BASIS OF PRESENTATION

3 Months Ended

Mar. 31, 2023

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC") and include all adjustments that, in the opinion of management, are necessary for a fair presentation of the results of the periods presented. All such adjustments are considered of a normal recurring nature. Quarterly results of operations are not necessarily indicative of annual results.

Certain footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") have been condensed or omitted. The condensed consolidated balance sheet as of December 31, 2022 was derived from the audited consolidated balance sheet at that date. These unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements of Computer Programs and Systems, Inc. ("CPSI" or the "Company") for the year ended December 31, 2022 and the notes thereto contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.

Commencing with the fourth quarter of 2022, the Company realigned its reporting structure due to certain organizational changes. As a result, the Company changed its three reportable segments from (i) TruBridge, (ii) Acute Care Electronic Health Record ("EHR"), and (iii) Post-acute Care EHR to (i) Revenue Cycle Management ("RCM"), (ii) EHR, and (iii) Patient engagement. All prior segment information has been recast to reflect the Company's new segment structure and current period presentation. Refer to Note 17 - Segment Reporting for more information.

During the first quarter of 2023, we identified certain costs related to the implementation of our cloud strategy and our security operations center that were recorded within the caption "Costs of Sales - EHR" on our condensed consolidated statements of income, that we determined do not solely contribute to the production of EHR products and services, but support the overall business. Consequently, effective January 1, 2023, certain costs related to the implementation of our cloud strategy, which were formerly included within the caption "Costs of Sales - EHR" have been recorded as components of "Operating expenses - Product development". In addition, certain costs related to the Company's security operations center, which were formerly included within the caption "Costs of Sales - EHR" have been recorded as components of "Operating expenses - General and administrative". Additionally, immaterial travel costs were reclassified from within the caption "Costs of Sales - RCM" to "Operating expenses - Product development". Amounts presented for the three months ended March 31, 2022 have been reclassified to conform to the current presentation.

In addition, during the first quarter of 2023, we refined our operating expense allocation methodology to more accurately distribute the appropriate share of costs among operating segments. Amounts presented for the three months ended March 31, 2022 are reflective of the current operating expense methodology in order to conform to the current presentation.

The following table provides the amounts reclassified and the impact of applying the current operating expense allocation methodology for the three months ended March 31, 2022.


(in thousands)	As previously reported		Re-classifications		As reclassified		Impact of operating expense allocations		As currently reported
Costs of sales
RCM	$	20,430	$	(32)	$	20,398	$	—	$	20,398
EHR	16,683		(687)		15,996		(657)		15,339
Gross Profit	39,815		719		40,534		657		41,190
Operating expenses
Product development	7,101		306		7,407		657		8,064
General and administrative	13,014		412		13,426		—		13,426
Total operating expenses	$	30,829	$	718	$	31,547	$	657	$	32,204

Principles of Consolidation

The condensed consolidated financial statements of CPSI include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated.