,242

     
Stockholders’ Equity    
Common stock, $0.001 par value; 30,000 shares authorized; 14,511 and 14,356 shares issued  

 

15

 

 

 

14

Treasury stock, 46,900 and zero shares  

 

(1,261

)

 

 

Additional paid-in capital  

 

181,622

 

 

 

174,618

Retained earnings  

 

19,624

 

 

 

9,715

Total stockholders’ equity  

 

200,000

 

 

 

184,347

     
Total liabilities and stockholders’ equity  

$

326,272

 

 

$

339,589

 
Computer Programs and Systems, Inc.
Condensed Consolidated Statements of Cash Flows
(In ‘000s)
(Unaudited)
     
 

Twelve Months Ended December 31,

 

2020

 

2019

Operating activities:    
Net income  

$

14,246

 

 

$

20,468

 

Adjustments to net income:    
Provision for bad debt  

 

4,370

 

 

 

2,348

 

Deferred taxes  

 

2,755

 

 

 

1,011

 

Stock-based compensation  

 

7,005

 

 

 

9,822

 

Depreciation  

 

1,790

 

 

 

1,407

 

Amortization of acquisition-related intangibles  

 

11,421

 

 

 

11,006

 

Amortization of software development costs  

 

118

 

 

 

 

Amortization of deferred finance costs  

 

317

 

 

 

345

 

Gain on contingent consideration  

 

 

 

 

(5,000

)

Loss on extinguishment of debt  

 

202

 

 

 

 

Changes in operating assets and liabilities:    
Accounts receivable  

 

3,667

 

 

 

641

 

Financing receivables  

 

6,369

 

 

 

3,053

 

Inventories  

 

342

 

 

 

72

 

Prepaid expenses and other  

 

(3,519

)

 

 

(1,474

)

Accounts payable  

 

(1,088

)

 

 

2,542

 

Deferred revenue  

 

(498

)

 

 

(2,003

)

Other liabilities  

 

2,097

 

 

 

(1,418

)

Income taxes payable  

 

(452

)

 

 

782

 

Net cash provided by operating activities  

 

49,142

 

 

 

43,602

 

     
Investing activities:    
Purchase of business, net of cash acquired  

 

 

 

 

(10,733

)

Investment in software development  

 

(3,328

)

 

 

 

Purchases of property and equipment  

 

(3,336

)

 

 

(1,760

)

Net cash used in investing activities  

 

(6,664

)

 

 

(12,493

)

     
Financing activities:    
Dividends paid  

 

(4,338

)

 

 

(5,729

)

Treasury stock purchases  

 

(1,261

)

 

 

 

Proceeds from long-term debt  

 

65

 

 

 

 

Payments of long-term debt principal  

 

(4,069

)

 

 

(13,609

)

Payments of revolving line of credit  

 

(27,561

)

 

 

(20,693

)

Proceeds from revolving line of credit  

 

 

 

 

11,000

 

Payments on capital lease  

 

 

 

 

(250

)

Payments of contingent consideration  

 

 

 

 

(206

)

Proceeds from the exercise of options  

 

 

 

 

3

 

Net cash used in financing activities  

 

(37,164

)

 

 

(29,484

)

     
Net increase in cash and cash equivalents  

 

5,314

 

 

 

1,625

 

     
Cash and cash equivalents, beginning of period  

 

7,357

 

 

 

5,732

 

Cash and cash equivalents, end of period  

$

12,671

 

 

$

7,357

 

Computer Programs and Systems, Inc.
Consolidated Bookings
(In ‘000s)
       
 

Three Months Ended

Twelve Months Ended

In ‘000s  

12/31/2020

 

12/31/2019

12/31/2020

 

12/31/2019

System sales and support(1)  

$

11,144

 

$

17,638

$

48,790

 

$

52,306

TruBridge(2)  

 

10,062

 

 

9,637

 

33,238

 

 

27,209

       
Total  

$

21,206

 

$

27,275

$

82,028

 

$

79,515

       

(1)

Generally calculated as the total contract price (for system sales) and annualized contract value (for support).

(2)

Generally calculated as the total contract price (for non-recurring, project-related amounts) and annualized contract value (for recurring amounts).
 
Computer Programs and Systems, Inc.
Bookings Composition
(In ‘000s, except per share data)
(Unaudited)
         
  Three Months Ended   Twelve Months Ended
  12/31/2020   12/31/2019   12/31/2020   12/31/2019
System sales and support        
Non-subscription sales(1)  

$

6,498

 

$

10,117

 

$

27,500

 

$

32,510

Subscription revenue(2)  

 

3,243

 

 

5,972

 

 

16,899

 

 

14,974

Other  

 

1,403

 

 

1,549

 

 

4,391

 

 

4,822

TruBridge        
Net new(3)  

 

3,700

 

 

2,523

 

 

10,511

 

 

7,905

Cross-sell(3)  

 

4,970

 

 

5,409

 

 

20,285

 

 

16,988

Get Real Health  

 

1,392

 

 

1,705

 

 

2,442

 

 

2,316

         
Total  

$

21,206

 

$

27,275

 

$

82,028

 

$

79,515

         

(1)

Represents nonrecurring revenues that generally exhibit a timeframe for bookings-to-revenue conversion of five to six months following contract execution.

(2)

Represents recurring revenues to be recognized on a monthly basis over a weighted-average contract period of five years, with a start date in the next 12 months and an average timeframe for commencement of bookings-to-revenue conversion of five to six months following contract execution.

(3)

“Net new” represents bookings from outside the Company’s core EHR client base, and “Cross-sell” represents bookings from existing EHR customers. In each case, generally comprised of recurring revenues to be recognized ratably over a one-year period and an average timeframe for commencement of bookings-to-revenue conversion of four to six months following contract execution.
Computer Programs and Systems, Inc.
Acute Care EHR Net New License Mix
         
  Three Months Ended   Twelve Months Ended
 

12/31/2020

 

12/31/2019

 

12/31/2020

 

12/31/2019

SaaS(1)  

3

 

7

 

17

 

12

Perpetual license(2)  

 

6

 

8

 

16

         
Total  

3

 

13

 

25

 

28

         

(1)

Exhibit revenue attribution that is recurring in nature.

(2)

Exhibit revenue attribution that is nonrecurring in nature.
Computer Programs and Systems, Inc.
Reconciliation of Non-GAAP Financial Measures
(In ‘000s)
(Unaudited)
         
 

Three Months Ended December 31,

 

Twelve Months Ended December 31,

Adjusted EBITDA:  

2020

 

2019

 

2020

 

2019

Net income, as reported  

$

3,123

 

$

11,226

 

 

$

14,246

 

$

20,468

 

         
Depreciation expense  

 

456

 

 

323

 

 

 

1,790

 

 

1,407

 

Amortization of software development costs  

 

39

 

 

 

 

 

118

 

 

 

Amortization of acquisition-related intangible assets  

 

2,822

 

 

2,866

 

 

 

11,421

 

 

11,006

 

Stock-based compensation  

 

1,831

 

 

2,524

 

 

 

7,005

 

 

9,822

 

Severance and other nonrecurring charges  

 

1,183

 

 

215

 

 

 

1,998

 

 

3,143

 

Interest expense and other, net  

 

478

 

 

1,153

 

 

 

2,270

 

 

5,887

 

Gain on contingent consideration  

 

 

 

(5,000

)

 

 

 

 

(5,000

)

Provision for income taxes  

 

2,373

 

 

1,533

 

 

 

4,538

 

 

3,228

 

         
Adjusted EBITDA  

$

12,305

 

$

14,840

 

 

$

43,386

 

$

49,961

 

 
Computer Programs and Systems, Inc.
Reconciliation of Non-GAAP Financial Measures
(In ‘000s, except per share data)
(Unaudited)
         
 

Three Months Ended December 31,

 

Twelve Months Ended December 31,

Non-GAAP Net Income and Non-GAAP EPS:  

2020

 

2019

 

2020

 

2019

Net income, as reported  

$

3,123

 

 

$

11,226

 

 

$

14,246

 

 

$

20,468

 

         
Pre-tax adjustments for Non-GAAP EPS:        
Amortization of acquisition-related intangible assets  

 

2,822

 

 

 

2,866

 

 

 

11,421

 

 

 

11,006

 

Stock-based compensation  

 

1,831

 

 

 

2,524

 

 

 

7,005

 

 

 

9,822

 

Severance and other nonrecurring charges  

 

1,183

 

 

 

215

 

 

 

1,998

 

 

 

3,143

 

Non-cash interest expense  

 

75

 

 

 

86

 

 

 

317

 

 

 

345

 

Loss on extinguishment of debt  

 

 

 

 

 

 

 

202

 

 

 

 

After-tax adjustments for Non-GAAP EPS:        
Tax-effect of pre-tax adjustments, at 21%

 

(1,241

)

 

 

(1,195

)

 

 

(4,398

)

 

 

(5,106

)

Tax shortfall from stock-based compensation

 

(2

)

 

 

 

 

 

297

 

 

 

186

 

Gain on contingent consideration

 

 

 

 

(5,000

)

 

 

 

 

 

(5,000

)

         
Non-GAAP net income  

$

7,791

 

 

$

10,722

 

 

$

31,088

 

 

$

34,864

 

         
Weighted average shares outstanding, diluted  

 

14,086

 

 

 

13,830

 

 

 

14,038

 

 

 

13,778

 

         
Non-GAAP EPS  

$

0.55

 

 

$

0.78

 

 

$

2.21

 

 

$

2.53

 

Explanation of Non-GAAP Financial Measures

We report our financial results in accordance with accounting principles generally accepted in the United States of America, or “GAAP.” However, management believes that, in order to properly understand our short-term and long-term financial and operational trends, investors may wish to consider the impact of certain non-cash or non-recurring items, when used as a supplement to financial performance measures that are prepared in accordance with GAAP. These items result from facts and circumstances that vary in frequency and impact on continuing operations. Management uses these non-GAAP financial measures in order to evaluate the operating performance of the Company and compare it against past periods, make operating decisions, and serve as a basis for strategic planning. These non-GAAP financial measures provide management with additional means to understand and evaluate the operating results and trends in our ongoing business by eliminating certain non-cash expenses and other items that management believes might otherwise make comparisons of our ongoing business with prior periods more difficult, obscure trends in ongoing operations, or reduce management’s ability to make useful forecasts. In addition, management understands that some investors and financial analysts find these non-GAAP financial measures helpful in analyzing our financial and operational performance and comparing this performance to our peers and competitors.

As such, to supplement the GAAP information provided, we present in this press release and during the live webcast discussing our financial results the following 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 expense; (ii) amortization of software development costs; (iii) amortization of acquisition-related intangible assets; (iv) stock-based compensation; (v) severance and other non-recurring charges; (vi) interest expense and other, net; (vii) gain on contingent consideration; and (viii) 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 charges; (iv) non-cash interest expense; (v) loss on extinguishment of debt; and (vi) the total tax effect of items (i) through (v). Adjustments to Non-GAAP net income also include the after-tax effect of the shortfall from stock-based compensation and gain on contingent consideration.
  • 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 software development costs – Amortization of software development costs is a non-cash expense resulting from the application of U.S. GAAP to our product development expenditures, which requires capitalization of expenditures meeting certain defined criteria which are then amortized over the estimated useful life of the related assets. We exclude amortization expense related to capitalized software development costs from non-GAAP financial measures because we believe the amount of such expenses in any period may not directly correlate with the underlying performance of our business operations.
  • Amortization of acquisition-related intangible assets – Acquisition-related amortization expense is a non-cash expense arising primarily from the acquisition of intangible assets in connection with acquisitions or investments. We exclude acquisition-related amortization expense from non-GAAP financial measures because we believe (i) the amount of such expenses in any specific period may not directly correlate to the underlying performance of our business operations and (ii) such expenses can vary significantly between periods as a result of new acquisitions and full amortization of previously acquired intangible assets. Investors should note that the use of these intangible assets contributed to revenue in the periods presented and will contribute to future revenue generation, and the related amortization expense will recur in future periods.
  • Stock-based compensation – Stock-based compensation expense is a non-cash expense arising from the grant of stock-based awards. We exclude stock-based compensation expense from non-GAAP financial measures because we believe (i) the amount of such expenses in any specific period may not directly correlate to the underlying performance of our business operations and (ii) such expenses can vary significantly between periods as a result of the timing and valuation of grants of new stock-based awards, including grants in connection with acquisitions. Investors should note that stock-based compensation is a key incentive offered to employees whose efforts contributed to the operating results in the periods presented and are expected to contribute to operating results in future periods, and such expense will recur in future periods.
  • Severance and other non-recurring charges– Non-recurring charges relate to certain severance and other charges incurred in connection with activities that are considered one-time. We exclude non-recurring expenses 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 interest expense – Non-cash interest expense includes amortization of deferred debt issuance costs. We exclude non-cash interest expense from non-GAAP financial measures because we believe these non-cash amounts relate to specific transactions and, as such, may not directly correlate to the underlying performance of our business operations.
  • Gain on contingent consideration – The purchase agreement for our acquisition of Get Real Health in 2019 contained contingent consideration, or “earnout,” provisions whereby the previous shareholders of Get Real Health would receive additional consideration at the conclusion of 2019, depending upon the achievement of certain profitability targets. After the initial measurement period, U.S. GAAP requires that any adjustments to the estimated fair value of this contingent liability, including upon final determination of amounts due, should be recorded in the relevant period’s earnings. We exclude gains on contingent consideration from non-GAAP financial measures because we believe (i) the amount of such gains in any specific period may not directly correlate to the underlying performance of our business operations and (ii) such gains can vary significantly between periods.
  • 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; and (ii) such expenses or benefits can vary significantly between periods as a result of the valuation of grants of new stock-based awards, the timing of vesting of awards, and periodic movements in the fair value of our common stock.

Management considers these non-GAAP financial measures to be important indicators of our operational strength and performance of our business and a good measure of our historical operating trends, in particular the extent to which ongoing operations impact our overall financial performance. In addition, management may use Adjusted EBITDA, Non-GAAP net income and/or Non-GAAP EPS to measure the achievement of performance objectives under the Company’s stock and cash incentive programs. Note, however, that these non-GAAP financial measures are performance measures only, and they do not provide any measure of cash flow or liquidity. Non-GAAP financial measures are not alternatives for measures of financial performance prepared in accordance with GAAP and may be different from similarly titled non-GAAP measures presented by other companies, limiting their usefulness as comparative measures. Non-GAAP financial measures have limitations in that they do not reflect all of the amounts associated with our results of operations as determined in accordance with GAAP. Additionally, there is no certainty that we will not incur expenses in the future that are similar to those excluded in the calculations of the non-GAAP financial measures presented in this press release. Investors and potential investors are encouraged to review the “Unaudited Reconciliation of Non-GAAP Financial Measures” above.