CPSI

Computer Programs and Systems, Inc. (CPSI)

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Computer Programs and Systems Inc. (CPSI)

Q4 2012 Earnings Call

February 1, 2013 9:00 am ET

Executives

J. Boyd Douglas – President, Chief Executive Officer

David Dye – Chairman, Chief Financial Officer

Analysts

Jamie Stockton – Wells Fargo

David Larsen – Leerink Swann

Ryan Daniels – William Blair

George Hill – Citigroup

Richard Close – Avondale Partners

Caroline LeCates – Lazard Capital Markets

Sean Wieland – Piper Jaffray

Frank Sparacino – First Analysis

Sandy Draper – Raymond James

Bret Jones – Oppenheimer

Presentation

Operator

Ladies and gentlemen, thank you for standing by and welcome to the Computer Programs and Systems Fourth Quarter and Year-End 2012 Earnings conference call. During the presentation, all participants will be in a listen-only mode. Afterwards we will conduct a question and answer session. At that time, if you have a question, please press the one followed by the four on your telephone. If at any time during the conference you need to reach an operator, please press star, zero. As a reminder, this conference is being recorded Friday, February 1, 2013.

I would now like to turn the conference over to Mr. Boyd Douglas, President and Chief Executive Officer. Please go ahead, sir.

Boyd Douglas

Thank you, Carlos. Good morning everyone and thank you for joining us.

During this conference call, we may make statements regarding future operating plans, expectations and performance that constitute forward-looking statements made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. We caution you that any such forward-looking statements only reflect management expectations and predictions based upon currently available information and are not guarantees of future results or performance. Actual results might differ materially from those expressed or implied by such forward-looking statements as a result of known and unknown risks, uncertainties and other factors, including those described 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.

We also caution investors that the forward-looking information provided in this call 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 call.

Joining me on the call this morning is David Dye, Chief Financial Officer. David and I have a few minutes of prepared comments and then we’ll be happy to take your questions.

In the fourth quarter, we installed our financial and patient accounting system at eight hospitals and our core clinical departmental applications at 12 facilities. Additionally, 16 hospitals implemented nursing point of care, 14 customers went live with the CPOE, and 21 facilities implemented physician documentation. Add-on sales to existing clients were $13.5 million or 28% of total revenue for the quarter.

At this time, we expect to install our financial and patient accounting system in seven facilities in the first quarter. We anticipate 15 new installations of our core clinical departmental modules, 15 nursing point of care implementations, and 39 installations of physician applications which consist of CPOE and physician documentation. In business management solutions during the fourth quarter, we executed seven new accounts receivable management contracts, two of which were for full services and five for private pay and insurance follow-up services.

I’d spent a good deal of time on our meaningful use success in the previous call, so I’m going to scale back some today. Basically the message is that the beat goes on. From the CMS data as of December 31, 2012, 302 of our clients have successfully tested for meaningful use under the complete EHR designation. This trails only Epic with 308, and the significant gap that has existed between CPSI and our competitors in the rural and community hospital space since the start of the program remains. The one takeaway from these numbers I’d like to leave you with is that we are seeing tangible evidence of the positive effect that our dominance is having on new client sales. For instance, we have budgeted for 35 new client installations for 2013. To date, we have already signed contracts to fill 16 of those slots.

In closing my comments, I would like to briefly discuss two more items. Sales of our physician documentation application continue to track at a high level and we expect that to increase as the reality of Stage 2 meaningful use compliance comes closer. Also in 2013, we will be bringing our emergency department application to market. While a small number of our hospitals have implemented third party ED systems, the majority of our clients recognize the particular importance of integration with regard to that area and have waited patiently for CPSI to bring our product to market. Because we will be the only vendor that offers a truly integrated ED/HIS system, we feel that the opportunity here is substantial.

As you can tell, the news continues to be positive on all fronts. With that, I’m going to turn the call over to David for his comments.

David Dye

Thanks Boyd, and good morning everyone. Our DSOs as of year-end were 38, down 10 days sequentially and seven days year-over-year. Cash collections for the fourth quarter were a record 53.2 million. Collections for 2012 totaled 184 million, marking the second consecutive year that our cash collections exceeded our gross revenues. Both of these metrics highlight our comparably conservative revenue recognition practices.

Depreciation expense was 820,000 for the quarter and 3.2 million for the year. CAPEX for the fourth quarter was 2 million primarily due to the build-out of our new Fairhope software support office location which is set to open later this month and will initially house 100-plus software support and installation professionals. We expect CAPEX of approximately 750,000 for the first quarter and 500,000 per quarter for the remaining quarters in 2013.

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