FINANCIAL REPORT

FINANCIAL REPORT

FINANCIAL REPORT

Actively managing costs while investing in the right member benefits helped the cap ensure its ability to meet the needs of our members for years to come.

Actively managing costs while investing in the right member benefits helped the cap ensure its ability to meet the needs of our members for years to come.

Actively managing costs while investing in the right member benefits helped the cap ensure its ability to meet the needs of our members for years to come.

Going Strong in a Challenging Year

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

I am pleased to report that the CAP remains financially strong despite the unprecedented challenges that 2020 brought to our organization, our members, and our customers.

Total 2020 operating revenues were $237.4 million, short of the Board-approved 2020 target by $4.5 million (1.9%), as the global pandemic negatively impacted nearly all revenue streams. Revenue increased $6.1 million (2.6%) over fiscal year 2019.

Revenue from Laboratory Quality Solutions (proficiency testing and laboratory accreditation) grew 3.6% over 2019. These programs benefit pathologists, clinicians, and patients and—at 93.7% of total revenues—remained the primary source of funding for other CAP member benefits. All other revenue declined by 9.8% in 2020, as we canceled large in-person events due to the pandemic and provided additional hardship relief to our members.

Investment earnings net of non-operating adjustments were $10.7 million in 2020. The CAP’s diversified portfolio was negatively impacted early in the year, but later recovered resulting in investment earnings of $13.8 million. The non-operating adjustment of negative $3.2 million is the last adjustment related to the new accreditation revenue recognition accounting standards implemented in 2019.

While the pandemic negatively impacted revenue in 2020, we realized significant savings in expenses as we pivoted to a different way of conducting operations. Total operating expenses net of capitalized amounts were $219.7 million, a reduction of $8.7 million, or 3.8%, from 2019, and $25.9 million, or 10.6%, better than 2020 budget.

Cost of personnel and benefits (net of capitalized amounts)—our largest expense category—was $97.7 million, or 44.5% of total expenses. This expense was 5.5% below budget, partially because we delayed filling new and vacant roles, and partially due to better than anticipated health care costs as many employees delayed elective procedures. The Compensation Committee continuously monitors personnel and benefits cost against external benchmarks (including a comprehensive compensation study conducted in 2020), ensuring our ability to attract and retain the right talent in a sustainable way.

In addition to building internal capabilities, the CAP also selectively engages outside services to obtain more cost-effective solutions for ongoing operations and for unique expertise on projects or infrequent needs. In 2020, outside services cost (net of capitalized amounts) was $22.1 million, or 10.1% of total expenses.

Cost of materials and on-site inspections—our second largest expense category—was $71.8 million, or 32.7% of total expenses, a decline of 1.5% compared to 2019. Payments to outside vendors for test kits and packaging continued to grow commensurate with growth in proficiency testing revenue. In addition, we incurred higher than anticipated costs of shipping those kits to 23,176 laboratory sites in over 100 countries. Pandemic disruptions forced us to delay many shipments into the hotter summer months, requiring additional coolant and faster delivery methods. We continue to seek the most cost-efficient ways to deliver our growing programs in an increasingly complex global environment.

Cost of onsite inspection was significantly lower in 2020 than in 2019, as most routine inspections were deferred from March through June to late 2020 and beyond.

Depreciation and amortization expense was $10.9 million, or 5.0% of total expenses, in 2020. This non-cash expense is largely related to significant past investments to update our information systems.

Due to the pandemic restrictions, the CAP pivoted to conducting most of our operations remotely, including staff work and council and committee meetings. As a result, council and committee and other travel expenses were only $2.5 million in 2020, $8.6 million lower than in 2019.

Although many of the savings realized in 2020 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 $28.4 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. In 2020 the CAP again exceeded this target—achieving EBIDA less CapEx of $17.9 million and positioning us well for future investments.

We continued to fund programs that meet our members’ top needs. As the only 501(c)(6) membership organization representing pathologists, the CAP spent $10.1 million in total expenses to advocate on behalf of pathologists in Washington, DC, and beyond. We also invested $10.2 million into high-quality practical learning and member conferences which evolved with member needs. In response to the pandemic, CAP20 was held virtually and was a resounding success.

The CAP balance sheet remains strong, with total assets as of December 31, 2020, of $316.0 million, including reserves of $112.5 million. Assets net of liabilities were $101.3 million.

During a challenging year, we continued to actively manage costs while investing in the right member benefits to ensure that the CAP can meet the needs of our members for years to come.

Financial_Report_Gomez_DT-1

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

  1. Program revenue includes proficiency testing and pathologist quality registry revenue.
  2. Investment earnings of $13.8 million net of a one-time adjustment of $3.2 million for change in accounting related to 2019 accreditation revenue.
  1. Amounts for personnel and benefits and outside services have been reduced by the capitalized expenses of $3.1 million and $5.8 million, respectively.

CAP Operating Revenue

cap_op_rev_dt_t_v22x

Going Strong in a Challenging Year

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

I am pleased to report that the CAP remains financially strong despite the unprecedented challenges that 2020 brought to our organization, our members, and our customers.

Total 2020 operating revenues were $237.4 million, short of the Board-approved 2020 target by $4.5 million (1.9%), as the global pandemic negatively impacted nearly all revenue streams. Revenue increased $6.1 million (2.6%) over fiscal year 2019.

Revenue from Laboratory Quality Solutions (proficiency testing and laboratory accreditation) grew 3.6% over 2019. These programs benefit pathologists, clinicians, and patients and—at 93.7% of total revenues—remained the primary source of funding for other CAP member benefits. All other revenue declined by 9.8% in 2020, as we canceled large in-person events due to the pandemic and provided additional hardship relief to our members.

Investment earnings net of non-operating adjustments were $10.7 million in 2020. The CAP’s diversified portfolio was negatively impacted early in the year, but later recovered, resulting in investment earnings of $13.8 million. The non-operating adjustment of negative $3.2 million is the last adjustment related to the new accreditation revenue recognition accounting standards implemented in 2019.

01financials_t_gomez3x

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

While the pandemic negatively impacted revenue in 2020, we realized significant savings in expenses as we pivoted to a different way of conducting operations. Total operating expenses net of capitalized amounts were $219.7 million, a reduction of $8.7 million, or 3.8%, from 2019, and $25.9 million, or 10.6%, better than 2020 budget.

Cost of personnel and benefits (net of capitalized amounts)—our largest expense category—was $97.7 million, or 44.5% of total expenses. This expense was 5.5% below budget, partially because we delayed filling new and vacant roles, and partially due to better than anticipated health care costs as many employees delayed elective procedures. The Compensation Committee continuously monitors personnel and benefits cost against external benchmarks (including a comprehensive compensation study conducted in 2020), ensuring our ability to attract and retain the right talent in a sustainable way.

In addition to building internal capabilities, the CAP also selectively engages outside services to obtain more cost-effective solutions for ongoing operations and for unique expertise on projects or infrequent needs. In 2020, outside services cost (net of capitalized amounts) was $22.1 million, or 10.1% of total expenses.

Cost of materials and on-site inspections—our second largest expense category—was $71.8 million, or 32.7% of total expenses, a decline of 1.5% compared to 2019. Payments to outside vendors for test kits and packaging continued to grow commensurate with growth in proficiency testing revenue. In addition, we incurred higher than anticipated costs of shipping those kits to 23,176 laboratory sites in over 100 countries. Pandemic disruptions forced us to delay many shipments into the hotter summer months, requiring additional coolant and faster delivery methods. We continue to seek the most cost-efficient ways to deliver our growing programs in an increasingly complex global environment.

Cost of onsite inspection was significantly lower in 2020 than in 2019, as most routine inspections were deferred from March through June to late 2020 and beyond.

Depreciation and amortization expense was $10.9 million, or 5.0% of total expenses, in 2020. This non-cash expense is largely related to significant past investments to update our information systems.

Due to the pandemic restrictions, the CAP pivoted to conducting most of our operations remotely, including staff work and council and committee meetings. As a result, council and committee and other travel expenses were only $2.5 million in 2020, $8.6 million lower than in 2019.

Although many of the savings realized in 2020 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 $28.4 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. In 2020 the CAP again exceeded this target—achieving EBIDA less CapEx of $17.9 million and positioning us well for future investments.

We continued to fund programs that meet our members’ top needs. As the only 501(c)(6) membership organization representing pathologists, the CAP spent $10.1 million in total expenses to advocate on behalf of pathologists in Washington, DC, and beyond. We also invested $10.2 million into high-quality practical learning and member conferences which evolved with your needs. In response to the pandemic, CAP20 was held virtually and was a resounding success.

The CAP balance sheet remains strong, with total assets as of December 31, 2020, of $316.0 million, including reserves of $112.5 million. Assets net of liabilities were $101.3 million.

During a challenging year, we continued to actively manage costs while investing in the right member benefits to ensure that the CAP can meet the needs of our members for years to come.

  1. Program revenue includes proficiency testing and pathologist quality registry revenue.
  2. Investment earnings of $13.8 million net of a one-time adjustment of $3.2 million for change in accounting related to 2019 accreditation revenue.
  1. Amounts for personnel and benefits and outside services have been reduced by the capitalized expenses of $3.1 million and $5.8 million, respectively.

CAP Operating Revenue

cap_op_rev_dt_t_v22x

Going Strong in a Challenging Year

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

I am pleased to report that the CAP remains financially strong despite the unprecedented challenges that 2020 brought to our organization, our members, and our customers.

Total 2020 operating revenues were $237.4 million, short of the Board-approved 2020 target by $4.5 million (1.9%), as the global pandemic negatively impacted nearly all revenue streams. Revenue increased $6.1 million (2.6%) over fiscal year 2019.

01financials_m_gomez3x

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

Revenue from Laboratory Quality Solutions (proficiency testing and laboratory accreditation) grew 3.6% over 2019. These programs benefit pathologists, clinicians, and patients and—at 93.7% of total revenues—remained the primary source of funding for other CAP member benefits. All other revenue declined by 9.8% in 2020, as we canceled large in-person events due to the pandemic and provided additional hardship relief to our members.

Investment earnings net of non-operating adjustments were $10.7 million in 2020. The CAP’s diversified portfolio was negatively impacted early in the year, but later recovered, resulting in investment earnings of $13.8 million. The non-operating adjustment of negative $3.2 million is the last adjustment related to the new accreditation revenue recognition accounting standards implemented in 2019.

While the pandemic negatively impacted revenue in 2020, we realized significant savings in expenses as we pivoted to a different way of conducting operations. Total operating expenses net of capitalized amounts were $219.7 million, a reduction of $8.7 million, or 3.8%, from 2019, and $25.9 million, or 10.6%, better than 2020 budget.

Cost of personnel and benefits (net of capitalized amounts)—our largest expense category—was $97.7 million, or 44.5% of total expenses. This expense was 5.5% below budget, partially because we delayed filling new and vacant roles, and partially due to better than anticipated health care costs as many employees delayed elective procedures. The Compensation Committee continuously monitors personnel and benefits cost against external benchmarks (including a comprehensive compensation study conducted in 2020), ensuring our ability to attract and retain the right talent in a sustainable way.

In addition to building internal capabilities, the CAP also selectively engages outside services to obtain more cost-effective solutions for ongoing operations and for unique expertise on projects or infrequent needs. In 2020, outside services cost (net of capitalized amounts) was $22.1 million, or 10.1% of total expenses.

Cost of materials and on-site inspections—our second largest expense category—was $71.8 million, or 32.7% of total expenses, a decline of 1.5% compared to 2019. Payments to outside vendors for test kits and packaging continued to grow commensurate with growth in proficiency testing revenue. In addition, we incurred higher than anticipated costs of shipping those kits to 23,176 laboratory sites in over 100 countries. Pandemic disruptions forced us to delay many shipments into the hotter summer months, requiring additional coolant and faster delivery methods. We continue to seek the most cost-efficient ways to deliver our growing programs in an increasingly complex global environment.

Cost of onsite inspection was significantly lower in 2020 than in 2019, as most routine inspections were deferred from March through June to late 2020 and beyond.

Depreciation and amortization expense was $10.9 million, or 5.0% of total expenses, in 2020. This non-cash expense is largely related to significant past investments to update our information systems.

Due to the pandemic restrictions, the CAP pivoted to conducting most of our operations remotely, including staff work and council and committee meetings. As a result, council and committee and other travel expenses were only $2.5 million in 2020, $8.6 million lower than in 2019.

Although many of the savings realized in 2020 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 $28.4 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. In 2020 the CAP again exceeded this target—achieving EBIDA less CapEx of $17.9 million and positioning us well for future investments.

We continued to fund programs that meet our members’ top needs. As the only 501(c)(6) membership organization representing pathologists, the CAP spent $10.1 million in total expenses to advocate on behalf of pathologists in Washington, DC, and beyond. We also invested $10.2 million into high-quality practical learning and member conferences which evolved with your needs. In response to the pandemic, CAP20 was held virtually and was a resounding success.

The CAP balance sheet remains strong, with total assets as of December 31, 2020, of $316.0 million, including reserves of $112.5 million. Assets net of liabilities were $101.3 million.

During a challenging year, we continued to actively manage costs while investing in the right member benefits to ensure that the CAP can meet the needs of our members for years to come.

  1. Program revenue includes proficiency testing and pathologist quality registry revenue.
  2. Investment earnings of $13.8 million net of a one-time adjustment of $3.2 million for change in accounting related to 2019 accreditation revenue.
  1. Amounts for personnel and benefits and outside services have been reduced by the capitalized expenses of $3.1 million and $5.8 million, respectively.

CAP Operating Revenue

CAP_OP_Rev_M@2x

GROWING AND EVOLVING

$237.4M

operating revenue—2.6% growth over 2019

$222.6M

revenue from Laboratory Quality Solutions—3.6% growth over 2019

$3.5M

revenue from member dues

$219.7M

expenses—down 3.8% from 2019

$10.1M

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

$10.2M

allocated toward advancing comprehensive learning programs and member conferences

$17.9M

EBIDA minus capital expenditures

$28.4M

earnings net of noncash expenses

GROWING AND EVOLVING

$237.4M

operating revenue—2.6% growth over 2019

$222.6M

revenue from Laboratory Quality Solutions—3.6% growth over 2019

$3.5M

revenue from member dues

$219.7M

expenses—down 3.8% from 2019

$10.1M

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

$10.2M

allocated toward advancing comprehensive learning programs and member conferences

$17.9M

EBIDA minus capital expenditures

$28.4M

earnings net of noncash expenses

GROWING AND EVOLVING

$237.4M

operating revenue—2.6% growth over 2019

$222.6M

revenue from Laboratory Quality Solutions—3.6% growth over 2019

$3.5M

revenue from member dues

$219.7M

expenses—down 3.8% from 2019

$10.1M

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

$10.2M

allocated toward advancing comprehensive learning programs and member conferences

$17.9M

EBIDA minus capital expenditures

$28.4M

earnings net of noncash expenses