Computer Programs and Systems Annual Report 2020

FY2020 Annual Report · Computer Programs and Systems

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2020 Annual Report

Building Healthier Communities

COMPANY PROFILE
CPSI is a leading provider of healthcare solutions and services for community hospitals and other healthcare
systems and post-acute care facilities. Founded in 1979, CPSI offers its products and services through four
companies – Evident, LLC, American HealthTech, Inc., TruBridge, LLC, and iNetXperts, Corp. d/b/a Get Real
Health. These combined companies are focused on improving the health of the communities we serve, connecting
communities for a better patient care experience, and improving the financial operations of our clients. Evident
provides comprehensive acute care EHR solutions and related services for community hospitals and their physician
clinics. American HealthTech provides a comprehensive post-acute care EHR solution and related services for
skilled nursing and assisted living facilities. TruBridge focuses on providing business management, consulting,
and managed IT services, along with its complete RCM solution, for all care settings. Get Real Health delivers
technology solutions to improve patient outcomes and engagement strategies with care providers. For more
information, visit www.cpsi.com.

ANNUAL MEETING
The annual meeting of stockholders will be held Thursday, May 13, 2021, at 8:00 a.m. Central Time in a virtual
format only via the internet at www.proxydocs.com/CPSI.

FINANCIAL HIGHLIGHTS

(In thousands, except per share data)

Total sales revenue
Total cost of sales
Gross proﬁt

Total operating expenses
Operating income
Total other expense

Income before income taxes

Provision for income taxes

Net income

Net income per share – basic and diluted
Weighted average shares outstanding:

Basic
Diluted

1
1
4
,
0
8
2
$

7
2
9
,
6
7
2
$

4
3
6
,
4
7
2
$

2
7
2
,
7
6
2
$

8
8
4
,
4
6
2
$

Year Ended December 31,

2020

2019

$ 264,488
128,242
136,246
115,192
21,054
(2,270)
18,784
4,538
14,246
0.98

$ 274,634
130,489
144,145
119,562
24,583
(887)
23,696
3,228
20,468
1.43

14,038
14,038

13,778
13,778

8
6
4
,
0
2
$

2
3
6
,
7
1
$

6
4
2
,
4
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TO OUR SHAREHOLDERS:

An enduring strength of CPSI has been our ability to respond to dynamic market conditions and execute
a consistent growth strategy that creates long-term value for all our stakeholders. Without question, 2020
was a year like no other for CPSI, our clients, and the communities we serve due to the unprecedented
challenges and social and economic disruptions caused by the COVID-19 pandemic. We have faced these
challenges, however, with the same determination and resilience that has supported our business for over
41 years. Through vision, innovation, and collaboration, CPSI demonstrated strong leadership over the past
year, afﬁrming our position as a trusted partner providing critical support and solutions when our clients needed
it the most. Across the CPSI family of companies, we have a shared commitment to do everything possible to
ensure our communities have access to safe, quality healthcare. We commend the heroic efforts of dedicated
healthcare workers on the front lines across the country who worked tirelessly in 2020 to support patients in
their respective communities.

At the onset of the pandemic, CPSI took immediate steps to help our clients respond to this crisis with
resources to manage ﬂuctuating patient volumes, provide treatment or testing for COVID-19, and deliver
ongoing patient care safely and effectively. We provided a COVID-19 Resource webpage and offered webinars
to help providers navigate rapidly changing information. In late March, through a partnership with QliqSOFT, we
began offering our CPSI COVID-19 Toolkit, including a screening for assessments based on CDC guidelines,
live care escalation to an agent, and video chat to support virtual care. And, in early April, we introduced a free
telehealth solution, TalkWithYourDoc.com, to enable providers and patients to connect in a safe manner.

Above all, our top priority throughout the pandemic has been to ensure the safety of our employees and those
we serve. COVID-19 gave us the opportunity to revise our implementation strategy and leverage technology
innovation to meet the expectations of our customers. We continued to deliver the same high level of customer
support and training on a remote basis, including on time, on budget, implementations. While the health and
safety of everyone involved was the key driver for this transition, there were other beneﬁts realized by our
clients. In addition to cost savings, clinical care teams experienced less disruption to day-to-day job functions
with virtual training being more efﬁcient and less time consuming, allowing more time to focus on patient care.

Our ﬁnancial results for 2020 reﬂect the challenging and dynamic conditions we faced, especially at the onset
of the pandemic as COVID-19 reduced hospital volumes and forced temporary closures, creating obstacles
for new Electronic Health Record (EHR) sales efforts. Despite these challenges, we achieved total revenues
for the year of $264.5 million, and net income of $14.2 million, or $0.98 per diluted share. As a result of
our successful execution on cash ﬂow priorities during 2020, cash provided by operations for the year was
$49.1 million, compared with $43.6 million for 2019. Our continued strength in cash ﬂow generation allowed
for an annual net reduction in bank debt of $30.7 million, and our balance sheet reﬂected $12.7 million in cash
as of December 31, 2020, compared with $7.4 million one year prior.

In June 2020, we announced the reﬁnancing of the Company’s existing credit agreement to provide ample
liquidity to broaden our capital allocation strategy and create greater ﬂexibility for more diversiﬁed and
opportunistic uses of capital. Additionally, in September, the Board of Directors approved a stock repurchase
program under which the Company may repurchase up to $30 million in aggregate amount of its outstanding
shares of common stock from time to time over a two-year period depending upon market conditions. Concurrent

with the authorization of the stock repurchase program, the Board of Directors opted to indeﬁnitely suspend all
quarterly dividends. With the improved strength of our balance sheet, combined with robust cash generating
capabilities, we are well positioned to conﬁdently deploy capital in future strategic M&A opportunities that
strengthen our market position as well as make strategic investments in products and services. Together, these
initiatives will support our growth strategy and create greater value for our clients and our shareholders.

Overall, consolidated bookings for the year showed improvement over the prior year, despite headwinds posed
by the pandemic. Notably, TruBridge, our services business, had total bookings of $33.2 million, surpassing
the previous year’s bookings by 22 percent, and posting a new annual Company record. We were especially
pleased with the composition of these bookings as we saw a 33 percent increase in bookings outside our
EHR base and a 19 percent increase in cross-sell bookings from existing EHR customers, providing conﬁdence
in additional marketing opportunities for TruBridge. Our HFMA Peer-Reviewed® suite of Revenue Cycle
Management (RCM) offerings provide a complete outsourcing service. In addition, other recent TruBridge
offerings include our innovative care management program and price transparency solution, which support
a more patient-driven healthcare experience. This price transparency solution also enables hospitals of all
sizes, regardless of their EHR provider, to meet the Centers for Medicare & Medicaid Services (CMS) price
transparency mandate that went into effect in January 2021 for all U.S. hospitals.

While our total system sales and support bookings showed a modest decline over the prior year, we were
encouraged to see new acute care bookings show more favorable trends than add-on sales. Additionally, our
post-acute care segment had its best bookings year since 2016, showing a 25 percent improvement over
the prior year. We see these trends as tangible proof that both the acute care and post-acute care markets
appreciate the critical investments we have made in our EHR products. In 2020, we also continued to focus on
growing our recurring revenue and develop a more stable and predictable business model. A growing number
of customers have shifted from the traditional license model to Software as a Service (SaaS) model, with
recurring revenues accounting for 85 percent of total revenue in 2020. Approximately 57 percent of our new
acute care EHR deals sold as SaaS in 2020, providing a favorable impact on future recurring revenue.

We ended 2020 with pride in our execution during a disruptive and challenging year. Importantly, we have also
viewed the valuable lessons learned over the past year as an opportunity to reassess CPSI’s future growth
strategy. In late 2020, we partnered with an outside consulting ﬁrm to review our business and growth prospects
and identify the best path forward to increase value for our shareholders, while also protecting the interests
of other critical stakeholders such as our clients and employees. Our primary objectives are to have a clearly
deﬁned strategy that will drive long-term sustainability, expand CPSI’s footprint and maximize our success in
a post-COVID environment, both in the markets we serve and new markets. We have a unique opportunity to
leverage our 41 years of success as a trusted partner and advocate of community healthcare. Our success is
validated by an expansive client base of acute and post-acute care facilities that employ solutions from CPSI’s
combined companies, including a growing number of clients supported by TruBridge.

We are excited to share with you the key aspects of this transformative growth plan, which will further solidify
CPSI’s position as a leader in shaping the future of community healthcare. Underlying these growth initiatives
will be our same core values of vision, innovation and collaboration that are synonymous with CPSI.

First, we will continue to expand our established sales relationships by cross-selling TruBridge services into
our substantial acute and post-acute EHR client base. We believe we have signiﬁcant opportunities to build on
the momentum we have created and improve our execution. With a total addressable market of $400 million
in annual cross-selling revenues, we have conﬁdence in the long-term growth prospects for TruBridge. We
believe we can reach our expected goal of $60 million in incremental annual revenues through cross-selling
efforts over the next three years.

Second, we will focus on net new TruBridge sales. An estimated 85 percent of hospitals in our market are still
managing their RCM operations in-house. With hospitals facing increasing ﬁnancial pressure due to ﬂuctuating
patient volumes, increasing self-pay accounts and the impact of COVID-19, we expect to see a continued
shift to outsourcing, and we remain conﬁdent in our ability to continue increasing TruBridge market share with
providers outside our EHR base. With a renewed focus on supporting the business of good health, we have
an opportunity to help more healthcare organizations, regardless of size, maximize their reimbursement while

increasing productivity, from patient eligibility and liability to managing denials and contract management. The
total addressable market is over $1 billion in annual revenues, including upmarket opportunities with larger
hospitals and healthcare systems. With the recent favorable trends in net TruBridge sales, including a solid
33 percent growth rate in 2020, our target of $25 million in incremental annual revenues from outside our EHR
base by the end of 2024 is attainable.

The third part of our core growth plan is to maintain our strong retention rate across our EHR base and, at the
same time, pursue additional growth opportunities with new EHR clients. Both CPSI acute care and post-acute
care clients beneﬁt from an EHR designed with the user in mind, including ongoing training and dedicated
support. This relationship-driven approach, along with the delivery of a single solution, provide conﬁdence that
we will maintain or improve on our current 95 percent retention rate with our acute care segment. Based on
our historical win rates, we see a clear path forward to maintaining our consistent track record of net new EHR
client wins.

We are also focused on initiatives that will modernize our business, increase our efﬁciency, and deliver cost
savings that will support our growth as well as fund additional investments to enhance our service offering.
Our operational initiatives over the next three years are expected to achieve targeted cost savings of $25 million
by 2024. We have already taken the ﬁrst step with an organizational realignment intended to foster a more
nimble and dynamic organization that will support faster decision-making by bringing our leadership closer to
our clients and frontline employees. Furthermore, we are establishing improved efﬁciencies by standardizing
processes and activities by function, aligning incentives to ensure productivity and desired outcomes, and
reassessing certain vendor partnerships.

At the same time, we remain committed to product innovation and development activities focused on solutions
that improve the patient experience and care outcomes. In line with current trends for value-based care, we
see increasing demand for patient engagement, industry insights, reporting and analytics technology. These
trends create an additional window of opportunity for our investment in Get Real Health, which we acquired in
2019, and the further development of enhanced patient engagement solutions.

As we look ahead, we are more excited than ever about the future of CPSI with a renewed focus and viable
plan for long-term success. We are proud of our accomplishments and the favorable reputation we have earned
for our leading role in connecting providers, patients, and communities with innovative solutions that address
both the clinical and ﬁnancial side of healthcare delivery. In the ever-changing world of healthcare, TruBridge
is at the forefront of helping healthcare organizations become more efﬁcient with our industry leading suite of
RCM solutions that enhance productivity, maximize reimbursement, and support more efﬁcient operations.
We provide the people, products and processes that ensure our clients’ success both now and in the future.
As always, our mission is to deliver efﬁcient, accessible and transformative products and services to the global
healthcare marketplace, which, in turn will help build healthy and vibrant communities. We are fortunate to have
an exceptional team of employees who share this mission and who stepped up to meet the challenges of the
past year with the same level of dedication and support for our clients that has always been a hallmark of CPSI.
We must also acknowledge the truly heroic work in our communities with hospital leaders, clinicians, and
healthcare workers across the continuum of care working under extraordinary conditions to deliver safe patient
care. We are extremely proud to be associated with them as our clients, and we look forward to extending our
valued relationships. Together, with everyone across our combined companies, our management team and our
Board of Directors, we will move CPSI forward and pursue a strategic direction that delivers greater value to
our shareholders and the communities we serve.

Thank you for the support your investment provides.

J. Boyd Douglas
President and Chief Executive Ofﬁcer

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

☒

☐

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED December 31, 2020

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM

Commission file number: 000-49796
COMPUTER PROGRAMS AND SYSTEMS, INC.
(Exact Name of Registrant as Specified in Its Charter)

Delaware
(State or Other Jurisdiction of
Incorporation or Organization)

6600 Wall Street, Mobile, Alabama
(Address of Principal Executive Offices)

74-3032373
(I.R.S. Employer
Identification No.)

36695

(Zip Code)

(251) 639-8100
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:

Title of each class
Common Stock, par value $.001 per share

Trading symbol

CPSI

Name of each exchange on which registered
The NASDAQ Stock Market LLC

Securities registered pursuant to Section 12(g) of the Act:
None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No x
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act

of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to

Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to
submit such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company, or an emerging growth company. See the definitions of "large accelerated filer," accelerated filer,” "smaller reporting company," and
"emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):

Accelerated filer

Smaller reporting company

ý
☐

Large accelerated filer

Non-accelerated filer

¨
☐

Emerging Growth Company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any
new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal
control of financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that
prepared or issued its audit report. ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No x
The aggregate market value of common stock held by non-affiliates of the registrant at June 30, 2020 was $289,321,922.
As of March 9, 2021, the registrant had outstanding 14,662,160 shares of its common stock.

DOCUMENTS INCORPORATED BY REFERENCE IN THIS FORM 10-K:

Portions of the definitive Proxy Statement for the 2021 Annual Meeting of Stockholders are incorporated by reference into Part III of this report to the
extent described herein.

Item No.

Page No.

Special Note Regarding Forward-Looking Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

TABLE OF CONTENTS

1A.
1B.
2
3
4

6
7

7A.
8
9

9A.
9B.

10
11
12

13
14

PART I
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Industry Dynamics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Our Products and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Product Development and Enhancement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Product Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
System Implementation and Training . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Clients, Sales and Marketing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Backlog . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Health Information Security and Privacy Practices . . . . . . . . . . . . . . . . . . . . . . . .
Managing Cybersecurity Risks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Material Government Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Human Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Executive Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Company Web Site . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mine Safety Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

PART II

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Management’s Discussion and Analysis of Financial Condition and Results of
Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Quantitative and Qualitative Disclosures about Market Risk . . . . . . . . . . . . . . . . . . . .
Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

PART III
Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . . . . . .
Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Certain Relationships and Related Transactions, and Director Independence . . . . . . . .
Principal Accountant Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

PART IV
Exhibits and Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
15
16
Form 10-K Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Portions of the definitive Proxy Statement for the 2021 Annual Meeting of Stockholders are incorporated by
reference into Part III of this report to the extent described herein.

5
5
5
7
9
14
14
15
15
16
17
18
18
19

19
21
22
23
41
41
41
41

42
43

44
57
58

92
92
93

94
94

95
95
95

96
96
96

SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS

This Annual Report on Form 10-K contains forward-looking statements within the meaning of the "safe harbor" provisions of
the Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified generally by the use
of forward-looking terminology and words such as "expects," "anticipates," "estimates," "believes," "predicts," "intends,"
"plans," "potential," "may," "continue," "should," "will" and words of comparable meaning. Without limiting the generality of
the preceding statement, all statements in this Annual Report relating to estimated and projected earnings, margins, costs,
expenditures, cash flows, growth rates and future financial results are forward-looking statements. We caution investors that
any such forward-looking statements are only predictions and are not guarantees of future performance. Certain risks,
uncertainties and other factors may cause actual results to differ materially from those projected in the forward-looking
statements. The following is a summary of the principal risks that could adversely affect our business, financial condition,
results of operations and cash flows.

Risks Related to Our Industry

•
•
•

•
•

the ongoing COVID-19 pandemic and related economic disruption;
saturation of our target market and hospital consolidations;
unfavorable economic or market conditions that may cause a decline in spending for information technology and
services;
significant legislative and regulatory uncertainty in the healthcare industry;
exposure to liability for failure to comply with regulatory requirements;

Risks Related to Our Business

•
•
•
•
•
•

•

competition with companies that have greater financial, technical and marketing resources than we have;
potential future acquisitions that may be expensive, time consuming, and subject to other inherent risks;
our ability to attract and retain qualified client service and support personnel;
disruption from periodic restructuring of our sales force;
our potential inability to manage our growth in the new markets we may enter;
exposure to numerous and often conflicting laws, regulations, policies, standards or other requirements through our
international business activities;
potential litigation against us;

Risks Related to Our Products and Services

•
•
•
•
•
•
•
•
•
•
•
•
•

potential failure to develop new products or enhance current products that keep pace with market demands;
exposure to claims if our products fail to provide accurate and timely information for clinical decision-making;
exposure to claims for breaches of security and viruses in our systems;
undetected errors or problems in new products or enhancements;
our potential inability to convince customers to migrate to current or future releases of our products;
failure to maintain our margins and service rates;
increase in the percentage of total revenues represented by service revenues, which have lower gross margins;
exposure to liability in the event we provide inaccurate claims data to payors;
exposure to liability claims arising out of the licensing of our software and provision of services;
dependence on licenses of rights, products and services from third parties;
a failure to protect our intellectual property rights;
exposure to significant license fees or damages for intellectual property infringement;
service interruptions resulting from loss of power and/or telecommunications capabilities;

Risks Related to Our Indebtedness

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our potential inability to secure additional financing on favorable terms to meet our future capital needs;
substantial indebtedness that may adversely affect our business operations;
our ability to incur substantially more debt;
pressures on cash flow to service our outstanding debt;
restrictive terms of our credit agreement on our current and future operations;

Risks Related to Our Common Stock and Other General Risks

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changes in and interpretations of financial accounting matters that govern the measurement of our performance;
the potential for our goodwill or intangible assets to become impaired;
quarterly fluctuations in our financial results due to various factors;

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volatility in our stock price;
failure to maintain effective internal control over financial reporting;
lack of employment or non-competition agreements with most of our key personnel;
inherent limitations in our internal control over financial reporting;
vulnerability to significant damage from natural disasters; and
exposure to market risk related to interest rate changes.

For more information about the risks described above and other risks affecting us, see "Risk Factors" beginning on page 23 of
this Annual Report. We also caution investors that the forward-looking information described herein 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 Annual Report.

PART I

ITEM 1.

BUSINESS

Overview

CPSI is a leading provider of healthcare solutions and services for community hospitals and other healthcare systems and post-
acute care facilities. Founded in 1979, CPSI offers its products and services through four companies - Evident, LLC
("Evident"), TruBridge, LLC ("TruBridge"), American HealthTech, Inc. ("AHT"), and iNetXperts, Corp. d/b/a Get Real Health
("Get Real Health"). These combined companies are focused on improving the health of the communities we serve, connecting
communities for a better patient care experience, and improving the financial operations of our clients. The individual
contributions of each of these companies towards this combined focus are as follows:

•

Evident, which makes up our acute Care EHR reporting segment, provides comprehensive acute care electronic health
record ("EHR") solutions, Thrive and Centriq, and related services for community hospitals and their physician clinics.

AHT, which makes up our post-acute Care EHR reporting segment, provides a comprehensive post-acute care EHR
solution and related services for skilled nursing and assisted living facilities.

TruBridge, our third reporting segment, focuses on providing business management, consulting, and managed
information technology ("IT") services along with its complete revenue cycle management ("RCM") solution for all
care settings, regardless of their primary healthcare information solutions provider.

Get Real Health, included within our TruBridge segment, delivers technology solutions to improve patient outcomes
and engagement strategies with care providers.

Our companies currently support acute care facilities and post-acute care facilities with a geographically diverse customer mix
within the domestic community healthcare market. Our target market for our acute care solutions includes community hospitals
with fewer than 200 acute care beds. Our primary focus within this defined target market is on hospitals with fewer than 100
beds, which comprise approximately 98% of our acute care hospital EHR customer base. Our target market for our TruBridge
services includes community hospitals with fewer than 600 acute care beds. The target market for our post-acute care solutions
consists of approximately 15,500 skilled nursing facilities that are either independently owned or part of a larger management
group with multiple facilities. During 2020, we generated revenues of $264.5 million from the sale of our products and services.

Industry Dynamics

The healthcare industry is the largest industry in the United States economy, comprising approximately 17.7% of the U.S. gross
domestic product in 2019 according to the Centers for Medicare and Medicaid Services ("CMS"). CMS estimates that by fiscal
2028, total U.S. healthcare spending will reach $6.2 trillion, or 19.7% of the estimated U.S. gross domestic product.

Hospital services represents one of the largest categories of total healthcare expenditures, comprising approximately 31% of
total healthcare expenditures in 2019 according to the National Center for Health Services. According to the American Hospital
Association’s AHA Hospital Statistics, 2021 Edition, there are approximately 3,900 community hospitals in the United States
that are in our target market of hospitals with fewer than 200 beds, with approximately 2,900 of those in our primary area of
focus of fewer than 100 acute care beds. In addition, there is a market of small specialty hospitals that focus on discrete medical
areas such as surgery, rehabilitation and long-term acute care.

Notwithstanding the size and importance of the healthcare industry within the United States economy, the industry is constantly
challenged by changing economic dynamics, increased regulation and pressure to improve the quality of healthcare. These
challenges are particularly significant for the hospitals in our target market due to their more limited financial and human
resources and their dependency on Medicare and Medicaid populations for a substantial portion of their revenue. However, we
believe healthcare providers can successfully address these issues with the help of advanced medical information systems and
our suite of complementary services. Specific examples of the challenges and opportunities facing healthcare providers include
the following:

Changing Economic Dynamics

The economy of the healthcare industry, although not immune to general macroeconomic conditions, is heavily impacted by
legislative and regulatory initiatives of the federal and state governments. These legislative and regulatory initiatives have a

particularly significant impact on our customer base, as community hospitals typically generate a significant portion of their
revenues from beneficiaries of the Medicare and Medicaid programs. Consequently, even small changes in these federal and
state programs have a disproportionately larger effect on community hospitals as compared to larger facilities where greater
portions of their revenues are typically generated from beneficiaries of private insurance programs. Medicare and Medicaid
funding and reimbursements fluctuate year to year and, with the growth in healthcare costs, will continue to be scrutinized as
the federal and state governments attempt to control the costs and growth of the program. The Medicaid program, which is a
federal/state program managed by the individual states and dependent in part on funding from the states, also continues to
experience funding issues due to the increasing cost of healthcare and limited state revenues.

Mandatory cuts in federal spending resulting from the Budget Control Act of 2011 (the "Budget Control Act") became effective
in March 2013. Although Medicaid is specifically exempted from the cuts mandated by the legislation, the Budget Control Act
includes a reduction of up to 2% in federal Medicare spending, which has been achieved by reduced reimbursements to
healthcare providers. Additionally, the Patient Protection and Affordable Care Act, more commonly referred to as the
Affordable Care Act (the "ACA"), has put into effect a number of provisions designed to reduce Medicare and Medicaid
program spending by significant amounts. As the federal government seeks in the future to further limit deficit spending due to
fiscal restraints, it will likely continue to cut entitlement spending programs such as Medicare and Medicaid matching grants,
which will place further cost pressures on hospitals and other healthcare providers. Furthermore, federal and state budget
shortfalls, exacerbated by the novel coronavirus ("COVID-19") pandemic, as described below, could lead to potential
reductions in funding for Medicare and Medicaid. Further reductions in reimbursements from Medicare and Medicaid could
lead to hospitals postponing expenditures on information technology.

While legislative and regulatory initiatives are placing significant pressure on Medicare and Medicaid reimbursements, our
customer base of community hospitals is also likely faced with increases in demand for Medicare and Medicaid services. We
expect that the demand for Medicare and Medicaid services will increase for the foreseeable future due to the growing number
of people born during the post-World War II baby boom that are becoming eligible for Medicare benefits at age 65, as well as
states electing to expand Medicaid coverage under the provisions of the ACA. The challenges posed by this dual-threat of
increased demand for Medicare and Medicaid services and downward pressure on reimbursements are further complicated by
the shift away from volume-based reimbursement towards value-based reimbursement, linking reimbursement to quality
measurements and outcomes.

Compounding the combined effects of a likely increase in demand for Medicare and Medicaid services and persistent pressure
on related reimbursements, the increasing prevalence of high deductible health plans and value-based reimbursement models is
transforming domestic healthcare delivery into a more patient-centric experience. This transformation brings about new and
increased data needs, resulting in additional regulatory demands for data that patients find useful in decision-making. These
new regulatory demands increase regulatory risks and compliance burdens for CPSI and our clients, but also pose opportunities
for CPSI to provide additional value-added products and services to our target market.

One such regulatory demand, the price transparency mandate, became effective in January 2021 for all U.S. hospitals. This
mandate requires that hospitals publicly post, online and in a searchable, consumer-friendly manner, standard charge
information for at least 300 shopable services, which gives patients the ability to compare payer-specific negotiated charges
across healthcare settings. In response to this mandate, we announced in July 2020 the availability of a pricing transparency
solution that gives patients the ability to shop for healthcare services based on price, supporting a more patient-driven
healthcare experience.

To compete in the continually changing healthcare environment, providers are increasingly using technology in order to help
maximize the efficiency of their business practices, to assist in enhancing patient care, and to maintain the privacy and security
of patient information. Healthcare providers are placing increased demands on their information systems to accomplish these
tasks. We believe that information systems must facilitate management of patient information across administrative, financial
and clinical tasks. Information systems must also effectively interface with a variety of payor organizations within the
increasingly complex reimbursement environment.

The American Recovery and Reinvestment Act of 2009

In 2009, the U.S. federal government enacted the American Recovery and Reinvestment Act (the "ARRA"), which included the
Health Information Technology for Economic and Clinical Health Act ("HITECH"). HITECH authorized the EHR incentive
program, which provided significant incentive funding to physicians and hospitals that can prove they have adopted and are
appropriately using technology such as our EHR solutions. The level to which healthcare providers must prove they are
effectively utilizing such solutions in order to qualify for these incentives is measured through an escalating criteria designated
as "meaningful use." As a result of our obtaining the required certifications and our track record with our hospital customers

successfully achieving meaningful use, the ARRA continues to have a positive impact on our business and the businesses of the
community hospitals that comprise our target market.

Similarly, compliance with the meaningful use rules accelerated the purchases of incremental applications by our existing
clients. Consequently, our penetration rates within our existing customer base for our current menu of applications have
increased significantly under the ARRA, thereby significantly narrowing the market for add-on sales to existing clients in future
years. As a result of the announcement from CMS on August 2, 2018 of a final rule changing the attestation period for 2019 and
2020 to any continuous 90-day period instead of the previously-required full year attestation period, hospitals had until October
1, 2019 to install compliant technology in order to meet the requirements of the program during 2019, compared to a deadline
of January 1, 2019 under the previous rule. The stage three requirements of the meaningful use program (re-named "Promoting
Interoperability" by such rule) provided a significant opportunity for add-on sales revenues during 2017 through 2019. The
passing of the October 1, 2019 compliance deadline resulted in reduced MU3-related revenue opportunities throughout 2020.

Continued Push for Improved Patient Care

With the increased pressure to improve the quality of healthcare and reduce costs, there is a general shift towards value-based
reimbursement, which increases the demand for information technology solutions for clinical decision support. This migration
toward clinical decision support solutions is further supported by the ARRA. Provisions of the ARRA offered incentives for
hospitals to become meaningful users of EHRs through September 2015. Hospitals and healthcare providers that did not
implement and demonstrate meaningful use of EHRs by October 1, 2014 were penalized with lower Medicare payment levels
after that date.

In the face of decreasing revenue and increasing pressure to improve patient care, healthcare providers are in need of
management tools and related services that (1) increase efficiency in the delivery of healthcare services, (2) reduce medical
errors, (3) effectively track the cost of delivering services so that those costs can be properly managed and (4) increase the
speed and rate of reimbursement. A hospital’s failure to adequately invest in a modern medical information system could result
in fewer patient referrals, cost inefficiencies, lower than expected reimbursement, increased malpractice risk and possible
regulatory infractions. Additionally, we believe that the industry will continue to increase its utilization of third party services
that contribute to the achievement of these and other objectives necessary for success in the current environment. We believe
these dynamics should allow for future revenue growth for both our information technology solutions and our complementary
suite of services.

COVID-19 Pandemic

The healthcare industry is at the forefront of the COVID-19 pandemic, with heroic efforts by healthcare providers on the
frontlines and advances in technology and science bringing vaccines to market in an unprecedented timeframe. Looking beyond
2020, we believe the pandemic could lead to an acceleration of macro trends already developing in the industry. For example, it
is likely that the pandemic advances the role of the federal government as the top regulator and payor for healthcare and that
financial distress resulting from the pandemic increases the pace of health system consolidations. Additionally, the quick pivot
to virtual healthcare in response to the pandemic has increased consumer expectations, particularly around the convenience of
telemedicine and digital health options.

This quick pivot to virtual healthcare accelerated the ongoing increasing demand for telemedicine solutions and services, with
recent history suggesting an evolving reimbursement environment that is becoming more receptive to telemedicine with each
passing year. In response to this trend and the necessity for virtual care imposed by the COVID-19 pandemic, we accelerated
the product roadmap for Get Real Health’s Talk With Your Doc telehealth portal. The product was introduced for general
release by April 2020 and was provided to customers free of charge for the remainder of the year.

Strategy

Our objective is to increase the market share of our TruBridge services, aggressively pursue competitive and vulnerable EHR
replacement opportunities, and differentiate our products and services on a client experience basis that enables us to sell a
broader set of services into a loyal base of clients that are our advocates. During 2020, we took pause and engaged a top-tier
international consulting firm to assess our company-wide growth strategy. The outcome of this eight-week effort was the
confirmation of our current strategy of cross-selling TruBridge into the existing EHR base, expanding TruBridge market share
with sales to new community and larger health systems, and pursuing competitive EHR takeaway opportunities.

The healthcare industry is in the midst of transitioning to value-based reimbursement, care coordination and interoperability.
Our strategy is to position our services and solutions with community healthcare providers so that they are able to respond to
these changes positively by enabling them to improve community health and connect providers and patients within the

community and with other communities, while improving financial operations. We intend to leverage several strengths to
accomplish this goal.

Market Share/Scale

Over the course of our more than 40 year history of providing valuable technology solutions and services to the acute care and
post acute care environments, we have developed a significant customer base of community hospitals and skilled nursing
facilities. This customer base is our most valuable asset, providing us with the critical mass necessary to scale our development,
client support and service resources to meet the ever changing needs of our customers. In doing so, we solidify our position as a
long-term partner with a proven track record in meeting the unique needs of community healthcare.

EHR Solutions Across the Care Continuum

Our EHR solutions address the entire continuum of care, with systems that address the three primary care settings: ambulatory
care, inpatient acute care and post-acute care. This enables providers to coordinate patient care across the major settings where
care is delivered. New payment models in both the government and private payer sectors are focused on payment for delivering
quality outcomes and keeping patients well while still delivering financial efficiencies. These financial efficiencies are realized
through the elimination of duplicate tests performed in different care settings, as well as providing timely access to clinical
information from other care settings, when making diagnostic decisions. Having integrated solutions across the care continuum
facilitates this process for providers and healthcare organizations.

Solutions and Services to Address Value-Based Reimbursement

With the continued emphasis on value-based reimbursement models, data analytics has become a critical tool for community
healthcare providers to enable them to shift from reactive to proactive care delivery. We currently offer business intelligence as
the first facet of a three-phase approach to analytics solutions, which we plan to expand to include predictive and prescriptive
analytics. Because of the complexity inherent in data analytics, we will provide services to healthcare providers to assist them
with certain aspects of data modeling and data analysis.

Interoperability

We currently provide integration across our ambulatory and inpatient EHR solutions. This integration was expanded to
encompass our post-acute care EHR product in 2016. In addition, as a founding member of the CommonWell Health Alliance,
we enable healthcare organizations to identify, confirm and link patient encounters across the CommonWell network. This
translates into patient data that is not only shareable within communities but across communities as well.

Focus on the Financial Health of Community Healthcare Providers

Given the ongoing transition to value-based reimbursement models, community healthcare providers are under more financial
pressure than ever before, and financial health and stability is essential to their longevity and survival. Our accounts receivable
management services incorporate proven workflow and processes as well as industry leading revenue cycle management tools.
A new aspect of many current payment models is an increasing shift of the financial burden to the patient. Community hospitals
typically underperform in private pay collections because of the nature of community healthcare but cannot afford to forego the
patient portion of contributions. Through our private pay services, providers can bring in much needed private pay receipts
without alienating the local community.

Our operational expertise and technology tools provide proven results in improving claim acceptance rates, accelerating
payments from third party payers and increasing private pay collections. We also differentiate our services by working to
maintain employment in the community by hiring displaced employees into TruBridge to continue their functional role under
TruBridge program management.

Strategic Uses of Capital

2020 marked the culmination of a years-long evolution in the capital allocation strategy of CPSI, a strategy designed to afford
the flexibility necessary to be adaptive and opportunistic with future capital allocation decisions. Such flexibility is necessary if
we are to continue to bring timely products and services to a rapidly changing healthcare landscape, serving the needs of
multiple stakeholder groups as customers benefit from the related products and services and our stockholders benefit from the
increasing diversity in revenue sources. Specific components of this years-long evolution include:

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Reducing our leverage profile, while increasing capital availability: Since December 31, 2017, our total bank debt has
decreased from $143.5 million to $78.1 million, while the amount available under our revolving credit facility has
increased from $17.0 million to $105.0 million.

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Refinancing our debt: In June 2020, we refinanced our outstanding indebtedness with the primary objectives of
increasing the maximum borrowing capacity under the revolving credit facility from $50.0 million to $110.0 million
and removing absolute-dollar limits on acquisition activity.

Announcing a share repurchase program, while simultaneously suspending all quarterly dividends: In September
2020, our Board of Directors approved a stock repurchase program under which the Company may repurchase up to
$30.0 million of its outstanding shares of common stock over a two-year period. Concurrent with the approval of the
stock repurchase program, the Board of Directors opted to indefinitely suspend all quarterly dividends. These joint
actions allow CPSI to continue its commitment to returning capital to shareholders, while at the same time enhancing
our flexibility to adapt to an ever-changing landscape of alternative uses of capital.

Explore Additional Revenue Streams that Complement Existing Markets, Solutions and Services

In the EHR space, we are selling our ambulatory EHR solutions on a standalone basis with a focus on communities that already
have one of our EHR solutions installed in an acute care setting. Also, we are actively pursuing expansion of our inpatient EHR
product into the Canadian market through our own direct efforts and collaboration with key Canadian technology providers. In
the United States EHR market, we are targeting other types of providers who have lagged behind inpatient acute care in EHR
adoption such as ambulatory surgery centers, behavioral health facilities and inpatient psychiatric hospitals. In the post-acute
care market, we are now providing an EHR solution for assisted living facilities in conjunction with our own post-acute care
EHR for skilled nursing operators. In the services business we will continue to look for opportunities to add or increase services
resulting from changing market dynamics, availability of technology or operational expertise, or changes in regulatory
requirements.

Our Products and Services

Evident and American HealthTech provide tailored IT solutions that effectively address the specific needs of small and midsize
hospitals and their physician clinics, as well as skilled nursing facilities of all sizes across the U.S. Their broad offerings of
software products and services collect, process, retain, and report data in the primary functional areas of these healthcare
providers, from patient care to clinical processing to administration and accounting. Due to their smaller operating budgets,
community hospitals have limited financial and human resources to operate manual or inefficient information systems.
However, these hospitals are expected to achieve the same quality of care and regulatory compliance as larger hospitals, placing
them in a particularly difficult operating environment. These pressures on the operating environments of community hospitals
were increased with the passage of the ARRA in 2009 which, in addition to providing incentives to healthcare providers to
achieve meaningful use of EHR, has resulted in lowered Medicare payment levels for healthcare providers that have yet to
achieve meaningful use of EHR.

We believe that our acute care IT solutions meet these challenges facing community hospitals by providing fully integrated,
enterprise-wide and ARRA-certified medical information systems and services that are compliant with the Health Insurance
Portability and Accountability Act of 1996 ("HIPAA"). Further, through our wholly-owned subsidiary, TruBridge, we offer
business management, consulting and managed IT services, along with its full RCM solution, that allow our acute and post-
acute care clients to outsource all or just a portion of their business office function. Consulting and other services help clients
avoid some of the fixed costs of a business office and leverage our expertise and resources in helping them identify their IT
objectives, define the best way to meet those requirements and manage the resulting projects and associated technologies. As a
result, we are capable of providing a single-source solution to healthcare organizations, making us a partner in their initiatives
to improve operations and medical care.

As a key component to providing complete solutions, we maintain strong partnerships with our clients through a variety of two-
way communication channels, including our support teams, role-based user groups, client councils, client work groups, our
annual National Client Conference and other organized events and venues that foster insightful and meaningful communication.
By listening to our clients and staying abreast of market trends, we strive to provide the right healthcare solutions at the right
time to help meet the specific business needs of acute and post-acute care organizations. Our business has continued to grow
because we have successfully provided fully integrated, enterprise-wide information systems that allow community hospitals,
their physician clinics and skilled nursing facilities to improve operating effectiveness, reduce costs and improve the quality of
patient care.

Acute Care Software Systems

Through our wholly-owned subsidiary, Evident, we offer healthcare IT solutions specifically designed to cater to the specific
needs of community hospital organizations under the software solution platforms Thrive and Centriq.

Thrive

With the formation of Evident in 2015 came the introduction of our EHR solution under the name Thrive, previously sold
under the CPSI name, through which we offer a full array of software applications designed to streamline the flow of
information to the primary functional areas of community hospitals using one fully integrated system. We intend to
continue to enhance our existing software applications and develop new applications as required by evolving industry
standards and the changing needs of our clients. Pursuant to our client support agreements, we provide our clients with
software enhancements and upgrades periodically on a when-and-if-available basis. See "Acute Care Support and
Maintenance Services." These enhancements enable each client, regardless of its original installation date, to have the
benefit of the most advanced Evident products available. Evident's software applications within Thrive:

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provide automated processes that improve clinical workflow and support clinical decision-making;

allow healthcare providers to efficiently input and easily access the most current patient medical data in order
to improve quality of care and patient safety;

integrate clinical, financial and patient information to promote efficient use of time and resources, while
eliminating dependence on paper medical records;

provide tools that permit healthcare organizations to analyze past performance, model new plans for the future
and measure and monitor the effectiveness of those plans;

provide for rapid and cost-effective implementation, whether through the installation of an in-house system or
through our Software as a Service ("SaaS") services; and

increase the flow of information by replacing centralized data over which there is limited control with broad-
based, secure access by clinical and administrative personnel to data relevant to their functional areas.

Our software applications within Thrive are grouped for support purposes according to the following general functional
categories described below:

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Patient Management. Our patient management software enables a hospital to identify a patient at any point in
the healthcare delivery system and to collect and maintain patient information throughout the entire process of
patient care on an enterprise-wide basis. Thrive's single database structure permits authorized hospital
personnel to simultaneously access appropriate portions of a patient’s record from any point on the system.
Our patient management software applications include: Registration, Patient Accounting, Health Information
Management, Patient Index, Enterprise Wide Scheduling, Contract Management, and Quality Improvement.

Financial Accounting. Our financial accounting software provides a variety of business office applications
designed to efficiently track and coordinate information needed for managerial decision-making. Our
financial accounting software applications include: Executive Information System, General Ledger, Accounts
Payable, Payroll/Personnel, Time and Attendance, Electronic Direct Deposits, Human Resources, Budgeting,
Fixed Assets, and Materials Management.

Clinical. Our clinical software automates record keeping and reporting for many clinical functions including
laboratory, radiology, physical therapy, respiratory care and pharmacy. These products eliminate tedious
paperwork, calculations and written documentation while allowing for easy retrieval of patient data and
statistics. Our clinical software applications include: Laboratory Information Systems, Laboratory Instrument
Interfaces, Radiology Information Systems, ImageLink Picture Archiving and Communication System
(PACS), Physical Therapy and Respiratory Care, and Pharmacy.

Patient Care. Our patient care applications allow hospitals to create computerized "patient files" in place of
the traditional paper file systems. This software enables physicians, nurses and other hospital staff to improve
the quality of patient care through increased access to patient information, assistance with projected care
requirements and feedback regarding patient needs. Our software also addresses current safety initiatives in
the healthcare industry such as the transition from written prescriptions and physician orders to computerized
physician order entry. Our patient care software applications include: Order Entry/Results Reporting, Point-
of-Care System, Patient Acuity, ChartLink®, Computerized Physician Order Entry (CPOE), Medication
Verification, Resident Assessment Instruments, Thrive Provider EHR, Outreach Client Access, Electronic
Forms, Physician Documentation, and Emergency Department System.

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Enterprise Applications. We provide software applications that support the products described above and are
useful to all areas of the hospital. These applications include: ad hoc reporting, automatic batch and real-time
system backups, an integrated fax system, archival data repository, document scanning and Microsoft Office
integration, and an Application Portal.

Centriq

During 2018, the products and services formerly offered under the Healthland logo, including Centriq, were brought into
the Evident product family. The Centriq platform was brought to market in 2011 and is designed to be an intuitive user
interface that is easy for clinicians to use and attractive to both patients and clinicians. Additionally, as a web-based
platform, users are able to connect to the system from any device that is connected to the Internet. Ease of use combined
with Centriq’s ability to centralize data from various care areas provide the end user with a powerful tool to view past and
present patient information with ease. Each system or application offers a broad set of features and functionalities that can
help clinics reduce costs, increase revenue, and improve administrative and clinical staff efficiency, all while enhancing
patient care and safety. Key Centriq capabilities include:

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Computerized Practitioner Order Entry ("CPOE"). The cornerstone of inpatient EHR systems, CPOE
promotes user adoption by including medication interaction alerts, access to relevant laboratory results,
duplicate order checking, customizable order sets and protocols, and order templates containing pre-populated
screens.

Clinical Documentation. This system securely enables a patient’s caregivers to view the vital signs, intake-
output values, progress notes, and nursing tasks that are entered into the patient’s EHR.

Emergency Department. This system expedites and simplifies registration, patient tracking, order
management, assessments, and other activities in a fast-paced environment.

Laboratory. This system automates routine tasks such as lab order processing and tracking, enabling the
practitioner to focus on the results and ultimately better patient care.

Radiology. This application delivers faster turnaround times and enhanced communications among caregivers
by automatically processing radiology orders, managing and tracking images, and generating reports.

Pharmacy. This application helps pharmacies manage all aspects of medication verification and dispensing,
including order coordination, interaction checks, administration, and charging.

Financial Accounting. A hospital financial accounting management solution that helps community hospitals
gain better insight and perspective on their costs.

Patient Management. An accounting system to better manage patient information and automate the hospital
billing process.

Ambulatory Software Solutions. Enables clinicians to focus on providing high-quality patient care by
streamlining the management of patient data.

Post-acute Care Software Systems

CPSI entered into the post-acute care market with the acquisition of AHT in January 2016. AHT, a leading provider of
integrated solutions to the post-acute care industry, offers software solutions that promote data-driven clinical and financial
outcomes for the customers they serve. AHT's comprehensive, long-term care management solutions include:

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Care Management. This integrated offering helps manage the delivery of quality care, collect and report on
resident information, and manage compliance risk. Core modules include: Work Center, Clinical, Smart
Charting Order Administration (Point of Care), Quality Assurance, Therapy Tracking, Supplies Tracking,
and Disease State Management.

Financial and Enterprise Management. This comprehensive set of financial solutions enables customers to
improve cash flow and better manage costs. Core modules include: Accounts Payable, General Ledger,
Payroll, Financial Management, Trust Funds, and Enterprise Management.

Acute Care Support and Maintenance Services

After a customer installs Thrive or Centriq, we provide software application support, hardware maintenance, continuing
education and related services pursuant to a support agreement using our collaborative support model. The following describes
services provided to customers using Thrive and Centriq:

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Total System Support. We believe the quality of continuing customer support is one of the most critical
considerations in the selection of an information system provider. We provide hardware, technical and
software support for all aspects of our system, which gives us the flexibility to take the necessary course of
action to resolve any issue. Unlike our competitors who use third-party services for hardware and software
support, we provide a single, convenient and efficient resource for all of our customers’ system support needs.
In order to minimize the impact of a system problem, we train our customer service personnel to be
technically proficient, courteous and prompt. Because a properly functioning information system is crucial to
a hospital’s operations, our support teams are available 24 hours per day to assist customers with any problem
that may arise. Customers can also use the Internet to directly access our support system.

National Client Conference. All of our customers have the opportunity to attend our annual National Client
Conference. CPSI hosts this conference to provide our customers educational sessions, product
demonstrations, and one-on-one time with application experts. The conference also allows important time for
networking among customers and CPSI staff across all business platforms.

Continuing Education. Effective learning tools are a key factor in successful EHR adoption and allowing
clients to get the most out of a software investment. Therefore, ongoing learning and training is a cornerstone
to our “total solution” and a key competitive differentiator. Our ongoing learning and training offerings also
address some of the unique needs of community hospitals - limited resources and staff with cross-department
responsibilities and budget and time constraints - all of which require a customized approach to learning and
training. To meet these needs, Evident offers customers with online content that can be accessed at any time,
scheduled online interactive classroom presentations, on-campus training at our facilities in Mobile, Alabama
and Minneapolis, Minnesota, educational sessions during user group conferences, and scheduled regional
training sessions.

Software Releases. We are committed to providing our customers with software and technology solutions that
will continue to meet their information system needs. To accomplish this purpose, we continually work to
enhance and improve our application programs. As part of this effort, for each customer covered under our
general support agreement, we provide software updates as they become available at no additional cost. We
design these enhancements to be seamlessly integrated into each customer’s existing system. The benefit of
these enhancements is that each customer, regardless of its original installation date, uses the most advanced
software available. Through this process, we can keep our customers up-to-date with the latest operational
innovations in the healthcare industry as well as with changing governmental regulatory requirements.
Another benefit of this "one system" concept is that our customer service teams can be more effective in
responding to customer needs because they maintain a complete understanding of and familiarity with the one
system that all customers use.

Purchasing a new information technology system requires the expenditure of a substantial amount of capital
and other resources, and many customers are concerned that these systems will become obsolete as
technology changes. Our periodic product updates eliminate our customers’ concerns about system
obsolescence. We believe providing this benefit is a strong incentive for potential customers to select our
products over the products of our competitors.

Hardware Replacement. As part of our general support agreements, we are also committed to promptly
replacing malfunctioning system hardware in order to minimize the effect of operational interruptions. By
offering replacements of all hardware used in our system, we believe we are better able to meet and address
all of the information technology needs of our customers.

Cloud Electronic Health Record (Cloud EHR). We offer Cloud EHR services to customers via remote access
telecommunications. Cloud EHR is a "Software as a Service" (or "SaaS") configuration and is in essence a
subscription to access and use application software maintained by CPSI in a cloud environment for a monthly
fee. Under this configuration, a customer is able to obtain access to an advanced EHR without a significant
initial capital outlay. We store and maintain all Cloud EHR customers’ critical patient and administrative data

using TruBridge Cloud Computing Services. These customers access this information remotely through direct
telecommunications connections.

•

Forms and Supplies. In addition to our support services, we offer our customers the standard and customized
forms that they need for their patient and financial records, as well as the supplies necessary to support the
operation of their server and peripheral equipment. Furnishing these forms and supplies helps us to achieve
our objective of being a one-source solution for a hospital’s complete healthcare information system
requirements.

Post-acute Care Support and Maintenance Services

AHT’s comprehensive and integrated solution set is backed by ongoing training and support by AHT to ensure that clients can
maximize their software investment. This is demonstrated by:

•

Experienced and Dedicated Support Representatives. Seasoned experts assigned to each client site that not
only understand the challenges in the post-acute care industry, but know how to best address them. This
includes proactive education on the key regulatory changes and requirements before they impact business
operations.

Client Portal and Training. Instant, on-line access to the most up-to-date industry information impacting long-
term care, plus a vast array of product training opportunities.

Client Enhancement Council. Access to a community of peers along with a robust set of resources and
knowledge to help clients get the most out of their AHT investment.

Annual Client Symposium. An opportunity for clients to share best practices, gain industry insight on key
topics impacting post-acute care providers, network with peers, and learn more about current and future AHT
product and service offerings.

TruBridge

We offer complementary services through TruBridge, our wholly-owned subsidiary, which can be grouped into the following
categories:

•

Revenue Cycle Management Products. TruBridge RCM solutions empower providers and caregivers in
hospitals, healthcare systems and skilled nursing organizations to accelerate their revenue cycle through a
suite of comprehensive, web-based solutions designed to improve financial operations and staff productivity
and increase reimbursement. Our RCM products include the following offerings:

◦

Patient Liability Estimates. Improve patient satisfaction, maximize point-of-service collections, and
equip staff with the ability to provide transparent pricing with the Patient Liability Estimate ("PLE")
module.

Eligibility Verification. Reduce claim denials and carrier rejections by performing on-demand
eligibility look-ups, assuring the care provided is covered.

Claim Scrubbing and Submission. A powerful claim management solution for submitting, validating,
and processing a healthcare facility’s claims with ease and with a high quality of edits.

Remittance Management. Remittance advice can be effortlessly gathered and managed with the
Electronic Remittance Advice ("ERA") Retrieval and Remittance Management modules, simplifying
workflow and involvement.

Denial/Audit Management. Equips healthcare facilities with the tools necessary to combat denied and
audited claims, assisting organizations in recovering lost revenue.

Contract Management. Allows healthcare facilities to take control over complex healthcare contracts
by prospectively pricing every claim submitted to payers, retrospectively pricing every remittance to
ensure proper payment was received, and modeling proposed contract terms during payer negotiations.

•

Revenue Cycle Management Services. Our RCM services span a healthcare enterprise’s revenue cycle and
provide clients with a strong alternative to in-house operations. These services leverage our deep service and
technology experience and are designed to allow clients to streamline their administrative staffing while
improving operational efficiencies. Our RCM services include the following service offerings: Accounts
Receivable Management, Private Pay Service, Medical Coding, Revenue Cycle Consulting, and other
additional Insurance and Patient Billing Services.

Consulting and Business Management Services. Our consulting and business management services are
designed to help healthcare organizations by assessing their needs, setting goals, and creating an action plan
to achieve those goals, and, if needed, implementing the action plan. Many of our professional consultants
possess decades of experience and all are skilled in adopting new technologies, redesigning processes,
educating staff, and providing interim or on-going management services. Our consulting and business
management services include the following service offerings: Consulting, Business Intelligence, Staffing, and
Administrative.

• Managed IT Services. Our managed IT services provide a range of services designed to meet the IT needs of
community healthcare enterprises. The pace of technological change can be overwhelming. Our services
allow clients to affordably maintain an advanced IT infrastructure, meet regulatory requirements, and reduce
risk. Our managed IT services include the following service offerings: Cloud Services, Backup and
Recovery, Collaboration and Connectivity, Security Services, Systems Management, and Help Desk.

•

Patient Engagement. In May 2019, the Company closed its acquisition of Get Real Health. Get Real Health
delivers patient engagement and empowerment technology solutions to improve patient outcomes and
engagement strategies with care providers.

For additional details on our products, service, and support offerings, visit www.evident.com (Evident), www.healthtech.net
(AHT), www.trubridge.com (TruBridge), and www.getrealhealth.com (Get Real Health).

For the results of operations by segment, refer to Note 18 of the consolidated financial statements included herein.

Product Development and Enhancement

The healthcare information technology industry is characterized by rapid technological change requiring us to continually make
investments to update, enhance and improve our products and services. These investments have resulted in total expenditures
related to our Product Development Services division of approximately $33.5 million, $36.9 million, and $36.4 million during
the years ended December 31, 2020, 2019 and 2018, respectively.

Product Management

We formally announced our product management team in November 2018, and in 2019 we began to apply new product
management principles throughout our organization to better utilize our valuable resources and maximize value creation and
innovation. This team is responsible for launching products, providing industry insight and identifying emerging segments
within our target markets. By focusing on the right workflows, aligning the appropriate stakeholders and establishing clear roles
and responsibilities, CPSI can make better product decisions faster. The key tenets of product management are being the best
stewards of our resources and enabling growth.

By working with the various internal stakeholders (product development, marketing, sales and support), as well as external
stakeholders (customers, industry subject matter experts), the product management team takes new product and service ideas
and creates a business case for each of the initiatives. We have created a Provider Council, Nursing Council and CFO Council
to assist with these efforts as well.

The goals of the product management team are to understand our customers and identify the value of various ideas, by
considering customer retention and satisfaction, support and training impact and revenue potential. The initiatives become part
of our initiative portfolio and are evaluated against each other. We use this view of the portfolio to manage risks within the
portfolio and allow us to create the most value for each investment we make. We are experiencing successes with this approach,
as evidenced by increased product innovation and related momentum.

System Implementation and Training

Conversion Services. When a client purchases or leases one of our systems, we convert their existing data to the new system.
Our knowledge of hospital data processing, in conjunction with extensive in-house technical expertise, allows us to accomplish
this task in a cost effective manner. When we install a new system, the data conversion has already occurred so that the system
is immediately operational. Our goal is for each client to be productive day one in order to eliminate time and money wasted on
the costly and inefficient task of maintaining the same data on parallel systems. Our services also relieve the hospital staff of the
time-consuming burden of data conversion. The conversion process is the initial phase of our long-term partnership and overall
client experience.

Training. In order to integrate the new system and to ensure its success, we spend approximately sixteen weeks providing
individualized training remotely and on-site at the go-live. We provide hardware and software application training for all
hospital users, including staff members and healthcare providers, during all hospital shifts. We employ nurses, medical
technicians, and providers along with our technical training staff in order to help us communicate more effectively with our
clients during the training process. This training phase is also part of the overall client experience that is provided to all of our
clients.

Clients, Sales and Marketing

Target Markets

The target market for our acute care EHR systems consists of community hospitals with fewer than 200 acute care beds, with a
primary focus on hospitals with fewer than 100 acute care beds. In the United States, there are approximately 3,900 community
hospitals with fewer than 200 acute care beds, with approximately 2,900 of these having fewer than 100 acute care beds. In
addition, we market our products to small specialty hospitals in the United States that focus on discrete medical areas such as
behavioral health, surgery, rehabilitation and long-term acute care. Approximately 98% of our existing acute care clients are
hospitals with fewer than 100 acute care beds, while approximately 99% of our existing acute care clients are hospitals with
fewer than 200 acute care beds.

The target market for our post-acute care EHR solution consists of approximately 15,500 long-term care and skilled nursing
facilities in the United States. In addition, through a strategic relationship with Medtelligent, we are able to market an EHR for
assisted living facilities creating add-on sales opportunities in our direct client base and new sales opportunities across the
broader senior living market.

The expanded target market for our TruBridge services consists of small to mid-size hospitals in the United States. There are
approximately 4,850 of these hospitals with fewer than 500 beds. In addition, we are now marketing our services to post-acute
care facilities, of which there are approximately 15,500 in the United States.

In the acute care provider market, we are now actively marketing our EHR system to English speaking countries outside the
United States, including Canada. We have established business relationships with key Canadian healthcare and technology
providers which we believe will be a significant factor in penetrating the Canadian market. We have concluded our evaluation
of the unique requirements of the Canadian healthcare system and are actively working on incorporating the necessary changes
into our Thrive acute care EHR product.

Our goals in the inpatient hospital market are threefold: (1) target those hospitals under 100 beds in the United States that we
believe are currently using a vendor that we have determined is vulnerable based on a variety of factors, (2) continue our efforts
to expand into English speaking countries outside the U.S. through active marketing efforts and establishing strategic business
relationships, and (3) selectively target hospitals in the 100 to 200 bed market that we believe offer a reasonable chance of sales
success based on size, location and other factors. Our goal in the ambulatory market is to aggressively target physician practices
in those communities where the local hospital is a current CPSI client.

Our goal in the post-acute care market is to continue to target both individual facilities as well as larger multi-facility corporate
entities. In addition, we intend to extend our penetration into the post-acute care market by offering an assisted living facility
EHR solution that we believe will broaden the appeal of our solutions to those operators who offer multiple care settings in
their organizations.

The following table presents our revenues generated from clients located within the U.S. ("Domestic") and all foreign countries,
in total ("International").

(In thousands)
Sales revenues:

Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
International(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Year ended December 31,

2020

2019

2018

257,883

6,605
264,488

270,966

3,668
274,634

280,182

229
280,411

(1) International sales revenues for 2018 are related solely to the Caribbean nation of St. Maarten, while revenues
during 2019 and 2020 also include amounts related to the islands of Turks and Caicos, Canada, England, Australia,
and the Netherlands.

Sales Staff

We have dedicated sales organizations in all three business lines: acute care EHR, post-acute care EHR and business
management, consulting and managed IT services. Many of our sales personnel are hired from within the Company and have
previous experience in client support roles. We believe this experience positions them to more effectively sell our products and
services within our target markets. Our sales organizations are generally divided into four areas: sales management, new client
sales, existing client sales and sales support staff. New client sales staff are typically organized based on geographic territories,
though we also have sales personnel that focus on national accounts in our post-acute care EHR business due to the number of
national chain operators in that market. Our sales representatives who sell to existing clients have assigned clients within their
territory, which is also geographically based. Some sales representatives in our services areas are assigned specifically to cross-
sell services into our acute care EHR and post-acute care EHR client bases. A significant portion of the compensation for all
sales personnel except for administrative support staff is commission based.

Marketing Strategy

Our corporate marketing strategy positions CPSI as a healthcare solutions company serving community healthcare
organizations through our family of healthcare information technology ("HCIT") companies. Our EHR software and services
address providers across the care continuum, with a primary focus on the community healthcare market. We believe our ability
to serve ambulatory, acute and post-acute care settings with our products will be especially appealing as new reimbursement
models force the coordination of care by healthcare providers. Our ability to connect patients to care providers within their
community and across communities through our own products and interoperability development, including our membership in
the CommonWell Health Alliance, sets us apart from other competitors in our market. Our goal is to position ourselves as
partners to community healthcare providers as they move to a more proactive care model based on the use of data analytics and
patient engagement tools.

With regard to business management, consulting and managed IT services, we will continue to leverage our proven track record
of success in accounts receivable management and private pay collections for community healthcare providers. With the
increasing complexity of reimbursement requirements and a global shift in healthcare towards an increase in patient financial
responsibility, the ability of our services business to bring expertise and best practice operational efficiencies to bear is a
significant competitive advantage. In consulting services, the added complexity brought about by the transition to the ICD-10
code set, a standard transaction code set for diagnostic purposes under HIPAA, has created a significant demand for our coding
services. Our strategy is to leverage any services engagement, whether business, IT or consulting, into opportunities to cross-
sell other services to the client.

Backlog

Backlog consists of revenues we reasonably expect to recognize over the next twelve months under existing contracts. The
revenues to be recognized may relate to a combination of one-time fees for system sales and recurring fees for support and
maintenance and TruBridge services. As of December 31, 2020, we had a twelve-month backlog of approximately $10 million
in connection with non-recurring system purchases and approximately $242 million in connection with recurring payments
under support and maintenance and TruBridge services. As of December 31, 2019, we had a twelve-month backlog of
approximately $15 million in connection with non-recurring system purchases and approximately $235 million in connection
with recurring payments under support and maintenance and TruBridge services.

Competition

The market for our products and services is competitive, and we expect additional competition from established and emerging
companies in the future. Our market is characterized by rapidly changing technology, global shifts in the healthcare system,
evolving user needs and impactful regulatory and reimbursement changes. We believe the principal competitive factors that
hospitals, clinics and post-acute care providers consider when choosing between us and our competitors are:

•

product features, functionality and performance;

range of services offered;

level of client service and satisfaction;

ease of integration and speed of implementation;

product price;

cost of services offered;

results of services engagements;

knowledge of the healthcare industry;

training provided;

sales and marketing efforts; and

company reputation.

We believe that we compete favorably with our competitors on these factors. Our principal competitors in the acute care EHR
market are Cerner Corporation, Medical Information Technology, Inc. ("Meditech"), and MEDHOST, Inc. These companies
compete with us directly in our target market of small and midsize hospitals. They offer products and systems that are
comparable to our system and address the needs of hospitals in the markets we serve.

Our secondary competitors in the acute care EHR market include Allscripts Healthcare Solutions, Inc. and Epic Systems
Corporation. These companies are significantly larger than we are, and they typically sell their products and services to larger
hospitals outside of our target market. However, they will sometimes compete with us directly or, more commonly, when a
larger health system who uses a system from one of these companies will offer it to a smaller hospital as part of a merger or
alliance.

We also face competition from providers of practice management systems, general decision support and database systems and
other segment-specific applications. Any of these companies as well as other technology or healthcare companies could decide
at any time to specifically target hospitals within our target market.

Our principal competitors in the post-acute care EHR market are PointClickCare Corporation and MatrixCare, Inc. These
companies compete with us directly in our target market of long-term post-acute care facilities. They offer products and
systems that are comparable to our system and address the needs of long-term care providers.

Our principal competitors in the business management, consulting and managed IT services market are Healthcare Resource
Group, Inc., Resolution Health, Inc., The Outsource Group Inc., Patient Focus, Inc., Xtend Healthcare Inc., Ensemble Health
Partners, and nThrive, Inc. All of these companies provide one or more of the services we offer, with their primary focus being
on business management services. The services they offer are comparable in scope to the competing services we offer. These
companies all focus on providing services to the healthcare market. Secondary competitors include ARx LLC, Citadel
Outsource Group LLC, Patient Matters, LLC, KIWI-TEK, LLC, and Aviacode Inc. Our principle competitors for RCM
solutions include RelayHealth Corp, SSI Group, LLC, Quadax Inc., Change Healthcare Holdings, Inc., Availity, LLC, and
Navicure, Inc. Get Real Health's primary competitors include Relay Health, Get Well Network/Healthloop, Apollo Care
Connect, Bridge Paitent Portal, eClinicalWorks Patient Portal, Influence Health, and InteliChart.

Actual or perceived security breaches of our systems could harm the market perception of our products and services which
could impact our retention of existing clients and ability to acquire prospective clients.

Health Information Security and Privacy Practices

The Health Insurance Portability and Accountability Act of 1996 ("HIPAA") is a federal law governing the use, disclosure,
transmission and storage of certain individually identifiable health information, referred to as "protected health information,"
and that was enacted for the purpose of, among other things, protecting the privacy and security of protected health information.
As directed by HIPAA, the Department of Health and Human Services (the "DHHS") has promulgated standards and rules for
certain electronic health transactions, code sets, data security, unique identification numbers and privacy of protected health
information. HIPAA and the standards promulgated by DHHS apply to certain health plans, healthcare clearinghouses and
healthcare providers (referred to as "covered entities"), which includes our hospital and post-acute care clients. The Health
Information Technology for Economic and Clinical Health Act and its implementing regulations published in January 2013 (the
"HITECH Act") significantly expand HIPAA by extending privacy and security standards to "business associates" of healthcare
providers that are covered entities. Under the HITECH Act, business associates are required to establish administrative,
physical and technical safeguards and are subject to direct penalties for violations. Certain of our services frequently entail us
acting as a healthcare clearinghouse and/or in the capacity of a business associate to the hospitals and post-acute care clients
that we serve. As a result, we are covered by the patient privacy and security standards of HIPAA and subject to oversight by
DHHS. We believe that we have taken all necessary steps to comply with HIPAA, as it applies to us as a business associate, but
it is important to note that DHHS could, at any time in the future, adopt new rules or modify existing rules in a manner that
could require us to change our systems or operations.

Protecting individually identifiable health information and other sensitive data is a critical and essential function of CPSI’s
operations and its software solutions. A variety of industry-standard approaches that meet or exceed regulatory requirements
such as HIPAA and HITECH are employed. In order to avoid unauthorized access for the life span of this data, diverse methods
of identification, authentication, authorization and encryption are utilized at various points throughout the operating system,
application software and hardware. These methods and processes are shared amongst servers and other end-user devices and are
complemented by change management processes and tools, which allow the software change control cycle to be a formal,
defined process.

Managing Cybersecurity Risks

Our business operations, including the provision of the products and services described above, involve the compilation and
transmission of confidential information, including patient health information. We have included security features in our
systems that are intended to protect the privacy and integrity of this information, but our systems may be vulnerable to security
breaches, viruses, programming errors and other similar disruptive problems.

The Board of Directors is responsible for exercising oversight of management’s identification of, and planning for, the material
risks facing the Company, and we believe our policies and procedures are adequate to ensure that relevant information about
cybersecurity risks and incidents is appropriately reported and disclosed. During 2020, the Board authorized the formation of an
Innovation and Technology Committee comprised of members of the Board. This Committee’s responsibilities include, but are
not limited to, more closely monitoring and collaborating with the Company’s Governance, Risk & Compliance (“GRC”)
Committee. The purpose of the GRC is to assist the Board in fulfilling its oversight responsibility with respect to the Company's
risk management, ethics programs, and information security/privacy programs. The oversight responsibility of the GRC
includes, but is not limited to, planning and conducting audits, conducting investigations, assuring compliance with relevant
laws, and ensuring compliance with the Company's Code of Conduct and Business Ethics and related policies. The GRC
consists of a cross functional leadership team including the Executive Vice President, Chief Technology Officer, Corporate
Information Security Officer, Corporate Compliance Officer, Corporate Counsel, and Chief Financial Officer.

Additionally, we appointed a Security Operations Center ("SOC") Director to oversee a number of initiatives designed to
improve our cybersecurity protection, readiness and response. The Company partnered with a third party to provide Security as
a Service ("SECaaS") to assist our internal SOC in reducing the likelihood and impact of a cybersecurity attack. The SOC
oversees penetration testing, vulnerability scanning, intrusion prevention, endpoint and insider threat detection, log
management and other cybersecurity-related projects. The Company consulted with third parties in 2017 and 2018 to conduct
an evaluation of our cybersecurity risks. The Company also consulted with third parties during 2019 and 2020 related to the
Company's efforts to achieve ISO 27001 certification related to information security management, which was achieved during
2020. Finally, all users employed by or contracted to the Company are required to complete annual cybersecurity education and
training, which includes identifying suspicious emails, internet threats, telecommunication threats and ransomware.
Early in 2020, it became apparent that, for the safety and well-being of employees in light of the COVID-19 pandemic, the
Company would need to transition from a primarily work-from-office based workforce to a work-from-home based workforce.
A phased approach was designed in order for our employees to remain focused on maintaining daily operations, continuing a
high level of client support and minimizing impact to the culture, all while not introducing vulnerabilities into our information

technology systems. While the vast majority of employees were fully remote in a very short period of time, those unable to
work remotely continued to work from the office following guidelines established by the Centers for Disease Control and
Prevention. Although a portion of our workforce has returned to in-office environments, the successful expansion of work-
from-home arrangements during the past year, in terms of employee productivity and satisfaction, has resulted in many of these
arrangements becoming permanent. As such, we anticipate that our go-forward workforce will be more heavily distributed to
remote work environments.

Intellectual Property

We regard some aspects of our internal operations, software and documentation as proprietary, and rely primarily on a
combination of contract and trade secret laws to protect our proprietary information. We believe, because of the rapid pace of
technological change in the computer software industry, trade secret and copyright protection is less significant than factors
such as the knowledge, ability and experience of our employees, frequent software product enhancements and the timeliness
and quality of our support services. The source code for our proprietary software is protected as a trade secret. We enter into
confidentiality or license agreements with our employees, consultants and clients, and control access to and distribution of our
software, documentation and other proprietary information. We cannot guarantee that these protections will be adequate or that
our competitors will not independently develop technologies that are substantially equivalent or superior to our technology.

We do not believe our software products or other CPSI proprietary rights infringe on the property rights of third parties.
However, we cannot guarantee that third parties will not assert infringement claims against us with respect to current or future
software products or that any such assertion may not require us to enter into royalty arrangements or result in costly litigation.

Material Government Regulations

Our business operations are subject to various federal and state laws, and our products and services are governed by a number
of rules and regulations. For example, we are affected by the following regulations:

•

As discussed above, the HIPAA security and privacy standards affect our claims transmission services, since those
services must be structured and provided in a way that supports our clients’ HIPAA compliance obligations.

The United States Food and Drug Administration (the “FDA”) has determined that certain of our solutions, such as our
ImageLink® product, are medical devices that are actively regulated under the Federal Food, Drug and Cosmetic Act,
as amended.

The use of our solutions by physicians for electronic prescribing and electronic routing of prescriptions via the
Surescripts network to pharmacies is governed by federal and state laws. States have differing regulations that govern
the electronic transmission of certain prescriptions and prescription requirements.

Although there is no assurance that existing or future government laws, rules and other regulations applicable to our operations,
products or services will not have a material adverse effect on our capital expenditures, results of operations and competitive
position, we do not currently anticipate materially increased expenditures in response to government regulations or future
material impacts to our results or competitiveness. These regulations and related risks are described in more detail below under
“Risk Factors” beginning on page 23 of this Annual Report.

Human Capital

As of December 31, 2020, we had approximately 2,000 employees, the substantial majority of which are located at our offices
in Alabama, Louisiana, Mississippi, Pennsylvania, and Minnesota. None of our employees are covered by a collective
bargaining agreement or are represented by a labor union with respect to his or her employment with us. We have not
experienced any work stoppages and we consider our relations with our employees to be good.

We recognize that attracting, motivating, developing and retaining talent at all levels is vital to continuing our success. By
improving employee satisfaction, retention and engagement, we also improve our ability to support our customers and protect
the long-term interests of our stockholders.

COVID-19 Response

During the COVID-19 pandemic, our primary focus has been the safety and well-being of our employees and their families.
We implemented significant changes that we determined were in the best interests of our employees as well as the communities

in which we operate. This includes having the vast majority of our employees work from home, while implementing additional
safety measures for employees continuing critical on-site work. All employees were offered no-cost telemedicine visits for any
COVID-related symptoms or illness. Increased flexibility in hours and days was also offered to our in-office employees as
childcare or other needs dictated. Additionally, at the onset of the pandemic, we notified our employees that we would not
execute any payroll cost mitigation efforts in response to COVID-19 through July 31, 2020. Out of sincere commitment to and
concern for our employees, their families and communities, we have not to date executed any pandemic-related reduction-in-
force or furlough action plans.

Diversity, Equity and Inclusion

Our goal is to be a desirable place to work, where everyone is inspired to be the best they can be and feels empowered to openly
express opinions and ideas that help drive innovation. We will achieve our goal through our relentless commitment to create an
inclusive and respectful culture across our family of companies. We are steadfast in our responsibility to embrace the diversity
of all people and demonstrate our values – collaborative, dependable, proactive, empathetic and agile - with an unwavering
focus on those essential to the Company achieving sustainable and meaningful growth. We have a long-standing commitment to
equal employment opportunity ("EEO"), as evidenced by the Company’s EEO policy.

As part of our commitment to continued enhancements in this area, in 2020, we launched our Inclusion, Diversity, Equity
Alliance ("IDEA"). This council is made up of employees from across multiple diversity dimensions, including by business,
functional area, role, geography, gender, age and race. The council has established strategic objectives to strengthen the
promotion of workplace diversity for our employees, to create a collaborative environment that promotes authenticity and a
culture that celebrates differences, unique experiences and diverse perspectives. The Company's diversity, equity and inclusion
strategy, supported by IDEA, will enhance company-wide engagement on diversity and inclusion, provide educational
opportunities for our employees, help identify areas for improvement and monitor progress against these initiatives.

Compensation and Benefits

We compensate employees with competitive wages and benefit programs designed to meet employee needs. Our compensation
program is designed to recognize our employees' contributions to value creation and business results. We use a combination of
fixed and variable pay including base salary, bonus, commissions and merit increases which vary across the Company. In
addition, as part of our incentive plan for executives and certain employees, we provide share based compensation to attract,
retain and motivate our key leaders. For further information concerning our equity incentive plans, see Note 9, Stock-based
Compensation and Equity.

As the success of our business is fundamentally connected to the well-being of our people, our healthcare and benefit programs
focus on three key pillars: physical, emotional, and financial well-being. We provide eligible employees with access to flexible
and convenient healthcare programs intended to meet the needs of their families. We offer a wide array of benefits including
comprehensive health and welfare insurances, a 401(K) plan with employer-match, generous time-off, paid maternity leave,
identity theft insurance, and financial support. We provide emotional well-being services through our medical carrier and
associated Employee Assistance Program. In addition, our financial education tools offer employees resources to reach their
personal financial goals.

Development

Our goal is to create opportunities for employee growth, development, education and training, including opportunities to
cultivate talent and identify candidates for new roles from within the Company. We strive to ensure that we have the right
leaders in place to drive our strategic initiatives not only today but also into the future. We are committed to a safe workplace
and an ethical environment in which employees are respected in a culture of belonging and dignity and in which they can
continually develop their skills and expertise to advance their careers.

We also believe that ongoing performance feedback encourages greater engagement in our business and improved individual
performance. Each year, our employees participate in our Performance Development Program that summarizes key
accomplishments for the preceding year, establishes new goals, and identifies critical capabilities for development. We
encourage managers to solicit and share supportive 360-degree feedback, further strengthening the focus on teamwork and team
success.

Employee Recruitment

Our key talent philosophy is to develop talent from within and supplement with external hires. This approach has yielded a deep
understanding among our employee base of our business, vision, products, services and clients, while adding new employees

and ideas in support of our continuous improvement mindset. As a direct result of the operational COVID-19 pandemic
adjustments made to the organization during 2020, the opportunity became available to offer more work from home positions,
whereas before, they would have been conducted from within an office space. Leveraging work collaboration tools and other
technologies, the ability to hire remote employees has supported our efforts to grow our internal talent and welcome employees
from diverse backgrounds and geographies, creating deeper team collaboration and a more engaging client experience. Our
recruitment team uses internal and external resources to recruit diverse, highly skilled and talented workers, and we encourage
employee referrals for open positions.

Communication and Engagement

Given the geographic diversity of our workforce, we use multiple modalities in our communication efforts. Our email and the
employee hotline have been bolstered by the inclusion of all-employee texting and weekly all-employee communications. Other
efforts include live teleconference all-employee meetings hosted by a variety of our leaders. Additionally, leaders participate in
monthly business updates that facilitate awareness of business initiatives, progress and results. These meetings encourage
cross-functional collaboration and help ensure that teams are not working in silos. These efforts have led to our ability to
deliver a more consistent message across all of our constituencies and thereby improve engagement.

Executive Officers

The executive officers of CPSI serve at the pleasure of the Board of Directors. Set forth below is a list of the current executive
officers of CPSI and a brief explanation of each individual’s principal employment during the last five years.

J. Boyd Douglas – President and Chief Executive Officer. J. Boyd Douglas, age 54, has served as our President and Chief
Executive Officer since May 2006. He was first elected as a director in March 2002. Mr. Douglas began his career with us in
August 1988 as a Financial Software Support Representative. From May 1990 until November 1994, Mr. Douglas served as
Manager of Electronic Billing, and from December 1994 until July 1999, he held the position of Director of Programming
Services. From July 1999 until May 2006, Mr. Douglas served as our Executive Vice President and Chief Operating Officer.

David A. Dye – Chief Growth Officer. David A. Dye, age 51, was appointed as our Chief Growth Officer in November 2015,
having previously served as our Chief Financial Officer, Secretary and Treasurer from June 2010 until November 2015.
Mr. Dye served as our President and Chief Executive Officer from July 1999 to May 2006. He was first elected as a director in
March 2002 and served as our Chairman of the Board from May 2006 until April 2019. Mr. Dye began his career with CPSI in
May 1990 as a Financial Software Support Representative and served in various capacities until July 1999. Mr. Dye served as a
director of Bulow Biotech Prosthetics, LLC, a company headquartered in Nashville, Tennessee that operates prosthetic clinics
in the Southeastern United States, from July 2006 until October 2018.

Christopher L. Fowler – Chief Operating Officer and President (TruBridge). Christopher L. Fowler, age 45, was
appointed as our Chief Operating Officer in November 2015 and has served as the President of TruBridge since its formation in
January 2013. Prior to the formation of TruBridge, Mr. Fowler served as CPSI’s Vice President - Business Management
Services, beginning in March 2008. Mr. Fowler began his career with CPSI in May 2000 as a Software Support Representative
and later as a manager of Financial Software Services. From August 2004 until March 2008, Mr. Fowler served as Assistant
Director and Director of Business Management Services.

Matt J. Chambless – Chief Financial Officer, Secretary and Treasurer. Matt J. Chambless, age 40, was appointed as our
Chief Financial Officer, Secretary and Treasurer in November 2015, having previously served as our Director of Financial
Reporting from March 2012 until November 2015. Prior to joining CPSI, Mr. Chambless served as the Accounting Manager
for Northside Hospital System from May 2011 until March 2012 and as an audit professional, including an Audit Manager, for
Grant Thornton, LLP from August 2004 to May 2011.

Robert D. Hinckle – Senior Vice President–Client Services. Robert D. Hinckle, age 51, served as our Vice President -
Software Services from October 2004 until January 2013 and has served as our Senior Vice President - Client Services since
January 2013. Since beginning his career with CPSI in 1995 as a Financial Software Support Representative, Mr. Hinckle has
worked in various positions in our Software Services Division, including Team Manager, Assistant Director and Director of
that division.

Troy D. Rosser – Senior Vice President–Sales. Troy D. Rosser, age 56, has served as our Senior Vice President - Sales since
January 2012, having previously served as Vice President - Sales since October 2005. Mr. Rosser began his career with us in
March 1989 as a Financial Software Support Representative. In 1992, Mr. Rosser was transferred to the Sales and Marketing
division where he has worked in various positions, including Sales Manager and, from October 2000 until October 2005,
Director of Sales.

Company Web Site

The Company maintains a web site at http://www.cpsi.com. The Company makes available on its web site, free of charge, its
Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and all amendments to those
reports, as soon as it is reasonably practicable after such material is electronically filed with the Securities and Exchange
Commission. The Company is not including the information contained on or available through its web site as a part of, or
incorporating such information into, this Annual Report on Form 10-K.

ITEM 1A.

RISK FACTORS

These are not the only risks and uncertainties that we face. Our business, financial condition, operating results, and stock price
can be materially and adversely affected by a number of factors, whether currently known or unknown, including, but not
limited to, those described below. Any one or more of such factors could directly or indirectly cause our actual financial
condition and operating results to vary materially from our past or anticipated future financial condition or operating results.

RISKS RELATED TO OUR INDUSTRY

The impact of the ongoing COVID-19 pandemic and related economic disruptions have materially affected our revenue and
could materially affect our gross margin and income, as well as our financial position and/or liquidity.

Beginning in March 2020, the global pandemic related to the novel coronavirus COVID-19 began to impact the global
economy and our results of operations. Because of the size and breadth of this pandemic, all of the direct and indirect
consequences of COVID-19 are not yet known and may not emerge for some time. Risks presented by the ongoing effects of
COVI-19 include the following:

•

Revenues, Gross Margin, and Income. The impact of COVID-19 on our community hospital client base, and the
related decrease in patient volumes, have negatively impacted, and will continue to negatively impact, our variable
revenues, gross margins and income driven by collection volume. Additionally, new EHR system installations have
been, and will continue to be, negatively impacted by restrictive travel and social distancing protocols. We began to
experience this impact in March 2020, which increased in significance in the second quarter of 2020 and persisted
throughout the year. The Company expects these impacts to continue into 2021, but the degree of the impact will
depend on the ability of our community hospital clients to return to normal operations and patient volume. In addition,
although we have experienced no notable disruption to our operating cash flows through the date of this report, we
currently expect that the aforementioned limitations on travel and decreased client patient volumes will ultimately
result in decreased cash collections from our customers as long as these conditions persist. For further discussion, see
“Failure to maintain our margins and services rates for implementation services could have a material adverse effect
on our operating performance and financial conditions”.

Adverse Legislative and/or Regulatory Action. Federal, state and local government actions to address and contain the
impact of COVID-19 have adversely affected and may continue to adversely affect us. For further discussion, see
“There is significant uncertainty in the healthcare industry, both as a result of recently enacted legislation and
changing government regulation, which may have a material adverse impact on the businesses of our hospital clients
and ultimately on our business, financial condition and results of operations”.

Operational Disruptions and Heightened Cybersecurity Risks. Our operations could be disrupted if key members of
our senior management or a significant percentage of our workforce or the workforce of our client community
hospitals are unable to work because of illness, government directives or otherwise. Having shifted to remote working
arrangements, we also face a heightened risk of cybersecurity attacks or data security incidents and are more
dependent on the internet and telecommunications access and capabilities. For further discussion, see “Breaches of
security and viruses in our systems could result in client claims against us and harm to our reputation causing us to
incur expenses and/or lose clients”.

The extent to which the COVID-19 pandemic will impact our financial condition and results of operations will depend on
future developments, which are highly uncertain and difficult to predict, including, but not limited to, the duration and spread of
the pandemic, its severity, the actions to contain the virus or treat its impact, the speed at which vaccines are deployed and their
effectiveness against COVID-19 variants and how quickly and to what extent normal economic and operating conditions can
resume. Even after the COVID-19 pandemic has subsided, we may experience material adverse impacts to our business as a
result of the global or U.S. economic impact and any recession that has occurred or may occur in the future. There are no
comparable recent events that provide guidance as to the effect the COVID-19 pandemic may have, and, as a result, the ultimate
impact of the pandemic on our operations and financial results is highly uncertain and subject to change. There can be no
assurance that any decrease in sales resulting from the COVID-19 pandemic will be offset by increased sales in subsequent
periods.

Additionally, concerns over the economic impact of the COVID-19 pandemic have caused extreme volatility in financial and
other capital markets which has and may continue to adversely impact our stock price and may adversely impact our ability to

access capital, at all or on reasonable terms. To the extent the COVID-19 pandemic adversely affects our business and financial
results, it may also have the effect of heightening many of the other risks described herein.

There are a limited number of hospitals in our target market. Saturation or consolidation in the healthcare industry could
result in the loss of existing clients, a reduction in our potential client base and downward pressure on the prices of our
products and services.

The limited number of hospitals with fewer than 200 acute care beds in our general target market for our acute care product and
service offerings has resulted in an ever narrowing market for new system installations and add-on sales which could materially
and adversely impact our business, financial condition and operating results.

Our primary objectives are to increase the market share of our TruBridge services, aggressively pursue competitive and
vulnerable EHR replacement opportunities, and differentiate our products and services on a client experience basis that enables
us to sell a broader set of services into a loyal base of clients that are our advocates. Although we have formulated strategic
responses for capitalizing on each of the identified opportunities, there is no guarantee that such responses will ultimately prove
successful. Additionally, to the extent that these opportunities fail to develop or develop more slowly than expected, our
business, financial condition and operating results could be materially and adversely impacted.

Furthermore, many healthcare providers have consolidated to create larger healthcare delivery enterprises with greater market
power. If this consolidation continues, we could lose existing clients and could experience a decrease in the number of potential
purchasers of our products and services. The loss of existing and potential clients due to industry consolidation could cause our
revenue growth rate to decline.

Economic, market and other factors may cause a decline in spending for information technology and services by our current
and prospective clients which may result in less demand for our products, lower prices and, consequently, lower revenues
and a lower revenue growth rate.

The purchase of our information system involves a significant financial commitment by our clients. At the same time, the
healthcare industry faces significant financial pressures that could adversely affect overall spending on healthcare information
technology and services. For example, the COVID-induced recession, combined with actual and potential further reductions in
federal and state funding for Medicare and Medicaid, has caused hospitals to reduce, eliminate or postpone information
technology related and other spending. To the extent spending for healthcare information technology and services declines or
increases slower than we anticipate, demand for our products and services, as well as the prices we charge, could be adversely
affected. Accordingly, we cannot assure you that we will be able to increase or maintain our revenues or our revenue growth
rate.

There is significant uncertainty in the healthcare industry, both as a result of recently enacted legislation and changing
government regulation, which may have a material adverse impact on the businesses of our hospital clients and ultimately
on our business, financial condition and results of operations.

The healthcare industry is subject to changing political, economic and regulatory influences that may affect the procurement
processes and operation of healthcare facilities, including our hospital clients. During the past decade, the healthcare industry
has been subject to increased legislation and regulation of, among other things, reimbursement rates, payment programs,
information technology programs and certain capital expenditures (collectively, the "Health Reform Laws").

The Health Reform Laws contain various provisions which impact us and our clients. Some of these provisions have a positive
impact, by expanding the use of electronic health records in certain federal programs, for example, while others, such as
reductions in reimbursement for certain types of providers, have a negative impact due to fewer available resources. The
continued increase in fraud and abuse penalties is expected to adversely affect participants in the healthcare sector, including us.

Among other things, the Health Reform Laws provide for the expansion of Medicaid eligibility, mandate material changes to
the delivery of healthcare services and reduce the reimbursement paid for such services in order to generate savings in the
Medicare program. The Health Reform Laws also modify certain payment systems to encourage more cost-effective, quality-
based care and a reduction of inefficiencies and waste, including through various tools to address fraud and abuse.

The Health Reform Laws will continue to affect hospitals differently depending upon the populations they serve and their payor
mix. Our target market of community hospitals typically serve higher uninsured populations than larger urban hospitals and rely
more heavily on Medicare and Medicaid for reimbursement. It remains to be seen whether the increase in the insured
population for community hospitals will be sufficient to offset actual and proposed additional cuts in Medicare and Medicaid
reimbursements contained in the Health Reform Laws.

The Health Reform Laws are leading to significant changes in the healthcare system, but the full impact of the legislation and of
further statutory and regulatory actions to reform healthcare on our business is unknown. As a result, there can be no assurances
that the legislation will not adversely impact either our operational results or the manner in which we operate our business. We
believe some healthcare industry participants have reduced their investments or postponed investment decisions, including
investments in our solutions and services.

Cost-containment measures instituted by healthcare providers as a result of regulatory reform or otherwise could result in a
reduced allocation of capital funds. Such a reduction could have an adverse effect on our ability to sell our systems and related
services. Although the new Biden administration promises to prioritize public health by fortifying and expanding
implementation of such laws and legislation, we cannot predict what effect, if any, such additional proposals or healthcare
reforms might have on our business, financial condition and results of operations.

As existing regulations mature and become better defined, we anticipate that these regulations will continue to directly affect
certain of our products and services, but we cannot fully predict the effect at this time. We have taken steps to modify our
products, services and internal practices as necessary to facilitate our compliance with the regulations, but there can be no
assurance that we will be able to do so in a timely or complete manner. Achieving compliance with these regulations could be
costly and distract management’s attention and divert other company resources, and any noncompliance by us could result in
civil and criminal penalties.

The healthcare industry is heavily regulated at the local, state and federal levels. Our failure to comply with regulatory
requirements could create liability for us, result in adverse publicity and negatively affect our business.

The healthcare industry is heavily regulated and is constantly evolving due to the changing political, legislative and regulatory
landscapes. In some instances, the impact of these regulations on our business is direct to the extent that we are subject to these
laws and regulations ourselves. However, these regulations also impact our business indirectly as, in a number of
circumstances, our solutions, devices and services must be capable of being used by our clients in a way that complies with
those laws and regulations, even though we may not be directly regulated by the specific healthcare laws and regulations. There
is a significant number of wide-ranging regulations, including regulations in the areas of healthcare fraud, e-prescribing, claims
processing and transmission, medical devices, the security and privacy of patient data, the ARRA meaningful use program,
patient access rights and interoperability standards, that may be directly or indirectly applicable to our operations and
relationships or the business practices of our clients. Specific areas that are subject to increased regulation include, but are not
limited to, the following:

Healthcare Fraud. Federal and state governments continue to enhance regulation of and increase their scrutiny over practices
potentially involving healthcare fraud, waste and abuse by healthcare providers whose services are reimbursed by Medicare,
Medicaid and other government healthcare programs. Our healthcare provider clients are subject to laws and regulations
regarding fraud and abuse that, among other things, prohibit the direct or indirect payment or receipt of any remuneration for
patient referrals, or arranging for or recommending referrals or other business paid for in whole or in part by these federal or
state healthcare programs. Federal enforcement personnel have substantial funding, powers and remedies to pursue suspected or
perceived fraud and abuse. The effect of this government regulation on our clients is difficult to predict. Many of the
regulations applicable to our clients and that may be applicable to us, including those relating to marketing incentives offered in
connection with medical device sales may be interpreted or applied by a prosecutorial, regulatory or judicial authority in a
manner that could broaden their applicability to us or require our clients to make changes in their operations or the way in
which they deal with us. If such laws and regulations are determined to be applicable to us and if we fail to comply with any
applicable laws and regulations, we could be subject to civil and criminal penalties, sanctions or other liabilities, including
exclusion from government healthcare programs, which could have a material adverse effect on our business, results of
operations and financial condition. Even an unsuccessful challenge by a regulatory or prosecutorial authority of our activities
could result in adverse publicity, could require a costly response from us and could adversely affect our business, results of
operations and financial condition.

E-Prescribing. The use of our solutions by physicians for electronic prescribing and electronic routing of prescriptions via the
Surescripts network to pharmacies is governed by federal and state laws. States have differing regulations that govern the
electronic transmission of certain prescriptions and prescription requirements. Standards adopted by the National Council for
Prescription Drug Programs and regulations adopted by the Centers for Medicare and Medicaid Services ("CMS") related to
"EPrescribing and the Prescription Drug Program" set forth implementation standards for the transmission of electronic
prescriptions. These standards are detailed and broad, and cover not only routing transactions between prescribers and
pharmacies, but also electronic eligibility, formulary and benefits inquiries. In general, regulations in this area can be
burdensome and evolve regularly, meaning that any potential benefits to our clients from utilizing such solutions and services

may be superseded by a newly-promulgated regulation that adversely affects our business model. Our efforts to provide
solutions that enable our clients to comply with these regulations could be time consuming and expensive.

Claims Processing and Transmission. Our system electronically transmits medical claims by physicians to patients’ payors for
immediate approval and reimbursement. In addition, we offer business management services that include the manual and
electronic processing and submission of medical claims by healthcare providers to patients’ payors for approval and
reimbursement. Federal and state laws provide that it is a violation for any person to submit, or cause to be submitted, a claim to
any payor, including, without limitation, Medicare, Medicaid and all private health plans and managed care plans, seeking
payment for any service or product that overbills or bills for items that have not been provided to the patient. We have in place
policies and procedures that we believe assure that all claims that are transmitted by our system and through our services are
accurate and complete, provided that the information given to us by our clients is also accurate and complete. If, however, we
do not follow those procedures and policies, or they are not sufficient to prevent inaccurate claims from being submitted, we
could be subject to substantial liability including, but not limited to, civil and criminal liability. Additionally, any such failure of
our billing and collection services to comply with these laws and regulations could adversely affect demand for our services and
could force us to expend significant capital, research and development, and other resources to address the failure.

Where we are permitted to do so, we calculate charges for our billing and collection services based on a percentage of the
collections that our clients receive as a result of our services. To the extent that violations or liability for violations of these laws
and regulations require intent, it may be alleged that this percentage calculation provides us or our employees with incentive to
commit or overlook fraud or abuse in connection with submission and payment of reimbursement claims. CMS has stated that it
is concerned that percentage-based billing services may encourage billing companies to commit or to overlook fraudulent or
abusive practices.

A portion of our business involves billing Medicare claims on behalf of our clients. In an effort to combat fraudulent Medicare
claims, the federal government offers rewards for reporting of Medicare fraud which could encourage others to subject us to a
charge of fraudulent claims, including charges that are ultimately proved to be without merit.

As discussed below, the HIPAA security and privacy standards also affect our claims transmission services, since those services
must be structured and provided in a way that supports our clients’ HIPAA compliance obligations.

Regulation of Medical Devices. The United States Food and Drug Administration (the "FDA") has determined that certain of
our solutions, such as our ImageLink® product, are medical devices that are actively regulated under the Federal Food, Drug
and Cosmetic Act, as amended. If other of our solutions are deemed to be actively regulated medical devices by the FDA, we
could be subject to extensive requirements governing pre- and post-marketing activities including registration of the applicable
manufacturing facility and software and hardware products, application of detailed record-keeping and manufacturing
standards, application of the medical device excise tax, and FDA approval or clearance prior to marketing. Complying with
these medical device regulations is time consuming and expensive, and our marketing and other sales activities could be subject
to unanticipated and significant delays. Further, it is possible that the FDA may become more active in regulating software and
medical devices that are used in the healthcare industry. If we are unable to obtain the required regulatory approvals for any
such software or medical devices, our short- to long-term business plans for these solutions or medical devices could be delayed
or canceled and we could face FDA refusal to grant pre-market clearance or approval of products; withdrawal of existing
clearances and approvals; fines, injunctions or civil penalties; recalls or product corrections; production suspensions; and
criminal prosecution. FDA regulation of our products could increase our operating costs, delay or prevent the marketing of new
or existing products, and adversely affect our revenue growth.

Security and Privacy of Patient Information. Federal, state and local laws regulate the privacy and security of patient records
and the circumstances under which those records may be released. These regulations govern both the disclosure and use of
confidential patient medical record information and require the users of such information to implement specified security and
privacy measures. United States regulations currently in place governing electronic health data transmissions continue to evolve
and are often unclear and difficult to apply.

In the United States, HIPAA regulations require national standards for some types of electronic health information transactions
and the data elements used in those transactions, security standards to ensure the integrity and confidentiality of health
information, and standards to protect the privacy of individually identifiable health information. Covered entities under HIPAA,
which include healthcare organizations such as our clients, and our claims processing, transmission and submission services,
are required to comply with the privacy standards, transaction regulations and security regulations. Moreover, HITECH and
associated regulatory requirements extend many of the HIPAA obligations, formerly imposed only upon covered entities, to
business associates as well. As a business associate of our clients who are covered entities, we are in most instances already
contractually required to ensure compliance with the HIPAA regulations as they pertain to the handling of covered client data.

However, the extension of these HIPAA obligations to business associates by law has created a direct liability risk related to the
privacy and security of individually identifiable health information.

Evolving HIPAA and HITECH-related laws or regulations could restrict the ability of our clients to obtain, use or disseminate
patient information. This could adversely affect demand for our solutions and devices if they are not re-designed in a timely
manner in order to meet the requirements of any new interpretations or regulations that seek to protect the privacy and security
of patient data or enable our clients to execute new or modified healthcare transactions. We may need to expend additional
capital and software development and other resources to modify our solutions to address these evolving data security and
privacy issues. Furthermore, our failure to maintain the confidentiality of sensitive personal information in accordance with the
applicable regulatory requirements could damage our reputation and expose us to claims, fines and penalties.

Federal and state statutes and regulations have granted broad enforcement powers to regulatory agencies to investigate and
enforce compliance with these privacy and security laws and regulations. Federal and state enforcement personnel have
substantial funding, powers and remedies to pursue suspected or perceived violations. If we fail to comply with any applicable
laws or regulations, we could be subject to civil penalties, sanctions or other liability. Enforcement investigations, even if
meritless, could have a negative impact on our reputation, cause us to lose existing clients or limit our ability to attract new
clients.

ARRA Meaningful Use Program. The ARRA initially required "meaningful use of certified electronic health record technology"
by healthcare providers by 2015 in order to receive limited incentive payments and to avoid related reduced reimbursement
rates for Medicare claims. Related standards and specifications are subject to interpretation by the entities designated to certify
such technology. While a combination of our solutions has been certified as meeting stage one, stage two, and stage three
standards for certified electronic health record technology, the regulatory standards to achieve certification will continue to
evolve over time. We may incur increased development costs and delays in delivering solutions if we need to upgrade our
software or healthcare devices to be in compliance with these varying and evolving standards. In addition, further delays in
interpreting these standards may result in postponement or cancellation of our clients’ decisions to purchase our software
solutions. If our software solutions are not compliant with these evolving standards, our market position and sales could be
impaired and we may have to invest significantly in changes to our software solutions.

Interoperability Standards. Our clients are concerned with and often require that our software and systems be interoperable
with other third party healthcare information technology systems. Market forces or governmental or regulatory authorities could
create software interoperability standards that would apply to our software and systems, and if our software and systems are not
consistent with those standards, we could be forced to incur substantial additional development costs. For example, the
HITECH Act contains interoperability standards that healthcare providers are required to adhere to in order to receive stimulus
funds from the federal government under the ARRA. Compliance with these and related standards is becoming a competitive
requirement and, although a combination of our solutions has been certified as meeting all such required interoperability
standards to date, maintaining such compliance with these varying and evolving rules may result in increased development
costs and delays in upgrading our client software and systems. To the extent these rules are narrowly construed, subsequently
changed or supplemented, or that we are delayed in achieving certification under these evolving rules for applicable products,
our clients may postpone or cancel their decisions to purchase or implement our software and systems.

As it relates specifically to interoperability, we are a member of CommonWell Health Alliance ("CommonWell"), a not-for-
profit trade association comprised of healthcare information technology vendors devoted to the notion that patient data should
be safely, securely and immediately available to patients and healthcare providers to support better care delivery, regardless of
where that care occurs. CommonWell is committed to fostering standards that make this possible, and to having healthcare
information technology companies embed these capabilities natively and cost effectively into their EHR systems. Despite our
membership in CommonWell, there is no guarantee that we will successfully manage the interoperability of our software and
systems with third-party health IT providers.

Patient Access Rights. In March 2020, the Office of National Coordinator for Health Information Technology ("ONC") of the
U.S. Department of Health and Human Services ("HHS") released the "21st Century Cures Act: Interoperablity, Information
Blocking, and the ONC Health IT Certification Program, Final Rule." The rule implements several of the key interoperability
provisions included in the 21st Century Cures Act. Specifically, it calls on developers of certified EHRs and health IT products
to adopt standardized application programming interfaces ("API's"), which will help allow individuals to securely and easily
access structured and unstructured EHI formats using smartphones and other mobile devices. This provision and others
included in the new rule create a potentially lengthy list of new certification and maintenance of certification requirements that
developers of EHRs and other health IT products have to meet in order to maintain approved federal government certification
status. Meeting and maintaining this certification status could require additional development costs.

The ONC rule also implements the information blocking provisions of the 21st Century Cure Act, including identifying
reasonable and necessary activities that do not constitute information blocking. Under the 21st Century Cures Act, the HHS has
the regulatory authority to investigate and assess civil monetary penalties of up to $1,000,000 against health IT developers and/
or providers found to be guilty of "information blocking." This new oversight and authority to investigate claims of information
blocking creates significant risks for us and our clients and could potentially create substantial new compliance costs.

In December 2020, in order to allow the U.S. health care system to focus on addressing the COVID-19 pandemic, ONC
extended the applicability date for the information blocking provisions to April 5, 2021 and delayed compliance dates and
timeframes for certain other program requirements.

Standards for Submission of Healthcare Claims. Effective October 2015, CMS mandated the use of new patient codes for
reporting medical diagnosis and inpatient procedures, referred to as the ICD-10 codes. CMS requires all providers, payors,
clearinghouses and billing services to utilize these ICD-10 codes when submitting claims for payment. ICD-10 codes affect
medical diagnosis and inpatient procedure coding for everyone covered by HIPAA, not just those who submit Medicare or
Medicaid claims. Claims for services must use ICD-10 codes for medical diagnosis and inpatient procedures or they will not be
paid. While we have successfully implemented the use of ICD-10 codes within our products and services, the possibility exists
for similar future mandates by CMS. If our products and services do not accommodate CMS mandates at any future date,
clients may cease to use those products and services that are not compliant and may choose alternative vendors and products
that are compliant. This could adversely impact future revenues.

RISKS RELATED TO OUR BUSINESS

Competition with companies that have greater financial, technical and marketing resources than we have could result in a
loss of clients and/or a lowering of prices for our products, causing a decrease in our revenues and/or market share.

Our principal competitors are Cerner Corporation, Medical Information Technology, Inc. ("Meditech"), and MEDHOST, Inc.
These companies compete with us directly in our target market of small and midsize hospitals. They offer products and systems
that are comparable to our solutions and address the needs of hospitals in the markets we serve.

Our secondary competitors in the acute care EHR market include Allscripts Healthcare Solutions, Inc. and Epic Systems
Corporation. These companies are significantly larger than we are, and they typically sell their products and services to larger
hospitals outside of our target market. However, they will sometimes compete with us directly or, more commonly, a larger
health system who uses a system provided by one of these competitors will offer it to a smaller hospital as part of a merger or
alliance.

We also face competition from providers of practice management systems, general decision support and database systems, and
other segment-specific applications. Any of these companies, as well as other technology or healthcare companies could decide
at any time to specifically target hospitals within our target market.

A number of existing and potential competitors are more established than we are and have greater name recognition and
financial, technical and marketing resources. Products of our competitors may have better performance, lower prices and
broader market acceptance than our products. We expect increased competition that could cause us to lose clients, lower our
prices to remain competitive and, consequently, experience lower revenues, revenue growth and profit margins.

We may engage in future acquisitions. Such strategic acquisitions may be expensive, time consuming, and subject to other
inherent risks which may jeopardize our ability to realize anticipated benefits.

We may acquire additional businesses, technologies and products if we determine that these additional businesses, technologies
and products are likely to serve our strategic goals. Acquisitions have inherent risks, which may have a material adverse effect
on our business, financial condition, operating results or prospects, including, but not limited to the following:

•

significant acquisition and integration costs;

failure to achieve projected synergies and performance targets;

potentially dilutive issuances of our securities, the incurrence of debt and contingent liabilities and amortization
expenses related to intangible assets with indefinite useful lives, which could adversely affect our results of operations
and financial condition;

using cash as acquisition currency may adversely affect interest or investment income, which may in turn adversely
affect our earnings and/or earnings per share;

difficulty in fully or effectively integrating the acquired technologies, software products, services, business practices or
personnel, which would prevent us from realizing the intended benefits of the acquisition;

failure to maintain uniform standard controls, policies and procedures across acquired businesses;

difficulty in predicting and responding to issues related to product transition such as development, distribution and
client support;

the possible adverse effect of such acquisitions on existing relationships with third party partners and suppliers of
technologies and services;

the possibility that staff or clients of the acquired companies might not accept new ownership and may transition to
different technologies or attempt to renegotiate contract terms or relationships, including maintenance or support
agreements;

the assumption of known and unknown liabilities;

the possibility that the due diligence process in any such acquisition may not completely identify material issues
associated with product quality, product architecture, product development, intellectual property issues, key personnel
issues or legal and financial contingencies, including any deficiencies in internal controls and procedures and the costs
associated with remedying such deficiencies;

difficulty in entering geographic and/or business markets in which we have no or limited prior experience;

diversion of management’s attention from other business concerns; and

the possibility that acquired assets become impaired, requiring us to take a charge to earnings which could be
significant.

A failure to successfully integrate acquired businesses or technology in a timely manner could, for any of these reasons, have an
adverse effect on our financial condition and results of operations. As a result, we may not be able to realize the expected
benefits that we seek to achieve from the acquisitions, which could also affect our ability to service our debt obligations. In
addition, we may be required to spend additional time or money on integration that otherwise would be spent on the
development and expansion of our business.

If we are unable to attract and retain qualified client service and support personnel, our business and operating results will
suffer.

Our client service and support is a key component of our business. Most of our hospital clients have small information
technology staffs, and they depend on us to service and support their systems. Future difficulty in attracting, training and
retaining capable client service and support personnel could cause a decrease in the overall quality of our client service and
support. That decrease would have a negative effect on client satisfaction which could cause us to lose existing clients and
could have an adverse effect on our new client sales. The loss of clients due to inadequate client service and support would
negatively impact our ability to continue to grow our business.

We periodically have restructured our sales force, which can be disruptive.

We continue to rely heavily on our direct sales force. Periodically, we have restructured or made other adjustments to our sales
force in response to factors such as product changes, geographical coverage and other internal considerations. Change in the
structures of the sales force and sales force management can result in temporary lack of focus and reduced productivity that
may affect revenues in one or more quarters. Future restructuring of our sales force could occur, and if so we may again
experience the adverse transition issues associated with such restructuring.

If we are unable to manage our growth in the new markets we may enter, our business and financial results could suffer.

Our future financial results will depend in part on our ability to profitably manage our business in new markets that we may
enter. We are engaging in the strategic identification of, and competition for, growth and expansion opportunities in new
markets or offerings. In order to successfully execute on these future initiatives, we will need to, among other things, manage
changing business conditions and develop expertise in areas outside of our business's traditional core competencies. Difficulties
in managing future growth in new markets could have a significant negative impact on our business, financial condition and
results of operations.

Our international business activities and processes expose us to numerous and often conflicting laws, regulations, policies,
standards or other requirements, and to risks that could harm our business, financial condition and results of operations.

Our subsidiary, Get Real Health, sells patient engagement technology to hospital systems and government agencies in Canada,
Australia, England, the United Arab Emirates and the Netherlands, directly and through resellers, and Evident has had limited
sales of EHR software to government agencies in Canada and the Caribbean. Our business in these countries is subject to
numerous risks inherent in international business operations. Among others, these risks include:

•

data protection and privacy regulations regarding access by government authorities to customer, partner, or employee
data;

data residency requirements (the requirement to store certain data only in and, in some cases, also to access such data
only from within a certain jurisdiction);

conflict and overlap among tax regimes;

possible tax constraints impeding business operations in certain countries;

expenses associated with the localization of our products and compliance with local regulatory requirements;

discriminatory or conflicting fiscal policies;

operational difficulties in countries with a high corruption perception index;

difficulties enforcing intellectual property and contractual rights in certain jurisdictions;

country-specific software certification requirements;

compliance with various industry standards; and

• market volatilities or workforce restrictions due to changing laws and regulations resulting from political decisions

(e.g. Brexit, government elections).

As we expand into new countries and markets, these risks could intensify. The application of the respective local laws and
regulations to our business is sometimes unclear, subject to change over time, and often conflicting among jurisdictions.
Additionally, these laws and government approaches to enforcement are continuing to change and evolve, just as our products
and services continually evolve. Compliance with these varying laws and regulations could involve significant costs or require
changes in products or business practices. Non-compliance could result in the imposition of penalties or cessation of orders due
to alleged non-compliant activity. We do not believe we have engaged in any activities sanctionable under these laws and
regulations, but governmental authorities could use considerable discretion in applying these statutes and any imposition of
sanctions against us could be material. One or more of these factors could have an adverse effect on our operations globally or
in one or more countries or regions, which could have an adverse effect on our business, financial condition and results of
operations.

We face the risks and uncertainties that are associated with litigation against us, which may adversely impact our marketing,
distract management and have a negative impact upon our business, results of operations and financial condition.

We face the risks associated with litigation concerning the operation of our business. For example, companies in our industry,
including many of our competitors, have been subject to litigation based on allegations of patent infringement or other
violations of intellectual property rights. In particular, patent holding companies often engage in litigation to seek to monetize
patents that they have obtained. As the number of competitors, patents and patent holding companies in our industry increases,
the functionality of our products and services expands, and we enter into new geographies and markets, the number of
intellectual property rights-related actions against us is likely to continue to increase. The uncertainty associated with
substantial unresolved litigation may have an adverse effect on our business. In particular, such litigation could impair our
relationships with existing clients and our ability to obtain new clients. Defending such litigation may result in a diversion of
management's time and attention away from business operations, which could have an adverse effect on our business, results of
operations and financial condition. Such litigation may also have the effect of discouraging potential acquirers from bidding for
us or reducing the consideration such acquirers would otherwise be willing to pay in connection with an acquisition.

There can be no assurance that such litigation will not result in liability in excess of our insurance coverage, that our insurance
will cover such claims or that appropriate insurance will continue to be available to us in the future at commercially reasonable
rates.

RISKS RELATED TO OUR PRODUCTS AND SERVICES

Our failure to develop new products or enhance current products in response to market demands could adversely impact our
competitive position and require substantial capital resources to correct.

The needs of hospitals in our target market are subject to rapid change due to government regulation, trends in clinical care
practices and technological advancements. As a result of these changes, our products may quickly become obsolete or less
competitive. New product introductions and enhancements by our competitors that more effectively or timely respond to
changing industry needs may weaken our competitive position.

We continually redesign and enhance our products to incorporate new technologies and adapt our products to ever-changing
hardware and software platforms. Often we face difficult choices regarding which new technologies to adopt. If we fail to
anticipate or respond adequately to technological advancements, or experience significant delays in product development or
introduction, our competitive position could be negatively affected. Moreover, our failure to offer products acceptable to our
target market could require us to make significant capital investments and incur higher operating costs to redesign our products,
which could negatively affect our financial condition and operating results.

Our products assist clinical decision-making and related care by capturing, maintaining and reporting relevant patient data.
If our products fail to provide accurate and timely information, our clients could assert claims against us that could result in
substantial cost to us, harm our reputation in the industry and cause demand for our products to decline.

We provide products that assist clinical decision-making and related care by capturing, maintaining and reporting relevant
patient data. Our products could fail or produce inaccurate results due to a variety of reasons, including mechanical error,
product flaws, faulty installation and/or human error during the initial data conversion. If our products fail to provide accurate
and timely information, clients and/or patients could sue us to hold us responsible for losses they incur from these errors. These
lawsuits, regardless of merit or outcome, could result in substantial cost to us, divert management’s attention from operations
and decrease market acceptance of our products. We attempt to limit by contract our liability for damages arising from
negligence, errors or mistakes. Despite this precaution, such contract provisions may not be enforceable or may not otherwise
protect us from liability for damages. We maintain general liability insurance coverage, including coverage for errors or
omissions. However, this coverage may not be sufficient to cover one or more large claims against us or otherwise continue to
be available on terms acceptable to us. In addition, the insurer could disclaim coverage as to any future claim.

Breaches of security and viruses in our systems could result in client claims against us and harm to our reputation causing
us to incur expenses and/or lose clients.

In the course of our business operations, we compile and transmit confidential information, including patient health
information. We have included security features in our systems that are intended to protect the privacy and integrity of this
information. Despite the existence of these security features, our system may experience break-ins and similar disruptive
problems that could jeopardize the security of information stored in and transmitted through the information technology
networks of our clients. In addition, the other systems with which we may interface, such as the Internet and related systems,
may be vulnerable to security breaches, viruses, programming errors or similar disruptive problems. Based on the size of our

company, the industry in which we operate, and the overall percentage of impacted companies in the same or similar industry, it
is probable there will be attempts to breach our security. Healthcare information has become a prime target for attackers based
on the value of the information and, therefore, has the potential to increase the risk of us experiencing a cyber attack.

Our systems have experienced various immaterial breaches in the past, including ransomware, denial-of-service, malware, and
phishing. Also, our business partners have experienced security breaches, which is disruptive for our customers. While these
events have not had an adverse impact on our business or financial condition, security breaches such as these could have a
material adverse effect on our financial condition, as, (a) clients could sue us for breaches of security involving our system due
to the sensitivity of the medical information we compile and transmit; (b) actual or perceived security breaches in our system
could harm the market perception of our products which could cause us to lose existing and prospective clients; and (c) the
effect of security breaches and related issues could disrupt our ability to perform certain key business functions and could
potentially reduce demand for our products and services. Accordingly, we have expended significant resources toward
establishing and enhancing the security of our related infrastructures and we have enhanced our cybersecurity risk management
program and disclosure controls and procedures, as discussed under "Business - Our Products and Services." However, no
assurance can be given that these efforts will be sufficient to protect against a breach or other cybersecurity incident. Also,
maintaining and enhancing our infrastructure security may require us to expend significant capital in the future.

In addition, in December 2020 it was revealed that malicious actors implanted malware in the Orion network monitoring
software built by SolarWinds, which software was distributed to thousands of its customers, including government agencies and
companies in the private sector. The vulnerability was designed to enable hackers to install and execute additional malware that
could be used to exfiltrate and facilitate remote access to data possessed by these government agencies and companies. The full
scope of the security threat and extent of exploitation of the vulnerability is not yet known.

New products that we introduce or enhancements to our existing products may contain undetected errors or problems that
could affect client satisfaction and cause a decrease in revenues.

Highly complex software products such as ours sometimes contain undetected errors or failures when first introduced or when
updates and new versions are released. Tests of our products may not detect bugs or errors because it is difficult to simulate our
clients’ wide variety of computing environments. Despite extensive testing, from time to time we have discovered defects or
errors in our products. Defects or errors discovered in our products could cause delays in product introductions and shipments,
result in increased costs and diversion of development resources, require design modifications, decrease market acceptance or
client satisfaction with our products, cause a loss of revenue, result in legal actions by our clients and cause increased insurance
costs.

We may not be successful in convincing customers to migrate to current or future releases of our products, which may lead
to reduced services and maintenance revenues and less future business from existing customers.

Our customers may not be willing to incur the costs or invest the resources necessary to complete upgrades to current or future
releases of our products. This may lead to our loss of services and maintenance revenues and future business from customers
that continue to operate prior versions of our products or choose to no longer use our products.

Failure to maintain our margins and service rates for implementation services could have a material adverse effect on our
operating performance and financial condition.

A significant portion of our revenues is derived from implementation services. If we fail to scope our implementation projects
correctly, our services margins may suffer. We bill for implementation services predominately on an hourly or daily basis (time
and materials) and sometimes under fixed price contracts, and we generally recognize revenue from those services as we
perform the work. If we are not able to maintain the current service rates for our time and materials implementation services,
without corresponding cost reductions, or if the percentage of fixed price contracts increases and we underestimate the costs of
our fixed price contracts, our operating performance may suffer. The rates we charge for our implementation services depend
on a number of factors, including the following:

•

perceptions of our ability to add value through our implementation services;

complexity of services performed;

competition;

pricing policies of our competitors and of systems integrators;

•

the use of globally sourced, lower-cost service delivery capabilities within our industry; and

economic, political and market conditions.

Services revenues carry lower gross margins than license revenues and an overall increase in services revenues as a
percentage of total revenues could have an adverse impact on our business.

Because our service revenues have lower gross margins than do our license revenues, an increase in the percentage of total
revenues represented by service revenues could have a detrimental impact on our overall gross margins and could adversely
affect operating results.

We may be subject to liability in the event we provide inaccurate claims data to payors.

We offer electronic claims submission services as part of our business management services. While we have implemented
certain product features designed to maximize the accuracy and completeness of claims submissions, these features may not be
sufficient to prevent inaccurate claims data from being submitted to payors. Should inaccurate claims data be submitted to
payors, we may be subject to liability claims.

We may experience liability claims arising out of the licensing of our software and provision of services.

Our agreements normally contain provisions designed to limit our exposure to potential liability claims and generally exclude
consequential and other forms of extraordinary damages. However, these provisions could be rendered ineffective, invalid or
unenforceable by unfavorable judicial decisions or by federal, state, local or foreign laws or ordinances. For example, we may
not be able to avoid or limit liability for disputes relating to product performance or the provision of services. If a claim against
us were to be successful, we may be required to incur significant expense and pay substantial damages, including consequential
or punitive damages, which could have a material adverse effect on our business, operating results and financial condition.
Even if we prevail in contesting such a claim, the accompanying publicity could adversely affect the demand for our products
and services.

We also rely on certain technology that we license from third parties, including software that is integrated with our internally
developed software. Although these third parties generally indemnify us against claims that their technology infringes on the
proprietary rights of others, such indemnification is not always available for all types of intellectual property. Often such third-
party indemnifiers are not well capitalized and may not be able to indemnify us in the event that their technology infringes on
the proprietary rights of others. As a result, we may face substantial exposure if technology we license from a third party
infringes on another party’s proprietary rights. Defending such infringement claims, regardless of their validity, could result in
significant cost and diversion of resources.

We are dependent on our licenses of rights, products and services from third parties, disruptions of which may cause us to
discontinue, delay or reduce product shipments.

We are increasingly dependent upon licenses for some of the technology used in our products as well as other products and
services from third-party vendors, and the costs of these licenses have increased in recent years. Most of these arrangements can
be continued/renewed only by mutual consent and may be terminated for any number of reasons. We may not be able to
continue using the technology, products or services made available to us under these arrangements on commercially reasonable
terms or at all. As a result, we may have to discontinue, delay or reduce product shipments or services provided until we can
obtain equivalent technology or services. Most of our third-party licenses are non-exclusive. Our competitors may obtain the
right to use any of the business elements covered by these arrangements and use these elements to compete directly with us. In
addition, if our vendors choose to discontinue providing their technology, products or services in the future or are unsuccessful
in their continued research and development efforts, we may not be able to modify or adapt our own products. The operation of
our products would be impaired if errors occur in third party technology or content that we incorporate, and we may incur additional
costs to repair or replace the defective technology or content. It may be difficult for us to correct any errors in third party products
because the products are not within our control.

Because we believe that proprietary rights are material to our success, misappropriation of these rights could limit our
ability to compete effectively and adversely affect our financial condition.

We are heavily dependent on the maintenance and protection of our intellectual property and we rely largely on a combination
of confidentiality provisions in our client agreements, employee nondisclosure agreements, trademark and trade secret laws and
other measures to protect our intellectual property. Additionally, our software is not patented or copyrighted. Although we
attempt to control access to our intellectual property, unauthorized persons may attempt to copy or otherwise use our
intellectual property. There can be no assurance that the legal protections and precautions we take will be adequate to prevent

misappropriation of our technology or that competitors will not independently develop technologies equivalent or superior to
ours. Monitoring unauthorized use of our intellectual property is difficult, and the steps we have taken may not prevent
unauthorized use. If our competitors gain access to our intellectual property, our competitive position in the industry could be
damaged. An inability to compete effectively could cause us to lose existing and potential clients and experience lower
revenues, revenue growth and profit margins. Third parties could obtain patents that may require us to negotiate licenses to
conduct our business, and the required licenses may not be available on reasonable terms or at all. We also rely on
nondisclosure agreements with certain employees, and we cannot be certain that these agreements will not be breached or that
we will have adequate remedies for any breach.

If we are deemed to infringe on the intellectual property rights of third parties, we could incur unanticipated expense and be
prevented from providing our products and services if we cannot obtain licenses to these rights on commercially acceptable
terms.

We do not believe that our operations or products infringe on the intellectual property rights of others. However, there can be
no assurance that others will not assert infringement or trade secret claims against us with respect to our current or future
products. Many participants in the technology industry have an increasing number of patents and patent applications and have
frequently demonstrated a readiness to take legal action based on allegations of patent and other intellectual property
infringement. Further, as the number and functionality of our products increase, we believe we may become increasingly
subject to the risk of infringement claims. If infringement claims are brought against us, these assertions could distract
management. We may have to spend a significant amount of money and time to defend or settle those claims. In addition,
claims against third parties from which we purchase software could adversely affect our ability to access third-party software
for our systems.

If we were found to infringe on the intellectual property rights of others, we could be forced to pay significant license fees or
damages for infringement. If we were unable to obtain licenses to these rights on commercially acceptable terms, we would be
required to discontinue the sale of our products that contain the infringing technology. Our clients would also be required to
discontinue the use of those products. We are unable to insure against this risk on an economically feasible basis. Even if we
were to prevail in an infringement lawsuit, the accompanying publicity could adversely impact the demand for our products.
Under some circumstances, we agree to indemnify our clients for some types of infringement claims that may arise from the use
of our products.

Interruptions in our power supply and/or telecommunications capabilities could disrupt our operations, cause us to lose
revenues and/or increase our expenses.

We currently have backup generators to be used as alternative sources of power in the event of a loss of power to our facilities.
If these generators were to fail during any power outage, we would be temporarily unable to continue operations at our
facilities. This would have adverse consequences for our clients who depend on us for system support, business management,
and managed IT and professional services. Any such interruption in operations at our facilities could damage our reputation,
harm our ability to retain existing clients and obtain new clients, and result in lost revenue and increased insurance and other
operating costs.

We also have clients for whom we store and maintain computer servers containing critical patient and administrative data.
Those clients access this data remotely through telecommunications lines. If our power generators fail during any power outage
or if our telecommunications lines are severed or impaired for any reason, those clients would be unable to access their mission
critical data causing an interruption in their operations. In such event our remote access clients and/or their patients could seek
to hold us responsible for any losses. We would also potentially lose those clients, and our reputation could be harmed.

RISKS RELATED TO OUR INDEBTEDNESS

Volatility in and disruption to the global capital and credit markets and tightened lending standards may adversely affect our
ability to access credit in the future, the cost of any credit obtained in the future, and the financial soundness of our clients
and our business.

Domestic and international events have frequently resulted in volatility and disruption to the global capital and credit markets,
often adversely affecting the availability, terms and cost of credit. Although we believe that our operating cash flow and
financial assets will give us the ability to meet our financing needs for the foreseeable future, there can be no assurance that the
volatility and disruption in the global capital and credit markets will not impair our liquidity or increase the costs of any future
borrowing.

Our business could also be negatively impacted to the extent that our hospital clients continue to face tight capital and credit
markets and other disruptions resulting from the COVID-related economic recession or cuts in Medicare and Medicaid funding.
Hospitals may modify, delay or cancel plans to purchase our software systems or services. Additionally, if hospitals’ operating
and financial performance deteriorates, or if they are unable to make scheduled payments or obtain credit, they may not be able
to pay, or may delay payment of, accounts receivable owed to us. Any inability of clients to pay us for our products and
services may adversely affect our earnings and cash flow.

Tightened lending standards and the absence of third-party credit has resulted in many of our hospital clients seeking financing
arrangements from us to purchase our software systems and services. These financing arrangements impact our short-term
operating cash flow and cash available. Should the requests for these financing arrangements continue or increase, our business
could be negatively impacted by our inability to finance these arrangements. In addition, the absence of credit could negatively
impact our existing financing receivables should our clients with financing arrangements be unable to meet their obligations.

Our substantial indebtedness may adversely affect our available cash flow and our ability to operate our business, remain in
compliance with debt covenants and make payments on our indebtedness.

As of December 31, 2020, we had approximately $78.1 million of indebtedness, which includes $73.1 million under our term
loan facility and $5.0 million borrowed under our revolving credit facility. We also had $105.0 million of unused commitments
under our revolving credit facility as of December 31, 2020.

Our substantial indebtedness increases the possibility that we may be unable to generate cash sufficient to pay, when due, the
principal of, interest on or other amounts due in respect of our indebtedness. Our substantial indebtedness, combined with our
other financial obligations and contractual commitments, could have important consequences. For example, it could:

• make it more difficult for us to satisfy our obligations with respect to our indebtedness, and any failure to comply with
the obligations under any of our debt instruments, including restrictive covenants, could result in an event of default
under such instruments;

• make us more vulnerable to adverse changes in general economic, industry and competitive conditions and adverse

changes in government regulation;

•

require us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, thereby
reducing the availability of our cash flow to fund working capital, capital expenditures, acquisitions and other general
corporate purposes;

limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate;

place us at a competitive disadvantage compared to our competitors that are less highly leveraged and therefore able to
take advantage of opportunities that our indebtedness prevents us from exploiting; and

limit our ability to borrow additional amounts for working capital, capital expenditures, acquisitions, debt service
requirements, execution of our business strategy or other purposes.

Any of the above listed factors could have a material adverse effect on our business, prospects, results of operations and
financial condition. Furthermore, our interest expense could increase if interest rates increase because our debt bears interest at
floating rates, which could adversely affect our cash flows. If we do not have sufficient earnings to service our debt, we may be
required to refinance all or part of our existing debt, sell assets, borrow more money or sell securities, none of which we can
guarantee we will be able to do.

In addition, the credit agreement governing our term loan facility and revolving credit facility contains restrictive covenants that
limit our ability to engage in activities that may be in our long-term best interests. A breach of any of these restrictive
covenants, if not cured or waived, could result in an event of default that could trigger acceleration of our indebtedness and may
result in the acceleration of or default under any other debt to which a cross-acceleration or cross-default provision applies,
which could have a material adverse effect on our business and financial condition. The credit agreement requires compliance
with a consolidated net leverage ratio test. In addition, the credit agreement requires prepayment of the outstanding
indebtedness thereunder if we have certain excess cash flow, as described therein. The credit agreement requires us to
mandatorily prepay the term loan facility and amounts borrowed under the revolving credit facility with net cash proceeds from
certain financing and other transactions. Additionally, the credit agreement requires repayment of the facilities with 50% of
excess cash flow (minus certain specified other payments), subject to elimination if our consolidated net leverage ratio is less
than or equal to 2.50 to 1.00.

Despite our current indebtedness levels, we and our subsidiaries may still be able to incur substantially more debt, which
could exacerbate the risks associated with our substantial leverage.

We and our subsidiaries may be able to incur substantial additional indebtedness in the future, including secured indebtedness.
Although the credit agreement governing our term loan facility and revolving credit facility contains restrictions on the
incurrence of additional indebtedness, these restrictions are subject to a number of significant qualifications and exceptions, and
the indebtedness incurred in compliance with these restrictions could be substantial. If new debt is added to our or our
subsidiaries’ current debt levels, the related risks that we face would be increased.

To service our indebtedness, we will require a significant amount of cash. Our ability to generate cash depends on many
factors beyond our control, and any failure to meet our debt service obligations could have a material adverse effect on our
business, prospects, results of operations and financial condition.

Our ability to pay interest on and principal of our debt obligations principally depends upon our operating performance. As a
result, prevailing economic conditions and financial, business and other factors, many of which are beyond our control, will
affect our ability to make these payments.

If we do not generate sufficient cash flow from operations to satisfy our debt service obligations, we may have to undertake
alternative financing plans, such as refinancing or restructuring our indebtedness, selling assets, reducing or delaying capital
investments or capital expenditures or seeking to raise additional capital. Our ability to restructure or refinance our debt, if at
all, will depend on the condition of the capital markets and our financial condition at such time. Any refinancing of our debt
could be at higher interest rates and may require us to comply with more onerous covenants, which could further restrict our
business operations. In addition, the terms of existing or future debt instruments may restrict us from adopting some of these
alternatives. Our inability to generate sufficient cash flow to satisfy our debt service obligations, or to refinance our obligations
at all or on commercially reasonable terms, could affect our ability to satisfy our debt obligations and have a material adverse
effect on our business, prospects, results of operations and financial condition.

The terms of the credit agreement governing our term loan facility and revolving credit facility may restrict our current and
future operations, particularly our ability to respond to changes in our business or to take certain actions.

Our term loan facility and revolving credit facility contain, and any future indebtedness of ours would likely contain, a number
of restrictive covenants that impose significant operating restrictions, including restrictions on our ability to engage in acts that
may be in our best long-term interests.

The credit agreement governing our term loan facility and revolving credit facility includes covenants restricting, among other
things, our ability to:

•

incur additional debt;

incur liens and encumbrances;

pay dividends on our equity securities or payments to redeem, repurchase or retire our equity securities;

enter into restrictive agreements;

• make investments, loans and acquisitions;

• merge or consolidate with any other person;

•

dispose of assets;

enter into sale and leaseback transactions;

engage in transactions with our affiliates; and

• materially alter the business we conduct.

The operating restrictions and covenants in these debt agreements and any future financing agreements may adversely affect our
ability to finance future operations or capital needs or to engage in other business activities. Our ability to comply with these
covenants may be affected by events beyond our control, and any material deviations from our forecasts could require us to
seek waivers or amendments of covenants, alternative sources of financing or reductions in expenditures. In addition, the
outstanding indebtedness under our term loan facility and revolving credit facility is, subject to certain exceptions, secured by

security interests in substantially all of our and the subsidiary guarantors’ tangible and intangible assets (subject to certain
exceptions). A breach of any of the restrictive covenants in the credit agreement governing our term loan facility and revolving
credit facility would result in a default, and our lenders may elect to declare all outstanding borrowings, together with accrued
interest and other fees, to be immediately due and payable, or enforce and foreclose on their security interest and liquidate some
or all of such pledged assets. The lenders under our term loan facility and revolving credit facility also have the right in these
circumstances to terminate any commitments they have to provide further borrowings.

RISKS RELATED TO OUR COMMON STOCK AND OTHER GENERAL RISKS

We are subject to changes in and interpretations of financial accounting matters that govern the measurement of our
performance, one or more of which could adversely affect our business, financial condition, cash flows, revenue and results
of operations.

Based on our reading and interpretations of relevant guidance, principles or concepts issued by, among other authorities, the
American Institute of Certified Public Accountants, the Financial Accounting Standards Board and the Securities and Exchange
Commission, we believe revenue received pursuant to our current sales and licensing contract terms and business arrangements
have been properly recognized. However, there continue to be issued interpretations and guidance for applying the relevant
standards to a wide range of sales and licensing contract terms and business arrangements that are prevalent in the software
industry. Future interpretations or changes by the regulators of existing accounting standards, including Financial Accounting
Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 606, Revenue from Contracts with Customers, or
changes in our business practices could result in changes in our revenue recognition and/or other accounting policies and
practices that could adversely affect our business, financial condition, cash flows, revenue and results of operations.

We may be required to record a significant charge to earnings if our goodwill or intangible assets become impaired.

We are required under U.S. generally accepted accounting principles ("U.S. GAAP") to test our goodwill for impairment
annually or more frequently if indicators for potential impairment exist. Indicators that are considered include significant
changes in performance relative to expected operating results, significant changes in the use of the assets, significant negative
industry, or economic trends, or a significant decline in the Company's stock price and/or market capitalization for a sustained
period of time. In addition, we periodically review our intangible assets for impairment when events or changes in
circumstances indicate that the carrying value may not be recoverable. Factors that may be considered a change in
circumstances indicating that the carrying value of our intangible assets may not be recoverable include slower growth rates, the
loss of significant clients, or divestiture of a business or asset for less than its carrying value. We may be required to record a
significant charge to earnings in our consolidated financial statements during the period in which any impairment of our
goodwill or intangible assets is determined. For example, we recorded a goodwill impairment charge of $28.0 million in the
fourth quarter of 2017 relating to our Post-acute Care EHR reporting unit, which consists soley of American HealthTech, which
we acquired in January 2016 as part of our acquisition of HHI. This impairment charge had a significant negative effect on our
consolidated net income for the year ended December 31, 2017.

Any future impairment charges could have a material adverse impact on our results of operations. There are inherent
uncertainties in management's estimates, judgments and assumptions used in assessing recoverability of goodwill and intangible
assets. Any changes in key assumptions, including failure to meet business plans, a deterioration in the market, or other
unanticipated events and circumstances, may affect the accuracy or validity of such estimates and could potentially result in an
impairment charge.

The unpredictability of our quarterly operating results may cause us to fail to meet revenues or earnings expectations which
could cause the price of our common stock to fluctuate or decline.

There is no assurance that consistent quarterly growth in our business will occur. Our quarterly revenues may fluctuate and may
be difficult to forecast for a variety of reasons. For example, prospective clients often take significant time evaluating our
system and related services before making a purchase decision. Moreover, a prospective client who has placed an order for our
system could decide to cancel that order or postpone installation of the ordered system. If a prospective client delays or cancels
a scheduled system installation during any quarter, we may not be able to schedule a substitute system installation during that
quarter. The amount of revenues that would have been generated from that installation will be postponed or lost. The possibility
of delays or cancellations of scheduled system installations could cause our quarterly revenues to fluctuate.

The following factors may also affect demand for our products and services and cause our quarterly revenues to fluctuate:

•

changes in client budgets and purchasing priorities;

•

the ability of our clients to obtain financing for the purchase of our products;

the financial stability of our clients;

the specific mix of software, hardware and services in orders from clients;

the timing of new product announcements and product introductions by us and our competitors;

• market acceptance of new products, product enhancements and services from us and our competitors;

•

product and price competition;

our success in expanding our sales and marketing programs;

the availability and cost of system components;

delay of revenue recognition to future quarters due to an increase in the sales of our remote access SaaS services;

the length of sales cycles and installation processes;

changes in revenue recognition or other accounting guidelines employed by us and/or established by the Financial
Accounting Standards Board or other rulemaking bodies;

accounting policies concerning the timing of recognition of revenue;

personnel changes; and

general market and economic factors.

Variations in our quarterly revenues may adversely affect our operating results. In each fiscal quarter, our expense levels,
operating costs and hiring plans are based on projections of future revenues and are relatively fixed. Because a significant
percentage of our expenses are relatively fixed, a variation in the timing of systems sales, implementations and installations can
cause significant variations in operating results from quarter to quarter. As a result, we believe that interim period-to-period
comparisons of our results of operations are not necessarily meaningful and should not be relied upon as indications of future
performance. Further, our historical operating results are not necessarily indicative of future performance for any particular
period.

Due to all of the foregoing factors, it is possible that our operating results may be below the expectations of securities analysts
and investors. In such event, the price of our common stock would likely be adversely affected.

Our common stock price has periodically experienced significant volatility, which could result in substantial losses for
investors purchasing shares of our common stock and in litigation against us.

Volatility may be caused by a number of factors including but not limited to:

•

actual or anticipated quarterly variations in operating results;

rumors about our performance, software solutions, or merger and acquisition activity;

changes in expectations of future financial performance or changes in estimates of securities analysts;

governmental regulatory action;

healthcare reform measures;

client relationship developments;

purchases or sales of Company stock;

changes occurring in the markets in general;

• macroeconomic conditions, both nationally and internationally; and

•

other factors, many of which are beyond our control.

Furthermore, the stock market in general, and the market for software, healthcare and high technology companies in particular,
has experienced significant volatility in recent years that often has been unrelated to the operating performance of particular
companies. These broad market and industry fluctuations may adversely affect the trading price of our common stock,
regardless of actual operating performance.

Moreover, in the past, securities class action litigation has often been brought against a company following periods of volatility
in the market price of its securities. We may in the future be the target of similar litigation. Securities litigation could result in
substantial costs and divert management’s attention and resources.

If we fail to maintain effective internal control over financial reporting, this may adversely affect investor confidence in our
company and, as a result, the value of our common stock.

We are required under Section 404 of the Sarbanes-Oxley Act to furnish a report by management on the effectiveness of our
internal control over financial reporting and to include a report by our independent auditors attesting to such effectiveness. Any
failure by us to maintain effective internal control over financial reporting could adversely affect our ability to report accurately
our financial condition or results of operations.

If we are unable to maintain effective internal control over financial reporting, or if our independent auditors determine that we
have a material weakness in our internal control over financial reporting, we could lose investor confidence in the accuracy and
completeness of our financial reports, the market price of our common stock could decline, and we could be subject to sanctions
or investigations by the SEC or other regulatory authorities. Failure to remedy any material weakness in our internal control
over financial reporting, or to implement or maintain other effective control systems required of public companies, also could
restrict our future access to the capital markets.

We do not have employment or non-competition agreements with most of our key personnel, and their departure could harm
our future success.

Our future success depends to a significant extent on the leadership and performance of our chief executive officer and other
executive officers. We do not have employment or non-competition agreements with any of our executive officers. Therefore,
they may terminate their employment with us at any time and may compete against us. The loss of the services of any of our
executive officers could have a material adverse effect on our business, financial condition and results of operations.

As a result of the inherent limitations in our internal control over financial reporting, misstatements due to error or fraud
may occur and not be detected.

Our disclosure controls and procedures are designed to provide reasonable assurance that information required to be disclosed
by us in reports we file with or submit to the SEC under the Securities Exchange Act of 1934 (“Exchange Act”) is accumulated
and communicated to management and recorded, processed, summarized, and reported within the time periods specified in SEC
rules and forms. We believe that any disclosure controls and procedures or internal controls and procedures, no matter how well
conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.
These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur
because of simple error or mistake. In addition, controls can be circumvented by the individual acts of some persons, by
collusion of two or more people, or by an unauthorized override of the controls.

Most of our facilities are located in an area vulnerable to hurricanes and tropical storms, and the occurrence of a severe
hurricane, similar storm or other natural disaster could cause damage to our facilities and equipment, which could require
us to cease or limit our operations.

A significant portion of our facilities and employees are located within 30 miles of the coast of the Gulf of Mexico. Our
facilities are vulnerable to significant damage or destruction from hurricanes and tropical storms. We are also vulnerable to
damage from other types of disasters, including tornadoes, fires, floods and similar events. If any disaster were to occur, our
ability to conduct business at our facilities could be seriously impaired or completely destroyed. This would have adverse
consequences for our clients who depend on us for system support or business management, consulting and managed IT
services. Also, the servers of clients who use our remote access services could be damaged or destroyed in any such disaster.
This would have potentially devastating consequences to those clients. Although we have an emergency recovery plan,
including back-up systems in remote locations, there can be no assurance that this plan will effectively prevent the interruption
of our business due to a natural disaster. Furthermore, the insurance we maintain may not be adequate to cover our losses
resulting from any natural disaster or other business interruption.

We are exposed to market risk related to interest rate changes.

We are exposed to market risk related to changes in interest rates as a result of the floating interest rates applicable to the
outstanding debt under our term loan facility and revolving credit facility. The interest rate for the outstanding debt under our
term loan facility and revolving credit facility as of December 31, 2020 was 2.5%. Borrowings under our term loan facility and
revolving credit facility bear interest at a base rate, a LIBOR rate, or a combination of the two, as elected by us, plus an
applicable margin. The base rate is determined by reference to the greatest of (a) the prime lending rate of Regions Bank, (b)
the federal funds rate for the relevant interest period plus one half of one percent per annum and (c) the one month LIBOR rate
plus one percent per annum. The LIBOR rate is determined by reference to the interest rate for dollar deposits in the London
interbank market for the interest period relevant to such borrowings, adjusted as set forth in the credit agreement. There is no
cap on the maximum interest rate for borrowings under our term loan facility and revolving credit facility.

LIBOR is scheduled to be phased out by the end of 2021. When LIBOR ceases to exist, we will need to agree upon a
replacement index with our lenders under our outstanding indebtedness at the time, and such new rates may not be as favorable
to us as those in effect prior to any LIBOR phase-out.

ITEM 1B.

UNRESOLVED STAFF COMMENTS

None.

ITEM 2.

PROPERTIES

Our corporate campus is located on approximately 16.5 acres in Mobile, Alabama and includes approximately 135,500 square
feet of office space. Our main campus headquarters building consists of approximately 66,000 square feet of office and
warehouse space. We also have eleven additional smaller campus buildings consisting of approximately 6,000 square feet of
office space each and an additional campus building consisting of approximately 3,500 square feet. The Company also owns
11.3 acres of undeveloped real property adjacent to our corporate campus.

We lease the remainder of our facilities in various locations in the United States, including: Fairhope, Alabama; Pottsville,
Pennsylvania; Mobile, Alabama; Monroe, Louisiana; Glenwood, Minnesota; Marshall, Minnesota; Plymouth, Minnesota;
Ridgeland, Mississippi, and Rockville, Maryland. The terms of these leases generally range in length from one to twelve years,
and all of the leases contain options to incrementally extend the lease period. During 2020, we had one lease which expired and
the Company did not renew: Lanett, Alabama.

ITEM 3.

LEGAL PROCEEDINGS

From time to time, we are involved in routine litigation that arises in the ordinary course of business. We are not currently
involved in any claims outside the ordinary course of business that are material to our financial condition or results of
operations.

ITEM 4.

MINE SAFETY DISCLOSURES

Not applicable.

PART II

ITEM 5.

MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES

Market for CPSI Common Stock

As of March 9, 2021, there were approximately 117 registered holders of our common stock, as provided to us by our transfer
agent. This number does not include the number of beneficial owners whose shares are held in "street" names by broker-dealers
and other institutions who hold shares on behalf of their clients. As of March 9, 2021, there were 14,662,160 shares of common
stock outstanding.

CPSI’s common stock is listed on the NASDAQ Global Select Market under the symbol "CPSI."

Dividends

On November 2, 2017, the Company announced that our Board of Directors adopted a fixed dividend policy for the payment of
quarterly dividends. The policy provided for dividends to be paid quarterly in an amount of $0.10 per share, and in 2020, our
Board of Directors declared three separate quarterly cash dividends. On September 4, 2020, our Board of Directors opted to
indefinitely suspend all quarterly dividends. The indefinite suspension of quarterly dividends was concurrent with the
authorization of a stock repurchase program, aligning with the Company's capital allocation strategy that prioritizes flexibility
to allow for more opportunistic uses of capital. Our Board of Directors will take into account such matters as general business
conditions, capital needs, our financial results, available liquidity and such other factors as our Board of Directors may deem
relevant in future dividend declarations. Additionally, the terms of our Credit Agreement restrict our ability to pay dividends.
See Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, “Liquidity and Capital
Resources-Credit Agreement” included herein.

Purchases of Equity Securities

The following table summarizes our repurchase of equity securities during the three months ended December 31, 2020:

Period

Total Number
of Shares
Purchased

Average Price
Paid per Share

Total Number
of Shares
Purchased as
Part of Publicly
Announced
Plans or
Programs (a)

Approximate
Dollar Value of
Shares That
May Yet Be
Purchased
Under the Plans
or Programs (a)

October 1, 2020 - October 31, 2020 . . . . . . . . . .

— $

November 1, 2020 - November 30, 2020 . . . . . .

December 1, 2020 - December 31, 2020 . . . . . .

8,835 $

38,065 $

—

29.15

27.51

— $

30,000,000

8,835 $

29,742,460

38,065 $

28,695,292

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

46,900 $

27.82

46,900

(a) On September 4, 2020, our Board of Directors approved a stock repurchase program under which we may repurchase
up to $30.0 million of our common stock through September 3, 2022. Any future stock repurchase transactions may
be made through open market purchases, privately-negotiated transactions, or otherwise in compliance with Rule
10b-18 under the securities Exchange Act of 1934, as amended.

ITEM 6.

SELECTED FINANCIAL DATA

(In thousands, except for per share data)
INCOME DATA:
Total sales revenues . . . . . . . . . . . . . . . . . $
Total costs of sales . . . . . . . . . . . . . . . . . .
Gross profit . . . . . . . . . . . . . . . . . . . . . . .
Total operating expenses* . . . . . . . . . . . .
Operating income (loss)* . . . . . . . . . . . .
Total other income (expense) . . . . . . . . .
Income (loss) before taxes* . . . . . . . . . . .
Provision for income taxes . . . . . . . . . . .
$
Net Income (loss)* . . . . . . . . . . . . . . . . .
Net income (loss) per share - basic* . . . . $
Net income (loss) per share - diluted* . . . $
Weighted average shares outstanding: . .
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash dividends declared per common
share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

2020

Year Ended December 31,
2018

2017

2019

2016

$
$
$

264,488
128,242
136,246
115,192
21,054
(2,270)
18,784
4,538
14,246
0.98
0.98

14,038
14,038

$
$
$

274,634
130,489
144,145
119,562
24,583
(887)
23,696
3,228
20,468
1.43
1.43

13,778
13,778

$
$
$

280,411
130,683
149,728
124,846
24,882
(6,774)
18,108
476
17,632
1.26
1.26

13,561
13,568

276,927
129,654
147,273
152,087
(4,814)
(8,669)
(13,483)
3,933
(17,416) $
(1.27) $
(1.27) $

13,419
13,419

267,272
133,538
133,734
119,359
14,375
(6,389)
7,986
4,053
3,933
0.29
0.29

13,255
13,255

0.30

0.40

0.85

1.86

2020

2019

As of December 31,
2018

2017

2016

BALANCE SHEET DATA
Cash and cash equivalents . . . . . . . . . . . . $
Working capital . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . .
Total current liabilities . . . . . . . . . . . . . .
Total long-term obligations . . . . . . . . . . .
Total stockholders’ equity . . . . . . . . . . . .

12,671
29,702
326,272
37,442
88,830
200,000

7,357
24,902
339,589
41,930
113,312
184,347

5,732
31,435
327,746
38,503
129,460
159,783

520
17,028
318,216
40,849
141,281
136,086

2,220
13,604
339,150
30,945
150,235
157,970

* Year ended December 31, 2017 is inclusive of a $28.0 million ($2.09 per share) non-cash goodwill impairment expense.

ITEM 7.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

You should read the following discussion of our financial condition and results of operations in conjunction with the "Selected
Financial Data" and our financial statements and the related notes included elsewhere in this Annual Report. This discussion
and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may
differ materially from those anticipated in these forward-looking statements as a result of many factors, including but not
limited to those set forth under "Risk Factors" and elsewhere in this Annual Report.

Background

CPSI is a leading provider of healthcare solutions and services for community hospitals and other healthcare systems and post-
acute care facilities. Founded in 1979, CPSI offers its products and services through four companies - Evident, LLC
("Evident"), American HealthTech, Inc. ("AHT"), TruBridge, LLC ("TruBridge") and iNetXperts, Corp. d/b/a Get Real Health
("Get Real Health"). These combined companies are focused on improving the health of the communities we serve, connecting
communities for a better patient care experience, and improving the financial operations of our clients. The individual
contributions of each of these companies towards this combined focus are as follows:

•

Evident, which makes up our Acute Care EHR reporting segment, provides comprehensive acute care electronic health
record ("EHR") solutions, Thrive and Centriq, and related services for community hospitals and their physician clinics.

AHT, which makes up our Post-acute Care EHR reporting segment, provides a comprehensive post-acute care EHR
solution and related services for skilled nursing and assisted living facilities.

TruBridge, our third reporting segment, focuses on providing business management, consulting, and managed IT
services along with its complete revenue cycle management ("RCM") solution for all care settings, regardless of their
primary healthcare information solutions provider.

Get Real Health, included within our TruBridge segment, delivers technology solutions to improve patient outcomes
and engagement strategies with care providers.

Our clients primarily consist of community hospitals with fewer than 200 acute care beds, with hospitals having fewer than 100
beds comprising approximately 98% of our acute care EHR client base.

See Note 18 to the consolidated financial statements included herein for additional information on our three reportable
segments.

Management Overview

Through much of our history, our strategy has been to achieve meaningful long-term revenue growth through sales of
healthcare IT systems and related services to existing and new clients within our target market. Prospectively, our ability to
continue to realize long-term revenue growth is largely dependent on our ability to sell new and additional products and
services to our existing customer base, including cross-selling opportunities presented between our operating segments, Acute
Care EHR, Post-acute Care EHR, and TruBridge. Chief among these cross-selling opportunities is the ability to continue to sell
TruBridge services into our Acute Care EHR customer base. As a result, retention of existing Acute Care EHR customers is a
key component of our long-term growth strategy by protecting this base of potential TruBridge customers, while at the same
time serving as a leading indicator of our market position and stability of revenues and cash flows.

We determine retention rates by reference to the amount of beginning-of-period Acute Care EHR recurring revenues that have
not been lost due to customer attrition from our production environment customer base. Production environment customers are
those that are using our applications to document live patient encounters, as opposed to legacy environment customers that have
view-only access to historical patient records. Historically, these retention rates had consistently remained in the mid-to-high
90th percentile ranges. However, fiscal years 2017 through 2019 saw retention rates decrease to the low 90th percentile ranges
due to, among other factors, (i) post-acquisition customer concerns regarding our long-term commitment to the Centriq
platform, acquired in January 2016, (ii) an intensified competitive market, primarily due to aggressive pricing and marketing by
a highly disruptive new entrant into the Acute Care EHR marketplace, and (iii) the announced sunset of the Classic platform,
also acquired in January 2016. During 2020, retention rates have returned to the mid-90th percentile ranges, as (i) the lingering
effects of the Centriq acquisition continue to abate, (ii) the competitive environment continues to normalize as the
aforementioned disruptive new entrant into this market has since departed the market altogether, and (iii) the Classic platform

was sunset in the fourth quarter of 2019, with all related customers having either changed EHR vendors or migrated to one of
our EHR solutions.

As we consider the long-term growth prospects of our business, we are seeking to further stabilize our revenues and cash flows
and leverage TruBridge services as a growth agent. As a result, we are placing ever-increasing value in further developing our
already significant recurring revenue base. As such, maintaining and growing recurring revenues are key components of our
long-term growth strategy, aided by the aforementioned focus on customer retention. This includes a renewed focus on driving
demand for subscriptions for our existing technology solutions and expanding the footprint for TruBridge services beyond our
EHR customer base.

During 2020, we took pause and engaged a top-tier international consulting firm to assess our company-wide growth strategy.
The outcome of this eight-week effort was the confirmation of our current strategy of cross-selling TruBridge into the existing
EHR base, expanding TruBridge market share with sales to new community and larger health systems, and pursuing
competitive EHR takeaway opportunities in the acute and post-acute market.

Our business model is designed such that, as revenue growth materializes, earnings and profitability growth are naturally
bolstered through the increased margin realization afforded us by operating leverage. Once a hospital has installed our
solutions, we continue to provide support services to the customer on a continuing basis and make available to the customer our
broad portfolio of business management, consulting, and managed IT services, all of which contribute to recurring revenue
growth. The provision of these recurring revenue services typically requires fewer resources than the initial system installation,
resulting in increased overall gross margins and operating margins. We also look to increase margins through cost containment
measures where appropriate as we continue to leverage opportunities for greater operating efficiencies of the combined entity.
However, in the immediate future, we anticipate incremental margin pressure from the continued client transition from
perpetual license arrangements to “Software as a Service” arrangements as described below.

Turbulence in the U.S. and worldwide economies and financial markets impacts almost all industries. While the domestic
healthcare industry is not immune to economic cycles, we believe it is more significantly affected by U.S. regulatory and
national health initiatives than by the economic cycles of our economy. Additionally, healthcare organizations with a large
dependency on Medicare and Medicaid populations, such as community hospitals, have been affected by the challenging
financial condition of the federal government and many state governments and government programs. Accordingly, we
recognize that prospective hospital clients often do not have the necessary capital to make investments in information
technology. Additionally, in response to these challenges, hospitals have become more selective regarding where they invest
capital, resulting in a focus on strategic spending that generates a return on their investment. Despite these challenges, we
believe healthcare information technology is often viewed as more strategically beneficial to hospitals than other possible
purchases because the technology also plays an important role in healthcare by improving safety and efficiency and reducing
costs. Additionally, we believe most hospitals recognize that they must invest in healthcare information technology to meet
current and future regulatory, compliance and government reimbursement requirements.

In recent years, there have been significant changes to provider reimbursement by the U.S. federal government, followed by
commercial payers and state governments. There is increasing pressure on healthcare organizations to reduce costs and increase
quality while replacing fee-for-service in part by enrolling in advanced payment models. This pressure has encouraged further
adoption of healthcare IT and increase demand for business management, consulting, and managed IT services, as the future
success of these healthcare providers is greatly dependent upon their ability to engage patient populations and to coordinate
patient care across a multitude of settings, while optimizing operating efficiency along the way.

Much of the variability in our periodic revenues and profitability has been and will continue to be due to changing demand for
different license models for our technology solutions, with variability in operating cash flows further impacted by the financing
decisions within those license models. Our technology solutions are generally deployed in one of two license models: (1)
perpetual licenses, for which the related revenue is recognized effectively upon installation, and (2) “Software as a Service” or
“SaaS” arrangements, including our Cloud Electronic Health Record (“Cloud EHR”) offering, which generally result in revenue
being recognized monthly as the services are provided over the term of the arrangement.

Although the overwhelming majority of our historical installations have been under a perpetual license model, the dramatic
shift in customer preferences to a SaaS license model continued in 2020, with 68% of the year’s new acute care EHR
installations being performed in a SaaS model, compared to 43% in 2019 and only 12% in 2018. These SaaS offerings are
becoming increasingly attractive to our clients because this configuration allows them to obtain access to advanced software
products without a significant initial capital outlay. We expect this trend to continue for the foreseeable future, with the
resulting impact on the Company’s financial statements being reduced system sales revenues in the period of installation in
exchange for increased recurring periodic revenues (reflected in system sales and support revenues) over the term of the SaaS

arrangement. This naturally places downward pressure on short-term revenue growth and profitability metrics, but benefits
long-term revenue growth and profitability which, in our view, is consistent with our goal of delivering long-term shareholder
value.

For customers electing to purchase our technology solutions under a perpetual license, we have historically made financing
arrangements available on a case-by-case basis, depending on the various aspects of the proposed contract and customer
attributes. These financing arrangements continue to comprise the majority of our perpetual license installations, and include
short-term payment plans and longer-term lease financing through us or third-party financing companies. During 2018, total
financing receivables increased dramatically and had a significant impact on operating cash flows. This increase in financing
arrangements was primarily due to two reasons. First, meaningful use stage 3 (“MU3”) installations were primarily financed
through short-term payment plans and demand for such installations increased significantly in late 2017. Second, competitor
financing options, primarily through accounts receivable management collections and Cloud EHR arrangements, have applied
pressure to reduce initial customer capital investment requirements for new EHR installations, leading to the offering of long-
term lease options. In 2019, we experienced a modest reduction in total financing receivables due to the natural exhaustion of
the MU3 opportunity and the aforementioned dramatic shift in license preferences towards SaaS arrangements, the former of
which also resulted in a positive impact to operating cash flows. We experienced a more substantial reduction in total financing
receivables during 2020, with a corresponding beneficial impact to operating cash flows, as the trends related to MU3 purchases
and SaaS arrangements continue into 2021.

For those perpetual license clients not seeking a financing arrangement, the payment schedule of the typical contract is
structured to provide for a scheduling deposit due at contract signing, with the remainder of the contracted fees due at various
stages of the installation process (delivery of hardware, installation of software and commencement of training, and satisfactory
completion of a monthly accounting cycle or end-of-month operation by each respective application, as applicable).

In May 2019, the Company closed its acquisition of Get Real Health. Based in Rockville, Maryland, Get Real Health delivers
technology solutions to improve patient outcomes and engagement strategies with care providers. Through this acquisition, the
Company strengthened its position in community healthcare by offering three new comprehensive patient engagement and
empowerment solutions that are offered by Get Real Health.

On February 1, 2021, we committed to a reduction in force that is expected to result in the termination of approximately 1.0%
of our workforce (21 employees). The reduction in force is a component of a broader strategic review of the Company’s
operations that is intended to more effectively align resources with business priorities. Substantially all of the employees
impacted by the reduction in force will exit the Company in the first quarter of 2021. The Company estimates that it will incur
expenses of approximately $2.7 million related to the reduction in force, of which approximately $2.4 million is expected to be
incurred in the first quarter of 2021, with the remaining expenses to be incurred during the remainder of 2021. These expenses
will consist of one-time termination benefits to the affected employees, including but not limited to severance payments,
healthcare benefits, and payments for accrued vacation time. The Company expects to pay for the expenses from cash flow
from operations and does not expect to incur any debt. After the reduction in force is implemented, the Company expects to
realize approximately $3.9 million in annual savings compared to current expense levels.

Impact of COVID-19 Pandemic

The continuing impacts of COVID-19 and related economic conditions on the Company's results are highly uncertain and
outside the Company's control. The scope, duration and magnitude of the direct and indirect effects of COVID-19 continue to
evolve in ways that are difficult or impossible to anticipate.

As a result of COVID-19, community hospital patient volume in the United States and other countries around the world rapidly
deteriorated in the second quarter of 2020. Although patient volumes have since improved significantly, the persistence of the
pandemic and the unprecedented nature of the resulting challenges it has imposed on national and global healthcare and
economic systems are likely to continue to negatively impact patient volumes and make uncertain the path to recovery for
community hospitals. These decreased levels of our hospital clients' patient volumes have negatively impacted, and will
continue to negatively impact, our revenues, gross margins, and income for our TruBridge service offerings. Additionally, new
EHR system installations have been, and will continue to be, negatively impacted by restrictive travel and social distancing
protocols. The Company began to experience this impact in March 2020, which increased in significance during the second
quarter and showed gradual signs of improvement during the third and fourth quarters of 2020. The Company expects these
impacts to continue into 2021, but the degree of impact will depend on the ability of our community hospital clients to return to
normal operations and patient volumes. We believe that COVID-19 has impacted, and will continue to impact, our business
results in the following additional areas:

•

Bookings - A decline in new business and add-on bookings as certain client purchasing decisions and projects are
delayed to focus on treating patients, procuring necessary medical supplies, implementing COVID-19 vaccination
protocols, and managing their organization through this crisis. This decline in bookings eventually results in reduced
backlog and lower subsequent revenue.

TruBridge revenues - Decreased levels of patient volume within our community hospital client base will negatively
impact our revenues for our TruBridge service offerings as the overwhelming majority of TruBridge revenues are
directly or indirectly correlated with client patient volumes. This decline in revenues will have a negative impact on
gross margins and income.

Associate productivity - A decline in associate productivity, primarily for our implementation personnel, as a large
amount of work is typically done at client sites, which is being impacted by travel restrictions and our clients' focus on
the pandemic. Our clients' focus on the pandemic has also led to pauses on existing projects and postponed start dates
for others, which translates into lower implementation revenues, gross margin and income. We are mitigating this by
doing more work remotely than we have in the past, but we cannot fully offset the negative impact.

Travel - Associate travel restrictions reduce client-related travel, which reduces reimbursed travel revenues and lowers
our cost of sales as a percent of revenues. Such restrictions also reduce non-reimbursable travel, which lowers
operating expenses.

Cash collections - A delay in client cash collections due to COVID-19's impact on national reimbursement processes,
and client focus on managing their own organizations' liquidity during this time, could impact our cash collections.
The federal government has allocated unprecedented resources specifically designed to assist healthcare providers with
their operating and capital needs during the pandemic, allocating a total of $175 billion through the Coronavirus Aid,
Relief, and Economic Security (CARES) Act Provider Relief Fund. Further, $10 billion has been specifically targeted
for rural providers, which is of particular interest to our client base, which is comprised mostly of non-urban
community hospitals. Of this $10 billion, the average rural hospital was expected to receive a total of approximately
$3.6 million in direct financial relief. While these funds certainly help mitigate the financial pressures our clients face,
the clinical and operational challenges remain immense and are likely to cause certain of our customers to more
aggressively manage cash resources in order to preserve liquidity, resulting in uncharacteristic aging of our trade
accounts receivable. Additionally, the aforementioned decrease in community hospital patient volumes has had, and
will continue to have, a negative impact on TruBridge billings for services and resulting revenues. These factors
would translate to lower cash flows from operating activities. Lower cash flows from operating activities may impact
how we execute under our capital allocation strategy and may adversely affect our financial condition.

2020 Financial Overview

We generated revenues of $264.5 million from the sale of our products and services during 2020, compared to $274.6 million
during 2019, a decrease of 4% that is primarily attributed to reduced MU3-related revenue opportunities as the related October
1, 2019 compliance deadline passed and the impact of COVID-19 on client purchasing and implementation plans. This
decrease in MU3 and implementation-related revenues was partially offset by continued TruBridge revenue growth. Our net
income decreased to $14.2 million in 2020 compared to $20.5 million in 2019. This decrease was primarily due to the
decreased sales revenues in 2020 in combination with 2019's $5.0 million gain on contingent consideration resulting from Get
Real Health not meeting the purchase agreement earnout during 2019. Our operating income decreased to $21.1 million in 2020
compared to $24.6 million in 2019, primarily as a decrease in operating expenses did not fully offset the decrease in revenue.
Net cash provided by operating activities increased by $5.5 million, from $43.6 million provided by operations for 2019 to
$49.1 million provided by operations for 2020. This increase was primarily due to cash advantageous changes in working
capital, particularly in relation to accounts receivable and financing receivables.

Results of Operations

The following table sets forth certain items included in our results of operations for each of the three years in the period ended
December 31, 2020, expressed as a percentage of our total revenues for these periods:

(In thousands)
INCOME DATA:
Sales revenues:

System sales and support:

Acute Care EHR . . . . . . . . . . . . . . $
Post-acute Care EHR . . . . . . . . . .
Total system sales and support . . . .
TruBridge . . . . . . . . . . . . . . . . . . . .
Total sales revenues . . . . . . . . . . . . . .
Costs of sales:

System sales and support:

Acute Care EHR . . . . . . . . . . . . . .
Post-acute Care EHR . . . . . . . . . .
Total system sales and support . . . .
TruBridge . . . . . . . . . . . . . . . . . . . .
Total costs of sales . . . . . . . . . . . . . . .
Gross profit . . . . . . . . . . . . . . . . . . . .
Operating expenses:

Product development . . . . . . . . . . . .
Sales and marketing . . . . . . . . . . . .
General and administrative . . . . . . .
Amortization of acquisition-related
intangibles . . . . . . . . . . . . . . . . . . . .

Total operating expenses . . . . . . . . . .
Operating income . . . . . . . . . . . . . . .
Other income (expense):

Other income . . . . . . . . . . . . . . . . .
Gain on contingent consideration . .
Loss on extinguishment of debt . . .
Interest expense . . . . . . . . . . . . . . . .
Total other income (expense) . . . . . .
Income before taxes . . . . . . . . . . . . . .
Provision for income taxes . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . $

2020

Year ended December 31,
2019

2018

Amount

% Sales

Amount

% Sales

Amount

% Sales

134,770
18,184
152,954
111,534
264,488

64,540
4,821
69,361
58,881
128,242
136,246

33,457
24,185
46,129

11,421
115,192
21,054

1,494
—
(202)
(3,562)
(2,270)
18,784
4,538
14,246

51.0 % $
6.9 %
57.8 %
42.2 %
100.0 %

144,074
21,278
165,352
109,282
274,634

52.5 % $
7.7 %
60.2 %
39.8 %
100.0 %

157,972
22,192
180,164
100,247
280,411

56.3 %
7.9 %
64.2 %
35.8 %
100.0 %

24.4 %
1.8 %
26.2 %
22.3 %
48.5 %
51.5 %

12.6 %
9.1 %
17.4 %

4.3 %
43.6 %
8.0 %

68,569
5,303
73,872
56,617
130,489
144,145

36,861
27,774
43,921

11,006
119,562
24,583

25.0 %
1.9 %
26.9 %
20.6 %
47.5 %
52.5 %

13.4 %
10.1 %
16.0 %

4.0 %
43.5 %
9.0 %

69,831
6,153
75,984
54,699
130,683
149,728

36,371
30,713
47,275

10,487
124,846
24,882

0.6 %
— %
(0.1)%
(1.3)%
(0.9)%
7.1 %
1.7 %
5.4 % $

807
5,000
—
(6,694)
(887)
23,696
3,228
20,468

0.3 %
1.8 %
— %
(2.4)%
(0.3)%
8.6 %
1.2 %
7.5 % $

803
—
—
(7,577)
(6,774)
18,108
476
17,632

24.9 %
2.2 %
27.1 %
19.5 %
46.6 %
53.4 %

13.0 %
11.0 %
16.9 %

3.7 %
44.5 %
8.9 %

0.3 %
— %
— %
(2.7)%
(2.4)%
6.5 %
0.2 %
6.3 %

2020 Compared to 2019

Revenues

Total revenues for the year ended December 31, 2020 decreased $10.1 million, or 4%, compared to the year ended
December 31, 2019.

System sales and support revenues, consisting of the Acute Care EHR and Post-acute Care EHR segments, decreased $12.4
million, or 7%, from the year ended December 31, 2019. System sales and support revenues were comprised of the following
for the year ended December 31, 2020 and 2019:

(In thousands)
Recurring system sales and support revenues (1)

Year ended December 31,

2020

2019

Acute Care EHR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Post-acute Care EHR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total recurring system sales and support revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Non-recurring system sales and support revenues (2)

Acute Care EHR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Post-acute Care EHR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total non-recurring system sales and support revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total system sales and support revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

105,597
16,272
121,869

29,173
1,912
31,085
152,954

109,046
17,466
126,512

35,028
3,812
38,840
165,352

(1) Mostly comprised of support and maintenance, third-party subscriptions, and SaaS
revenues.
(2) Mostly comprised of installation revenues from the sale of our acute and post-acute care
EHR solutions and related applications under a perpetual (non-subscription) licensing
model.

Recurring system sales and support revenues decreased $4.6 million, or 4%, during 2020. Acute Care EHR recurring revenues
decreased $3.4 million, or 3%, as attrition from the Thrive and Centriq customer base outweighed new Thrive customer growth
and additional support and SaaS fees. Post-acute Care EHR recurring revenues decreased $1.2 million, or 7%, due to attrition
resulting from an aggressive competitive environment. We continue to make technological improvements to the AHT product
line to compete in this market.

Non-recurring system sales and support revenues decreased $7.8 million, or 20%, primarily due to a $5.9 million, or 17%,
decrease in Acute Care EHR non-recurring revenues. The opportunities for MU3-related revenues decreased significantly after
the October 1, 2019 deadline and the onset of the COVID-19 pandemic restricted demand for non-strategic information
technology purchases by our hospital clients. We installed our Acute Care EHR solutions at twenty-five new hospital clients
during 2020 (seventeen under a SaaS arrangement, resulting in revenue being recognized ratably over the contract term;
comparatively, revenues related to perpetual license arrangements are recognized when the related installation is complete)
compared to twenty-eight new hospital clients during 2019 (twelve under a SaaS arrangement). Non-recurring Post-acute Care
EHR revenues decreased $1.9 million, or 50%, in 2020 as compliance cataylsts in place in 2019 have largely abated as Patient
Driven Payment Model ("PDMP"), as required by CMS, became effective for post-acute care facilities beginning October 1,
2019.

TruBridge revenues increased $2.3 million, or 2%, compared to 2019 as the COVID-19 pandemic and the resulting impact on
patient volumes for our community hospital customers offset most of the revenue gains from new client wins over the past
twelve months. Most notably, an expanded customer base for our accounts receivable management services resulted in
increased revenues of $2.1 million, or 5%, despite the disruption caused by COVID-19. Continued increasing demand for
hosting services resulted in an increase of $1.1 million, or 9%, in our IT managed services revenues. Get Real Health, which
was acquired during the second quarter of 2019, contributed $4.1 million of revenues during 2020 compared to only $3.4
million during 2019. These increases were partially offset by a decrease in revenues from our private pay services offering of
$1.8 million, or 13%, as the aforementioned impact of the pandemic on patient volumes outpaced new client wins for this
service offering.

Costs of Sales

Total costs of sales decreased $2.2 million compared to 2019. As a percentage of total revenues, costs of sales remained flat at
48% in both 2020 and 2019.

Costs of Acute Care EHR system sales and support decreased $4.0 million, or 6%, compared to 2019, as hardware costs
decreased $1.8 million due to a decline in related revenues and the impact of COVID-19 on associate travel resulted in reduced
travel costs of $2.0 million. The gross margin on Acute Care EHR system sales and support remaining flat at 52% in both 2020
and 2019.

Costs of Post-acute Care EHR system sales and support decreased $0.5 million, or 9%, compared to 2019, primarily due to
improved personnel efficiency and travel costs savings due to the impact of COVID-19 on associate travel. However, this
decrease in costs of sales was outpaced by the decrease in related revenues, resulting in the related gross margin on Post-acute
Care EHR system sales and support decreasing from 75% for 2019 to 73% for 2020.

Our costs associated with TruBridge increased $2.3 million, or 4%, in 2020, more than offsetting the related revenue increase,
with the primary driver being a $2.9 million, or 7%, increase in payroll costs. At the onset of the COVID-19 pandemic, we
notified our employees, including those whose roles were negatively impacted by the declining patient volumes at our
community hospital clients, that we would not execute any payroll cost mitigation efforts in response to COVID-19 through
July 31, 2020 and have not, to date, executed any such efforts. As a result, we have not executed any reduction-in-force or
furlough action plans as a result of the pandemic, which severely limited our ability to offset revenue declines with cost savings.
This decision, while socially responsible in providing much needed job security to our employees and their families during a
period of unprecedented economic hardship, also serves the long-term interest of our shareholders by strengthening our team,
improving customer satisfaction, and better positioning us to capture opportunities as our markets recover. The gross margin on
these services decreased to 47% in 2020 compared to 48% in 2019.

Product Development

Product development expenses consist primarily of compensation and other employee-related costs (including stock-based
compensation) and infrastructure costs incurred, but not capitalized, for new product development and product enhancements.
Product development expenses decreased $3.4 million, or 9%, compared to 2019, as $3.3 million of software development costs
were capitalized during 2020 with no such costs capitalized during 2019.

Sales and Marketing

Sales and marketing expenses decreased $3.6 million, or 13%, in 2020 compared to 2019, primarily due to a decrease in travel
costs of $1.5 million, or 72%, and a net decrease in other marketing program costs of $1.0 million, or 25%, as travel restrictions
and social distancing guideline imposed in 2020 posed challenges to in-person sales efforts. Stock-based compensation expense
also decreased $0.9 million, or 37%, as the worsened near-term outlook resulted in reduced expected achievement levels for
performance share awards granted to executives and certain key employees in 2018 through 2020.

General and Administrative

General and administrative expenses increased $2.2 million, or 5%, as the general business climate that our hospital customers
operate in was stressed by the pandemic, causing a $2.0 million, or 86%, increase in our credit loss expense. Additionally,
worsening employee health claims severity resulted in a $2.0 million, or 20%, increase in costs associated with health benefits
we offer to our employees through our self-insured health plans. These increases were partially offset by a $1.1 million
decrease in stock-based compensation, as the pandemic has worsened our near-term outlook and reduced expected achievement
levels for performance share awards granted to executives and certain key employees in 2018 through 2020. Additionally, costs
associated with our annual client conference decreased $1.0 million as the 2020 event was cancelled in response to the
pandemic.

Amortization of Acquisition-Related Intangibles

Amortization expense associated with acquisition-related intangible assets increased $0.4 million in 2020 compared to 2019 due
to recognition of a full year of amortization expense in 2020 for the addition of Get Real Health intangible assets acquired on
May 3, 2019.

Total Operating Expenses

As a percentage of total revenues, total operating expenses remained flat at 44% in both 2020 and 2019.

Total Other Income (Expense)

Total other income (expense) increased from expense of $0.9 million during 2019 to expense of $2.3 million during 2020,
primarily as 2019 benefited from a $5.0 million gain on contingent consideration related to the Get Real Health acquisition with
no such gains during 2020. The absence of a comparable gain in 2020 was partially offset by a $3.1 million reduction in interest
expense resulting from reduced borrowings and decreasing interest rates.

Income Before Taxes

As a result of the foregoing factors, income before taxes decreased to $18.8 million in 2020, compared to $23.7 million in 2019.

Provision for Income Taxes

Our effective income tax rates for 2020 and 2019 were 24% and 14%, respectively. Our effective tax rate for 2019 was
significantly impacted by the non-taxable nature of our recorded gain on contingent consideration, which served to reduce the
year's effective tax rate by 4%. Additionally, provisions-to-return adjustments resulted in an incremental 4.9% increase in our
effective tax rate for 2020 compared to 2019.

Net Income

Net income for 2020 decreased $6.2 million to a net income of $14.2 million, or $0.98 per basic and diluted share, compared
with net income of $20.5 million, or $1.43 per basic and diluted share, for 2019. The gain on contingent consideration included
in 2019 resulted in a positive impact to net income of $5.0 million ($0.35 per share).

2019 Compared to 2018

To review the results of operations comparison of the year ended December 31, 2019 compared with the year ended
December 31, 2018, please refer to our Annual Report on Form 10-K filed on March 11, 2020 with the Securities and Exchange
Commission or follow the link below.

http://www.sec.gov/ix?doc=/Archives/edgar/data/1169445/000116944520000002/cpsi-20191231.htm

Liquidity and Capital Resources

Sources of Liquidity

As of December 31, 2020, our principal sources of liquidity consisted of cash and cash equivalents of $12.7 million and our
remaining borrowing capacity under the revolving credit facility of $105.0 million, compared to $7.4 million of cash and cash
equivalents and $30.0 million of remaining borrowing capacity under our revolving credit facility as of December 31, 2019. In
conjunction with our acquisition of HHI in January 2016, we entered into a syndicated credit agreement which provided for a
$125 million term loan facility and a $50 million revolving credit facility. On June 16, 2020, we entered into an Amended and
Restated Credit Agreement that increased the aggregate principal amount of our credit facilities to $185 million, which includes
a $75 million term loan facility and a $110 million revolving credit facility.

As of December 31, 2020, we had $78.1 million in principal amount of indebtedness outstanding under our credit facilities. We
believe that our cash and cash equivalents of $12.7 million as of December 31, 2020, the future operating cash flows of the
combined entity, and our remaining borrowing capacity under the revolving credit facility of $105.0 million as of December 31,
2020, taken together, provide adequate resources to fund ongoing cash requirements for the next twelve months. We cannot
provide assurance that our actual cash requirements will not be greater than we expect as of the date of filing of this Annual
Report on Form 10-K. If sources of liquidity are not available or if we cannot generate sufficient cash flow from operations
during the next twelve months, we may be required to obtain additional sources of funds through additional operational
improvements, capital market transactions, asset sales or financing from third parties, a combination thereof or otherwise. We
cannot provide assurance that these additional sources of funds will be available or, if available, would have reasonable terms.

Operating Cash Flow Activities

Net cash provided by operating activities increased $5.5 million, from $43.6 million provided by operations for 2019 to $49.1
million provided by operations for 2020. The increase in cash flows provided by operations was primarily due to cash-
advantageous changes in working capital, most notably as it relates to accounts receivable and financing receivables. During
2019, accounts receivable contracted by $1.7 million, or 4%, driven by a 2% reduction in annual revenues coupled with a slight
decrease in days sales outstanding ("DSO") from 53 days to 52 days. During 2020, accounts receivable contracted by $6.4

million, or 16%, driven by a 4% reduction in annual revenues coupled with a significant decrease in DSO from 52 days to 45
days. The resulting impact to operating cash flows was a $0.6 million increase during 2019 compared to a $3.7 million increase
during 2020. Additionally, the increasing shift towards a higher mix of SaaS arrangements for our new Acute Care EHR
installations resulted in fewer long-term financing arrangements for perpetual license arrangements during 2020. This
increasing shift in license mix, coupled with successful collections on past financing receivables, resulted in financing
receivables serving as a much greater source of cash during 2020. Financing receivables contributed $3.1 million of operating
cash flows during 2019, compared to $6.4 million of operating cash flows during 2020.

Investing Cash Flow Activities

Net cash used in investing activities decreased $5.8 million, with $6.7 million used during 2020 compared to $12.5 million used
during 2019. Most notably, we used $10.7 million of cash during 2019 to fund our acquisition of Get Real Health, with no such
acquisitions occurring during 2020. Conversely, our investing activities during 2020 included $3.3 million in capitalized
software development costs compared to none during 2019. Lastly, cash outflows for purchases of property and equipment
increased to $3.3 million during 2020 from $1.8 million during 2019, mostly due to the addition of a West Coast data center to
enhance our remote hosting capabilities.

Financing Cash Flow Activities

During 2020, our financing activities used net cash of $37.2 million, as we paid a net $31.6 million in long-term debt principal
and declared and paid dividends in the amount of $4.3 million, with another $1.3 million used to fund stock repurchases.
Financing cash flow activities used $29.5 million during 2019, primarily due to a net $23.3 million paid in long-term debt
principal and $5.7 million cash paid in dividends.

On September 4, 2020, our Board of Directors opted to indefinitely suspend all quarterly dividends. Our Board of Directors will
take into account such matters as general business conditions, capital needs, our financial results and such other factors as our
Board of Directors may deem relevant in future dividend declarations.

Credit Agreement

As of December 31, 2020, we had $73.1 million in principal amount outstanding under our term loan facility and $5.0 million
in principal amount outstanding under our revolving credit facility. Each of our credit facilities continues to bear interest at a
rate per annum equal to an applicable margin plus, at our option, either (1) the Adjusted LIBOR rate for the relevant interest
period, subject to a floor of 0.50%, (2) an alternate base rate determined by reference to the greater of (a) the prime lending rate
of Regions, (b) the federal funds rate for the relevant interest period plus one half of one percent per annum and (c) the one
month LIBOR rate, subject to the aforementioned floor, plus one percent per annum, or (3) a combination of (1) and (2). The
applicable margin range for LIBOR loans and the letter of credit fee ranges from 1.8% to 3.0%. The applicable margin range
for base rate loans ranges from 0.8% to 2.0%, in each case based on the Company's consolidated net leverage ratio.

Principal payments with respect to the term loan facility are due on the last day of each fiscal quarter beginning September 30,
2020, with quarterly principal payments of approximately $0.9 million through June 30, 2022, approximately $1.4 million
through June 30, 2024 and approximately $1.9 million through March 31, 2025 with maturity on June 16, 2025 or such earlier
date as the obligations under our credit agreement become due and payable pursuant to the terms of our credit agreement. Any
principal outstanding under our revolving credit facility is due and payable on the maturity date.

Our credit facilities are secured pursuant to an Amended and Restated Pledge and Security Agreement, dated June 16, 2020,
among the parties identified as obligors therein and Regions, as collateral agent, on a first priority basis by a security interest in
substantially all of the tangible and intangible assets (subject to certain exceptions) of the Company and certain subsidiaries of
the Company, as guarantors (collectively, the “Subsidiary Guarantors”), including certain registered intellectual property and
the capital stock of certain of the Company’s direct and indirect subsidiaries. Our obligations under the Amended and Restated
Credit Agreement are also guaranteed by the Subsidiary Guarantors.

sale and leaseback transactions; engage in transactions with affiliates; and materially alter the business we conduct. The
Amended and Restated Credit Agreement requires the Company to maintain a minimum fixed charge coverage ratio of
1.25:1.00 throughout the duration of such agreement. Under the Amended and Restated Credit Agreement, the Company is
required to comply with a maximum consolidated net leverage ratio of 3.50:1.00. The Amended and Restated Credit Agreement
also contains customary representations and warranties, affirmative covenants and events of default. We believe that we were in
compliance with the covenants contained in such agreement as of December 31, 2020.

The Amended and Restated Credit Agreement requires the Company to mandatorily prepay our credit facilities with 50% of
excess cash flow (minus certain specified other payments). This mandatory prepayment requirement is applicable only if the
Company’s consolidated net leverage ratio exceeds 2.50:1.00. The Company is permitted to voluntarily prepay the credit
facilities at any time without penalty, subject to customary “breakage” costs with respect to prepayments of LIBOR rate loans
made on a day other than the last day of any applicable interest period. During 2019, this mandatory prepayment requirement
resulted in a $7.0 million prepayment on the term loan facility during the first quarter of 2019 related to excess cash flow
generated by the Company during 2018. An excess cash flow prepayment related to excess cash flow generated during 2019
was not required during 2020.

Bookings

Bookings is a key operational metric used by management to assess the relative success of our sales generation efforts, and
were as follows for the years ended December 31, 2020 and 2019, respectively:

(In thousands)
System sales and support (1)

2020

2019

Acute Care EHR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

42,449 $

Post-acute Care EHR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total system sales and support . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
TruBridge (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total bookings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

6,341

48,790

33,238

82,028 $

47,217

5,089

52,306

27,209

79,515

(1) Generally calculated as the total contract price (for system sales) including annualized contract value (for support) for
perpetual license system sales and total contract price for SaaS sales.
(2) Generally calculated as the total contract price (for non-recurring, project-related amounts) and annualized contract value
(for recurring amounts).

Acute Care EHR bookings in 2020 decreased $4.8 million, or 10%, despite a $0.9 million, or 4%, increase in net new bookings
as the uncertainty resulting from the COVID-19 pandemic created a difficult demand environment for non-strategic IT
purchases. This difficult demand environment manifested itself in a $3.0 million, or 19%, decrease in non-MU3 add-on
bookings from existing customers with MU3-related add-on bookings decreasing $2.2 million, or 81%, as the related
compliance deadline of October 1, 2019 has passed.

Bookings for our Post-acute Care EHR segment increased $1.3 million, or 26%, primarily as recent investments in AHT’s
technology solutions are driving demand within the existing AHT customer base for additional applications and upgrades.

TruBridge bookings have increased $6.0 million, or 22%, to a record $33.2 million during 2020, mostly due to the combined
impacts of (i) our recently-introduced initiative to expand our TruBridge footprint outside of our traditional EHR customer
base, resulting in significant client wins, and (ii) a poor sales environment during the first half of 2019 driven by a lack of
urgency on the part of prospective customers, impacting the timing of customer decisions for purchasing TruBridge services.

Off-Balance Sheet Arrangements

We had no off-balance sheet arrangements, as defined by Item 303(a)(4) of SEC Regulation S-K, as of December 31, 2020.

Contractual Obligations

As of December 31, 2020, our material obligations requiring payments in the future are set forth below to reflect (i) our real
estate lease obligations, and (ii) the Company’s debt obligations under our credit facilities in connection with the Company’s
acquisition of HHI and its wholly-owned subsidiaries, and related interest payments as follows:

(In thousands)

Payment due by period

Total

Less than
1 year

1-3 Years

3-5 Years

More than
5 Years

Operating lease obligations . . . . . . . . . . . . . . . . . . . . . . $

7,679

1,518

3,779

1,468

Debt obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Interest on debt obligations . . . . . . . . . . . . . . . . . . . . . .

78,125

8,657

3,750

2,178

10,312

4,025

64,063

2,454

Total contractual obligations . . . . . . . . . . . . . . . . . . . .

$ 94,461

7,446

18,116

$ 67,985

914

—

914

Interest on debt obligations for floating rate instruments, as calculated above, assumes rates in effect at December 31,
2020 remain constant.

Critical Accounting Policies and Estimates

General

Our discussion and analysis of our financial condition and results of operations are based on our financial statements, which
have been prepared in accordance with accounting principles generally accepted in the United States of America. We are
required to make some estimates and judgments that affect the preparation of these financial statements. We base our estimates
on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, but actual
results may differ from these estimates under different assumptions or conditions.

Revenue Recognition

Revenue is recognized upon transfer of control of promised products or services to clients in an amount that reflects the
consideration we expect to receive in exchange for those products and services. We enter into contracts that can include various
combinations of products and services, which are generally distinct and accounted for as separate performance obligations. The
Company employs the 5-step revenue recognition model under ASC 606, Revenue from Contracts with Customers, to: (1)
identify the contract with the client, (2) identify the performance obligations in the contract, (3) determine the transaction price,
(4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue when (or as) the
entity satisfies a performance obligation.

Revenue is recognized net of shipping charges and any taxes collected from clients, which are subsequently remitted to
governmental authorities.

System Sales and Support

The Company enters into contractual obligations to sell perpetual software licenses, installation, conversion and
related training services, hardware and software application support, and hardware maintenance services to acute care
and post-acute care community hospitals.

•

Non-recurring Revenues

•

Perpetual software licenses and installation, conversion, and related training services are not considered
separate and distinct performance obligations due to the proprietary nature of our software and are,
therefore, accounted for as a single performance obligation on a module-by-module basis. Revenue is
recognized as each module's implementation is completed based on the module's stand-alone selling price
("SSP"), net of discounts. Fees for licenses and installation, conversion, and related training services are
typically due in three installments: (1) at placement of order, (2) upon installation of software and
commencement of training, and (3) upon satisfactory completion of monthly accounting cycle or end-of-
month operation by application and as applicable for each application. Often, short-term and/or long-term
financing arrangements are provided for software implementations; refer to Note 11 - Financing
Receivables for further information. Electronic health records ("EHR") implementations include a system
warranty that terminates thirty days from the software go-live date, the date which the client begins using
the system in a live environment.

Hardware revenue is recognized on a gross basis separately from software licenses at the point in time it
is delivered to the client. The SSP of hardware is cost plus a reasonable margin. Payment is generally due
upon delivery of the hardware to the client. Standard manufacturer warranties apply to hardware.

•

Recurring Revenues

Software application support and hardware maintenance services sold with software licenses and
hardware are separate and distinct performance obligations. Revenue for support and maintenance
services is recognized based on SSP, which is the renewal price, ratably over the life of the contract,
which is generally three to five years. Payment is due monthly for support services provided.

Subscriptions to third party content revenue is recognized on a gross basis as a separate performance
obligation ratably over the subscription term based on SSP, which is cost plus a reasonable margin.
Payment is due monthly for subscriptions to third party content.

Software as a Service ("SaaS") arrangements for EHR software and related conversion and training
services are considered a single performance obligation. Revenue is recognized on a monthly basis as the
SaaS service is provided to the client over the contract term. Payment is due monthly for SaaS services
provided.

•

TruBridge

TruBridge provides an array of business processing services ("BPS") consisting of accounts receivable management,
private pay services, insurance services, medical coding, electronic billing, statement processing, payroll processing,
and contract management. Fees are recognized over the period of the client contractual relationship as the services are
performed based on the SSP, net of discounts. Fees for many of these services are invoiced, and revenue recognized
accordingly, based on the volume of transactions or a percentage of client accounts receivable collections. Payment is
due monthly for BPS with certain amounts varying based on utilization and/or volumes.

TruBridge also provides professional IT services. Revenue from professional IT services is recognized as the services
are performed based on SSP. Payment is due monthly as services are performed.

Our contracts with clients often include promises to transfer multiple products and services. Determining whether
products and services are considered distinct performance obligations that should be accounted for separately versus
together may require significant judgment.

Judgment is required to determine SSP for each distinct performance obligation. We use observable SSP for items that
are sold on a stand-alone basis to similarly situated clients at unit prices within a sufficiently narrow range. For
performance obligations that are sold to different clients for a broad range of amounts, or for performance obligations
that are never sold on a stand-alone basis, the residual method in determining SSP is applied and requires significant
judgment.

Allocating the transaction price, including estimating SSP of promised goods and services for contracts with discounts
or variable consideration, may require significant judgment. Due to the short time frame of the implementation cycle,
discount allocation is immaterial as revenue is recognized net of discounts within the same reporting period. In
scenarios where the Company enters into a contract that includes both a software license and BPS or other services that
are charged based on volume of services rendered, the Company allocates variable amounts entirely to a distinct good
or service. The terms of the variable payment relate specifically to the entity’s efforts to satisfy that performance
obligation.

Although we believe that our approach to estimates and judgments regarding revenue recognition is reasonable, actual
results could differ and we may be exposed to increases or decreases in revenue that could be material.

Allowance for Credit Losses

Trade accounts receivable are stated at the amount the Company expects to collect and do not bear interest. The collectability of
trade receivable balances is regularly evaluated based on a combination of factors such as customer credit-worthiness, past
transaction history with the customer, current economic industry trends and changes in customer payment patterns, resulting in
the establishment of general reserves. Additionally, if it is determined that a customer will be unable to fully meet its financial
obligation, such as in the case of a bankruptcy filing or other material event impacting its business, a specific allowance for
doubtful accounts may be recorded to reduce the related receivable to the amount expected to be recovered. Refer to Note 11 of
the consolidated financial statements included herein for a detailed discussion about our credit loss accounting policy related to
trade accounts receivable.

The Company has sold information and patient care systems to certain healthcare providers under short-term payment plans and
sales-type leases. The Company establishes an allowance for credit losses for these financing receivables based on the historical
level of customer defaults under such financing arrangements. Additionally, if it is determined that a customer will be unable to
meet its financial obligation, such as in the case of a bankruptcy filing or other material event impacting its business, a specific
allowances may be recorded to reduce the related receivable to the amount expected to be recovered. Refer to Note 11 of the
consolidated financial statements for further information about our financing receivables.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326), which requires the
measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current
conditions, and reasonable and supportable forecasts. We adopted the new standard as of January 1, 2020. Adoption of this
standard did not have a material impact on our consolidated financial statements. Although we believe that that our approach to
estimates and judgments regarding our allowance for credit losses is reasonable, actual results could differ and we may be
exposed to increases or decreases in required allowances that could be material.

Estimates

The Company uses estimates to record certain transactions and liabilities. These estimates are generally based on management’s
best judgment, past experience, and utilization of third party services such as actuarial and other expert services. Because these
estimates are subjective and variable, actual results could differ significantly from these estimates. Significant estimates
included in our financial statements include those for self-insurance reserves under our health insurance plan, reserves for
uncertain tax positions, bad debt and credit allowances, legal liability exposure or lack thereof, and accrued expenses.

Business combinations, including purchased intangible assets

The Company accounts for business combinations at fair value. Acquisition costs are expensed as incurred and recorded in
general and administrative expenses. Measurement period adjustments relate to adjustments to the fair value of assets acquired
and liabilities assumed based on information that we should have known at the time of acquisition. All changes to purchase
accounting that do not qualify as measurement period adjustments are included in current period earnings.

The fair value amount assigned to an intangible asset is based on an exit price from a market participant’s viewpoint, and
utilizes data such as discounted cash flow analysis and replacement cost models. We review acquired intangible assets for
impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be
recoverable.

Goodwill is recorded as the difference, if any, between the aggregate consideration paid for an acquisition and the fair value of
the identifiable net tangible and intangible assets acquired. Goodwill is not amortized but is evaluated for impairment annually
or more frequently if indicators of impairment are present or changes in circumstances suggest that impairment may exist. We
test annually for impairment as of October 1.

As part of our annual goodwill impairment test, we first assess qualitative factors to determine whether it is more likely than not
that the fair value of a reporting unit is less than its carrying amount. If we conclude that it is more likely than not that the fair
value of a reporting unit is less than its carrying amount, we conduct a quantitative goodwill impairment assessment. The first
step of the quantitative goodwill impairment test compares the fair value of the reporting unit with its carrying amount,
including goodwill. The Company early adopted Accounting Standards Update ("ASU") 2017-04, Intangibles—Goodwill and
Other (Topic 350), on January 1, 2017, which eliminates the second step of the goodwill impairment analysis. Therefore, if the
carrying amount of the reporting unit exceeds its fair value in the first step of the goodwill impairment test, an impairment
charge is recognized for the amount by which the carrying amount exceeds the total amount of goodwill allocated to that
reporting unit. If the fair value of the reporting unit exceeds its carrying amount, the goodwill of the reporting unit is not
considered to be impaired.

Critical estimates in valuing certain intangible assets and the fair value of the reporting unit during goodwill impairment tests
include, but are not limited to, identifying reporting units, historical and projected customer retention rates, anticipated growth
in revenue from the acquired customers, expected future cash outflows, the allocation of those cash flows to identifiable
intangible assets, estimated useful lives of these intangible assets, and a probability-weighted income approach based on
scenarios in estimating achievement of operating results.

Significant judgments in testing goodwill for impairment also include assigning assets and liabilities to the reporting unit and
determining the fair value of each reporting unit based on management’s best estimates and assumptions, as well as other
information compiled by management, including valuations that utilize customary valuation procedures and techniques.

Management’s best estimates and assumptions are employed in determining the appropriateness of these assumptions as of the
acquisition date and for each subsequent period.

Future business and economic conditions, as well as differences actually related to any of the assumptions, could materially
affect the financial statements through impairment of goodwill or intangible assets, and acceleration of the amortization period
of the purchased intangible assets, which are finite-lived assets.

As of October 1, 2020, the date of our most recent impairment test, our Post-acute Care EHR and TruBridge reporting units had
fair values that were substantially in excess of their respective carrying values. The calculated fair value of our Acute Care EHR
reporting unit exceeded the reporting unit’s carrying value by 12% and, as such, poses a heightened risk of impairment if the
reporting unit’s operating results were to decline in future periods. During the three months ended December 31, 2020, there
were no identified indicators of impairment that required the Company to complete an interim quantitative assessment related to
any of the Company’s reporting units or indefinitely-lived intangible assets.

Quantitative and Qualitative Disclosures about Market and Interest Rate Risk

Our exposure to market risk relates primarily to the potential change in the British Bankers Association London Interbank
Offered Rate ("LIBOR"). We had $78.1 million of outstanding borrowings under our credit facilities with Regions Bank at
December 31, 2020. The term loan facility and revolving credit facility bear interest at a rate per annum equal to an applicable
margin plus (1) the Adjusted LIBOR rate for the relevant interest period, subject to a floor of 0.5%, (2) an alternate base rate
determined by reference to the greatest of (a) the prime lending rate of Regions, (b) the federal funds rate for the relevant
interest period plus one half of one percent per annum and (c) the one month LIBOR rate plus one percent per annum,subject to
the aforementioned floor, or (3) a combination of (1) and (2). Accordingly, we are exposed to fluctuations in interest rates on
borrowings under our credit facilities. A one hundred basis point change in interest rate on our borrowings outstanding as of
December 31, 2020 would result in a change in interest expense of approximately $0.8 million annually.

We did not have investments as of December 31, 2020. We do not utilize derivative financial instruments to manage our
interest rate risks.

Recent Accounting Pronouncements

Reference is made to Note 2 to the consolidated financial statements for a discussion of accounting pronouncements that have
been recently issued which we have not yet adopted.

ITEM 7A.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The information required by this Item is contained in Item 7 herein under the heading "Quantitative and Qualitative Disclosures
about Market and Interest Rate Risk."

ITEM 8.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Index to Financial Statements

Management’s Report on Internal Control Over Financial Reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Report of Grant Thornton LLP, Independent Registered Public Accounting Firm, on Internal Control
Over Financial Reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Report of Grant Thornton LLP, Independent Registered Public Accounting Firm, on Consolidated
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Consolidated Balance Sheets — December 31, 2020 and 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Consolidated Statements of Operations — Years ended December 31, 2020, 2019 and 2018 . . . . . . . . . .

Consolidated Statements of Stockholders’ Equity — Years ended December 31, 2020, 2019 and 2018 . .

Consolidated Statements of Cash Flows — Years ended December 31, 2020, 2019 and 2018 . . . . . . . . .

Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Index to Financial Statement Schedules

Schedule II — Valuation and Qualifying Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

All other schedules to the financial statements required by Article 9 of Regulation S-X are not
applicable and therefore have been omitted.

Page

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in
Rule 13a-15(f) under the Securities Exchange Act of 1934. Computer Programs and Systems, Inc.’s ("CPSI") internal control
over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles. CPSI’s
internal control over financial reporting includes those policies and procedures that:

(i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of CPSI;

(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that receipts and expenditures of CPSI are
being made only in accordance with authorizations of management and directors of CPSI; and

(iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or
disposition of CPSI’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management assessed the effectiveness of CPSI’s internal control over financial reporting as of December 31, 2020. In making
this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO) in Internal Control-Integrated Framework (2013).

Based on our assessment and those criteria, management believes that CPSI maintained effective control over financial
reporting as of December 31, 2020.

The independent registered public accounting firm, Grant Thornton LLP, has audited the consolidated financial statements of
the Company as of and for the year ended December 31, 2020, and has also issued its report on the effectiveness of the
Company’s internal control over financial reporting included in this report on page 60.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON INTERNAL CONTROL OVER
FINANCIAL REPORTING

Board of Directors and Stockholders
Computer Programs and Systems, Inc.:

Opinion on internal control over financial reporting
We have audited the internal control over financial reporting of Computer Programs and Systems, Inc. (a Delaware corporation)
and subsidiaries (the “Company”) as of December 31, 2020, based on criteria established in the 2013 Internal Control—
Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). In our
opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31,
2020, based on criteria established in the 2013 Internal Control—Integrated Framework issued by COSO.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(“PCAOB”), the consolidated financial statements of the Company as of and for the year ended December 31, 2020, and our
report dated March 12, 2021 expressed an unqualified opinion on those financial statements.

Basis for opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report
on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control
over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be
independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all
material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk
that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the
assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit
provides a reasonable basis for our opinion.

Definition and limitations of internal control over financial reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.

/s/ GRANT THORNTON LLP

Atlanta, Georgia
March 12, 2021

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON CONSOLIDATED FINANCIAL
STATEMENTS

Board of Directors and Stockholders
Computer Programs and Systems, Inc.:

Opinion on the financial statements
We have audited the accompanying consolidated balance sheets of Computer Programs and Systems, Inc. (a Delaware
corporation) and subsidiaries (the “Company”) as of December 31, 2020 and 2019, the related consolidated statements of
operations, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2020, and the
related notes and financial statement schedule (collectively referred to as the “financial statements”). In our opinion, the
financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and
2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020, in
conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2020, based on criteria established in
the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (“COSO”), and our report dated March 12, 2021 expressed an unqualified opinion.

Basis for opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on
the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to
error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included
examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our audits also
included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the
overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical audit matters
The critical audit matter communicated below is a matter arising from the current period audit or the financial statements that
was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that
are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgements. The
communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and
we are not, by communicating the critical audit matters below, providing a separate opinion on the critical audit matter or on the
accounts or disclosures to which it relates.

Goodwill Impairment Assessment

As described further in Notes 2 and 12 to the consolidated financial statements, management evaluates goodwill for impairment
on an annual basis as of October 1, or more frequently if impairment indicators exist, at the reporting unit level. Management
estimated the fair values of its reporting units using a combination of the income and market approaches. The determination of
the fair value of the reporting units requires management to make significant estimates and assumptions related to forecasts of
future revenues and operating expenses and discount rates. We identified the goodwill impairment assessment of the acute and
post-acute reporting units as a critical audit matter.

Changes in these assumptions could materially affect the determination of the fair value of the reporting units, the amount of
any goodwill impairment charge, or both. The principal consideration for this determination is that management utilized
significant judgment when estimating the fair value and carrying value of the reporting units. In turn, auditing management's
judgments regarding forecasts of future revenues and operating expenses, and the discount rate applied, involved a high degree
of subjectivity due to the estimation uncertainty of management's significant judgments.

Our audit procedures related to the goodwill impairment assessment included the following, among others:

• We evaluated the design and tested the operating effectiveness of controls relating to the goodwill impairment

assessment, including the determination of the fair value and carrying value of the reporting units.

• We tested management's process for determining the fair value and carrying value of the reporting units. This

included evaluating the appropriateness of the valuation methods, testing the completeness, accuracy, and relevance of
data used by management, and evaluating the reasonableness of management's significant assumptions, which
included forecasted revenues, operating expenses, and net capital expenditures. We tested whether these forecasts
were reasonable and consistent with historical performance, third-party market data, and other evidence obtained in
other areas of the audit.

• We tested the Company's discounted cash flow model for the reporting units with the assistance of valuation

specialists, including the reasonableness of the utilized discount rate.

• We tested the Company's use of the market approach with the assistance of valuation specialists, including the

reasonableness of selected multiples.

/s/ GRANT THORNTON LLP

We have served as the Company’s auditor since 2004.

Atlanta, Georgia
March 12, 2021

COMPUTER PROGRAMS AND SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)

December 31,
2020

December 31,
2019

12,671

7,357

Assets

Current assets:

Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Accounts receivable, net of allowance for credit losses of $1,701 and $2,078,
respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financing receivables, current portion, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Software development costs, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating lease assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financing receivables, net of current portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets, net of current portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangible assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Liabilities and Stockholders’ Equity

Current liabilities:

Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Current portion of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued vacation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt, net of current portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating lease liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stockholders’ equity:

32,414
10,821
1,084
1,789
8,365
67,144
13,139
3,210
6,610
11,477
2,787
71,689
150,216
326,272

7,716
3,457
8,130
5,353
12,786
37,442
73,360
5,092
10,378
126,272

Common stock, $0.001 par value per share; 30,000 shares authorized; 14,511
shares issued at December 31, 2020 and 14,356 shares issued at December 31,
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Treasury stock, 47 shares at December 31, 2020 and zero shares at December 31,
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities and stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

15
181,622
19,624

(1,261)
200,000
326,272

The accompanying notes are an integral part of these consolidated financial statements.

38,819
12,032
1,426
1,337
5,861
66,832
11,593
—
7,800
18,267
1,771
83,110
150,216
339,589

8,804
8,430
8,628
4,301
11,767
41,930
99,433
6,256
7,623
155,242

14
174,618
9,715

—
184,347
339,589

COMPUTER PROGRAMS AND SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)

Sales revenues:

System sales and support . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
TruBridge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total sales revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Costs of sales (exclusive of amortization shown separately below):

System sales and support . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
TruBridge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total costs of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating expenses:

Product development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sales and marketing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
General and administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of acquisition-related intangibles . . . . . . . . . . . . . . . . . . .
Total operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other income (expense):

Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on contingent consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on extinguishment of debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total other income (expense) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income before taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Net income per share - basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Net income per share - diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Weighted average shares outstanding used in per common share
computations:

Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Year ended December 31,
2019

2018

2020

152,954
111,534
264,488

165,352
109,282
274,634

69,361
58,881
128,242
136,246

33,457
24,185
46,129
11,421
115,192
21,054

1,494
—
(202)
(3,562)
(2,270)
18,784
4,538
14,246
0.98
0.98

14,038
14,038

$
$
$

73,872
56,617
130,489
144,145

36,861
27,774
43,921
11,006
119,562
24,583

807
5,000
—
(6,694)
(887)
23,696
3,228
20,468
1.43
1.43

13,778
13,778

$
$
$

180,164
100,247
280,411

75,984
54,699
130,683
149,728

36,371
30,713
47,275
10,487
124,846
24,882

803
—
—
(7,577)
(6,774)
18,108
476
17,632
1.26
1.26

13,561
13,568

The accompanying notes are an integral part of these consolidated financial statements.

COMPUTER PROGRAMS AND SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands)

Common
Shares

Common
Stock

Balance at December 31, 2017 . . . . . . . . . . . . .

13,760

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Adoption of accounting standards (Note 2) . . .

Issuance of restricted stock . . . . . . . . . . . . . . . .

Forfeiture of restricted stock . . . . . . . . . . . . . . .

Stock-based compensation . . . . . . . . . . . . . . . .

Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

—

326

(3)

—

Balance at December 31, 2018 . . . . . . . . . . . . .

14,083

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Common stock issued upon exercise of stock
options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Issuance of restricted stock . . . . . . . . . . . . . . . .

Stock-based compensation . . . . . . . . . . . . . . . .

Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Balance at December 31, 2019 . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Common stock issued upon exercise of stock
Issuance of restricted stock . . . . . . . . . . . . . . . .
Forfeiture of restricted stock . . . . . . . . . . . . . . .
Stock-based compensation . . . . . . . . . . . . . . . .
Treasury stock purchases . . . . . . . . . . . . . . . . .
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at December 31, 2020 . . . . . . . . . . . . .

—

272

—

—
14,356
—
—
156
(1)
—
—
—
14,511

—

—
14
—
—
1
—
—
—
—
15

Retained
Earnings
(Accumulated
Deficit)

Treasury Stock

Additional
Paid-in
Capital
155,078

—

9,715

—

(19,006) $

17,632

1,970

—

(5,620)

Total
Stockholders’
Equity
136,086

— $

—

17,632

1,970

—

9,715

(5,620)

164,793

(5,024) $

— $

159,783

—

9,822

—
174,618

$
— $
—
(1)
—
7,005
—
—
181,622

20,468

—

(5,729)
9,715
14,246
—
—
—
—
—
(4,337)
19,624

—

—
— $
— $
— $
— $
— $
— $
(1,261) $
— $
(1,261) $

20,468

—

9,822

(5,729)
184,347
14,246
—
—
—
7,005
(1,261)
(4,337)
200,000

The accompanying notes are an integral part of these consolidated financial statements.

COMPUTER PROGRAMS AND SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)

Operating Activities
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Adjustments to net income:

Provision for bad debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of acquisition-related intangibles . . . . . . . . . . . . . . . . . . .
Amortization of software development costs . . . . . . . . . . . . . . . . . . . . .
Amortization of deferred finance costs . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on contingent consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on extinguishment of debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Changes in operating assets and liabilities (net of acquired assets and
liabilities):

Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financing receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid income taxes/income taxes payable . . . . . . . . . . . . . . . . . . . . .
Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investing Activities
Purchases of property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchase of business, net of cash received . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment in software development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash used in investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financing Activities
Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payments of long-term debt principal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from revolving line of credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payments of revolving line of credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payments on capital lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payments of contingent consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from exercise of stock options . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Treasury stock purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash used in financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents at beginning of year . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . $

Continued on following page.

Year ended December 31,
2019

2018

2020

14,246

20,468

17,632

4,370
2,755
7,005
1,790
11,421
118
317
—
202

3,667
6,369
342
(3,519)
(1,088)
(498)
2,097
(452)
49,142

(3,336)
—
(3,328)
(6,664)

(4,337)
64
(4,069)
—
(27,561)
—
—
—
(1,261)
(37,164)
5,314
7,357
12,671

2,348
1,011
9,822
1,407
11,006
—
345
(5,000)
—

641
3,053
72
(1,474)
2,542
(2,003)
(1,418)
782
43,602

(1,760)
(10,733)
—
(12,493)

(5,729)
—
(13,609)
11,000
(20,693)
(250)
(206)
3
— —

(29,484)
1,625
5,732
7,357

3,176
(364)
9,715
1,795
10,487
—
345
—
—

(3,898)
(9,473)
(81)
549
(1,952)
264
(1,336)
(2,930)
23,929

(978)
—
—
(978)

(5,620)
—
(13,105)
7,300
(5,590)
(315)
(409)
—
—
(17,739)
5,212
520
5,732

COMPUTER PROGRAMS AND SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS - (Continued)
(In thousands)

Year ended December 31,
2019

2018

2020

Supplemental disclosure of cash flow information:
Cash paid for interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Cash paid for income taxes, net of refund . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Supplemental disclosure of non-cash flow information:
Write-off of fully depreciated assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

3,245
2,235

1,618

$
$

6,342
3,193

$
$

7,138
3,771

— $

8,244

The accompanying notes are an integral part of these consolidated financial statements.

COMPUTER PROGRAMS AND SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2020

NATURE OF OPERATIONS

Computer Programs and Systems, Inc. ("CPSI" or the "Company") is a healthcare information technology solutions
provider which was formed and commenced operations in 1979. The Company provides, on an integrated basis, enterprise-
wide clinical management, access management, patient financial management, health information management, strategic
decision support, resource planning management and enterprise application integration solutions to healthcare
organizations throughout the United States. Additionally, CPSI provides other information technology solutions, including
business management services, remote hosting, networking technologies and other related services.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The consolidated financial statements of CPSI include the accounts of TruBridge, LLC ("TruBridge"), Evident, LLC
("Evident"), iNetXperts, Corp. d/b/a Get Real Health ("Get Real Health"), and Healthland Holding Inc. ("HHI"), all of
which are wholly-owned subsidiaries of CPSI. The accounts of HHI include those of its wholly-owned subsidiaries,
Healthland Inc. ("Healthland"), Rycan Technologies, Inc. ("Rycan"), and American HealthTech, Inc. ("AHT"). All
significant intercompany balances and transactions have been eliminated.

Cash and Cash Equivalents

Cash and cash equivalents can include time deposits and certificates of deposit with original maturities of three months or
less that are highly liquid and readily convertible to a known amount of cash. These assets are stated at cost, which
approximates market value, due to their short duration or liquid nature.

Accounts Receivable and Allowance for Credit Losses

Trade accounts receivable are stated at the amount the Company expects to collect and do not bear interest. The Company
establishes a general allowance for doubtful accounts based on collections history. In the case of a bankruptcy filing or
other similar event indicating the collectability of specific customer accounts is no longer probable, a specific allowance for
doubtful accounts may be recorded to reduce the related receivable to the amount expected to be recovered.

Financing Receivables

Financing receivables are comprised of short-term payment plans and sales-type leases. Short-term payment plans are
stated at the amount the Company expects to collect and do not bear interest. Sales-type leases are initially recorded at the
present value of the related minimum lease payments, computed at the interest rate implicit in the lease, and are presented
net of unearned income. Unearned income is amortized over the lease term to produce a constant periodic rate of return on
the net investment in the lease (the interest method).

An allowance for credit losses has been established for our financing receivables based on the historical level of customer
defaults under such arrangements. In the case of a bankruptcy filing or other similar event indicating the collectability of
specific customer accounts is no longer probable, a specific reserve may be recorded to reduce the related receivable to the
amount expected to be recovered. Customer payments are considered past due if a scheduled payment is not received
within contractually agreed upon terms, with amounts reclassified to accounts receivable when they become due. As a
result, we evaluate the credit quality of our financing receivables on an ongoing basis utilizing an aging of receivables and
write-offs, customer collection experience, the customer’s financial condition and known risk characteristics impacting the
respective customer base, as well as existing economic conditions, to determine if any further allowance is necessary.
Amounts are specifically charged off once all available means of collection have been exhausted.

Inventories

Inventories are stated at lower of cost or net realizable value using the average cost method. The Company’s inventories are
comprised of computer equipment, forms and supplies.

Property and Equipment

Property and equipment is recorded at cost, less accumulated depreciation. Additions and improvements to property and
equipment that materially increase productive capacity or extend the life of an asset are capitalized. Maintenance, repairs
and minor renewals are expensed as incurred. Upon retirement or other disposition of such assets, the related costs and
accumulated depreciation are removed from the respective accounts and any resulting gain or loss is included in the results
of operations.

Depreciation expense is computed using the straight-line method over the asset’s useful life, which is generally 5 years for
computer equipment, furniture, and fixtures and 30 years for buildings. Leasehold improvements are depreciated over the
shorter of the asset’s useful life or the remaining lease term. The Company reviews for the possible impairment of long-
lived assets whenever events or changes in circumstances indicate that the carrying amount of an asset may not be
recoverable. Depreciation expense is reported in the consolidated statements of operations as a component of costs of sales
and operating expenses.

Business Combinations

We apply business combination accounting when we acquire a business. Business combinations are accounted for at fair
value. The associated acquisition costs are expensed as incurred and recorded in general and administrative expenses;
restructuring costs associated with a business combination are expenses; contingent consideration is measured at fair value
at the acquisition date, with changes in fair value after the acquisition date affecting earnings; changes in deferred tax asset
valuation allowances and income tax uncertainties after the measurement period affect income tax expense; and goodwill is
determined as the excess of the fair value of the consideration conveyed in the acquisition over the fair value of the net
assets acquired. The accounting for business combinations requires estimates and judgments as to expectations for future
cash flows of the acquired business, and the allocation of those cash flows to identifiable intangible assets, in determining
the estimated fair value for assets and liabilities acquired. The fair values assigned to tangible and intangible assets
acquired and liabilities assumed, are based on management's estimates and assumptions, including valuations that utilize
customary valuation procedures and techniques. If the actual results differ from the estimates and judgments used in these
estimates, the amounts recorded in the financial statements could result in a possible impairment of the intangible assets
and goodwill, or require acceleration of the amortization expense of finite-lived intangible assets. The results of the
acquired businesses' operations are included in the Consolidated Statements of Operations of the combined entity
beginning on the date of the acquisition. We have applied this acquisition method to the transactions described in Note 3 -
Business Combination.

Goodwill

Goodwill is recorded as the difference, if any, between the aggregate consideration paid for an acquisition and the fair
value of the identifiable net tangible and intangible assets acquired. Goodwill is not amortized but is evaluated for
impairment annually or more frequently if indicators of impairment are present or changes in circumstances suggest that
impairment may exist. We test annually for impairment as of October 1.

As part of our annual goodwill impairment test, we first assess qualitative factors to determine whether it is more likely
than not that the fair value of a reporting unit is less than its carrying amount. If we conclude that it is more likely than not
that the fair value of a reporting unit is less than its carrying amount, we conduct a quantitative goodwill impairment
assessment. The first step of the quantitative goodwill impairment test compares the fair value of the reporting unit with its
carrying amount, including goodwill. The Company early adopted ASU 2017-04, Intangibles—Goodwill and Other (Topic
350), on January 1, 2017, which eliminates the second step of the goodwill impairment analysis. Therefore, if the carrying
amount of the reporting unit exceeds its fair value in the first step of the goodwill impairment test, an impairment charge is
recognized for the amount by which the carrying amount exceeds the total amount of goodwill allocated to that reporting
unit. If the fair value of the reporting unit exceeds its carrying amount, the goodwill of the reporting unit is not considered
to be impaired. We determined there was no impairment to goodwill for the years ended December 31, 2020, 2019 and
2018.

Purchased Intangible Assets

Purchased intangible assets are acquired in connection with a business acquisition, and are amortized over their estimated
useful lives based on the pattern of economic benefit expected from each asset. We concluded for certain purchased
intangible assets that the pattern of economic benefit approximated the straight-line method, and therefore, the use of the
straight-line method was appropriate, as the majority of the cash flows will be recognized ratably over the estimated useful
lives and there is no degradation of the cash flows over time.

We assess the recoverability of intangible assets whenever events or changes in circumstances indicate that the carrying
amount of the asset may not be recoverable. The carrying amount is not recoverable if it exceeds the undiscounted sum of
cash flows expected to result from the use and eventual disposition of the asset. If the asset is not recoverable, the
impairment loss is measured by the excess of the asset's carrying amount over its fair value. We determined there was no
impairment to purchased intangible assets as of December 31, 2020, 2019 or 2018.

Revenue Recognition

Revenue is recognized upon transfer of control of promised products or services to clients in an amount that reflects the
consideration we expect to receive in exchange for those products and services. We enter into contracts that can include
various combinations of products and services, which are generally distinct and accounted for as separate performance
obligations. The Company employs the 5-step revenue recognition model under ASC 606, Revenue from Contracts with
Customers, to: (1) identify the contract with the client, (2) identify the performance obligations in the contract, (3)
determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5)
recognize revenue when (or as) the entity satisfies a performance obligation.

Revenue is recognized net of shipping charges and any taxes collected from clients, which are subsequently remitted to
governmental authorities.

•

System Sales and Support

The Company enters into contractual obligations to sell perpetual software licenses, installation, conversion, and
related training services, hardware and software application support, and hardware maintenance services to acute
care and post-acute care community hospitals.

•

Non-recurring Revenues

•

Perpetual software licenses and installation, conversion, and related training services are not
considered separate and distinct performance obligations due to the proprietary nature of our software
and are, therefore, accounted for as a single performance obligation on a module-by-module basis.
Revenue is recognized as each module's implementation is completed based on the module's stand-
alone selling price ("SSP"), net of discounts. Fees for licenses and installation, conversion, and related
training services are typically due in three installments: (1) at placement of order, (2) upon installation
of software and commencement of training, and (3) upon satisfactory completion of monthly
accounting cycle or end-of-month operation by application and as applicable for each application.
Often, short-term and/or long-term financing arrangements are provided for software implementations;
refer to Note 11 - Financing Receivables for further information. Electronic health records ("EHR")
implementations include a system warranty that terminates thirty days from the software go-live date,
the date which the client begins using the system in a live environment.

Hardware revenue is recognized separately from software licenses at the point in time it is delivered to
the client. The SSP of hardware is cost plus a reasonable margin and revenue is recognized on a gross
basis. Payment is generally due upon delivery of the hardware to the client. Standard manufacturer
warranties apply to hardware.

•

Recurring Revenues

•

Subscriptions to third-party content revenue is recognized as a separate performance obligation ratably
over the subscription term based on SSP, which is cost plus a reasonable margin, and revenue is
recognized on a gross basis. Payment is due monthly for subscriptions to third party content.

Software as a Service ("SaaS") arrangements for EHR software and related conversion and training
services are considered a single performance obligation. Revenue is recognized on a monthly basis as
the SaaS service is provided to the client over the contract term. Payment is due monthly for SaaS
services provided.

Refer to Note 18 - Segment Reporting for further information, including revenue by client base (acute
care or post-acute care) bifurcated by recurring and non-recurring revenue.

•

TruBridge

TruBridge provides an array of business processing services ("BPS") consisting of accounts receivable
management, private pay services, insurance services, medical coding, electronic billing, statement processing,
payroll processing, and contract management. Fees are recognized over the period of the client contractual
relationship as the services are performed based on the SSP, net of discounts. Fees for many of these services
are invoiced, and revenue recognized accordingly, based on the volume of transactions or a percentage of client
accounts receivable collections. Payment is due monthly for BPS with certain amounts varying based on
utilization and/or volumes.

TruBridge also provides professional IT services. Revenue from professional IT services is recognized as the
services are performed based on SSP. Payment is due monthly as services are performed.

•

Deferred Revenue

Deferred revenue represents amounts invoiced to clients for which the services under contract have not been
completed and revenue has not been recognized, including annual renewals of certain software subscriptions
and customer deposits for implementations to be performed at a later date. Revenue is recognized ratably over
the life of the software subscriptions as services are provided and at the point-in-time when implementations
have been completed.

The following table details deferred revenue for the years ended December 31, 2020 and 2019, included in the
consolidated balance sheets:

(In thousands)

For years ended December 31,

2020

2019

Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

8,628

Deferred revenue recorded . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Deferred revenue acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Less deferred revenue recognized as revenue . . . . . . . . . . . . . . . . . . . . . . . . .

18,507

—

(19,005)

Ending balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

8,130

10,201

20,507

430

(22,510)

8,628

The deferred revenue recorded for years ended December 31, 2020 and 2019 is comprised primarily of the
annual renewals of certain software subscriptions billed during during the first quarter of each year and
deposits collected for future EHR installations. The deferred revenue acquired resulted from the May 2019
acquisition of Get Real Health. The deferred revenue recognized as revenue during the years ended December
31, 2020 and 2019 is comprised primarily of the periodic recognition of annual renewals that were deferred
until earned and deposits for future EHR installations that were deferred until earned.

•

Costs to Obtain and Fulfill a Contract with a Customer

Costs to obtain a contract include the commission costs related to SaaS arrangements, which are capitalized
and amortized ratably over the expected life of the customer. As a practical expedient, we generally recognize
the incremental costs of obtaining a contract as an expense when incurred if the amortization period of the
asset would have been one year or less, with the exception of commissions generated from TruBridge sales.
TruBridge commissions, which are paid up to twelve months in advance, are capitalized and amortized over
the prepayment period. Costs to obtain a contract are expensed within sales and marketing expenses in the
accompanying consolidated statements of operations.

Contract fulfillment costs related to the implementation of SaaS arrangements are capitalized and amortized
ratably over the expected life of the customer. Costs to fulfill contracts consist of the payroll costs for the
implementation of SaaS arrangements, including time for training, conversion, and installation that is
necessary for the software to be utilized. Contract fulfillment costs are expensed within the caption "System
sales and support - Cost of sales" in the accompanying consolidated statements of operations.

Costs to obtain and fulfill contracts related to SaaS arrangements are included within the "Prepaid expenses
and other" and "Other assets, net of current portion" line items on our consolidated balance sheets.

The following table details costs to obtain and fulfill contracts with customers for the years ended December
31, 2020 and 2019, included in the consolidated balance sheets:

(In thousands)
Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Costs to obtain and fulfill contracts capitalized . . . . . . . . . . . . . . . . . . . . . . . . . .
Less costs to obtain and fulfill contracts recognized as expense . . . . . . . . . . . . .
Ending balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

2020

2019

4,439
6,974
(5,421)
5,992

3,017
6,246
(4,824)
4,439

For years ended December 31,

•

Significant Judgments

Our contracts with clients often include promises to transfer multiple products and services. Determining
whether products and services are considered distinct performance obligations that should be accounted for
separately versus together may require significant judgment.

Judgment is required to determine SSP for each distinct performance obligation. We use observable SSP for
items that are sold on a stand-alone basis to similarly situated clients at unit prices within a sufficiently
narrow range. For performance obligations that are sold to different clients for a broad range of amounts, or
for performance obligations that are never sold on a stand-alone basis, the residual method in determining
SSP is applied and requires significant judgment.

Allocating the transaction price, including estimating SSP of promised goods and services for contracts with
discounts or variable consideration, may require significant judgment. Due to the short time frame of the
implementation cycle, discount allocation is immaterial as revenue is recognized net of discounts within the
same reporting period. In scenarios where the Company enters into a contract that includes both a software
license and BPS or other services that are charged based on volume of services rendered, the Company
allocates variable amounts entirely to a distinct good or service. The terms of the variable payment relate
specifically to the entity’s efforts to satisfy that performance obligation.

Significant judgment is required in determining the expected life of a customer, which is the amortization
period for costs to obtain and fulfill a contract that have been capitalized. The Company determined that the
expected life of the customer is not materially different from the initial contract term based on the
characteristics of the SaaS offering.

•

Remaining Performance Obligations

Disclosures regarding remaining performance obligations are not considered material as the overwhelming
majority of the Company's remaining performance obligations either (a) are related to contracts with an
expected duration of one year or less, or (b) exhibit revenue recognition in the amount to which the
Company has the right to invoice.

Stock-Based Compensation

The Company accounts for stock-based compensation according to the provisions of ASC 718, Compensation – Stock
Compensation, which establishes accounting for stock-based awards exchanged for employee services. Accordingly, stock-
based compensation cost is measured at the grant date based on the fair value of the award, and is recognized as an expense
over the employee’s or non-employee director’s requisite service period.

Product Development Costs

Product development costs are expensed as incurred. Product development costs totaled approximately $33.5 million,
$36.9 million and $36.4 million for the years ended December 31, 2020, 2019 and 2018, respectively.

Income Taxes

We account for income taxes in accordance with ASC 740, Accounting for Income Taxes. Under this topic, deferred
income taxes are determined utilizing the asset and liability approach. This method gives consideration to the future tax

consequences associated with differences between financial accounting and tax bases of assets and liabilities. The effect on
the deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the
enactment date. We recognize interest and penalties accrued related to unrecognized tax benefits in the consolidated
statements of operations as a component of the provision for income taxes.

We also make a provision for uncertain income tax positions in accordance with the ASC 740, Accounting for Income
Taxes. These provisions require that a tax position taken in a tax return be recognized in the financial statements when it is
more likely than not (i.e., a likelihood of more than fifty percent) that the position would be sustained upon examination by
tax authorities. A recognized tax position is then measured at the largest amount of benefit that is greater than fifty percent
likely of being realized upon settlement. The topic also requires that changes in judgment that result in subsequent
recognition, derecognition, or change in a measurement date of a tax position taken in a prior annual period (including any
related interest and penalties) be recognized as a discrete item in the interim period in which the change occurs.

Valuation allowances are recorded when, in the opinion of management, it is more likely than not that all or a portion of the
deferred tax assets will not be realized. These valuation allowances can be impacted by changes in tax laws, changes to
statutory tax rates, and future taxable income, and are based on our judgment, estimates, and assumptions.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires that management make estimates and
assumptions that affect the reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities at
the date of the financial statements, and the reported revenues and expenses during the reporting periods. Actual results
could differ from those estimates.

Segment Reporting

Operating segments are identified as components of an enterprise about which separate discrete financial information is
evaluated by the chief operating decision maker, which we refer to as the CODM, or decision-making group in assessing
performance and making decisions regarding resource allocation. The Company has prepared operating segment
information based on the manner in which management disaggregates the Company's operations for making internal
operating decisions. For more information, see Note 18 - Segment Reporting.

New Accounting Standards Adopted in 2020

New Accounting Standards Yet to be Adopted

We do not believe that any other recently issued but not yet effective accounting standards, if adopted, would have a
material impact on our consolidated financial statements.

3. BUSINESS COMBINATION

Acquisition of Get Real Health

On May 3, 2019, we acquired all of the assets and liabilities of iNetXperts, Corp., a Maryland corporation doing business
as Get Real Health (“Get Real Health”), pursuant to a Stock Purchase Agreement dated April 23, 2019, as amended on
May 2, 2019. Based in Rockville, Maryland, Get Real Health delivers technology solutions to improve patient outcomes
and engagement strategies with care providers.

Consideration for the acquisition included cash (net of cash of the acquired entity) of $10.8 million (inclusive of seller's
transaction expenses), plus a contingent earnout payment of up to $14.0 million tied to Get Real Health's earnings before
interest, tax, depreciation, and amortization ("EBITDA") (subject to certain pro-forma adjustments) for 2019. As of
December 31, 2019, the $5.0 million contingent consideration estimated in the allocation of purchase price paid was fully
reversed as Get Real Health's earnings did not achieve the required level for earnout payment. During 2019, we incurred
approximately $0.6 million of pre-tax acquisition costs in connection with the acquisition of Get Real Health. Acquisition
costs are included in general and administrative expenses in our consolidated statements of income.

Our acquisition of Get Real Health 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 was based on management's judgment after evaluating several factors, including a
preliminary valuation assessment.

The allocation of the purchase price paid for Get Real Health was as follows:

(In thousands)

Purchase Price
Allocation

Acquired cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Operating lease asset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Accounts payable and accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Deferred taxes, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Operating lease liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Contingent consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

159

364

107

365

1,285

7,890

9,767

(594)

(1,736)

(1,285)

(5,000)

(430)

Net assets acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

10,892

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
17 - 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 consolidated statement of operations for the year ended December 31, 2019 includes revenues of approximately
$3.4 million, and pre-tax loss of approximately $0.1 million, attributed to the acquired business since the May 3, 2019
acquisition date.

The following unaudited pro forma revenue, net income and earnings per share amounts for the years ended December 31,
2019 and 2018 give effect to the Get Real Health acquisition as if it had been completed on January 1, 2018. 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 Get Real Health 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 Get Real Health acquisition.

(In thousands, except per share data, unaudited)

Year Ended December 31,

2019

2018

Pro forma revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

276,097

Pro forma net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

19,077

Pro forma diluted earnings per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

1.38

283,994

15,172

1.12

Pro forma net income was calculated by adjusting the results for the applicable period to reflect (i) the additional
amortization that would have been charged assuming the fair value adjustments to intangible assets had been applied on
January 1, 2018 and (ii) adjustments to amortized revenue during fiscal 2019 and 2018 as a result of the acquisition date
valuation of assumed deferred revenue. The pro forma results for each period also reflect the pro forma adjustment to
interest expense as a result of utilizing revolver debt to finance the acquisition.

PROPERTY AND EQUIPMENT

Property and equipment were comprised of the following at December 31, 2020 and 2019:

(In thousands)
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Buildings and improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Computer equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Office furniture and fixtures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Automobiles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Less: accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

2020

2019

2,848
8,242
7,144
1,283
829
18
20,364
(7,225)
13,139

2,848
8,039
4,011
1,712
2,018
18
18,646
(7,053)
11,593

SOFTWARE DEVELOPMENT

Software development costs are accounted for in accordance with ASC 350-40, Internal-Use Software. We capitalize
incurred labor costs for software development from the time the preliminary project phase is completed until the software is
available for general release. Research and development costs and other computer software maintenance costs related to
software development are expensed as incurred. We estimate the useful life of our capitalized software and amortize its
value on a straight-line basis over that estimated life, which is estimated to be five years. If the actual life of the asset is
deemed to be impaired, a write-down of the value of the asset may be recorded as a charge to earnings. Upon the
software's availability for general release, we commence amortization of the capitalized software costs on a module-by-
module basis.

Software development, net was comprised of the following at December 31, 2020 and 2019:

(In thousands)
Software development costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Less: accumulated amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Software development costs, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

2020

2019

3,328

(118)

3,210

—

OTHER ACCRUED LIABILITIES

Other accrued liabilities were comprised of the following at December 31, 2020 and 2019:

(In thousands)
Salaries and benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Severance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Self-insurance reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating lease liabilities, current portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

2020

2019

7,876
25
1,040
1,776
551
1,518
12,786

6,946
329
1,037
1,382
529
1,544
11,767

NET INCOME PER SHARE

The Company presents basic and diluted earnings per share ("EPS") data for its common stock. Basic EPS is calculated by
dividing the net income attributable to stockholders of the Company by the weighted average number of shares of common
stock outstanding during the period. Diluted EPS is determined by adjusting the net income attributable to stockholders of
the Company and the weighted average number of shares of common stock outstanding during the period for the effects of
all dilutive potential common shares, including awards under stock-based compensation arrangements.

The Company's unvested restricted stock awards (see Note 9) are considered participating securities under ASC 260,
Earnings Per Share, because they entitle holders to non-forfeitable rights to dividends until the awards vest or are forfeited.
When a company has a security that qualifies as a "participating security," the Codification requires the use of the two-class
method when computing basic EPS. The two-class method is an earnings allocation formula that determines EPS for each
class of common stock and participating security according to dividends declared (or accumulated) and participation rights
in undistributed earnings. In determining the amount of net income to allocate to common stockholders, income is allocated
to both common stock and participating securities based on their respective weighted average shares outstanding for the
period, with net income attributable to common stockholders ultimately equaling net income less net income attributable to
participating securities. Diluted EPS for the Company's common stock is computed using the more dilutive of the two-class
method or the treasury stock method.

The following is a calculation of the basic and diluted EPS for the Company's common stock, including a reconciliation
between net income and net income attributable to common stockholders for the years ended December 31, 2020, 2019,
and 2018:

(In thousands, except for per share data)

2020

2019

2018

Basic EPS

Numerator

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

14,246

Less: Net income attributable to participating securities . . . . . . . . . . . . .

(429)

Net income attributable to common stockholders . . . . . . . . . . . . . . . . . . $

13,817

20,468

(764)

19,704

Denominator

Weighted average shares outstanding used in basic per common share
computations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

14,038

13,778

Basic EPS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

0.98

1.43

17,632

(595)

17,037

13,561

1.26

Diluted EPS

Numerator

Net income attributable to common stockholders for diluted EPS . . . . . . $

13,817

19,704

17,037

Denominator

Weighted average shares outstanding used in basic per common share
computations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

14,038

13,778

13,561

Weighted average effect of dilutive securities:

Performance share awards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Weighted average shares outstanding used in diluted per common share
computations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

—

14,038

13,778

Diluted EPS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

0.98

1.43

13,568

1.26

INCOME TAXES

The Company accounts for income taxes in accordance with the ASC 740, Accounting for Income Taxes. These provisions
require a company to determine whether it is more likely than not that a tax position will be sustained upon examination
based on the technical merits of the position. If the more-likely-than-not threshold is met, a company must measure the tax
position to determine the amount to recognize in the financial statements. The Company did not have any unrecognized tax
positions as of December 31, 2020 and 2019.

The federal returns for tax years 2017 through 2019 remain open to examination, and the tax years 2016 through 2019
remain open to examination by certain other taxing jurisdictions to which the Company is subject. Additional years may be
open to the extent attributes are being carried forward to an open year.

Deferred income taxes arise from the temporary differences in the recognition of income and expenses for tax purposes. A
valuation allowance is established when the Company believes that it is more likely than not that some portion of its
deferred tax assets will not be realized.

Deferred tax assets and liabilities were comprised of the following at December 31, 2020 and 2019:

(In thousands)
Deferred tax assets:

2020

2019

Accounts receivable and financing receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued vacation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued severance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fixed assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net operating loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Deferred tax liabilities:

Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Accrued liabilities and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fixed assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Total net deferred tax liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

773
691
2,568
283
4
—
3,274
4,301
11,894
636
11,258

19,603
956
1,077
21,636
$
(10,378) $

1,221
653
2,886
257
24
1,347
3,072
7,770
17,230
801
16,429

20,960
3092
—
24,052
(7,623)

Significant components of the income tax provision for the years ended December 31, 2020, 2019 and 2018 were as
follows:

(In thousands)
Current provision:

2020

2019

2018

Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Deferred provision:

Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total income tax provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

244
1,539

2,766
(11)
4,538

860
1,357

951
60
3,228

(594)
1,434

649
(1,013)
476

The difference between income taxes at the U.S. federal statutory income tax rate of 21% for the years ended December 31,
2020, 2019 and 2018, and those reported in the consolidated statements of operations for the years ended December 31,
2020, 2019 and 2018 are as follows:

(In thousands)
Income taxes at U.S. federal statutory rate . . . . . . . . . . . . . . . . . . . . . . $
Provision-to-return adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State income tax, net of federal tax effect . . . . . . . . . . . . . . . . . . . . . . .
Tax credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Contingent consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total income tax provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

2020

2019

2018

3,945
455
908
(958)
—
255
(165)
98
4,538

4,976
(66)
978
(2,196)
(1,050)
151
173
262
3,228

3,803
(112)
1109
(3,428)
—
356
(1,149)
(103)
476

Our effective tax rates for the years ended December 31, 2020, 2019 and 2018 were 24%, 14% and 3% respectively. Our
effective tax rate for 2018 was abnormally low and significantly impacted by our implementation of the ASC 730 Safe
Harbor Directive, which significantly increased our estimated R&D tax credits for the 2017 and 2018 tax years. Our
effective tax rate for 2019, although significantly higher than that of 2018, was significantly impacted by the non-taxable
nature of our recorded gain on contingent consideration, which served to reduce the year's effective tax rate by over 4%.

2020 lacked any benefit to the effective tax rate from such contingent consideration and, when combined with more
punitive provision to return adjustments primarily related to R&D tax credits and lowered estimates for current year
qualifying research expenditures, thereby lowering current year estimates for the R&D tax credit, resulted in a significant
increase in the year's effective tax rate.

We have federal net operating loss carryforwards related to the acquisition of HHI and Get Real Health of $12.2 million,
$27.9 million and $40.5 million for the years ending December 31, 2020, 2019, and 2018, respectively, which expire at
various dates from 2026 to 2035. We have state net operating loss carryforwards related to the acquisition of HHI and Get
Real Health of $29.2 million, $34.4 million and $34.5 million for the years ending December 31, 2020, 2019, and 2018,
respectively, which expire at various dates from 2023 to 2036.

Realization of deferred tax assets associated with the state net operating loss carryforward is dependent upon generating
sufficient taxable income prior to their expiration. We believe it is more likely than not that the benefit from certain state
NOL carryforwards will not be realized. In recognition of this risk, we have provided a valuation allowance on the deferred
tax assets related to these state NOL carryforwards of $0.8 million after December 31, 2019 and $0.6 million after
December 31, 2020. The change in valuation allowance was based on evidence supporting that certain state NOL
carryforwards associated with the acquisition of Get Real Health may not be realized.

STOCK-BASED COMPENSATION AND EQUITY

The Company's stock-based compensation awards are in the form of restricted stock and performance share awards granted
pursuant to the Company's 2012 Restricted Stock Plan for Non-Employee Directors, Amended and Restated 2014 Incentive
Plan and 2019 Incentive Plan, as amended (the "Plans"). Stock-based compensation cost is measured at the grant date based
on the fair value of the award, and is recognized as an expense over the employee’s or non-employee director’s requisite
service period. As of December 31, 2020, there was a total of 645,767 shares of common stock reserved under the Plans for
issuance under future share-based payment arrangements.

The following table details total stock-based compensation expense for the years ended December 31, 2020, 2019 and
2018, included in the consolidated statements of operations:

(In thousands)
Costs of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pre-tax stock-based compensation expense . . . . . . . . . . . . . . . . . . . . .
Less: income tax effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net (after tax) stock-based compensation expense . . . . . . . . . . . . . . . . $

2020

2019

2018

1,474
5,531
7,005
(1,471)
5,534

2,040
7,782
9,822
(2,063)
7,759

2,134
7,581
9,715
(2,040)
7,675

As of December 31, 2020, there was $5.7 million of unrecognized compensation cost related to unvested or unearned, as
applicable, stock-based compensation arrangements granted under the Plans, which is expected to be recognized over a
weighted-average period of 1.6 years.

Restricted Stock

The Company grants restricted stock to executive officers, certain key employees and non-employee directors under the
2019 Incentive Plan with the fair value of the awards representing the fair value of the common stock on the date the
restricted stock is granted. Shares of restricted stock generally vest in equal annual installments over the applicable vesting
period, which ranges from one to three years. The Company records expenses for these grants on a straight-line basis over
the applicable vesting periods. Shares of restricted stock have also been issued pursuant to the settlement of performance
share awards with one-year performance periods, for which the Company records expenses in the manner described in the
"Performance Share Awards" section below. Although no such one-year performance share awards were granted during
2020, shares issued pursuant to past one-year performance share awards are still subject to vesting.

A summary of restricted stock activity (including shares of restricted stock issued pursuant to the settlement of
performance share awards) under the Plans during the years ended December 31, 2020, 2019 and 2018 is as follows:

Weighted-
Average
Grant-Date
Fair Value

Unvested stock outstanding at January 1, 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

309,195

Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Performance share awards converted to restricted stock . . . . . . . . . . . . . . . . . . . . . . . . .

Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

148,841

177,395

(156,988)

(3,311)

Unvested stock outstanding at December 31, 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

475,132

Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Performance share awards converted to restricted stock . . . . . . . . . . . . . . . . . . . . . . . . .

Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

133,936

138,566

(221,775)

Unvested stock outstanding at December 31, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

525,859

Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Performance share awards converted to restricted stock . . . . . . . . . . . . . . . . . . . . . . . . .

Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

136,771

19,678

(268,067)

(1,274)

Unvested stock outstanding at December 31, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

412,967

38.36

30.20

29.94

40.52

30.20

32.00

30.89

29.80

33.48

30.51

26.16

30.15

30.80

26.16

28.87

Performance Share Awards

The Company grants performance share awards to executive officers and certain key employees under the Amended and
Restated 2014 Incentive Plan prior to 2019 and under the 2019 Incentive Plan beginning in 2019. The number of shares of
common stock earned and issuable under each award is determined at the end of each one-year or three-year performance
period, based on the Company's achievement of performance goals predetermined by the Compensation Committee of the
Board of Directors at the time of grant. The three-year performance share awards include a modifier to the total number of
shares earned based on the Company's total shareholder return ("TSR") compared to an industry index. If certain levels of
the performance objective are met, the award results in the issuance of shares of restricted stock or common stock
corresponding to such level. One-year performance share awards are then subject to time-based vesting pursuant to which
the shares of restricted stock vest in equal annual installments over the applicable vesting period, which is generally three
years. Three-year performance share awards result in the issuance of shares of common stock that are not subject to time-
based vesting at the conclusion of the three-year performance period if earned.

In the event that the Company's financial performance meets the predetermined targets for the performance objectives of
the one-year or three-year performance share awards, the Company will issue each award recipient the number of shares of
restricted stock or common stock, as applicable, equal to the target award specified in the individual's underlying
performance share award agreement. In the event the financial results of the Company exceed the predetermined targets,
additional shares up to the maximum award may be issued. In the event the financial results of the Company fall below the
predetermined targets, a reduced number of shares may be issued. If the financial results of the Company fall below the
threshold performance levels, no shares will be issued. The total number of shares issued for the three-year performance
share award may be increased, decreased, or unchanged based on the TSR modifier described above.

The recipients of performance share awards do not receive dividends or possess voting rights during the performance
period and, accordingly, the fair value of the one-year performance share awards is the quoted market value of CPSI's
common stock on the grant date less the present value of the expected dividends not received during the relevant period.
The TSR modifier applicable to the three-year performance share awards is considered a market condition and therefore is
reflected in the grant date fair value of the award. A Monte Carlo simulation has been used to account for this market
condition in the grant date fair value of the award.

Expense of one-year performance share awards is recognized using the accelerated attribution (graded vesting) method
over the period beginning on the date the Company determines that it is probable that the performance criteria will be

achieved and ending on the last day of the vesting period for the restricted stock issued in satisfaction of such awards.
Expense of three-year performance share awards is recognized using ratable straight-line amortization over the three-year
performance period. In the event the Company determines it is no longer probable that the minimum performance level will
be achieved, all previously recognized compensation expense related to the applicable awards is reversed in the period such
a determination is made.

A summary of performance share award activity under the Plans for the years ended December 31, 2020, 2019 and 2018, is
as follows, based on the target award amounts set forth in the performance share award agreements:

Weighted-
Average
Grant-Date
Fair Value

Performance share awards outstanding at January 1, 2018 . . . . . . . . . . . . . . . . . . . . . . .

189,325

Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Forfeited or unearned . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Performance share awards converted to restricted stock . . . . . . . . . . . . . . . . . . . . . . . . .

184,776

(11,930)

(177,395)

Performance share awards outstanding at December 31, 2018 . . . . . . . . . . . . . . . . . . . .

184,776

Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Forfeited or unearned . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Performance share awards converted to restricted stock . . . . . . . . . . . . . . . . . . . . . . . . .

110,310

44,189

(138,566)

Performance share awards outstanding at December 31, 2019 . . . . . . . . . . . . . . . . . . . .

200,709

Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Forfeited or unearned . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Performance share awards converted to restricted stock . . . . . . . . . . . . . . . . . . . . . . . . .

107,298

(35,477)

(19,678)

Performance share awards outstanding at December 31, 2020 . . . . . . . . . . . . . . . . . . . .

252,852

29.94

30.15

29.94

30.15

30.95

29.77

29.80

30.75

26.96

30.15

29.27

Stock Repurchases

On September 4, 2020, our Board of Directors approved a stock repurchase program under which we may repurchase up to
$30.0 million of our common stock through September 3, 2022. During 2020, we repurchased 46,900 shares. The
approximate dollar value of shares that may yet be repurchased under the stock repurchase program was $28.7 million as of
December 31, 2020. Any future stock repurchase transactions may be made through open market purchases, privately-
negotiated transactions, or otherwise in compliance with Rule 10b-18 under the Securities Exchange Act of 1934, as
amended. Any repurchase activity will depend on many factors, such as the availability of shares of our common stock,
general market conditions, the trading price of our common stock, alternative uses for capital, the Company's financial
performance, compliance with the terms of our Amended and Restated Credit Agreement and other factors. Concurrent
with the authorization of this stock repurchase program, the Board of Directors opted to indefinitely suspend all quarterly
dividends.

10.

CONCENTRATION OF CREDIT RISK

Financial instruments, which potentially subject the Company to concentration of credit risk, consist principally of
temporary cash investments and trade receivables (including financing receivables). The Company places its temporary
cash investments with credit-worthy, high-quality financial institutions.

The Company’s customer base is concentrated in the healthcare industry. Customers are primarily located throughout the
United States. The Company requires no collateral or other security to support customer trade receivables. An allowance
for credit losses for trade receivables and an allowance for credit losses for financing receivables have been established for
potential credit losses based on historical collection experience.

The Company maintains its cash and cash equivalents in bank deposit accounts, which, at times, may exceed federally
insured limits. The Company has not experienced any losses in such accounts and does not believe it is exposed to any
significant credit risk on cash and cash equivalents.

11.

FINANCING RECEIVABLES

Total financing receivables were $22.3 million as of December 31, 2020, compared with $30.3 million as of December 31,
2019.

Short-Term Payment Plans

The Company provides fixed monthly payment arrangements ("short-term payment plans") over terms ranging from three
to twelve months for meaningful use stage three and other 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 on December 31, 2020 and 2019:

(In thousands)
Short-term payment plans, gross . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Less: allowance for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Short-term payment plans, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

2020

2019

1,973
(99)
1,874

2,361
(165)
2,196

Long-Term Financing Arrangements

Additionally, the Company provides financing for purchases of its information and patient care systems to certain
healthcare providers under long-term financing arrangements expiring in various years through 2026. Under long-term
financing arrangements, the transaction price is adjusted by a discount rate that reflects market conditions and 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 consolidated statements of operations. These receivables typically have terms from
two to seven years.

The components of these receivables were as follows on December 31, 2020 and 2019:

(In thousands)
Long-term financing arrangements, gross . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Less: allowance for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: unearned income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term financing arrangements, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

2020

2019

24,082
(1,390)
(2,268)
20,424

34,483
(2,806)
(3,574)
28,103

Future minimum payments to be received subsequent to December 31, 2020 are as follows:

(In thousands)
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total minimum payments to be received . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: allowance for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: unearned income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Receivables, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

10,036
6,492
4,071
2,497
950
36
24,082
(1,390)
(2,268)
20,424

Credit Quality of Financing Receivables and Allowance for Credit Losses

The following table is a roll-forward of the allowance for financing credit losses for the years ended December 31, 2020
and 2019:

(In thousands)
December 31, 2020 . . . . . . . . . . . . $
December 31, 2019 . . . . . . . . . . . . $

Beginning
Balance

Provision

Charge-offs

Recoveries

Ending
Balance

2,971
2,567

$
$

1,632
970

$
$

(3,114) $
(566) $

— $
— $

1,489
2,971

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, 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 credit losses.
Financing receivables are written off only after the Company has exhausted all collection efforts. Write-off amounts during
2020 were uncharacteristically high as we wrote off large balances for a handful of customers for which specific reserves
had been established as of December 31, 2019.

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 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
December 31, 2020 and December 31, 2019:

(In thousands)
December 31, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . $
December 31, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . $

1 to 90 Days
Past Due

91 to 180 Days
Past Due

181 + Days
Past Due

Total
Past Due

1,270 $
1,480 $

227
150

$
$

672
207

$
$

2,169
1,837

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 the financing receivables or the financing receivables, current portion, net amounts in the accompanying
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), none of which are considered past due, based on the age of the oldest payment outstanding that has been reclassified
to trade accounts receivable:

(In thousands)
Stratification of uninvoiced client financing receivables based on aging of related trade
accounts receivable:

December 31,
2020

December 31,
2019

Uninvoiced client financing receivables related to trade accounts receivable that
are 1 to 90 Days Past Due . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Uninvoiced client financing receivables related to trade accounts receivable that
are 91 to 180 Days Past Due . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Uninvoiced client financing receivables related to trade accounts receivable that
are 181+Days Past Due . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total uninvoiced client financing receivables balances of clients with a trade accounts
receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Total uninvoiced client financing receivables of clients with no related trade accounts
receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total financing receivables with contractual maturities of one year or less . . . . . . . . . .

Less: allowance for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total financing receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

11,719

18,015

1,092

2,668

2,136

1,972

15,479

22,123

6,335

1,973

(1,489)

22,298

8,786

2,361

(2,971)

30,299

12.

INTANGIBLE ASSETS AND GOODWILL

Our purchased definite-lived intangible assets as of December 31, 2020 and 2019 are summarized as follows:

(In thousands)

December 31, 2020

Customer
Relationships

Trademark

Developed
Technology

Gross carrying amount, beginning of period . . . . . . . .

Accumulated amortization . . . . . . . . . . . . . . . . . . . . . .

84,370

(33,612)

11,120

(4,297)

29,700

(15,592)

Total

125,190

(53,501)

Net intangible assets as of December 31, 2020 . . . . $

50,758

6,823

14,108

71,689

Weighted average remaining years of useful life . . . . .

(In thousands)

December 31, 2019

Customer
Relationships

Trademark

Developed
Technology

Gross carrying amount, beginning of period . . . . . . . . $

82,300

10,900

Intangible assets acquired . . . . . . . . . . . . . . . . . . . . . .

Accumulated amortization . . . . . . . . . . . . . . . . . . . . . .

2,070

(26,456)

220

(3,449)

24,100

5,600

(12,175)

Net intangible assets as of December 31, 2019 . . . . $

57,914

7,671

17,525

Total

117,300

7,890

(42,080)

83,110

The following table represents the remaining amortization of definite-lived intangible assets as of December 31, 2020:

(In thousands)

For the year ended December 31,

2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Due thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

11,003

10,904

9,681

8,219

20,978

71,689

The following table sets forth the change in the carrying amount of goodwill by segment for the years ended December 31,
2020, 2019, and 2018:

(In thousands)

Acute Care
EHR

Post-acute
Care EHR

TruBridge

Total

Balance as of December 31, 2017 . . . . . . . . . . . . . . . . . . .

Balance as of December 31, 2018 . . . . . . . . . . . . . . . . . . .

Goodwill acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Balance as of December 31, 2019 . . . . . . . . . . . . . . . . . . .

Balance as of December 31, 2020 . . . . . . . . . . . . . . . . . . .

97,095

—

97,095

29,570

—

29,570

13,784

9,767

23,551

140,449

9,767

150,216

We determined there was no impairment to goodwill as of December 31, 2020, 2019, or 2018.

13.

LONG-TERM DEBT

Long-term debt was comprised of the following at December 31, 2020 and 2019:

(In thousands)

December 31, 2020

December 31, 2019

Term loan facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

Revolving credit facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Debt obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Less: debt issuance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Debt obligation, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Less: current portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

73,125

5,000

78,125

(1,308)

76,817

(3,457)

Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

73,360

88,823

20,000

108,823

(960)

107,863

(8,430)

99,433

As of December 31, 2020, the carrying value of debt approximates the fair value due to the variable interest rate which
reflects market rates.

Credit Agreement

In conjunction with our acquisition of HHI in January 2016, we entered into a syndicated credit agreement with Regions
Bank ("Regions") serving as administrative agent, which provided for a $125 million term loan facility and a $50 million
revolving credit facility. On June 16, 2020, we entered into an Amended and Restated Credit Agreement that increased the
aggregate principal amount of our credit facilities to $185 million, which includes a $75 million term loan facility and a
$110 million revolving credit facility.

Each of our credit facilities continues to bear interest at a rate per annum equal to an applicable margin plus, at our option,
either (1) the Adjusted LIBOR rate for the relevant interest period, subject to a floor of 0.50%, (2) an alternate base rate
determined by reference to the greater of (a) the prime lending rate of Regions, (b) the federal funds rate for the relevant
interest period plus one half of one percent per annum and (c) the one month LIBOR rate, subject to the aforementioned
floor, plus one percent per annum, or (3) a combination of (1) and (2). The applicable margin range for LIBOR loans and
the letter of credit fee ranges from 1.8% to 3.0%. The applicable margin range for base rate loans ranges from 0.8% to
2.0%, in each case based on the Company's consolidated net leverage ratio.

Principal payments with respect to the term loan facility are due on the last day of each fiscal quarter beginning September
30, 2020, with quarterly principal payments of approximately $0.9 million through June 30, 2022, approximately $1.4
million through June 30, 2024 and approximately $1.9 million through March 31, 2025, with maturity on June 16, 2025 or
such earlier date as the obligations under the Amended and Restated Credit Agreement become due and payable pursuant
to the terms of such agreement. Any principal outstanding under the revolving credit facility is due and payable on the
maturity date.

Anticipated annual future maturities of the term loan facility and revolving credit facility are as follows as of December 31,
2020:

2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3,750

4,687

5,625

6,563

57,500

78,125

Our credit facilities are secured pursuant to an Amended and Restated Pledge and Security Agreement, dated June 16,
2020, among the parties identified as obligors therein and Regions, as collateral agent, on a first priority basis by a security
interest in substantially all of the tangible and intangible assets (subject to certain exceptions) of the Company and certain
subsidiaries of the Company, as guarantors (collectively, the “Subsidiary Guarantors”), including certain registered
intellectual property and the capital stock of certain of the Company’s direct and indirect subsidiaries. Our obligations
under the Amended and Restated Credit Agreement are also guaranteed by the Subsidiary Guarantors.

The Amended and Restated Credit Agreement provides incremental facility capacity of $50 million, subject to certain
conditions. The Amended and Restated Credit Agreement includes a number of restrictive covenants that, among other
things and in each case subject to certain exceptions and baskets, impose operating and financial restrictions on the
Company and the Subsidiary Guarantors, including the ability to incur additional debt; incur liens and encumbrances; make
certain restricted payments, including paying dividends on the Company's equity securities or payments to redeem,
repurchase or retire the Company's equity securities (which are subject to our compliance, on a pro forma basis to give
effect to the restricted payment, with the fixed charge coverage ratio and consolidated net leverage ratio described below);
enter into certain restrictive agreements; make investments, loans and acquisitions; merge or consolidate with any other
person; dispose of assets; enter into sale and leaseback transactions; engage in transactions with affiliates; and materially
alter the business we conduct. The Amended and Restated Credit Agreement requires the Company to maintain a minimum
fixed charge coverage ratio of 1.25:1.00 throughout the duration of such agreement. Under the Amended and Restated
Credit Agreement, the Company is required to comply with a maximum consolidated net leverage ratio of 3.50:1.00. The
Amended and Restated Credit Agreement also contains customary representations and warranties, affirmative covenants
and events of default. We believe that we were in compliance with the covenants contained in the credit agreement as of
December 31, 2020.

The Amended and Restated Credit Agreement requires the Company to mandatorily prepay our credit facilities with 50%
of excess cash flow (minus certain specified other payments). This mandatory prepayment requirement is applicable only if
the Company's net leverage ratio exceeds 2.50:1.00. The Company is permitted to voluntarily prepay our credit facilities at
any time without penalty, subject to customary “breakage” costs with respect to prepayments of LIBOR rate loans made on
a day other than the last day of any applicable interest period. The excess cash flow mandatory prepayment requirement
under the credit agreement resulted in a $7.0 million prepayment on the term loan facility during the first quarter of 2019
related to excess cash flow generated by the Company during 2018. An excess cash flow prepayment related to excess cash
flow generated during 2019 was not required during 2020.

14.

BENEFIT PLANS

In January 1994, the Company adopted the CPSI 401(k) Retirement Plan that covers all eligible employees of the Company
who have completed one year of service. The plan allows eligible employees to contribute up to 60% of their pre-tax
earnings up to the statutory limit prescribed by the Internal Revenue Service. The Company matches a discretionary
amount determined by the Board of Directors. The Company contributed approximately $3.2 million, $2.9 million, and
$2.6 million to the plan for the years ended December 31, 2020, 2019 and 2018, respectively.

The Company provides certain health and medical benefits to eligible employees, their spouses and dependents pursuant to
a benefit plan funded by the Company. Each participating employee contributes to the Company’s costs associated with
such benefit plan. The Company’s obligation to fund this benefit plan and pay for these benefits is limited through the
Company’s purchase of an insurance policy from a third-party insurer. The amount established as a reserve is intended to
recognize the Company’s estimated obligations with respect to its payment of claims and claims incurred but not yet
reported under the benefit plan. Management believes that the recorded liability for medical self-insurance at December 31,
2020 and 2019 is adequate to cover the losses and claims incurred, but these reserves are based on estimates and the
amount ultimately paid may be more or less than such estimates.

15.

OPERATING LEASES

The Company leases office space in various locations in Alabama, Louisiana, Pennsylvania, Minnesota, Maryland, and
Mississippi. These leases have terms expiring from 2021 through 2030 but do contain optional extension terms. Leases
with an initial term of 12 months or less are not recorded on the balance sheet; we recognize lease expense for these leases
on a straight-line basis over the lease term.

Supplemental balance sheet information related to operating leases is as follows:

(In thousands)

Operating lease assets:

December 31,
2020

Operating lease assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

6,610

Operating lease liabilities:

Other accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Operating lease liabilities, net of current portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total operating lease liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

1,518

5,092

6,610

Weighted average remaining lease term in years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Weighted average discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5.1%

Because our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information
available at the lease commencement date in determining the present value of lease payments. We used the incremental
borrowing rate on January 1, 2019, for operating leases that commenced prior to that date.

The future minimum lease payments payable under these operating leases subsequent to December 31, 2020 are as follows:

(In thousands)
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total lease payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less imputed interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

1,518
1,436
1,363
980
727
1,656
7,680
(1,070)
6,610

Total rent expense for the years ended December 31, 2020, 2019, and 2018 was $1.7 million, $2.2 million, and
$2.6 million, respectively.

Total cash paid for amounts included in the measurement of lease liabilities within operating cash flows from operating
leases for the year ended December 31, 2020 was $1.7 million.

16.

COMMITMENTS AND CONTINGENCIES

From time to time, the Company is involved in routine litigation that arises in the ordinary course of business. Management
does not believe it is reasonably possible that such matters will have a material adverse effect on the Company’s financial
statements.

17.

FAIR VALUE

ASC 820, Fair Value Measurements and Disclosures, establishes a framework for measuring fair value and expands
financial statement disclosures about fair value measurements. Fair value is the price that would be received to sell an asset
or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an
orderly transaction between market participants at the measurement date. The Codification topic does not require any new
fair value measurements, but rather applies to all other accounting pronouncements that require or permit fair value
measurements. The Codification topic requires that assets and liabilities carried at fair value be classified and disclosed in
one of the following three categories:

Level 1: Quoted market prices in active markets for identical assets or liabilities.

Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data.

Level 3: Unobservable inputs that are not corroborated by market data.

As of December 31, 2020, we did not have any instruments that require fair value measurement.

18.

SEGMENT REPORTING

Our chief operating decision makers ("CODM") utilize three operating segments, "Acute Care EHR", "Post-acute Care
EHR" and "TruBridge", based on our three distinct business units with unique market dynamics and opportunities.
Revenues and costs of sales are primarily derived from the provision of services and sales of our proprietary software, and
our CODM assess the performance of these three segments at the gross profit level. Operating expenses and items such as
interest, income tax, capital expenditures and total assets are managed at a consolidated level and thus are not included in
our operating segment disclosures. Our CODM group is comprised of the Chief Executive Officer, Chief Growth Officer,
Chief Operating Officer, and Chief Financial Officer. Accounting policies for each of the reportable segments are the same
as those used on a consolidated basis.

The following table presents a summary of the revenues, cost of sales, and gross profit of our three operating segments for
the years ended December 31, 2020, 2019, and 2018:

(In thousands)

Revenues:

Acute Care EHR

Year Ended December 31,

2020

2019

2018

Recurring revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

105,597

109,046

111,936

Non-recurring revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total Acute Care EHR revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Post-acute Care EHR

Recurring revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Non-recurring revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total Post-acute Care EHR revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

TruBridge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Cost of sales:

Acute Care EHR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Post-acute Care EHR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

TruBridge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

29,173

134,770

16,272

1,912

18,184

111,534

264,488

64,540

4,821

58,881

35,028

144,074

17,466

3,812

21,278

109,282

274,634

68,569

5,303

56,617

46,036

157,972

18,599

3,593

22,192

100,247

280,411

69,831

6,153

54,699

Total cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

128,242

130,489

130,683

Gross profit:

Acute Care EHR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Post-acute Care EHR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

TruBridge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

70,230

13,363

52,653

75,505

15,975

52,665

88,141

16,039

45,548

Total gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

136,246

144,145

149,728

Corporate operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(115,192)

(119,562)

(124,846)

Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Gain on contingent consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Loss on extinguishment of debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,494

—

(202)

(3,562)

807

5,000

—

(6,694)

Income before taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

18,784

23,696

803

—

(7,577)

18,108

19.

SUBSEQUENT EVENTS

Costs Associated with Exit or Disposal Activities

On February 1, 2021, the Company committed to a reduction in force that is expected to result in the termination of
approximately 1.0% of the Company's workforce (21 employees). The reduction in force is a component of a broader
strategic review of the Company's operations that is intended to more effectively align resources with business priorities.
Substantially all of the employees impacted by the reduction in force were notified of the reduction on February 9, 2021
and will exit the Company in the first quarter of 2021. The Company estimates that it will incur expenses of approximately
$2.7 million related to the reduction in force, of which approximately $2.4 million is expected to be incurred in the first
quarter of 2021, with the remaining expenses to be incurred during the remainder of 2021. The expenses will consist of
one-time termination benefits to the affected employees, including but not limited to severance payments, healthcare
benefits, and payments for accrued vacation time. After the reduction in force is implemented, the Company expects to
realize approximately $3.9 million in annual savings compared to current expense levels.

20.

QUARTERLY FINANCIAL STATEMENTS (UNAUDITED)

The following table presents a summary of our results of operations for our eight most recent quarters ended December 31,
2020. The information for each of these quarters is unaudited and has been prepared on a basis consistent with the audited
financial statements. This information includes all adjustments, consisting only of normal recurring adjustments, we
consider necessary for fair presentation of this information when read in conjunction with the audited financial statements
and related notes. Our operating results have varied on a quarterly basis and may fluctuate significantly in the future.

(In thousands, except for per share data)
Year Ended December 31, 2020

Sales revenues . . . . . . . . . . . . . . . . . . . . . . . . . . $
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating income . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income per share

Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
$
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Year Ended December 31, 2019

Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
$
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1st Quarter

2nd Quarter

3rd Quarter

4th Quarter

$
$

69,757
36,113
6,132
4,090

0.28
0.28

69,141
37,115
6,048
3,444

$
$

59,549
30,106
2,745
1,764

0.12
0.12

66,156
34,535
3,616
1,663

$
$

68,333
35,418
6,204
5,268

0.36
0.36

68,699
35,915
6,007
4,135

0.24
0.24

$
$

0.12
0.12

$
$

0.29
0.29

$
$

66,849
34,609
5,973
3,124

0.22
0.22

70,638
36,580
8,912
11,226

0.78
0.78

21.

COVID-19 PANDEMIC

In December 2019, a novel coronavirus disease ("COVID-19") was reported, and in January 2020, the World Health
Organization ("WHO") declared it a Public Health Emergency of International Concern. In February 2020, the WHO
raised its assessment of the COVID-19 threat from high to very high at a global level due to the continued increase in the
number of cases and affected countries, and in March 2020, the WHO characterized COVID-19 as a pandemic and the
President of the United States declared the COVID-19 outbreak a national emergency.

The COVID-19 pandemic has caused, and is continuing to cause, severe economic, market, and other disruptions to the
U.S. and global economies. Although the pandemic had a muted impact on our results for the first quarter of 2020, the
Company began experiencing increasingly adverse business conditions beginning in the latter half of March through the
date of this report, including the results of operations for the year ended December 31, 2020. Most notably:

•

Travel restrictions and social distancing protocols have created an additional challenge to our on-site
implementation and sales teams. Although we have shown success with remote implementation models and our
sales representatives are engaging in remote contact with existing customers and prospects, these restrictions and
protocols are expected to continue to have an incrementally negative impact on implementation revenues and new
sales generation.

Patient volumes at our client hospitals have experienced a severe decline from historical levels. As the
overwhelming majority of TruBridge revenues are directly or indirectly correlated with client patient volumes,
these reduced patient volumes are expected to continue to negatively impact our related revenues.

Although we have experienced no notable disruption to our operating cash flows through the date of this report,
we currently expect that the aforementioned limitations on travel and decreased client patient volumes will
ultimately result in decreased cash collections from our customers as long as these conditions persist. These
decreases in cash collections could be further negatively impacted by the amount and extent to which the
pandemic impacts the financial condition and liquidity of our customers.

Despite these adverse business conditions, the pandemic has had a muted impact on our financial condition as of December
31, 2020.

At this time, the Company is uncertain of the potential full magnitude or duration of the business and economic impacts
from the unprecedented public health efforts to contain and combat the spread of COVID-19, and while the extent to which
the COVID-19 pandemic continues to impact the Company's results will depend on future developments, the outbreak
could result in a material impact to the Company's future financial position, results of operations, cash flows and liquidity.

SCHEDULE II
COMPUTER PROGRAMS AND SYSTEMS, INC.
VALUATION AND QUALIFYING ACCOUNTS
(In thousands)

Description
Allowance for credit losses deducted
from accounts receivable in the balance
sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Balance at
beginning of
period

Additions
charged to cost
and expenses (1)

Deductions (2)

Balance at end
of period

2018 $
2019 $
2020 $

2,654
2,124
2,078

$
$
$

1,485
1,378
2,825

$
$
$

(2,015) $
(1,424) $
(3,202) $

2,124
2,078
1,701

(1) Adjustments to allowance for change in estimates.
(2) Uncollectible accounts written off, net of recoveries.

Description
Allowance for credit losses deducted
from financing receivables in the
balance sheet . . . . . . . . . . . . . . . . . . . . .

Balance at
beginning of
period

Additions
charged to cost
and expenses (1)

Deductions (2)

Balance at end
of period

2018 $
2019 $
2020 $

3,244
2,567
2,971

$
$
$

1,691
970
1,632

$
$
$

(2,368) $
(566) $
(3,114) $

2,567
2,971
1,489

(1) Adjustments to allowance for change in estimates.
(2) Uncollectible accounts written off, net of recoveries.

ITEM 9.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.

ITEM 9A.

CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to provide reasonable assurance that the information required
to be disclosed by us in reports that we file or submit under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), is recorded, processed, summarized and reported within the time periods specified in the rules and forms promulgated by
the Securities and Exchange Commission, and that such information is accumulated and communicated to our management,
including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required
disclosure. Because of the inherent limitations to the effectiveness of any system of disclosure controls and procedures, no
evaluation of disclosure controls and procedures can provide absolute assurance that all control issues and instances of fraud, if
any, with a company have been prevented or detected on a timely basis. Even disclosure controls and procedures determined to
be effective can only provide reasonable assurance that their objectives are achieved.

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation
of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and
operation of our disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) pursuant to Rule 13a-15 of the
Exchange Act. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our
disclosure controls and procedures are effective at the reasonable assurance level.

Changes in Internal Control over Financial Reporting

There were no changes in the Company’s internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f))
during the quarter ended December 31, 2020 that have materially affected, or are reasonably likely to materially affect, the
Company’s internal control over financial reporting.

Management’s Annual Report on Internal Control Over Financial Reporting

This report is included in Item 8 on page 60 and is incorporated herein by reference.

Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting

This report is included in Item 8 on page 61 and is incorporated herein by reference.

ITEM 9B.

OTHER INFORMATION.

None.

PART III

ITEM 10.

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

We have adopted a Code of Business Conduct and Ethics applicable to all of our directors, officers (including our Chief
Executive Officer and senior financial officers) and employees. We have also adopted a separate code of ethics with additional
guidelines and responsibilities applicable to our Chief Executive Officer and senior financial officers, known as the Code of
Ethics for CEO and Senior Financial Officers. Copies of the Code of Business Conduct and Ethics and the Code of Ethics for
CEO and Senior Financial Officers are available on CPSI’s web site at www.cpsi.com in the "Corporate Information" section
under "Corporate Governance."

Other information required by this Item regarding executive officers is included in Part I of this Form 10-K under the caption
"Executive Officers" in accordance with Instruction 3 to Paragraph (b) of Item 401 of Regulation S-K.

Other information required by this Item is incorporated by reference pursuant to General Instruction G(3) of Form 10-K from
CPSI’s definitive Proxy Statement for the 2021 Annual Meeting of Stockholders (the "2021 Proxy Statement") to be filed with
the Securities and Exchange Commission pursuant to Regulation 14A.

ITEM 11.

EXECUTIVE COMPENSATION

The information required by this Item is incorporated by reference pursuant to General Instruction G(3) of Form 10-K from the
2021 Proxy Statement to be filed with the Securities and Exchange Commission pursuant to Regulation 14A.

ITEM 12.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS

Securities Authorized for Issuance Under Equity Compensation Plans

The following table summarizes the securities that have been authorized for issuance as of December 31, 2020 under the
Company’s 2019 Incentive Plan, as amended (the “Plan”), which was previously approved by our stockholders. The Plan is
described in Note 9 to the consolidated financial statements.

Plan Category

Equity compensation plans approved by
stockholders . . . . . . . . . . . . . . . . . . . . . . .

Number of securities to
be issued upon exercise
of outstanding options,
warrants and rights
(a)
665,819 (1)

Equity compensation plans not approved
by stockholders . . . . . . . . . . . . . . . . . . . .

3,927

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . .

669,746(3)

Weighted-average
exercise price of
outstanding options,
warrants and rights
(b)

N/A

$5.94

Number of securities
remaining available for
future issuance under
equity compensation
plans (excluding
securities reflected in
column (a))
(c)
645,767 (2)

N/A

645,767 (2)

(1)

Includes (i) 252,852 target performance share awards outstanding under the Plans and (ii) 412,967 time-vested restricted
stock awards outstanding under the Plan as of December 31, 2020.

(2) Represents shares of common stock issuable pursuant to the Plan, assuming maximum payout of outstanding

performance share awards.

(3) Represents (i) 3,927 shares issuable under outstanding stock options at an exercise price of $5.94 per share, assumed in
the Company’s acquisition of Healthland Holding Inc. and its affiliates in January 2016, (ii) 252,852 target performance
share awards outstanding under the Plan and (iii) 412,967 time-vested restricted stock awards outstanding under the Plan
as of December 31, 2020.

ITEM 13.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE

ITEM 14.

PRINCIPAL ACCOUNTANT FEES AND SERVICES

PART IV

ITEM 15.

EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a)(1) and (2) and (c) – Financial Statements and Financial Statement Schedules.

Financial Statements: The Financial Statements and related Financial Statements Schedule of CPSI are included herein in Part
II, Item 8.

(a)(3) and (b) – Exhibits.

The exhibits listed on the Exhibit Index beginning on page 98 of this Annual Report on Form 10-K are filed herewith or are
incorporated herein by reference.

ITEM 16.

FORM 10-K SUMMARY

None.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized, on this the 12th day of March, 2021.

COMPUTER PROGRAMS AND SYSTEMS, INC.

By:

/s/ J. Boyd Douglas
J. Boyd Douglas
President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on the dates indicated.

DIRECTORS AND OFFICERS

Board of Directors

Glenn P. Tobin, Ph.D.
Chairman
RetiredExecutive
VicePresident
The Advisory Board Company

J. Boyd Douglas, Jr.
PresidentandChief
ExecutiveOfficer
Computer Programs
and Systems, Inc.

David A. Dye
ChiefGrowthOfficer
Computer Programs
and Systems, Inc.

Regina M. Benjamin, M.D.
ChiefExecutiveOfficer
Bayou La Batre Rural Health Clinic

Christopher T. Hjelm
RetiredExecutiveVicePresident
andChiefInformationOfficer
The Kroger Company

Charles P. Huffman
RetiredExecutiveVicePresident
andChiefFinancialOfficer
EnergySouth, Inc.

W. Austin Mulherin, III
Attorney
Frazer, Greene, Upchurch
& Baker, LLC

Denise Warren
ExecutiveVicePresidentand
ChiefOperatingOfficer
WakeMed Health & Hospitals

Officers

J. Boyd Douglas, Jr.
Presidentand
ChiefExecutiveOfficer

David A. Dye
ChiefGrowthOfficer

Matt J. Chambless
ChiefFinancialOfficer

Chris L. Fowler
ChiefOperatingOfficer

Stock Performance Graph
The following graph sets forth the cumulative total return (assuming reinvestment of dividends) to our
stockholders during the period beginning December 31, 2015, and ending on December 31, 2020, compared
to an overall stock market index (S&P 500 Index) and the NASDAQ Computer and Data Processing Group.

$325

$300

$275

$250

$225

$200

$175

$150

$125

$100

$75

$50

$25

12/15

12/16

12/17

12/18

12/19

12/20

Computer Programs and Systems, Inc.

S&P 500

NASDAQ Computer and Data Processing

Computer Programs and Systems, Inc.
S&P 500
NASDAQ Computer and Data Processing

$ 100.00
$ 100.00
$ 100.00

$ 49.71
$ 111.96
$ 107.35

$ 65.18
$ 136.40
$ 150.04

$ 55.21
$ 130.42
$ 152.52

$ 58.95
$ 171.49
$ 213.66

$ 60.63
$ 203.04
$ 305.01

12/15

12/16

12/17

12/18

12/19

12/20

CORPORATE DATA

Independent Registered Public Accounting Firm
Grant Thornton LLP
1100 Peachtree Street, Suite 1200
Atlanta, GA 30309

Transfer Agent
American Stock Transfer & Trust Company, LLC
6201 15th Avenue
Brooklyn, NY 11219
Toll free: (800) 937-5449
Local & international: (718) 921-8124
Email: info@amstock.com
Web site: www.amstock.com

Legal Counsel
Maynard, Cooper & Gale, P.C.
1901 Sixth Avenue North, Suite 1700
Birmingham, AL 35203-2618
(205) 254-1000
www.maynardcooper.com

Corporate Headquarters
Computer Programs and Systems, Inc.
6600 Wall Street
Mobile, AL 36695
(251) 639-8100
www.cpsi.com

Common Stock
Computer Programs and Systems, Inc.’s common stock
is traded on The NASDAQ Stock Market’s Global Select
Market under the symbol “CPSI.”

6600 Wall Street

| Mobile, Alabama 36695

The CPSI family of companies