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BUSINESS COMBINATION | 3 Months Ended
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Mar. 31, 2022
Business Combination and Asset Acquisition [Abstract] |
BUSINESS COMBINATION | BUSINESS COMBINATION Acquisition of Healthcare Resource Group On March 1, 2022, we acquired all of the assets and liabilities of Healthcare Resource Group, Inc., a Washington corporation ("HRG"), pursuant to a Stock Purchase Agreement dated March 1, 2022. Based in Spokane, Washington, HRG is a leading provider of customized revenue cycle management ("RCM") solutions and consulting services that enable hospitals and clinics to improve efficiency, profitability, and patient satisfaction. Consideration for the acquisition included cash (net of cash of the acquired entity) of $43.4 million (inclusive of seller's transaction expenses). During 2022, we have incurred approximately $0.5 million of pre-tax acquisition costs in connection with the acquisition of HRG. Acquisition costs are included in general and administrative expenses in our consolidated statements of income. Our acquisition of HRG will be treated as a purchase in accordance with ASC 805, Business Combinations, which requires allocation of the purchase price to the estimated fair values of assets and liabilities acquired in the transaction. Our allocation of the purchase price is based on management's judgment after evaluating several factors, including a preliminary valuation assessment. The allocation is preliminary and subject to changes, which could be significant, as additional information becomes available and appraisals of intangible assets and deferred tax positions are finalized. The preliminary allocation of the purchase price paid for HRG as of March 31, 2022 was as follows:
(In thousands) | Purchase Price Allocation
Acquired cash | 3,989
Accounts receivable | 5,609
Prepaid expenses | 406
Property and equipment | 428
Other assets | 73
Intangible assets | 24,200
Operating lease assets | 1,315
Goodwill | 20,380
Accounts payable and accrued liabilities | (2,543)
Deferred taxes, net | (5,193)
Operating lease liability | (1,315)
Net assets acquired | $ | 47,349 |
The intangible assets in the table above are being amortized on a straight-line basis over their estimated useful lives. The amortization is included in amortization of acquisition-related intangibles in our condensed consolidated statements of income. The fair value measurements of tangible and intangible assets and liabilities were based on significant inputs not observable in the market and thus represent Level 3 measurements within the fair value measurement hierarchy (see Note 16 - Fair Value). Level 3 inputs included, among others, discount rates that we estimated would be used by a market participant in valuing these assets and liabilities, projections of revenues and cash flows, client attrition rates and market comparables. Our condensed consolidated statement of operations for the three months ended March 31, 2022 includes revenues of approximately $3.8 million and pre-tax net income of approximately $0.5 million attributed to the acquired business since the March 1, 2022 acquisition date. The following unaudited pro forma revenue, net income and earnings per share amounts for the three months ended March 31, 2022 give effect to the HRG acquisition as if it had been completed on January 1, 2021. The pro forma financial information is presented for illustrative purposes only and is not necessarily indicative of what the operating results actually would have been during the periods presented had the HRG acquisition been completed during the periods presented. In addition, the unaudited pro forma financial information does not purport to project future operating results. The pro forma information does not fully reflect: (1) any anticipated synergies (or costs to achieve synergies) or (2) the impact of non-recurring items directly related to the HRG acquisition.
| Three Months Ended March 31, |  |
(In thousands, except per share data) | 2022 |  | 2021 |  |  |  |
Pro forma revenues | $ | 84,211 |  |  | $ | 75,688 |  |  |  |  |
Pro forma net income | $ | 6,822 |  |  | $ | 2,317 |  |  |  |  |
Pro forma diluted earnings per share | $ | 0.46 |  |  | $ | 0.15 |  |  |  |  |
Pro forma net income was calculated by adjusting the results for the applicable period to reflect the additional amortization that would have been charged assuming the fair value adjustments to intangible assets had been applied on January 1, 2021 and other miscellaneous, immaterial adjustments. Acquisition of TruCode On May 12, 2021, we acquired all of the assets and liabilities of TruCode LLC, a Virginia limited liability company (“TruCode”), pursuant to a Stock Purchase Agreement dated May 12, 2021. Based in Alpharetta, Georgia, TruCode provides configurable, knowledge-based software that gives coders, clinical documentation improvement specialists and auditors the flexibility to code according to their knowledge, preferences and experience. The cloud-based medical coding solution has been bundled with the TruBridge solutions and services to enhance revenue cycle performance for healthcare organizations of all sizes. Consideration for the acquisition included cash (net of cash of the acquired entity) of $59.9 million (inclusive of sellers' transaction expenses), plus a contingent earnout payment of up to $15.0 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"). As of March 31, 2022, $1.25 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 remaining earnout period have declined since the date of acquisition. During 2021, we incurred approximately $0.9 million of pre-tax acquisition costs in connection with the acquisition of TruCode. Acquisition costs are included in general and administrative expenses in our consolidated statements of income. Our acquisition of TruCode was treated as a purchase in accordance with ASC 805, Business Combinations, which requires allocation of the purchase price to the estimated fair values of assets and liabilities acquired in the transaction. Our allocation of the purchase price is based on management's judgment after evaluating several factors, including a valuation assessment. The allocation of the purchase price paid for TruCode was as follows:
(In thousands) | Purchase Price Allocation
Acquired cash | $ | 4,249 |
Accounts receivable | 924
Prepaid expenses | 2
Intangible assets | 37,300
Goodwill | 27,287
Accounts payable and accrued liabilities | (1,840)
Contingent consideration | (2,500)
Deferred revenue | (1,300)
Net assets acquired | $ | 64,122 |
The intangible assets in the table above are being amortized on a straight-line basis over their estimated useful lives. The amortization is included in amortization of acquisition-related intangibles in our condensed consolidated statements of income. The fair value measurements of tangible and intangible assets and liabilities were based on significant inputs not observable in the market and thus represent Level 3 measurements within the fair value measurement hierarchy (see Note 16 - Fair Value). Level 3 inputs included, among others, discount rates that we estimated would be used by a market participant in valuing these assets and liabilities, projections of revenues and cash flows, client attrition rates and market comparables.

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- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI http://asc.fasb.org/topic&trid=2303972 + Details
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