Computer Programs and Systems Inc. (CPSI) filed Quarterly Report for the period ended 2009-09-30.
Computer Programs and Systems Inc has been serving the information technology needs of community healthcare providers for over twenty-seven years. Headquartered in Mobile Alabama the company provides a complete health information and patient care system that encompasses the full spectrum of financial and clinical applications. The CPSI System provides the most comprehensive single-source electronic medical record available and allows the realization of a true enterprise-wide electronic medical record. The Company is a single-source vendor providing comprehensive software and hardware products complemented by complete installation services and extensive support. Its fully integrated enterprise-wide system automates clinical and financial data management in each of the primary functional areas of a hospital. Computer Programs And Systems Inc. has a market cap of $472.1 million; its shares were traded at around $43.02 with a P/E ratio of 28.5 and P/S ratio of 4. The dividend yield of Computer Programs And Systems Inc. stocks is 3.3%. Computer Programs And Systems Inc. had an annual average earning growth of 16.5% over the past 5 years.
Highlight of Business Operations:
While the current economic recession and credit crisis has impacted and could continue to impact the community hospitals that comprise our target market, we believe that the American Recovery and Reinvestment Act of 2009 (the “ARRA”), which became law on February 17, 2009, will increase demand for healthcare information technology and will have a positive impact on our business prospects. The ARRA includes more than $19 billion in funding to aid healthcare organizations in modernizing their operations through the acquisition and wide-spread use of healthcare information technology. Included in the funding is approximately $17.2 billion in incentives through Medicare and Medicaid reimbursement systems to encourage and assist healthcare providers in adopting and using electronic health records (“EHRs”). These incentive payments are set to begin as early as 2010 and last through 2015. If an eligible healthcare provider does not begin to demonstrate meaningful use of EHRs by 2015, then reimbursement under Medicare will begin to be reduced.
In the nine months ended September 30, 2009, we generated revenues of $94.0 million from the sale of our products and services, as compared to $87.6 million in the nine months ended September 30, 2008, an increase of 7.3%. We installed our financial and patient accounting system in 22 new hospitals in the first nine months of 2009 compared to 18 in the first nine months of 2008. Our net income for the nine months ended September 30, 2009 increased 9.4% from the first nine months of 2008, principally as a result of the increase in sales. Cash flow from operations decreased 50.3% from the first nine months of 2008 primarily due to an increase in financing receivables and accounts receivable. While our operating cash flows did decline during the first nine months of 2009 compared to the first nine months of 2008, we have maintained a strong cash position sufficient to meet our operating requirements and continue our dividends at historical levels. We believe that a strong cash position enables us to compete better in the marketplace and maintain the quality of our customer service and product offerings.
Cost of system sales increased by 8.7%, or $0.8 million, for the comparative three month periods. Gross margin on system sales fell to 18.6% in the third quarter from 19.2% in the same quarter of the prior year. Payroll and related costs increased by 19.7%, or $0.8 million, for the comparative three month periods. This increase is primarily due to salary costs of additional support personnel hired during 2009 in anticipation of an increase in future installations stemming from electronic medical record requirements contained in the American Recovery and Reinvestment Act of 2009 (the “ARRA”). The training curve of a newly hired employee is generally 6 to 12 months and may depress gross margins on system sales in the short term. Travel and related costs increased 9.4%, or $0.2 million, as a result of increases in airline rates and more labor intensive clinical installations compared to the same quarter of the prior year.
Cost of support and maintenance increased by 15.1%, or $0.7 million, for the comparative three month periods. The gross margin on support and maintenance revenues decreased to 59.9% from 63.7% in the same quarter of the prior year. The decrease in gross margin was due to a 19.4%, or $0.8 million, increase in payroll and related costs due to the addition of the new personnel during 2009.
Our costs associated with business management services increased by 24.1%, or $0.9 million, for the comparative three month periods. This increase was caused by an increase in temporary labor as we move to utilizing temporary labor agencies for all new business management services employees due to historically high turnover costs. Temporary labor accounted for 20.6% of total labor and related costs for the third quarter of 2009 as compared to 7.4% during the third quarter of 2008. We expect this transition to contract labor services to improve costs, margins and efficiencies in the long term. We also incurred additional temporary labor and other costs in opening the new office in Monroe, Louisiana during the second quarter of 2009. The gross margin on business management services decreased to 41.5% from 43.5% in the same quarter of the prior year. Postage costs also increased $0.2 million for the comparative three month periods due to a $0.02 postage rate increase in May 2009.
Sales and Marketing Expenses. Sales and marketing expenses increased by 5.6%, or $0.1 million, for the comparative three month periods. The increase is attributable to a $0.2 million increase in salary and commission expense offset by a slight decrease in other marketing expenses.
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