FINANCIAL REPORT

FINANCIAL REPORT

FINANCIAL REPORT

Recovering faster than anticipated from the pandemic’s economic effect, cap revenue exceeded budget in nearly all categories last year

Recovering faster than anticipated from the pandemic’s economic effect, cap revenue exceeded budget in nearly all categories last year

Recovering faster than anticipated from the pandemic’s economic effect, cap revenue exceeded budget in nearly all categories last year

Persevering Through Uncertainty

Alfred Wray Campbell, Md, Mba, Fcap

Amidst the uncertainty of 2021, one thing remains constant—the CAP is financially healthy and well positioned to support our members, customers, and the patients we serve.

Total 2021 operating revenues were $251.7 million, $3.1 million (1.2%) better than the Board-approved target and $14.3 million (6.0%) above fiscal year 2020 levels, as nearly all revenue streams recovered faster than anticipated from the pandemic’s economic effect.

Revenue from Laboratory Quality Solutions (proficiency testing and laboratory accreditation) grew 5.8% over 2021, aided in part by stronger than expected sales of new COVID products and recovery in some international markets. These programs benefit pathologists, clinicians, and patients and—at 93.6% of total revenues—remained the primary source of funding for other CAP member benefits.

All other revenue grew by 9.3% in 2021 to nearly pre-pandemic levels, largely due to a strong recovery in periodical and published materials sales and continued growth in Cancer Protocols and data standards revenue. Ongoing COVID concerns continued to negatively impact revenue from conferences and other events (included in learning and other revenue) by prompting conversion to hybrid or virtual models. Net investment earnings were $15.9 million in 2021.

Total 2021 expenses net of capitalized amounts were $238.4 million, $10.9 million (4.4%) better than budget and an $18.6 million (8.5%) increase from 2020. While some face-to-face events resumed, the CAP continued to realize significant savings in travel-related costs, accounting for about 60% of the budget gains.

Cost of personnel and benefits (net of capitalized amounts), our largest expense category, was $102.1 million, or 42.8% of total expenses—3.8% below budget. The ongoing pandemic caused slower filling of new and vacant roles and better than anticipated health care costs, as many employees continued to delay elective procedures (although the CAP does not encourage this).

The Compensation Committee continuously monitors personnel and benefits cost against external benchmarks, ensuring our ability to attract and retain talent in a sustainable way. The CAP also selectively engages outside services to augment internal expertise, as reflected in the 2021 outside services cost (net of capitalized amounts) of $25.8 million, or 10.8% of total expenses.

Cost of materials and on-site inspections—our second largest expense category—was $80.5 million, or 33.8% of total expenses, an increase of $7.2 million (10.1%) from 2020. Payments to outside vendors for test kits and packaging continued to grow commensurate with growth in proficiency testing revenue, but we also incurred higher than anticipated costs of shipping kits to nearly 120 countries as carriers imposed pandemic surcharges. We continue to seek the most cost-efficient ways to deliver our growing programs in an increasingly complex global environment, including renegotiating our global shipping contracts in 2021 and reviewing our packaging solutions.

Cost of on-site inspection increased $1.9 million from 2020’s nominal levels but was still only about half of its pre-pandemic amount; deferral of routine inspections continued in the first half of 2021, while some inspections were conducted virtually. We incurred $1.4 million in 2021 addressing the backlog of inspections from 2020 and will continue to work closely with our laboratory customers and volunteer inspectors to address the remaining backlog in 2022.

Rental and maintenance expense has emerged as the fourth largest cost category in 2021, at $10.6 million (4.4% of total), as we continue our transition from legacy on-premise systems to modern cloud-based SaaS solutions that allow us to be more flexible and better meet customer and member needs.

Although many of the savings realized in 2021 are temporary due to pandemic disruptions, they allowed us to finish the year with a very strong net income (excess revenue over expenses after investments and adjustments) of $29.3 million. The Board also monitors earnings before interest, depreciation, and amortization (EBIDA), minus capital expenditures (CapEx) to ensure we break even in the long term when adjusted for non-cash expenses. In 2021 the CAP again exceeded this target—achieving EBIDA less CapEx of $13.1 million.

The CAP continued to fund programs that meet our members’ top needs. As the only 501(c)(6) membership organization representing pathologists, the CAP spent $10.3 million in total expenses to advocate on behalf of pathologists and another $1.9 million in support of the only quality data registry that allows pathologists to score highly and maximize payment for their services. We also invested $11.5 million into high-quality practical learning and member conferences, which evolved with member needs and were available both in person and virtually.

The CAP balance sheet remains strong, with total assets as of December 31, 2021, of $361.9 million, including reserves of $146.5 million. Assets net of liabilities were $130.6 million, an increase of $29.3 million over the prior year.

During an uncertain year, we continued to deliver critical member benefits while managing costs closely to ensure sustainable growth and strategically position the CAP for future investments.

Financial_Campbell_DT_v2

Secretary-Treasurer
Alfred Wray Campbell, MD, MBA, FCAP

Program Revenue

  1. Program revenue includes proficiency testing and pathologist quality registry revenue.

Expenses

  1. Amounts for personnel and benefits and outside services have been reduced by the capitalized expenses of $2.7 million and $6.5 million, respectively.
  2. Cost of materials and on-site inspection includes $1.4 million in non-operating expenses to address the backlog of on-site inspections due to the pandemic.

Assets

CAP Operating Revenue

2021_CAP_OP_Rev_DT_T_4

Persevering Through Uncertainty

Alfred Wray Campbell, Md, Mba, Fcap

Amidst the uncertainty of 2021, one thing remains constant—the CAP is financially healthy and well positioned to support our members, customers, and the patients we serve.

Total 2021 operating revenues were $251.7 million, $3.1 million (1.2%) better than the Board-approved target and $14.3 million (6.0%) above fiscal year 2020 levels, as nearly all revenue streams recovered faster than anticipated from the pandemic’s economic effect.

Revenue from Laboratory Quality Solutions (proficiency testing and laboratory accreditation) grew 5.8% over 2021, aided in part by stronger than expected sales of new COVID products and recovery in some international markets. These programs benefit pathologists, clinicians, and patients and—at 93.6% of total revenues—remained the primary source of funding for other CAP member benefits.

All other revenue grew by 9.3% in 2021 to nearly pre-pandemic levels, largely due to a strong recovery in periodical and published materials sales and continued growth in Cancer Protocols and data standards revenue. Ongoing COVID concerns continued to negatively impact revenue from conferences and other events (included in learning and other revenue) by prompting conversion to hybrid or virtual models. Net investment earnings were $15.9 million in 2021.

Financial_Campbell_T_v2

Secretary-Treasurer
Alfred Wray Campbell, MD, MBA, FCAP

Total 2021 expenses net of capitalized amounts were $238.4 million, $10.9 million (4.4%) better than budget and an $18.6 million (8.5%) increase from 2020. While some face-to-face events resumed, the CAP continued to realize significant savings in travel-related costs, accounting for about 60% of the budget gains.

Cost of personnel and benefits (net of capitalized amounts), our largest expense category, was $102.1 million, or 42.8% of total expenses—3.8% below budget. The ongoing pandemic caused slower filling of new and vacant roles and better than anticipated health care costs, as many employees continued to delay elective procedures (although the CAP does not encourage this).

The Compensation Committee continuously monitors personnel and benefits cost against external benchmarks, ensuring our ability to attract and retain talent in a sustainable way. The CAP also selectively engages outside services to augment internal expertise, as reflected in the 2021 outside services cost (net of capitalized amounts) of $25.8 million, or 10.8% of total expenses.

Cost of materials and on-site inspections—our second largest expense category—was $80.5 million, or 33.8% of total expenses, an increase of $7.2 million (10.1%) from 2020. Payments to outside vendors for test kits and packaging continued to grow commensurate with growth in proficiency testing revenue, but we also incurred higher than anticipated costs of shipping kits to nearly 120 countries as carriers imposed pandemic surcharges. We continue to seek the most cost-efficient ways to deliver our growing programs in an increasingly complex global environment, including renegotiating our global shipping contracts in 2021 and reviewing our packaging solutions.

Cost of on-site inspection increased $1.9 million from 2020’s nominal levels but was still only about half of its pre-pandemic amount; deferral of routine inspections continued in the first half of 2021, while some inspections were conducted virtually. We incurred $1.4 million in 2021 addressing the backlog of inspections from 2020 and will continue to work closely with our laboratory customers and volunteer inspectors to address the remaining backlog in 2022.

Rental and maintenance expense has emerged as the fourth largest cost category in 2021, at $10.6 million (4.4% of total), as we continue our transition from legacy on-premise systems to modern cloud-based SaaS solutions that allow us to be more flexible and better meet customer and member needs.

Although many of the savings realized in 2021 are temporary due to pandemic disruptions, they allowed us to finish the year with a very strong net income (excess revenue over expenses after investments and adjustments) of $29.3 million. The Board also monitors earnings before interest, depreciation, and amortization (EBIDA), minus capital expenditures (CapEx) to ensure we break even in the long term when adjusted for non-cash expenses. In 2021 the CAP again exceeded this target—achieving EBIDA less CapEx of $13.1 million.

The CAP continued to fund programs that meet our members’ top needs. As the only 501(c)(6) membership organization representing pathologists, the CAP spent $10.3 million in total expenses to advocate on behalf of pathologists and another $1.9 million in support of the only quality data registry that allows pathologists to score highly and maximize payment for their services. We also invested $11.5 million into high-quality practical learning and member conferences, which evolved with member needs and were available both in person and virtually.

The CAP balance sheet remains strong, with total assets as of December 31, 2021, of $361.9 million, including reserves of $146.5 million. Assets net of liabilities were $130.6 million, an increase of $29.3 million over the prior year.

During an uncertain year, we continued to deliver critical member benefits while managing costs closely to ensure sustainable growth and strategically position the CAP for future investments.

Program Revenue

  1. Program revenue includes proficiency testing and pathologist quality registry revenue.

Expenses

  1. Amounts for personnel and benefits and outside services have been reduced by the capitalized expenses of $2.7 million and $6.5 million, respectively.
  2. Cost of materials and on-site inspection includes $1.4 million in non-operating expenses to address the backlog of on-site inspections due to the pandemic.

Assets

CAP Operating Revenue

2021_CAP_OP_Rev_DT_T_4

Persevering Through Uncertainty

Alfred Wray Campbell, Md, Mba, Fcap

Amidst the uncertainty of 2021, one thing remains constant—the CAP is financially healthy and well positioned to support our members, customers, and the patients we serve.

Total 2021 operating revenues were $251.7 million, $3.1 million (1.2%) better than the Board-approved target and $14.3 million (6.0%) above fiscal year 2020 levels, as nearly all revenue streams recovered faster than anticipated from the pandemic’s economic effect.

financial_campbell_m

Secretary-Treasurer
Alfred Wray Campbell, MD, MBA, FCAP

Revenue from Laboratory Quality Solutions (proficiency testing and laboratory accreditation) grew 5.8% over 2021, aided in part by stronger than expected sales of new COVID products and recovery in some international markets. These programs benefit pathologists, clinicians, and patients and—at 93.6% of total revenues—remained the primary source of funding for other CAP member benefits.

All other revenue grew by 9.3% in 2021 to nearly pre-pandemic levels, largely due to a strong recovery in periodical and published materials sales and continued growth in Cancer Protocols and data standards revenue. Ongoing COVID concerns continued to negatively impact revenue from conferences and other events (included in learning and other revenue) by prompting conversion to hybrid or virtual models. Net investment earnings were $15.9 million in 2021.

Total 2021 expenses net of capitalized amounts were $238.4 million, $10.9 million (4.4%) better than budget and an $18.6 million (8.5%) increase from 2020. While some face-to-face events resumed, the CAP continued to realize significant savings in travel-related costs, accounting for about 60% of the budget gains.

Cost of personnel and benefits (net of capitalized amounts), our largest expense category, was $102.1 million, or 42.8% of total expenses—3.8% below budget. The ongoing pandemic caused slower filling of new and vacant roles and better than anticipated health care costs, as many employees continued to delay elective procedures (although the CAP does not encourage this).

The Compensation Committee continuously monitors personnel and benefits cost against external benchmarks, ensuring our ability to attract and retain talent in a sustainable way. The CAP also selectively engages outside services to augment internal expertise, as reflected in the 2021 outside services cost (net of capitalized amounts) of $25.8 million, or 10.8% of total expenses.

Cost of materials and on-site inspections—our second largest expense category—was $80.5 million, or 33.8% of total expenses, an increase of $7.2 million (10.1%) from 2020. Payments to outside vendors for test kits and packaging continued to grow commensurate with growth in proficiency testing revenue, but we also incurred higher than anticipated costs of shipping kits to nearly 120 countries as carriers imposed pandemic surcharges. We continue to seek the most cost-efficient ways to deliver our growing programs in an increasingly complex global environment, including renegotiating our global shipping contracts in 2021 and reviewing our packaging solutions.

Cost of on-site inspection increased $1.9 million from 2020’s nominal levels but was still only about half of its pre-pandemic amount; deferral of routine inspections continued in the first half of 2021, while some inspections were conducted virtually. We incurred $1.4 million in 2021 addressing the backlog of inspections from 2020 and will continue to work closely with our laboratory customers and volunteer inspectors to address the remaining backlog in 2022.

Rental and maintenance expense has emerged as the fourth largest cost category in 2021, at $10.6 million (4.4% of total), as we continue our transition from legacy on-premise systems to modern cloud-based SaaS solutions that allow us to be more flexible and better meet customer and member needs.

Although many of the savings realized in 2021 are temporary due to pandemic disruptions, they allowed us to finish the year with a very strong net income (excess revenue over expenses after investments and adjustments) of $29.3 million. The Board also monitors earnings before interest, depreciation, and amortization (EBIDA), minus capital expenditures (CapEx) to ensure we break even in the long term when adjusted for non-cash expenses. In 2021 the CAP again exceeded this target—achieving EBIDA less CapEx of $13.1 million.

The CAP continued to fund programs that meet our members’ top needs. As the only 501(c)(6) membership organization representing pathologists, the CAP spent $10.3 million in total expenses to advocate on behalf of pathologists and another $1.9 million in support of the only quality data registry that allows pathologists to score highly and maximize payment for their services. We also invested $11.5 million into high-quality practical learning and member conferences, which evolved with member needs and were available both in person and virtually.

The CAP balance sheet remains strong, with total assets as of December 31, 2021, of $361.9 million, including reserves of $146.5 million. Assets net of liabilities were $130.6 million, an increase of $29.3 million over the prior year.

During an uncertain year, we continued to deliver critical member benefits while managing costs closely to ensure sustainable growth and strategically position the CAP for future investments.

Program Revenue

  1. Program revenue includes proficiency testing and pathologist quality registry revenue.

Expenses

  1. Amounts for personnel and benefits and outside services have been reduced by the capitalized expenses of $2.7 million and $6.5 million, respectively.
  2. Cost of materials and on-site inspection includes $1.4 million in non-operating expenses to address the backlog of on-site inspections due to the pandemic.

Assets

CAP Operating Revenue

2021_CAP_OP_Rev_M_2

GROWING AND EVOLVING

$251.7M

operating revenue—6.0% growth over 2020

$235.5M

revenue from Laboratory Quality Solutions—5.8% growth over 2020

$3.7M

revenue from member dues

$238.4M

expenses—up 8.5% from 2020

$10.3M

spent in support of advocacy initiatives to lobby on behalf of the interests of pathologists

$11.5M

allocated toward advancing comprehensive learning programs and member conferences

$13.1M

EBIDA minus capital expenditures

$29.3M

excess revenue over expenses after investments and adjustments

GROWING AND EVOLVING

$251.7M

operating revenue—6.0% growth over 2020

$235.5M

revenue from Laboratory Quality Solutions—5.8% growth over 2020

$3.7M

revenue from member dues

$238.4M

expenses—up 8.5% from 2020

$10.3M

spent in support of advocacy initiatives to lobby on behalf of the interests of pathologists

$11.5M

allocated toward advancing comprehensive learning programs and member conferences

$13.1M

EBIDA minus capital expenditures

$29.3M

excess revenue over expenses after investments and adjustments

GROWING AND EVOLVING

$251.7M

6.0% growth over 2020

$235.5M

revenue from Laboratory Quality Solutions—5.8% growth over 2020

$3.7M

revenue from member dues

$238.4M

expenses—up 8.5% from 2020

$10.3M

spent in support of advocacy initiatives to lobby on behalf of the interests of pathologists

$11.5M

allocated toward advancing comprehensive learning programs and member conferences

$13.1M

EBIDA minus capital expenditures

$29.3M

excess revenue over expenses after investments and adjustments