FINANCING RECEIVABLES

6 Months Ended

Jun. 30, 2024

Short-Term Payment Plans

The Company provides fixed monthly payment arrangements ("short-term payment plans") over terms ranging from three to twelve months for certain add-on software installations. As a practical expedient, we do not adjust the amount of consideration recognized as revenue for the financing component as unearned income when we expect payment within one year or less. These receivables, included in the current portion of financing receivables, were comprised of the following at June 30, 2024 and December 31, 2023:


(In thousands)	June 30, 2024		December 31, 2023
Short-term payment plans, gross	$	1,119	$	788
Less: allowance for losses	(56)		(39)
Short-term payment plans, net	$	1,063	$	749

Long-Term Financing Arrangements

Additionally, the Company provides financing for purchases of its information and patient care solutions to certain healthcare providers under long-term financing arrangements expiring in various years through 2030. Under long-term financing arrangements, the transaction price is adjusted by a discount rate that reflects market conditions that would be used for a separate financing transaction between the Company and licensee at contract inception, and takes into account the credit characteristics of the licensee and market interest rates as of the date of the agreement. As such, the amount of fixed fee revenue recognized at the beginning of the license term will be reduced by the calculated financing component. As payments are received from the licensee, the Company recognizes a portion of the financing component as interest income, reported as other income in the condensed consolidated statements of operations. These receivables typically have terms from two to seven years.

The components of these receivables were as follows at June 30, 2024 and December 31, 2023:


(In thousands)	June 30, 2024		December 31, 2023
Long-term financing arrangements, gross	$	4,284	$	5,212
Less: allowance for expected credit losses	(332)		(377)
Less: unearned income	(271)		(361)
Long-term financing arrangements, net	$	3,681	$	4,474

Future minimum payments to be received subsequent to June 30, 2024 are as follows:


(In thousands)
Years Ending December 31,
2024	$	1,671
2025	2,195
2026	276
2027	69
2028	62
Thereafter	11
Total minimum payments to be received	4,284
Less: allowance for expected credit losses	(332)
Less: unearned income	(271)
Receivables, net	$	3,681

Credit Quality of Financing Receivables and Allowance for Expected Credit Losses

The following table is a roll-forward of the allowance for expected credit losses for the six months ended June 30, 2024 and year ended December 31, 2023:


(In thousands)	Balance at Beginning of Period		Provision		Charge-offs		Recoveries		Sale of AHT		Balance at End of Period
June 30, 2024	$	416	$	(26)	$	—	$	—	$	(2)	$	388
December 31, 2023	$	549	$	(133)	$	—	$	—	$	—	$	416

The Company’s financing receivables are comprised of a single portfolio segment, as the balances are all derived from short-term payment plan arrangements and long-term financing arrangements within our target market of community hospitals. The Company evaluates the credit quality of its financing receivables based on a combination of factors, including, but not limited to, customer collection experience, current and future economic conditions, the customer’s financial condition, and known risk characteristics impacting the respective customer base of community hospitals, the most notable of which relate to enacted and potential changes in Medicare and Medicaid reimbursement rates as community hospitals typically generate a significant portion of their revenues and related cash flows from beneficiaries of these programs. In addition to specific account identification, the Company utilizes historical collection experience to establish the allowance for expected credit losses. Financing receivables are written off only after the Company has exhausted all collection efforts.

Customer payments are considered past due if a scheduled payment is not received within contractually agreed upon terms. To facilitate customer collection and credit monitoring efforts, financing receivable amounts are invoiced and reclassified to trade accounts receivable when they become due, with all invoiced amounts placed on nonaccrual status. As a result, all past due amounts related to the Company’s financing receivables are included in trade accounts receivable in the accompanying condensed consolidated balance sheets. The following is an analysis of the age of financing receivables amounts (excluding short-term payment plans) that have been reclassified to trade accounts receivable and were past due as of June 30, 2024 and December 31, 2023:


(In thousands)	1 to 90 Days Past Due		91 to 180 Days Past Due		181 + Days Past Due		Total Past Due
June 30, 2024	$	594	$	235	$	518	$	1,347
December 31, 2023	$	857	$	231	$	323	$	1,411

From time to time, the Company may agree to alternative payment terms outside of the terms of the original financing receivable agreement due to customer difficulties in achieving the original terms. In general, such alternative payment arrangements do not result in a re-aging of the related receivables. Rather, payments pursuant to any alternative payment arrangements are applied to the already outstanding invoices beginning with the oldest outstanding invoices as the payments are received.

Because amounts are reclassified to trade accounts receivable when they become due, there are no past due amounts included within financing receivables, current portion, net or financing receivables, net of current portion in the accompanying condensed consolidated balance sheets.

The Company utilizes an aging of trade accounts receivable as the primary credit quality indicator for its financing receivables, which is facilitated by the reclassification of customer payment amounts to trade accounts receivable when they become due. The table below categorizes customer financing receivable balances (excluding short-term payment plans) based on the age of the oldest payment outstanding that has been reclassified to trade accounts receivable:


(In thousands)	June 30, 2024		December 31, 2023
Stratification of uninvoiced client financing receivables based on aging of related trade accounts receivable:
Uninvoiced client financing receivables related to trade accounts receivable that are 1 to 90 Days Past Due	$	2,347	$	1,068
Uninvoiced client financing receivables related to trade accounts receivable that are 91 to 180 Days Past Due	579		1,720
Uninvoiced client financing receivables related to trade accounts receivable that are 181 + Days Past Due	975		965
Total uninvoiced client financing receivables balances of clients with a trade accounts receivable	$	3,901	$	3,753
Total uninvoiced client financing receivables of clients with no related trade accounts receivable	112		1,098
Total financing receivables with contractual maturities of one year or less	1,119		788
Less: allowance for expected credit losses	(388)		(416)
Total financing receivables	$	4,744	$	5,223