FINANCIAL REPORT

FINANCIAL REPORT

FINANCIAL REPORT

CAP Remains Financially Strong

CAP Remains Financially Strong

CAP Remains Financially Strong

We can report that the CAP delivered strong financial performance. We continue to achieve robust growth in both domestic and international markets, actively manage costs across all departments, and invest in the right benefits for you—our members.

Total operating revenues for the year ending December 31, 2017, were $207.7 million, $1.0 million above the Board-approved 2017 target.

Our Laboratory Quality Solutions, which benefit pathologists, clinicians, and patients, accounted for nearly 93% of total revenue. Revenue from this area, which includes proficiency testing and laboratory accreditation, grew 5.5% in 2017 and remained the primary source of funding for other member benefits for the CAP. Similar to 2016, approximately 16% of proficiency testing revenues came from strategic international markets in 2017. For the first time, the number of laboratories participating in our accreditation program surpassed 8,000. The enduring success of our laboratory improvement programs is a testament to the dedication of our volunteers—both members and other laboratory professionals.

In addition to operating revenue, the CAP had investment earnings of $6.9 million in 2017.

With diligent financial discipline across the CAP, 2017 operating expenses were $4.3 million below budget.

At 40.6% of our total expenses, personnel and benefits cost, adjusted for capitalized labor, was below budget and 0.1% higher than the 2016 amount. The Compensation Committee continuously monitors this cost against external benchmarks, ensuring our ability to attract and retain the right talent in a sustainable way. The CAP also selectively engages outside services for specific short-term expertise or more cost-effective solutions. In 2017, we saw a full-year benefit of outsourcing select information services functions. While this resulted in growth in total cost of outside services compared to the prior year, it expanded our expertise and increased agility to address customer and member needs.

The CAP’s next largest expense category is the cost of materials and on-site inspections, which includes payments to outside vendors for test kits, cost of shipping those kits to more than 22,000 laboratory sites in more than 100 countries, and global inspector travel expenses.

financials_drgomez
Secretary-Treasurer
Richard R. Gomez, MD, FCAP

Revenues

Expenses

*Amounts for personnel and benefits and outside services have been reduced by the capitalized expenses of $1.5 million and $4.0 million, respectively.

We can report that the CAP delivered strong financial performance. We continue to achieve robust growth in both domestic and international markets, actively manage costs across all departments, and invest in the right benefits for you—our members.

Total operating revenues for the year ending December 31, 2017, were $207.7 million, $1.0 million above the Board-approved 2017 target.

Our Laboratory Quality Solutions, which benefit pathologists, clinicians, and patients, accounted for nearly 93% of total revenue. Revenue from this area, which includes proficiency testing and laboratory accreditation, grew 5.5% in 2017 and remained the primary source of funding for other member benefits for the CAP. Similar to 2016, approximately 16% of proficiency testing revenues came from strategic international markets in 2017. For the first time, the number of laboratories participating in our accreditation program surpassed 8,000. The enduring success of our laboratory improvement programs is a testament to the dedication of our volunteers—both members and other laboratory professionals.

financials_drgomez
Secretary-Treasurer
Richard R. Gomez, MD, FCAP

Revenue

Expenses

2013–2017 CAP Operating Revenue

In addition to operating revenue, the CAP had investment earnings of $6.9 million in 2017. With diligent financial discipline across the CAP, 2017 operating expenses were $4.3 million below budget. At 40.6% of our total expenses, personnel and benefits cost, adjusted for capitalized labor, was below budget and 0.1% higher than the 2016 amount. The Compensation Committee continuously monitors this cost against external benchmarks, ensuring our ability to attract and retain the right talent in a sustainable way. The CAP also selectively engages outside services for specific short-term expertise or more cost-effective solutions. In 2017, we saw a full-year benefit of outsourcing select information services functions. While this resulted in growth in total cost of outside services compared to the prior year, it expanded our expertise and increased agility to address customer and member needs.

The CAP’s next largest expense category is the cost of materials and on-site inspections, which includes payments to outside vendors for test kits, cost of shipping those kits to more than 22,000 laboratory sites in more than 100 countries, and global inspector travel expenses. We continue to seek the most cost-effective ways to deliver our growing programs. Despite the increase in the number of accredited laboratories and product shipments, this expense grew by only 0.4% from 2016, as cost increases from suppliers were offset by the full-year benefits of a new global logistics partner.

Depreciation and amortization expense was $14.1 million—or 6.6% of total expenses—in 2017. This is a noncash expense related to significant past investments to update our information systems.

As revenue exceeded 2017 target, and expenses were managed below budget, 2017 excess revenue over expenses after investments and adjustments (or total income) was $2.1 million—a significant increase from a loss of $1.3 million in 2016. Furthermore, when calculating earnings before interest, depreciation, and amortization (EBIDA) minus capital expenditures, the CAP’s strong operations generated a positive bottom line of $3.2 million. One of the long-term metrics established by the Board is maintaining positive EBIDA minus capital expenditures. The CAP continues to outperform against this target, while investing in strategic initiatives to bring the greatest value to our members and customers.

Assets

In 2017, we funded and completed more than a dozen projects to further improve our information systems. Many of them were directly guided by feedback from our users and represent our ongoing commitment to enhancing your online experience. We remain committed to delivering high-value services to our members. In 2017, we invested $4.9 million to help you meet your learning needs.

Another area where we’ll never stop working for you is advocacy. As the only 501(c)(6) membership organization representing pathologists, the CAP is uniquely positioned to advocate on behalf of pathologists and only pathologists. In 2017, we increased our investment in this space by 15.8% to $7.8 million, and we launched the Pathologists Quality Registry—the first qualified clinical data registry approved by the CMS to include non-MIPS quality measures specific to pathology.

In summary, we continue to fund critical initiatives to advance the profession, offer a comprehensive portfolio of benefits that is responsive to member needs, and drive further operating efficiencies. Our balance sheet remains strong, with total assets of $240.8 million and net assets of $70.3 million, an increase over the prior year of $10.5 million and $2.1 million, respectively. With this stable financial position, the CAP is poised to fulfill our mission and foster excellence in the practice of pathology and laboratory medicine worldwide.

We can report that the CAP delivered strong financial performance. We continue to achieve robust growth in both domestic and international markets, actively manage costs across all departments, and invest in the right benefits for you—our members.

Total operating revenues for the year ending December 31, 2017, were $207.7 million, $1.0 million above the Board-approved 2017 target.

financials_gomez-mobile
Secretary-Treasurer
Richard R. Gomez, MD, FCAP

We continue to seek the most cost-effective ways to deliver our growing programs. Despite the increase in the number of accredited laboratories and product shipments, this expense grew by only 0.4% from 2016, as cost increases from suppliers were offset by the full-year benefits of a new global logistics partner.

Depreciation and amortization expense was $14.1 million—or 6.6% of total expenses—in 2017. This is a noncash expense related to significant past investments to update our information systems.

As revenue exceeded 2017 target, and expenses were managed below budget, 2017 excess revenue over expenses after investments and adjustments (or total income) was $2.1 million—a significant increase from a loss of $1.3 million in 2016. Furthermore, when calculating earnings before interest, depreciation, and amortization (EBIDA) minus capital expenditures, the CAP’s strong operations generated a positive bottom line of $3.2 million. One of the long-term metrics established by the Board is maintaining positive EBIDA minus capital expenditures. The CAP continues to outperform against this target, while investing in strategic initiatives to bring the greatest value to our members and customers.

2013–2017 CAP Operating Revenue

In 2017, we funded and completed more than a dozen projects to further improve our information systems. Many of them were directly guided by feedback from our users and represent our ongoing commitment to enhancing your online experience. We remain committed to delivering high-value services to our members. In 2017, we invested $4.9 million to help you meet your learning needs.

Another area where we’ll never stop working for you is advocacy. As the only 501(c)(6) membership organization representing pathologists, the CAP is uniquely positioned to advocate on behalf of pathologists and only pathologists. In 2017, we increased our investment in this space by 15.8% to $7.8 million, and we launched the Pathologists Quality Registry—the first qualified clinical data registry approved by the CMS to include non-MIPS quality measures specific to pathology.

In summary, we continue to fund critical initiatives to advance the profession, offer a comprehensive portfolio of benefits that is responsive to member needs, and drive further operating efficiencies. Our balance sheet remains strong, with total assets of $240.8 million and net assets of $70.3 million, an increase over the prior year of $10.5 million and $2.1 million, respectively. With this stable financial position, the CAP is poised to fulfill our mission and foster excellence in the practice of pathology and laboratory medicine worldwide.

Assets

Our Laboratory Quality Solutions, which benefit pathologists, clinicians, and patients, accounted for nearly 93% of total revenue. Revenue from this area, which includes proficiency testing and laboratory accreditation, grew 5.5% in 2017 and remained the primary source of funding for other member benefits for the CAP. Similar to 2016, approximately 16% of proficiency testing revenues came from strategic international markets in 2017. For the first time, the number of laboratories participating in our accreditation program surpassed 8,000. The enduring success of our laboratory improvement programs is a testament to the dedication of our volunteers—both members and other laboratory professionals.

In addition to operating revenue, the CAP had investment earnings of $6.9 million in 2017.

Revenue

Expenses

2013–2017 CAP Operating Revenue

With diligent financial discipline across the CAP, 2017 operating expenses were $4.3 million below budget.

At 40.6% of our total expenses, personnel and benefits cost, adjusted for capitalized labor, was below budget and 0.1% higher than the 2016 amount. The Compensation Committee continuously monitors this cost against external benchmarks, ensuring our ability to attract and retain the right talent in a sustainable way. The CAP also selectively engages outside services for specific short-term expertise or more cost-effective solutions. In 2017, we saw a full-year benefit of outsourcing select information services functions. While this resulted in growth in total cost of outside services compared to the prior year, it expanded our expertise and increased agility to address customer and member needs.

The CAP’s next largest expense category is the cost of materials and on-site inspections, which includes payments to outside vendors for test kits, cost of shipping those kits to more than 22,000 laboratory sites in more than 100 countries, and global inspector travel expenses.

We continue to seek the most cost-effective ways to deliver our growing programs. Despite the increase in the number of accredited laboratories and product shipments, this expense grew by only 0.4% from 2016, as cost increases from suppliers were offset by the full-year benefits of a new global logistics partner.

Depreciation and amortization expense was $14.1 million—or 6.6% of total expenses—in 2017. This is a noncash expense related to significant past investments to update our information systems.

As revenue exceeded 2017 target, and expenses were managed below budget, 2017 excess revenue over expenses after investments and adjustments (or total income) was $2.1 million—a significant increase from a loss of $1.3 million in 2016. Furthermore, when calculating earnings before interest, depreciation, and amortization (EBIDA) minus capital expenditures, the CAP’s strong operations generated a positive bottom line of $3.2 million. One of the long-term metrics established by the Board is maintaining positive EBIDA minus capital expenditures. The CAP continues to outperform against this target, while investing in strategic initiatives to bring the greatest value to our members and customers.

In 2017, we funded and completed more than a dozen projects to further improve our information systems. Many of them were directly guided by feedback from our users and represent our ongoing commitment to enhancing your online experience.

Assets

We remain committed to delivering high-value services to our members. In 2017, we invested $4.9 million to help you meet your learning needs.

Another area where we’ll never stop working for you is advocacy. As the only 501(c)(6) membership organization representing pathologists, the CAP is uniquely positioned to advocate on behalf of pathologists and only pathologists. In 2017, we increased our investment in this space by 15.8% to $7.8 million, and we launched the Pathologists Quality Registry—the first qualified clinical data registry approved by the CMS to include non-MIPS quality measures specific to pathology.

In summary, we continue to fund critical initiatives to advance the profession, offer a comprehensive portfolio of benefits that is responsive to member needs, and drive further operating efficiencies. Our balance sheet remains strong, with total assets of $240.8 million and net assets of $70.3 million, an increase over the prior year of $10.5 million and $2.1 million, respectively. With this stable financial position, the CAP is poised to fulfill our mission and foster excellence in the practice of pathology and laboratory medicine worldwide.

Growing and Evolving

Growing and Evolving

Growing and Evolving

$3.2M

EBIDA minus capital expenditures

$212.5M

expenses—up 5.0% over 2016

$2.1M

earnings net of noncash expenses

$207.7M

operating revenue—
up 5.0% over 2016

$192.5M

revenue from Laboratory Quality Solutions—5.5% growth over 2016

$7.8M

spent in direct support of advocacy initiatives, designated to
lobby on behalf of the interests of pathology and laboratory medicine

$4.9M

allocated toward
advancing comprehensive
learning programs
for members

$3.8M

revenue from member dues