You should read the following discussion and analysis of our financial condition
and results of operations together with the unaudited condensed consolidated
financial statements and related notes appearing elsewhere herein.

This discussion and analysis 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 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. Such
factors may include:
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
•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
•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;


                                       25
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•quarterly fluctuations in our financial results due to various factors;
•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.
Additional information concerning these and other factors that could cause
differences between forward-looking statements and future actual results is
discussed under the heading "Risk Factors" in our Annual Report on Form 10-K for
the year ended December 31, 2020.
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 five companies - Evident,
LLC ("Evident"), TruBridge, LLC ("TruBridge"), American HealthTech, Inc.
("AHT"), iNetXperts, Corp. d/b/a Get Real Health ("Get Real Health"), and
TruCode LLC ("TruCode"). 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.
•TruCode, included within our TruBridge segment, provides configurable,
knowledge-based software that gives coders, CDI specialists and auditors the
flexibility to code according to their knowledge, preferences and experience.
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 client
base. 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. Our target
market for our TruBridge services includes community hospitals with fewer than
600 acute care beds.
See Note 17 to the condensed 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


                                       26

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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 and through the second quarter of 2021,
retention rates 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 markets. We may also seek to grow
through acquisitions of businesses, technologies or products if we determine
that such acquisitions are likely to help us meet our strategic goals.

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. 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 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 an advanced payment model that incentivizes high-quality, cost effective-care
via value-based reimbursement. This pressure could further encourage 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


                                       27

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"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 are 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. A more substantial reduction in total financing
receivables occurred in 2020 and has continued into the first six months of
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).
On February 1, 2021, we committed to a reduction in force that resulted 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 our resources with
business priorities. Substantially all of the employees impacted by the
reduction in force exited 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 $2.2 million was incurred in the
first six months of 2021, with the remaining expenses to be incurred during the
remainder of 2021. These expenses 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 fully implemented, the Company
expects to realize approximately $3.9 million in annual savings compared to
prior expense levels.
During the second quarter of 2021, our ongoing monitoring activities associated
with the capitalization of software development costs and the related
correlation between capitalization rates and operational metrics designed to
reflect the distribution of work revealed that our then-current labor
capitalization methodology did not fully reflect all of the critical activities
necessary to develop software assets. Consequently, during the second quarter of
2021, we elected to change our method of estimating the labor costs incurred in
developing software assets. Prior to this change, we estimated the associated
labor costs using an estimated time-equivalent for workload metrics commonly
utilized within agile software development environments. With this change, we
now estimate these labor costs using the distribution of these agile workload
metrics between capitalizable and non-capitalizable units of work. We believe
this change is preferable as the new methodology better estimates capitalizable
labor costs and is consistent with industry best practices. We have determined
that this change in accounting for software development costs is a change in
accounting estimate effected by a change in accounting principle and, as such,
has been accounted for on a prospective basis. In connection with this change,
we capitalized software development costs of $3.2 million and $4.1 million
during the three and six months ended June 30, 2021. We estimate that the effect
of this change was to increase capitalized amounts by approximately $2.0 million
for both the three and six months ended June 30, 2021, with a corresponding
decrease to product development costs.


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COVID-19
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. Although recent
operational metrics indicate promising signs that these patient volumes have
mostly recovered, 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 exact 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 of 2020. Gradual signs of improvements started in the third
quarter of 2020 and have continued through the second quarter of 2021. However,
uncertainty remains with respect to the pace of economic recovery, as well as
the potential for resurgence in transmission of COVID-19 and related business
closures due to the emergence of virus variants and vaccine hesistancy and
refusal among various populations.
The Company expects the negative impacts of the pandemic to continue for the
foreseeable future, but the degree of the impact will depend on the ability of
our community hospital clients to return to normal operations and patient
volume. 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, 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. Although we
have recently seen some improvement in TruBridge revenues, we cannot predict the
potential negative impacts any COVID-19 resurgence will have on patient volumes
and the resulting revenues.
•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 costs of sales as a percent of
revenues. Such restrictions also reduce non-reimbursable travel, which lowers
operating expenses. While travel has begun to rebound with the easing of certain
COVID-19 travel restrictions, any COVID-19 resurgence may result in the
re-imposition of travel restrictions.
•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.


                                       29
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Results of Operations
During the first six months of 2021, we generated revenues of $136.5 million
from the sale of our products and services, compared to $129.3 million million
during the first six months of 2020, an increase of 6% that is primarily
attributed to the aforementioned improvement in hospital patient volumes from
the early days of the COVID-19 pandemic and the corresponding positive impact on
TruBridge revenues. This increase in revenues is the primary driver behind the
corresponding increase in net income, which increased by $4.4 million to $10.3
million from the first six months of 2020. Net cash provided by operating
activities increased by $8.3 million, from $24.8 million during the first six
months of 2020 to $33.1 million during the first six months of 2021, primarily
due to the aforementioned improved profitability coupled with more cash
advantageous changes in working capital.


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The following table sets forth certain items included in our results of operations for the three and six months ended June 30, 2021 and 2020, expressed as a percentage of our total revenues for these periods:


                                                        Three Months Ended June 30,                                                       Six Months Ended June 30,
                                                 2021                                    2020                                    2021                                     2020
(In thousands)                        Amount               % Sales            Amount             % Sales              Amount               % Sales            Amount             % Sales
INCOME DATA:
Sales revenues:
System sales and support:
Acute Care EHR                   $      31,562                46.1  %       $ 30,362                51.0  %       $     63,452                46.5  %       $ 66,877                 51.7  %
Post-acute Care EHR                      4,405                 6.4  %          4,362                 7.3  %              8,881                 6.5  %          9,033                  7.0  %
Total System sales and support          35,967                52.5  %         34,724                58.3  %             72,333                53.0  %         75,910                 58.7  %
TruBridge                               32,566                47.5  %         24,825                41.7  %             64,205                47.0  %         53,396                 41.3  %
Total sales revenues                    68,533               100.0  %         59,549               100.0  %            136,538               100.0  %        129,306                100.0  %
Costs of sales:
System sales and support:
Acute Care EHR                          16,233                23.7  %         14,542                24.4  %             32,445                23.8  %         31,801                 24.6  %
Post-acute Care EHR                      1,216                 1.8  %          1,145                 1.9  %              2,380                 1.7  %          2,472                  1.9  %
Total System sales and support          17,449                25.5  %         15,687                26.3  %             34,825                25.5  %         34,273                 26.5  %
TruBridge                               17,196                25.1  %         13,756                23.1  %             32,975                24.2  %         28,813                 22.3  %
Total costs of sales                    34,645                50.6  %         29,443                49.4  %             67,800                49.7  %         63,086                 48.8  %
Gross profit                            33,888                49.4  %         30,106                50.6  %             68,738                50.3  %         66,220                 51.2  %
Operating expenses:
Product development                      6,469                 9.4  %          8,371                14.1  %             14,899                10.9  %         16,642                 12.9  %
Sales and marketing                      5,312                 7.8  %          5,169                 8.7  %             10,613                 7.8  %         12,166                  9.4  %
General and administrative              10,986                16.0  %         10,955                18.4  %             24,135                17.7  %         22,802                 17.6  %
Amortization of
acquisition-related intangibles          3,383                 4.9  %          2,866                 4.8  %              6,440                 4.7  %          5,733                  4.4  %
Total operating expenses                26,150                38.2  %         27,361                45.9  %             56,087                41.1  %         57,343                 44.3  %
Operating income                         7,738                11.3  %          2,745                 4.6  %             12,651                 9.3  %          8,877                  6.9  %
Other income (expense):
Other income                               224                 0.3  %            (38)               (0.1) %              1,038                 0.8  %            324                  0.3  %
Loss on extinguishment of debt               -                   -  %           (202)               (0.3) %                  -                   -  %           (202)                (0.2) %
Interest expense                          (797)               (1.2) %           (803)               (1.3) %             (1,424)               (1.0) %         (1,982)                (1.5) %
Total other income (expense)              (573)               (0.8) %         (1,043)               (1.8) %               (386)               (0.3) %         (1,860)                (1.4) %
Income before taxes                      7,165                10.5  %          1,702                 2.9  %             12,265                 9.0  %          7,017                  5.4  %
Provision (benefit) for income
taxes                                    1,024                 1.5  %            (62)               (0.1) %              1,980                 1.5  %          1,163                  0.9  %
Net income                       $       6,141                 9.0  %       $  1,764                 3.0  %       $     10,285                 7.5  %       $  5,854                  4.5  %


Three Months Ended June 30, 2021 Compared with Three Months Ended June 30, 2020
Revenues
Total revenues for the three months ended June 30, 2021 increased by $9.0
million, or approximately 15%, compared to the three months ended June 30, 2020.


                                       31
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System sales and support revenues increased by $1.2 million, or 4%, compared to
the second quarter of 2020. System sales and support revenues were comprised of
the following during the respective periods:
                                                                       Three Months Ended June 30,
(In thousands)                                                           2021                  2020
Recurring system sales and support revenues (1)
Acute Care EHR                                                     $       26,807          $  25,728
Post-acute Care EHR                                                         4,170              3,997
Total recurring system sales and support revenues                          30,977             29,725

Non-recurring system sales and support revenues (2) Acute Care EHR

                                                              4,755              4,634
Post-acute Care EHR                                                           235                365
Total non-recurring system sales and support revenues                       4,990              4,999
Total system sales and support revenue                             $

35,967 $ 34,724

(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 care and post-acute care EHR solutions and related applications under a perpetual (non-subscription) licensing model.




Recurring system sales and support revenues increased by $1.3 million, or 4%,
compared to the second quarter of 2020. Acute Care EHR recurring revenues
increased by $1.1 million, or 4%, as attrition from the Thrive and Centriq
customer base has normalized to more historical levels and our SaaS customer
base has continued to grow, strengthening recurring revenues. Post-acute Care
EHR recurring revenues increased by $0.2 million, or 4%, as attrition has
stabilized as we continue to make technological improvements to the AHT product
line.
Non-recurring system sales and support revenues remained relatively consistent
at $5.0 million in each period, as Acute Care EHR non-recurring revenues
increased $0.1 million while Post-acute Care EHR nonrecurring revenues decreased
$0.1 million. We installed our Acute Care EHR solutions at four new hospital
clients during the second quarter of 2021 (all under SaaS arrangements,
resulting in revenue being recognized ratably over the contract term) compared
to five new hospital clients during the second quarter of 2020 (three under a
SaaS arrangement).
TruBridge revenues increased by $7.7 million, or 31%, compared to the second
quarter of 2020. Our hospital clients operate in an environment typified by
rising costs and increased complexity and are increasingly seeking to alleviate
themselves of the ever-increasing administrative burden of operating their own
business office functions. This increasing demand for services, coupled with the
aforementioned impact of improving hospital patient volumes on TruBridge
revenues, resulted in revenue increases of $3.3 million, or 40%, for our
accounts receivable management services; $2.1 million, or 29%, for our insurance
services division; and $0.4 million, or 22%, for our medical coding services.
Lastly, the acquisition of TruCode in May 2021 resulted in an additional $1.5
million of revenue during the second quarter of 2021.
Costs of Sales
Total costs of sales increased by $5.2 million, or 18%, compared to the second
quarter of 2020. As a percentage of total revenues, costs of sales increased
slightly to 51% of revenues in the second quarter of 2021 compared to 49% of
revenues in the second quarter of 2020.
Costs of Acute Care EHR system sales and support increased by $1.7 million, or
12%, compared to the second quarter of 2020, as our increased usage of vendor
partnerships to fulfill customer needs increased the related costs of
third-party software by $1.4 million. Additionally, the relaxing of certain
travel restrictions associated with the COVID-19 pandemic resulted in an
increase in associated travel costs of $0.5 million. The gross margin on Acute
Care EHR system sales and support decreased to 49% in the second quarter of
2021, compared to 52% in the second quarter of 2020 as the increase in costs of
sales outpaced the related increase in revenues.
Costs of Post-acute Care EHR system sales and support increased by $0.1 million,
or 6%, compared to the second quarter of 2020. The gross margin on Post-acute
Care EHR system sales and support decreased to 72% in the second quarter of
2021, compared to 74% in the second quarter of 2020, as slight decreases in
non-recurring revenues worked in tandem with slight cost increases to decrease
margins.



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Our costs associated with TruBridge sales and support increased by $3.4 million,
or 25%, compared to the second quarter of 2020, primarily driven by resource
expansion necessitated by the growing customer base and improved patient
volumes. The acquisition of TruCode in May 2021 resulted in an additional $0.6
million of costs of sales during the second quarter of 2021. The gross margin on
these services increased to 47% in the second quarter of 2021, compared to 45%
during the second quarter of 2020, as the growing recurring revenue base worked
in tandem with operational efficiences to increase margins.
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 costs decreased by $1.9 million, or 23%,
compared to the second quarter of 2020, with the primary driver being a $2.5
million, or 166%, increase in product development labor capitalization pursuant
to the aforementioned change in our method of estimating the labor costs
incurred in developing software assets requiring capitalization under ASC
350-40, Internal Use Software. This increased capitalization rate was partially
offset by increased amortization of the related assets and increased payroll
costs associated with expanding resources. The acquisition of TruCode in May
2021 resulted in $0.2 million of additional product development expenses during
the second quarter of 2021.
Sales and Marketing
Sales and marketing costs increased by $0.1 million, or 3%, compared to the
second quarter of 2020, with cost savings from the aforementioned
reduction-in-force offsetting much of the increased commission expenses
resulting from increased revenues. The acquisition of TruCode in May 2021
resulted in $0.1 million of additional sales and marketing expenses during the
second quarter of 2021.
General and Administrative
General and administrative expenses remained effectively unchanged from the
second quarter of 2020 as increased transaction-related costs associated with
our acquisition of TruCode were mostly offset by lowered employee benefits costs
resulting from improved vacation utilization and lower severity in healthcare
claims. The acquisition of TruCode in May 2021 resulted in $0.2 million of
additional general and administrative expenses during the second quarter of
2021.
Amortization of Acquisition-Related Intangibles
Amortization expense associated with acquisition-related intangible assets
increased by $0.5 million, or 18%, compared to the second quarter of 2020, due
to changes in estimates regarding the remaining useful lives of certain of our
acquired intangible assets combined with the amortization of intangibles
acquired in the TruCode acquisition.
Total Operating Expenses
Total operating expenses decreased by $1.2 million, or 4%, compared to the
second quarter of 2020. As a percentage of total revenues, total operating
expenses decreased to 38% of revenues in the second quarter of 2021, compared to
46% in the second quarter of 2020.
Total Other Income (Expense)
Total other income (expense) improved to expense of $0.6 million during the
second quarter of 2021 compared to expense of $1.0 million during the second
quarter of 2020. This improvement was mostly attributable to decreased cost
associated with our Rural Accountable Care Organization program due to decreased
participation and the lack of any loss on extinguishment of debt during the
second quarter of 2021, while the refinancing of our credit facilities during
the second quarter of 2020 resulted in a loss on extinguishment of $0.2 million
during the period.
Income Before Taxes
As a result of the foregoing factors, income before taxes increased by $5.5
million in the second quarter of 2021 compared to the second quarter of 2020.


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Provision for Income Taxes
Our effective tax rate for the three months ended June 30, 2021 increased to an
expense of 14.3% from a benefit of 3.6% during the three months ended June 30,
2020. During the second quarter of 2020, we increased our estimates related to
research and development ("R&D") tax credits, resulting in a benefit to the
effective tax rate that exceeded the related benefit during the second quarter
of 2021 by 34.7%. The decreased rate impact of R&D tax credits during the second
quarter of 2021 was partially offset by increased rate impacts related to tax
windfalls related to stock-based compensation and changes in various state
effective tax rates.
Net Income
Net income for the second quarter of 2021 increased by $4.4 million to $6.1
million, or $0.42 per basic and diluted share, compared with net income of $1.8
million, or $0.12 per basic and diluted share, for the second quarter of 2020.
Net income represented 9% of revenue for the second quarter of 2021, compared to
3% of revenue for the second quarter of 2020.
Six Months Ended June 30, 2021 Compared with Six Months Ended June 30, 2020
Revenues
Total revenues for the first six months of 2021 increased by $7.2 million, or
approximately 6%, compared to the first six months of 2020.
System sales and support revenues decreased by $3.6 million, or 5%, compared to
the first six months of 2020. System sales and support revenues were comprised
of the following during the respective periods:
                                                                        Six Months Ended June 30,
(In thousands)                                                           2021                  2020
Recurring system sales and support revenues (1)
Acute Care EHR                                                     $       54,017          $  52,166
Post-acute Care EHR                                                         8,392              8,131
Total recurring system sales and support revenues                          62,409             60,297

Non-recurring system sales and support revenues (2) Acute Care EHR

                                                              9,435             14,711
Post-acute Care EHR                                                           489                902
Total non-recurring system sales and support revenues                       9,924             15,613
Total system sales and support revenue                             $

72,333 $ 75,910

(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 care and post-acute care EHR solutions and related applications under a perpetual (non-subscription) licensing model.




Recurring system sales and support revenues increased by $2.1 million, or 4%,
compared to the first six months of 2020. Acute Care EHR recurring revenues
increased by $1.9 million, or 4%, as attrition from the Thrive and Centriq
customer base has normalized to more historical levels and our SaaS customer
base has continued to grow, strengthening recurring revenues. Post-acute Care
EHR recurring revenues increased by $0.3 million, or 3%, as attrition has
stabilized as we continue to make technological improvements to the AHT product
line.
Non-recurring system sales and support revenues decreased by $5.7 million, or
36%, compared to the first six months of 2020. Acute Care EHR non-recurring
revenues decreased by $5.3 million, or 36%. We installed our Acute Care EHR
solutions at nine new hospital clients during the first six months of 2021 (six
of which were under a SaaS arrangement, resulting in revenue being recognized
ratably over the contract term) compared to 14 new hospital clients during the
first six months of 2020 (11 of which were under a SaaS arrangement). Although
the number of non-SaaS new customer implementations remained relatively
unchanged, the related non-recurring revenues decreased as the first six months
of 2020 benefited from a high volume of late-installing applications for
non-SaaS implementations that went live in prior periods. Comparatively, the
continued shift in customer preference towards SaaS arrangements and the
continuing impacts of COVID-19 on client purchasing and implementation plans has
decreased the opportunities for such follow-on revenue activities for recent
implementations.


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TruBridge revenues increased by $10.8 million, or 20%, compared to the first six
months of 2020. Our hospital clients operate in an environment typified by
rising costs and increased complexity and are increasingly seeking to alleviate
themselves of the ever-increasing administrative burden of operating their own
business office functions. This increasing demand for services, coupled with the
aforementioned impact of improving hospital patient volumes on TruBridge
revenues, resulted in revenue increases of $5.2 million, or 28%, for our
accounts receivable management services; $2.9 million, or 19%, for our insurance
services division; and $0.7 million, or 17%, for our medical coding services.
Lastly, the acquisition of TruCode in May 2021 resulted in an additional $1.5
million of revenue during the first six months of 2021.
Costs of Sales
Total costs of sales increased by $4.7 million, or 7%, compared to the first six
months of 2020. As a percentage of total revenues, costs of sales increased
slightly to 50% of revenues in the first six months of 2021 compared to 49% of
revenues in the first six months of 2020.
Costs of Acute Care EHR system sales and support increased by $0.6 million, or
2%, compared to the first six months of 2020, as our increased usage of vendor
partnerships to fulfill customer needs increased the related costs of
third-party software by $2.3 million, which was partially offset by a decrease
in hardware costs associated with the decrease in non-recurring revenues. The
gross margin on Acute Care EHR system sales and support decreased to 49% in the
first six months of 2021, compared to 52% in the first six months of 2020 as the
increase in costs of sales worked in tandem with decreased non-recurring
revenues to decrease margins.
Costs of Post-acute Care EHR system sales and support decreased by $0.1 million,
or 4%, compared to the first six months of 2020, mostly as the decrease in
non-recurring revenues resulted in decreased hardware costs. The gross margin on
Post-acute Care EHR system sales and support remained relatively unchanged at
73% for both periods.
Our costs associated with TruBridge sales and support increased by $4.2 million,
or 14%, compared to the first six months of 2020, primarily driven by resource
expansion necessitated by the growing customer base and improved patient
volumes. The acquisition of TruCode in May 2021 resulted in an additional $0.6
million of costs of sales during the first six months of 2021. The gross margin
on these services increased to 49% in the first six months of 2021, compared to
46% during the first six months of 2020, as the growing recurring revenue base
worked in tandem with operational efficiences to increase margins.
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 costs decreased by $1.7 million, or 10%,
compared to the first six months of 2020, with the primary driver being a $2.5
million, or 166%, increase in product development labor capitalization pursuant
to the aforementioned change in our method of estimating the labor costs
incurred in developing software assets requiring capitalization under ASC
350-40, Internal Use Software. This increased capitalization rate was partially
offset by increased amortization of the related assets and increased payroll
costs associated with expanding resources. The acquisition of TruCode in May
2021 resulted in $0.2 million of additional product development expenses during
the first six months of 2021.
Sales and Marketing
Sales and marketing costs decreased by $1.6 million, or 13%, compared to the
first six months of 2020. The aforementioned reduction-in-force combined with
reduced non-recurring revenues resulted in decreased payroll and commission
expenses, while travel restrictions related to COVID-19 resulted in decreased
travel costs. Finally, stock compensation expense decreased due mostly to
lowered expectations regarding eventual achievement of targets associated with
our long-term performance share awards. The acquisition of TruCode in May 2021
resulted in $0.1 million of additional sales and marketing expenses during the
first six months of 2021.
General and Administrative
General and administrative expenses increased by $1.3 million, or 6%, compared
to the first six months of 2020, mostly due to $2.2 million in
reduction-in-force-related severance costs in the first six months of 2021 and
$0.8 million in transaction-related costs associated with our acquisition of
TruCode. These increases were partially offset by decreases in employee benefits
costs.


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Amortization of Acquisition-Related Intangibles
Amortization expense associated with acquisition-related intangible assets
increased by $0.7 million, or 12%, compared to the first six months of 2020, due
to changes in estimates regarding the remaining useful lives of certain of our
acquired intangible assets combined with the amortization of intangibles
acquired in the TruCode acquisition.
Total Operating Expenses
Total operating expenses decreased by $1.3 million, or 2%, compared to the first
six months of 2020. As a percentage of total revenues, total operating expenses
decreased to 41% of revenues in the first six months of 2021, compared to 44% in
the first six months of 2020.
Total Other Income (Expense)
Total other income (expense) improved to expense of $0.4 million during the
first six months of 2021 compared to expense of $1.9 million during the first
six months of 2020. This improvement was mostly attributable to a $0.7 million
increase in interest income from our long-term financing receivables, while a
decreasing interest rate environment and lowered average amounts outstanding
under our long-term debt facilities resulted in a $0.6 million decrease in
related interest expense.
Income Before Taxes
As a result of the foregoing factors, income before taxes increased by $5.2
million in the first six months of 2021 compared to the first six months of
2020.
Provision for Income Taxes
Our effective tax rate for the six months ended June 30, 2021 decreased to 16.1%
from 16.6% for the six months ended June 30, 2020 as decreased benefits related
to R&D tax credits were mostly offset by increased rate impacts related to tax
windfalls related to stock-based compensation and changes in various state
effective tax rates.
Net Income
Net income for the first six months of 2021 increased by $4.4 million to $10.3
million, or $0.71 per basic and $0.70 per diluted share, compared with net
income of $5.9 million, or $0.41 per basic and diluted share, for the first six
months of 2020. Net income represented 8% of revenue for the first six months of
2021, compared to 5% of revenue for the first six months of 2020.
Liquidity and Capital Resources
The Company's liquidity and capital resources were not materially impacted by
COVID-19 and related economic conditions during the six months ended June 30,
2021. For further discussion regarding the potential future impacts of COVID-19
and related economic conditions on the Company's liquidity and capital
resources, see "COVID-19" in this Management's Discussion and Analysis of
Financial Condition and Results of Operations and Part I, "Item 1A. Risk
Factors" in our Annual Report on Form 10-K for the year ended December 31, 2020.
Sources of Liquidity
As of June 30, 2021, our principal sources of liquidity consisted of cash and
cash equivalents of $19.1 million and our remaining borrowing capacity under the
revolving credit facility of $64.0 million, compared to $12.7 million of cash
and cash equivalents and $105.0 million of remaining borrowing capacity under
the revolving credit facility as of December 31, 2020. 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 June 30, 2021, we had $117.2 million in principal amount of indebtedness
outstanding under the credit facilities. We believe that our cash and cash
equivalents of $19.1 million as of June 30, 2021, the future operating cash
flows of the combined entity, and our remaining borrowing capacity under the
revolving credit facility of $64.0 million as of June 30, 2021, 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 Form 10-Q. 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


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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 by $8.3 million from $24.8
million provided by operations for the six months ended June 30, 2020 to $33.1
million provided by operations for the six months ended June 30, 2021. The
increase in cash flows provided by operations is primarily due to the
aforementioned improved profitability combined with more advantageous changes in
working capital, which was a net source of cash during the first six months of
2020 in the amount of $5.8 million, compared to a net inflow of cash during the
first six months of 2021 in the amount of $9.4 million.
Investing Cash Flow Activities
Net cash used in investing activities increased by $60.1 million, with $64.6
million used in the six months ended June 30, 2021 compared to $4.5 million used
during the six months ended June 30, 2020. We completed our $59.8 million
acquisition of TruCode during the second quarter of 2021. Cash outflows for
purchases of property and equipment decreased from $3.0 million in the first six
months of 2020 to $0.7 million during the first six months of 2021. The decrease
is mostly due to the addition of a West Coast data center to enhance our remote
hosting capabilities in 2020 without similar capital expenditures during the
first three months of 2021. Lastly, cash outflows related to capitalized
internal software development efforts increased by $2.6 million due to the
aforementioned change in methodology for estimating labor costs eligible for
capitalization.
Financing Cash Flow Activities
During the six months ended June 30, 2021, our financing activities were a net
source cash in the amount of $37.9 million, as $61.0 million in borrowings from
our revolving line of credit were offset by long-term debt principal payments of
$21.9 million and $1.2 million used to repurchase shares of our common stock,
which are treated as treasury stock. Financing activities used $9.0 million
during the six months ended June 30, 2020, primarily due to $6.1 million net
paid in long-term debt principal and $2.9 million cash paid in dividends.
On September 4, 2020, our Board of Directors approved a stock repurchase program
to repurchase up to $30.0 million in aggregate amount of the Company's
outstanding shares of common stock through open market purchases,
privately-negotiated transactions, or otherwise in compliance with Rule 10b-18
under the Securities Exchange Act of 1934, as amended. These shares may be
purchased from time to time over a two-year period depending upon market
conditions. Our ability to repurchase shares is subject to compliance with the
terms of our Amended and Restated Credit Agreement. Concurrent with the
authorization of this stock repurchase program, the Board of Directors opted to
indefinitely suspend all quarterly dividends.
Credit Agreement
As of June 30, 2021, we had $71.3 million in principal amount outstanding under
the term loan facility and $46 million in principal amount outstanding under the
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.
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.


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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 such
agreement as of June 30, 2021.
The Amended and Restated Credit Agreement requires the Company to mandatorily
prepay the 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. An excess cash flow prepayment related to excess
cash flow generated during 2020 was not required during the first quarter of
2021.
Backlog
Backlog consists of revenues we reasonably expect to recognize over the next
twelve months under all existing contracts, including those with remaining
performance obligations that have original expected durations of one year or
less and those with fees that are variable in which we estimate future revenues.
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 June 30, 2021, we had a twelve-month backlog of approximately $8
million in connection with non-recurring system purchases and approximately
$259 million in connection with recurring payments under support and
maintenance, Cloud EHR contracts, and TruBridge services. As of June 30, 2020,
we had a twelve-month backlog of approximately $14 million in connection with
non-recurring system purchases and approximately $220 million in connection with
recurring payments under support and maintenance and TruBridge services.
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 six months
ended June 30, 2021 and 2020:
                                               Three Months Ended June 30,               Six Months Ended June 30,
(In thousands)                                   2021                2020                 2021                 2020
System sales and support (1)
Acute Care EHR                              $     9,697          $  11,933          $      15,139          $  20,852
Post-acute Care EHR                                 605              2,166                  1,253              3,079
Total system sales and support                   10,302             14,099                 16,392             23,931

TruBridge (2)                                     6,249              5,905                  8,936             15,416

Total bookings                              $    16,551          $  20,004          $      25,328          $  39,347

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


Bookings for each of our operating segments experienced significant decreases
compared to nearly all comparable three and six-month periods. Acute Care EHR
bookings decreased $2.2 million, or 19%, compared to the second quarter of 2020
and $5.7 million, or 27%, compared to the first six months of 2020. Post-acute
Care EHR bookings decreased $1.6 million, or 72%,


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compared to the second quarter of 2020 and $1.8 million, or 59%, compared to the
first six months of 2020. TruBridge bookings increased $0.3 million, or 6%,
compared to the second quarter of 2020 and decreased $6.5 million, or 42%,
compared to the first six months of 2020. Sales activities during the first six
months of 2021 suffered from a number of incremental headwinds, chief among them
being (a) COVID-19 related distractions, including increased infection rates for
certain geographies and widespread focus on eventual vaccine rollouts, (b)
reorganization transitions related to our February 2021 reduction-in-force, and
(c) lower-value regulatory purchases disproportionately dominated sales
discussions and resources. We view these incremental headwinds as being
temporary delays in decision-making and not reflective of a diminished overall
market opportunity.

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 June 30, 2021.
Critical Accounting Policies and Estimates
Our Management Discussion and Analysis is based upon our condensed consolidated
financial statements, which have been prepared in accordance with U.S. GAAP. The
preparation of these financial statements requires us to make subjective or
complex judgments that may affect the reported financial condition and results
of operations. We base our estimates on historical experience and other
assumptions that we believe to be reasonable under the circumstances, the
results of which form the basis for making judgments about the reported values
of assets, liabilities, revenues, expenses and other financial amounts that are
not readily apparent from other sources. Actual results may differ from these
estimates and these estimates may differ under different assumptions or
conditions. We continually evaluate the information used to make these estimates
as our business and the economic environment changes.
In our Annual Report on Form 10-K for the year ended December 31, 2020, we
identified our critical accounting polices related to revenue recognition,
allowance for credit losses, estimates, and business combinations, including
purchased intangible assets. During the second quarter of 2021, the we elected
to change our method of estimating the labor costs incurred in developing
software assets requiring capitalization under ASC 350-40, Internal Use
Software. Prior to this change, we estimated the associated labor costs using an
estimated time-equivalent for workload metrics commonly utilized within agile
software development environments. With this change, we now estimate these labor
costs using the distribution of these agile workload metrics between
capitalizable and non-capitalizable units of work. We believe this change is
preferable as the new methodology better estimates capitalizable labor costs and
is consistent with industry best practices. We have determined that this change
is a change in accounting estimate effected by a change in accounting principle
and, as such, has been accounted for on a prospective basis.
Aside from the addition of our accounting estimates related to capitalization of
software development costs and related policies as a critical accounting policy
and estimate, there have been no significant changes to these critical
accounting policies during the six months ended June 30, 2021.


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