- Strong second quarter bookings of $276 million up 31% from
the prior year period
- Raised 2019 bookings outlook to between $1,050 million and
$1,100 million
- Reached agreement in principle with the DOJ that, if
finalized, is intended to resolve all matters related to the
investigation of Practice Fusion
Allscripts Healthcare Solutions, Inc. (Nasdaq: MDRX)
(Allscripts) announced its financial results for the three and six
months ended June 30, 2019.
Second Quarter Financial Highlights
Bookings(1) were $276 million in the second quarter of 2019.
This result compares with $211 million in the second quarter of
2018. Contract revenue backlog totaled $3.9 billion as of June 30,
2019.
Second quarter 2019 GAAP revenue was $445 million, up 1 percent
year-over-year. Second quarter 2019 non-GAAP revenue also totaled
$445 million.
On a GAAP basis in the second quarter of 2019, total operating
expenses were $179 million, or a 23 percent decrease
year-over-year. Non-GAAP operating expenses totaled $152 million,
or a 4 percent decrease year-over-year. Additionally, the company
recorded $154 million of transaction, legal and other costs in the
second quarter of 2019, primarily due to the agreement in principle
with the DOJ discussed below. This compares with $43 million of
such costs in the second quarter of 2018.
GAAP net loss in the second quarter of 2019 totaled ($150)
million compared with net income of $65 million in the second
quarter of 2018. Non-GAAP net income in the second quarter of 2019
totaled $29 million compared with $32 million in the second quarter
of 2018.
GAAP loss per share in the second quarter of 2019 was ($0.90),
compared with earnings per share of $0.36 in the second quarter of
2018. Non-GAAP diluted earnings per share in the second quarter of
2019 were $0.17 compared with $0.19 in the second quarter of
2018.
Adjusted EBITDA totaled $75 million in the second quarter of
2019, compared with $76 million in the second quarter of 2018.
“Our strong bookings performance continued in the second quarter
with success in both our Provider and Veradigm businesses. Our 2019
bookings outlook has been raised, as we anticipate strong
performance in the second half of this year. This is the result of
our deliberate investments, along with the value we deliver to
clients through our comprehensive and industry-leading solutions,”
commented Paul M. Black, Chief Executive Officer of Allscripts. “We
are well-positioned to drive long-term revenue and earnings growth,
as we leverage our strategic platforms and maintain a disciplined
capital deployment strategy.”
Other Announcements
Practice Fusion has reached an agreement in principle with the
United States Department of Justice (“DOJ”) that, if finalized, is
intended to resolve the previously disclosed investigations
relating to certain business practices engaged in by Practice
Fusion. Allscripts recorded a $145 million charge in the second
quarter related to the DOJ investigations, which the Company
believes will be sufficient to resolve all potential civil and
criminal liability in connection with these investigations.
2019 Financial Outlook(2)
Allscripts currently expects to achieve:
- Full year 2019 bookings(1) between $1,050 million and $1,100
million, up from prior outlook of between $900 million and $1,000
million
- Full year 2019 non-GAAP earnings per share between $0.65 and
$0.70
- Third quarter 2019 non-GAAP revenue between $445 million and
$455 million
- Fourth quarter 2019 non-GAAP revenue between $460 million and
$470 million
Conference Call
Allscripts will conduct a conference call today, Thursday,
August 8th, 2019, at 4:30 PM Eastern Time to discuss its earnings
release and other information. Participants may access the
conference call via webcast at http://investor.allscripts.com.
Participants also may access the conference call by dialing +1
(877) 269-7756 or +1 (201) 689-7817 (international) and requesting
Conference ID # 13692981.
A replay of the call will be available approximately two hours
after the conclusion of the call, for a period of four weeks, on
the Allscripts Investor Relations website or by calling +1 (877)
660-6853 or +1 (201) 612-7415 - Conference ID # 13692981.
Supplemental and non-GAAP financial information is also
available at http://investor.allscripts.com.
Footnotes
(1)
Bookings have been determined on
a continuing operations basis, excluding Netsmart, and reflect the
value of executed contracts for software, hardware, client
services, private cloud hosting services, outsourcing and other
subscription-based services.
(2)
In providing financial guidance,
the company does not reconcile non-GAAP earnings per share and
non-GAAP revenue guidance to the corresponding GAAP financial
measures. Allscripts does not provide guidance for the various
reconciling items since certain items that impact GAAP net income
and GAAP revenue such as acquisition-related deferred revenue
adjustments, acquisition-related amortization, asset impairment
charges and transaction, legal and other costs, any of which may be
significant, are either outside of its control and/or cannot be
reasonably predicted. Please see the “Explanation of Non-GAAP
Financial Measures” at the end of this press release for detailed
information on calculating non-GAAP measures. For a reconciliation
of other non-GAAP items, see the non-GAAP financial reconciliation
tables in this release (Tables 4, 5, 6 and 7).
NOTE: All percentage changes described within this press release
are calculated from full dollar amounts as illustrated in the
accompanying financial statements and Allscripts Supplemental
Financial Data Workbook, posted on the Investor Relations website.
Rounding differences may occur when individually calculating
percentages or totals from rounded amounts included within the
press release body compared to full dollar amounts in the
tables.
About Allscripts
Allscripts (Nasdaq: MDRX) is a leader in healthcare information
technology solutions that advance clinical, financial and
operational results. Our innovative solutions connect people,
places and data across an Open, Connected Community of Health™.
Connectivity empowers caregivers to make better decisions and
deliver better care for healthier populations. To learn more, visit
www.allscripts.com, Twitter, YouTube and It
Takes A Community: The Allscripts Blog.
© 2019 Allscripts Healthcare, LLC and/or its affiliates. All
Rights Reserved.
Allscripts, the Allscripts logo, and other Allscripts marks are
trademarks of Allscripts Healthcare, LLC and/or its affiliates. All
other products are trademarks of their respective holders, all
rights reserved. Reference to these products is not intended to
imply affiliation with or sponsorship of Allscripts Healthcare, LLC
and/or its affiliates.
Forward-Looking Statements
This press release contains forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of
1995, including the statements under “2019 Financial Outlook” and
statements related to our agreement in principle with the DOJ.
These forward-looking statements are based on the current beliefs
and expectations of Allscripts management, only speak as of the
date that they are made and are subject to significant risks and
uncertainties. Such statements can be identified by the use of
words such as “future,” “anticipates,” “believes,” “estimates,”
“expects,” “intends,” “plans,” “predicts,” “will,” “would,”
“could,” “can,” “may,” and similar terms. Actual results could
differ significantly from those set forth in the forward-looking
statements and reported results should not be considered an
indication of future performance. Certain factors that could cause
Allscripts actual results to differ materially from those described
in the forward-looking statements include, but are not limited to:
the final outcome of the criminal and civil investigations by the
DOJ involving Practice Fusion, including our ability to negotiate
final settlement agreements with the DOJ and the terms of such
agreements; potential additional investigations and proceedings
from governmental entities or third parties other than the DOJ
related to the same or similar conduct underlying the DOJ’s
investigation into Practice Fusion’s business practices; the
expected financial results of business acquired by us, including
the EIS business, the NantHealth provider/patient solutions
business, Practice Fusion and HealthGrid; the successful
integration of businesses recently acquired by us; the anticipated
and unanticipated expenses and liabilities related to the EIS
business, the NantHealth provider/patient solutions business,
Practice Fusion and HealthGrid, including the civil investigation
by the U.S. Attorney’s Office involving our EIS business; security
breaches resulting in unauthorized access to our or our clients’
computer systems or data, including denial-of-services, ransomware
or other Internet-based attacks; Allscripts failure to compete
successfully; consolidation in Allscripts industry; current and
future laws, regulations and industry initiatives; increased
government involvement in Allscripts industry; the failure of
markets in which Allscripts operates to develop as quickly as
expected; Allscripts or its customers’ failure to see the benefits
of government programs; changes in interoperability or other
regulatory standards; the effects of the realignment of Allscripts
sales, services and support organizations; market acceptance of
Allscripts products and services; the unpredictability of the sales
and implementation cycles for Allscripts products and services;
Allscripts ability to manage future growth; Allscripts ability to
introduce new products and services; Allscripts ability to
establish and maintain strategic relationships; risks related to
the acquisition of new businesses or technologies; the performance
of Allscripts products; Allscripts ability to protect its
intellectual property rights; the outcome of legal proceedings
involving Allscripts; Allscripts ability to hire, retain and
motivate key personnel; performance by Allscripts content and
service providers; liability for use of content; price reductions;
Allscripts ability to license and integrate third party
technologies; Allscripts ability to maintain or expand its business
with existing customers; risks related to international operations;
changes in tax rates or laws; business disruptions; Allscripts
ability to maintain proper and effective internal controls; and
asset and long-term investment impairment charges. Additional
information about these and other risks, uncertainties, and factors
affecting Allscripts business is contained in Allscripts filings
with the Securities and Exchange Commission, including under the
caption “Risk Factors” in the most recent Allscripts Annual Report
on Form 10-K and subsequent Form 10-Qs. Allscripts does not
undertake to update forward-looking statements to reflect changed
assumptions, the impact of circumstances or events that may arise
after the date of the forward-looking statements, or other changes
in its business, financial condition or operating results over
time.
Table 1
Allscripts Healthcare
Solutions, Inc.
Condensed Consolidated Balance
Sheets
(In millions)
(Unaudited)
June 30,
December 31,
2019
2018
ASSETS Current assets: Cash and cash equivalents
$138.9
$174.2
Restricted cash
9.2
10.6
Accounts receivable, net
428.1
465.3
Contract assets
75.4
66.4
Prepaid expenses and other current assets
152.5
142.5
Total current assets
804.1
859.0
Fixed assets, net
105.9
121.9
Software development costs, net
225.6
209.7
Intangible assets, net
402.8
431.1
Goodwill
1,382.2
1,373.7
Deferred taxes, net
5.0
5.0
Contract assets - long-term
98.4
71.9
Right-of-use assets - operating leases
96.1
0.0
Other assets
115.4
109.2
Total assets
$3,235.5
$3,181.5
LIABILITIES AND STOCKHOLDERS’ EQUITY Current
liabilities: Accounts payable
$90.7
$73.2
Accrued expenses
256.5
107.0
Accrued compensation and benefits
53.8
100.1
Income tax payable
0.0
29.6
Deferred revenue
432.2
466.8
Current maturities of long-term debt
22.1
20.1
Current operating lease liabilities
24.5
0.0
Current liabilities attributable to discontinued operations
0.0
0.9
Total current liabilities
879.8
797.7
Long-term debt
822.7
647.5
Deferred revenue
13.0
16.0
Deferred taxes, net
56.9
58.5
Long-term operating lease liabilities
93.1
0.0
Other liabilities
53.8
81.4
Total liabilities
1,919.3
1,601.1
Total Allscripts Healthcare Solutions, Inc.'s stockholders' equity
1,316.2
1,551.1
Non-controlling interest
0.0
29.3
Total stockholders’ equity
1,316.2
1,580.4
Total liabilities and stockholders’ equity
$3,235.5
$3,181.5
Table 2
Allscripts Healthcare
Solutions, Inc.
Condensed Consolidated
Statements of Operations
(In millions, except per share
amounts)
(Unaudited)
Three Months Ended June
30,
Six Months Ended June
30,
2019
2018
2019
2018
Revenue: Software delivery, support and maintenance
$285.0
$284.4
$560.5
$565.0
Client services
159.5
157.0
316.0
310.2
Total revenue
444.5
441.4
876.5
875.2
Cost of revenue: Software delivery, support and maintenance
91.4
93.0
179.5
179.0
Client services
140.0
150.2
281.6
287.3
Amortization of software development and acquisition-related assets
(a)
29.0
24.6
57.2
50.5
Total cost of revenue
260.4
267.8
518.3
516.8
Gross profit
184.1
173.6
358.2
358.4
Selling, general and administrative expenses
105.6
122.9
205.8
242.9
Research and development
63.4
74.5
127.7
139.3
Asset impairment charges
3.7
30.1
3.8
30.1
Amortization of intangible and acquisition-related assets
6.7
6.4
13.5
13.0
Income (loss) from operations
4.7
(60.3
)
7.4
(66.9
)
Interest expense and other, net (b)
(155.4
)
(12.0
)
(165.1
)
(23.7
)
Gain (loss) on sale of business, net
0.0
173.2
0.0
172.3
Recovery (impairment) on long-term investments
0.0
(10.0
)
1.0
(15.5
)
Equity in net income (loss) of unconsolidated investments
0.3
0.9
0.2
0.8
Income (loss) before income taxes
(150.4
)
91.8
(156.5
)
67.0
Income tax (provision) benefit
0.5
(7.3
)
(1.4
)
(7.6
)
Income (loss) from continuing operations, net of tax
(149.9
)
84.5
(157.9
)
59.4
Income (loss) from discontinued operations
0.0
(14.1
)
0.0
(19.1
)
Income tax effect on discontinued operations
0.0
3.8
0.0
5.4
Income (loss) from discontinued operations, net of tax
0
(10.3
)
0.0
(13.7
)
Net income (loss)
(149.9
)
74.2
(157.9
)
45.7
Net (income) loss attributable to non-controlling interest
0.0
2.7
0.4
3.5
Accretion of redemption preference on redeemable
convertiblenon-controlling interest - discontinued operations
0.0
(12.2
)
0.0
(24.3
)
Net Income (loss) attributable to Allscripts Healthcare Solutions,
Inc. stockholders
($149.9
)
$64.7
($157.5
)
$24.9
Income (loss) from continuing operations per share - basic
($0.90
)
$0.49
($0.94
)
$0.35
Income (loss) from discontinued operations per share - basic
$0.00
($0.13
)
$0.00
($0.21
)
Income (loss) earnings per share - basic
($0.90
)
$0.36
($0.94
)
$0.14
Income (loss) from continuing operations per share - diluted
($0.90
)
$0.49
($0.94
)
$0.35
Income (loss) from discontinued operations per share - diluted
$0.00
($0.13
)
$0.00
($0.21
)
Income (loss) earnings per share - diluted
($0.90
)
$0.36
($0.94
)
$0.14
Weighted average common shares outstanding: Basic
166.5
176.4
168.2
178.1
Diluted
166.5
179.3
168.2
181.4
Three Months Ended June
30,
Six Months Ended June
30,
2019
2018
2019
2018
(a) Amortization of software development and
acquisition-related assets includes: Amortization of capitalized
software development costs
$20.0
$15.3
$39.2
$31.1
Amortization of acquisition-related intangible assets
9.0
9.3
18.0
19.4
$29.0
$24.6
$57.2
$50.5
(b) Interest expense and other, net are comprised of the
following for the periods presented: Non-cash charges to
interest expense
$3.3
$3.2
$6.6
$6.3
Interest expense
6.4
8.1
12.6
16.0
Amortization of discounts and debt issuance costs
0.7
0.7
1.4
1.4
Other (income) loss, net
145.0
0.0
144.5
0.0
Total interest expense and other, net
$155.4
$12.0
$165.1
$23.7
Table 3
Allscripts Healthcare
Solutions, Inc.
Condensed Consolidated
Statements of Cash Flows
(In millions)
(Unaudited)
Three Months Ended June
30,
Six Months Ended June
30,
2019
2018
2019
2018
Cash flows from operating activities: Net income (loss)
($149.9
)
$74.2
($157.9
)
$45.7
Less: Income(loss) from discontinued operations
0.0
(10.3
)
0.0
(13.7
)
Income (loss) from continuing operations
($149.9
)
$84.5
($157.9
)
$59.4
Non-cash adjustments to net income (loss): Depreciation and
amortization
50.5
47.3
100.6
95.2
Operating right-to-use asset amortization
5.7
0.0
11.0
0.0
Stock-based compensation expense
10.1
7.2
21.8
17.2
Asset impairment charges
3.7
30.1
3.8
30.1
Impairment (recovery) of long-term investments
0.0
10.0
(1.0
)
15.5
(Gain) loss on sale of businesses, net
0.0
(173.2
)
0.0
(172.3
)
Other, net
0.1
8.2
0.3
8.0
Total non-cash adjustments to net income (loss)
70.1
(70.4
)
136.5
(6.3
)
Cash impact of changes in operating assets and liabilities
72.1
(6.9
)
49.5
8.4
Net cash provided by (used in) operating activities - continuing
operations
(7.7
)
7.2
28.1
61.5
Net cash provided by (used in) operating activities - discontinued
operations
0.0
1.0
(30.0
)
5.0
Net cash provide by (used in) operating activities
(7.7
)
8.2
(1.9
)
66.5
Cash flows from investing activities: Capital expenditures
(4.6
)
(6.5
)
(9.4
)
(14.0
)
Capitalized software
(26.6
)
(31.1
)
(55.2
)
(57.3
)
Purchases of equity securities in partner entities,
businessacquisitions, net of cash acquired and other investments
(12.9
)
174.0
(12.9
)
66.8
Net cash provided by (used in) investing activities -
continuingoperations
(44.1
)
136.4
(77.5
)
(4.5
)
Net cash provided by (used in) investing activities - discontinued
- operations
0.0
(7.1
)
0.0
(16.0
)
Net cash provided by (used in) investing activities
(44.1
)
129.3
(77.5
)
(20.5
)
Cash flows from financing activities: Repurchase of common stock
0.0
(44.3
)
(65.1
)
(101.9
)
Proceeds from sale or issuance of common stock
0.0
0.0
0.0
0.2
Stock-based compensation-related payments, net
(1.4
)
(0.1
)
(6.7
)
(8.6
)
Credit facilities and capital lease payments, net
55.0
(85.0
)
169.9
60.6
Other payments
(1.5
)
(7.0
)
(55.5
)
(10.2
)
Net cash provided by (used in) financing activities - continuing
operations
52.1
(136.4
)
42.6
(59.9
)
Net cash provided by (used in) financing activities - discontinued
operations
0.0
(3.8
)
0.0
(7.6
)
Net cash provided by (used in) financing activities
52.1
(140.2
)
42.6
(67.5
)
Effect of exchange rate changes on cash and cash equivalents
(0.1
)
(0.3
)
0.1
(0.2
)
Net increase (decrease) in cash and cash equivalents
0.2
(3.0
)
(36.7
)
(21.7
)
Cash and cash equivalents, beginning of period
147.9
143.8
184.8
162.5
Cash and cash equivalents, end of period
$148.1
$140.8
$148.1
$140.8
Less: Cash and cash equivalents included in current assets
attributable to discontinued operations
0.0
(14.8
)
0.0
(14.8
)
Cash, cash equivalents and restricted cash, end of period,
excluding discontinued operations
$148.1
$126.0
$148.1
$126.0
Table 4
Allscripts Healthcare
Solutions, Inc.
Condensed Non-GAAP Financial
Information
(In millions, except per share
amounts)
(Unaudited)
Three Months Ended June 30,
2019
Three Months Ended June 30,
2018
GAAP
Non-GAAP
Adjustments (1)
Non-GAAP
GAAP
Non-GAAP
Adjustments (1)
Non-GAAP
Revenue
$444.5
$0.5
$445.0
$441.4
$7.7
$449.1
Gross profit
184.1
12.3
196.4
173.6
32.8
206.4
Total Operating Expenses
179.4
(27.8
)
151.6
233.9
(75.4
)
158.5
Income (loss) from operations
4.7
40.1
44.8
(60.3
)
108.2
47.9
Income (loss) from continuing operations, net of tax, net of
non-controlling interest
($149.9
)
$178.6
$28.7
$87.2
($54.9
)
$32.3
Income (loss) from continuing operations per share - diluted
($0.90
)
$0.17
$0.49
$0.19
Effective Tax Rate
0
%
24
%
8
%
27
%
Weighted average common shares outstanding - diluted
166.5
167.5
179.3
179.3
Six Months Ended June 30,
2019
Six Months Ended June 30,
2018
GAAP
Non-GAAP
Adjustments (1)
Non-GAAP
GAAP
Non-GAAP
Adjustments (1)
Non-GAAP
Revenue
$876.5
$1.1
$877.6
$875.2
$9.3
$884.5
Gross profit
358.2
24.7
382.9
358.4
49.9
408.3
Total Operating Expenses
350.8
(54.4
)
296.4
425.3
(111.4
)
313.9
Income (loss) from operations
7.4
79.1
86.5
(66.9
)
161.3
94.4
Income (loss) from continuing operations, net of tax, net of
non-controlling interest
($157.5
)
$213.1
$55.6
$62.9
($2.1
)
$60.8
Income (loss) from continuing operations per share - diluted
($0.94
)
$0.33
$0.35
$0.34
Effective Tax Rate
-1
%
24
%
11
%
27
%
Weighted average common shares outstanding - diluted
168.2
169.6
181.4
181.4
(1) Please see table 6 for detail on Non-GAAP
adjustments.
Table 5
Allscripts Healthcare
Solutions, Inc.
Non-GAAP Financial Information
- Adjusted EBITDA
(In millions, except
percentages)
(Unaudited)
Three Months Ended June
30,
Six Months Ended June
30,
2019
2018
2019
2018
Net income (loss) from continuing operations, as reported
($149.9
)
$84.5
($157.9
)
$59.4
Plus: Interest expense and other, net (a)
6.4
8.1
12.1
16.0
Depreciation and amortization
50.5
47.3
100.6
95.2
Equity in net (income) loss of unconsolidated investments
(0.3
)
(0.8
)
(0.2
)
(0.7
)
Tax provision/(benefit)
(0.5
)
7.3
1.4
7.6
EBITDA
($93.8
)
$146.4
($44.0
)
$177.5
Plus: Acquisition-related deferred revenue adjustments
0.5
10.0
1.1
13.9
Stock-based compensation expense
11.2
9.0
24.0
19.9
Transaction, legal and other costs
153.7
43.4
163.4
64.9
Asset impairment charges
3.7
30.1
3.8
30.1
(Recovery) impairment on long-term investments
0.0
10.0
(1.0
)
15.5
(Gain) loss on sale of business, net
0.0
(173.2
)
0.0
(172.3
)
Adjusted EBITDA
$75.3
$75.7
$147.3
$149.5
Adjusted EBITDA margin (b)
17
%
17
%
17
%
17
%
(a) Interest expense and other, net has been adjusted
from the amounts presented in the statements of operations in order
to remove the amortization of the fair value of the cash conversion
option embedded in the 1.25% Cash Convertible Notes and deferred
debt issuance costs from interest expense since such amortization
is also included in depreciation and amortization. (b)
Adjusted EBITDA margin is calculated by dividing adjusted EBITDA by
non-GAAP revenue.
Table 6 Allscripts Healthcare
Solutions, Inc. Non-GAAP Financial Information - Non-GAAP
Adjustments (In millions, except percentages) (Unaudited)
Three Months Ended June
30,
Six Months Ended June
30,
2019
2018
2019
2018
Income (loss) from continuing operations, net of tax and
net of non-controlling interest
($149.9
)
$87.2
($157.5
)
$62.9
Acquisition-related deferred revenue adjustments
0.5
10.0
1.1
13.9
Revenue
0.5
7.7
1.1
9.3
Gross Profit
0.5
10.0
1.1
13.9
Income (loss) from operations
0.5
10.0
1.1
13.9
Acquisition-related amortization
15.7
15.7
31.5
32.5
Gross Profit
9.0
9.3
18.0
19.5
Income (loss) from operations
15.7
15.7
31.5
32.5
Stock-based compensation expense
11.2
9.0
24.0
19.9
Gross Profit
1.8
1.6
3.4
3.6
Income (loss) from operations
11.2
9.0
24.0
19.9
Asset impairment charges
3.7
30.1
3.8
30.1
Income (loss) from operations
3.7
30.1
3.8
30.1
Transaction, legal and other costs
154.0
43.3
163.7
64.8
Gross Profit
1.0
11.9
2.2
12.9
Income (loss) from operations
9.0
43.3
18.7
64.8
Income (loss) from continuing operations before income taxes
154.0
43.3
163.7
64.8
Non-cash charges to interest expense and other
3.3
3.6
6.6
7.2
(Recovery) impairment on long-term investments
0.0
10.0
(1.0
)
15.5
(Gain) loss on sale of business, net
0.0
(173.2
)
0.0
(172.3
)
Equity in net (income) loss of unconsolidated investments
(0.3
)
(0.8
)
(0.2
)
(0.7
)
Tax rate alignment
(9.5
)
(3.4
)
(16.1
)
(13.5
)
Net (income) loss attributable to non-controlling interest
0.0
0.8
(0.3
)
0.5
Non-GAAP income (loss) attributable to Allscripts Healthcare
Solutions, Inc.
$28.7
$32.3
$55.6
$60.8
Non-GAAP effective tax rate
24
%
27
%
24
%
27
%
Weighted average shares outstanding - diluted
167.5
179.3
169.6
181.4
Table 7 Allscripts Healthcare Solutions, Inc.
Non-GAAP Financial Information - Free Cash Flow (In
millions) (Unaudited)
Three Months Ended June
30,
Six Months Ended June
30,
2019
2018
2019
2018
Net cash provided by (used in) operating activities - continuing
operations
($7.7
)
$7.2
$28.1
$61.5
Net cash provided by (used in) operating activities - discontinued
operations
0.0
1.0
(30.0
)
5.0
Net cash provided by (used in) operating activities
(7.7
)
8.2
(1.9
)
66.5
Cash flows from investing activities: Capital expenditures
(4.6
)
(6.5
)
(9.4
)
(14.0
)
Capitalized software
(26.6
)
(31.1
)
(55.2
)
(57.3
)
Cash flows from investing activities - discontinued operations
0.0
(7.1
)
0.0
(14.2
)
Free cash flow
($38.9
)
($36.5
)
($66.5
)
($19.0
)
Explanation of Non-GAAP Financial Measures
Allscripts reports its financial results in accordance with U.S.
generally accepted accounting principles, or GAAP. To supplement
this information, Allscripts presents in this release non-GAAP
revenue, gross profit, gross margin, operating expense, income from
operations, Adjusted EBITDA, effective income tax rate, net income
and earnings per share, which are considered non-GAAP financial
measures under Section 101 of Regulation G under the Securities
Exchange Act of 1934, as amended. The definitions of non-GAAP
financial measures used throughout this document are presented
below:
- Non-GAAP revenue consists of GAAP revenue, as reported, and
adds back recognized deferred revenue from the EIS business,
Practice Fusion, HealthGrid, NantHealth’s provider/patient
solutions business and non-material consolidated affiliates that is
eliminated for GAAP purposes due to purchase accounting
adjustments. Reconciliations to GAAP revenue are found in Tables 4
and 6 within this press release.
- Non-GAAP gross profit consists of GAAP gross profit, as
reported, and excludes acquisition-related deferred revenue
adjustments, acquisition-related amortization, stock-based
compensation expense, non-cash asset impairment charges and
transaction, legal and other costs. Non-GAAP gross margin consists
of non-GAAP gross profit as a percentage of non-GAAP revenue in the
applicable period. Reconciliations to GAAP gross profit are found
in Tables 4 and 6 within this press release.
- Non-GAAP operating expense consists of GAAP selling, general
and administrative expenses (SG&A) and research and development
expense (R&D), as reported, and excludes transaction, legal and
other costs and stock-based compensation expense recorded to
SG&A and R&D. Reconciliations to GAAP operating expense are
found in Table 4 within this press release.
- Non-GAAP income from operations consists of GAAP income from
operations, as reported, and excludes acquisition-related deferred
revenue adjustments, acquisition-related amortization, stock-based
compensation expense, non-cash asset impairment charges and
transaction, legal and other costs. Reconciliations to GAAP income
from operations are found in Tables 4 and 6 within this press
release.
- Adjusted EBITDA is a non-GAAP measure and consists of GAAP net
income/(loss), as reported, and adjusts for: acquisition-related
deferred revenue adjustments; depreciation and amortization;
stock-based compensation expense; transaction, legal and other
costs; non-cash asset and long-term investment impairment charges;
gain on sale of businesses, net; interest expense and other, net;
equity in net earnings of unconsolidated investments; and tax
provision (benefit). Reconciliations to GAAP net income/(loss) are
found in Table 5 within this press release.
- Non-GAAP effective income tax rate is based on non-GAAP pre-tax
earnings and consists of the statutory federal income tax rate,
Allscripts effective state income tax rate and adjustments for
permanent differences.
- Non-GAAP net income consists of GAAP net income/(loss), as
reported, and adds back acquisition-related deferred revenue
adjustments; acquisition-related amortization; stock-based
compensation expense; transaction, legal and other costs; non-cash
asset and long-term investment impairment charges; non-cash charges
to interest expense and other, asset impairment charges; gain on
sale of business, net; and equity in net earnings of unconsolidated
investments and the related tax effect of the aforementioned
adjustments. Non-GAAP net income also includes a GAAP to non-GAAP
tax rate alignment adjustment. Reconciliations to GAAP net
income/(loss) are found in Tables 4 and 6 within this press
release.
- Non-GAAP net income attributable to Allscripts Healthcare
Solutions, Inc. is a non-GAAP measure and consists of non-GAAP net
income, as described above, with an adjustment to reduce non-GAAP
net income for the percentage of non-controlling interest outside
Allscripts ownership position.
- Non-GAAP earnings per share consist of non-GAAP net income, as
defined above, divided by weighted shares outstanding – diluted
during the applicable period.
- Free cash flow consists of GAAP cash flows provided by
operating activities in the applicable period, net of capital
expenditures and capitalized software costs, including those
incurred by businesses presented as discontinued operations.
Reconciliations to GAAP cash flows provided by operating activities
are found in Table 7 within this press release.
Acquisition-Related Deferred Revenue Adjustments.
Deferred revenue adjustments include acquisition-related deferred
revenue adjustments, which reflect the fair value adjustments to
deferred revenue acquired in a business acquisition. The fair value
of acquired deferred revenue represents an amount equivalent to the
estimated cost plus an appropriate profit margin, to perform
services related to the acquiree's software and product support,
which assumes a legal obligation to do so, based on the deferred
revenue balances as of the acquisition date. Allscripts adds back
acquisition-related deferred revenue adjustments for its non-GAAP
financial measures because it believes the inclusion of this amount
directly correlates to the underlying performance of Allscripts
operations.
Acquisition-Related Amortization. Acquisition-related
amortization expense is a non-cash expense arising primarily from
the acquisition of intangible assets in connection with
acquisitions or investments. Allscripts excludes
acquisition-related amortization expense from non-GAAP gross
profit, non-GAAP operating income, and non-GAAP net income because
it believes (i) the amount of such expenses in any specific period
may not directly correlate to the underlying performance of
Allscripts business operations and (ii) such expenses can vary
significantly between periods because of new acquisitions and full
amortization of previously acquired intangible assets. Investors
should note that the use of these intangible assets contributed to
revenue in the periods presented and will contribute to future
revenue generation, and the related amortization expense will recur
in future periods.
Stock-Based Compensation Expense. Stock-based
compensation expense is a non-cash expense arising from the grant
of stock-based awards. Allscripts excludes stock-based compensation
expense from non-GAAP gross profit, non-GAAP operating income,
non-GAAP operating expense, non-GAAP net income and Adjusted EBITDA
because it believes (i) the amount of such expenses in any specific
period may not directly correlate to the underlying performance of
Allscripts business operations and (ii) such expenses can vary
significantly between periods as a result of the timing and
valuation of grants of new stock-based awards, including grants in
connection with acquisitions. Investors should note that
stock-based compensation is a key incentive offered to employees
whose efforts contributed to the operating results in the periods
presented and are expected to contribute to operating results in
future periods, and such expense will recur in future periods.
Asset impairment charges. Asset impairment charges
include (i) the write-off of purchased third-party software as a
result of our decision to discontinue several software development
projects, (ii) the write-off of acquired technology and value
assigned to commercial agreements, and (iii) the write-off of the
book value of certain fixed assets that resulted from consolidating
business functions and locations.
Transaction, Legal and Other Costs. Transaction, legal
and other costs relate to certain legal proceedings and
investigations, consulting, severance, incentive compensation and
other charges incurred in connection with activities that are
considered not reflective of our core business.
Allscripts excludes transaction, legal and other costs, in whole
or in part, from non-GAAP gross profit, non-GAAP operating income,
non-GAAP operating expense, non-GAAP net income and Adjusted EBITDA
because it believes (i) the amount of such expenses in any specific
period may not directly correlate to the underlying performance of
Allscripts business operations and (ii) such expenses can vary
significantly between periods.
Non-Cash Charges to Interest Expense and Other. Non-cash
charges to interest expense include the amortization of the fair
value of the cash conversion option embedded in the 1.25 percent
Cash Convertible Notes issued by Allscripts during the second
quarter of 2013.
Impairment of Long-Term Investments. Impairment of
long-term investments relates to other-than-temporary non-cash
impairment charges associated with such investments based on
management’s assessment of the likelihood of near-term recovery of
the investments’ value. The amounts recorded during the three
months ended March 31, 2018 relate to a non-cash impairment charge
related to one of our cost-method equity investments and a related
note receivable.
Gain on sale of business, net. Gain on sale of
businesses, net for the quarter ended June 30, 2018 consists of a
$177.9 million gain, partly offset by a ($4.7) million loss, from
the divestitures of our OneContent and Strategic Sourcing
businesses, respectively, both of which were acquired as part of
the EIS transaction during the fourth quarter of 2017. Gain on sale
of business, net for the six months ended June 30, 2018, includes
$0.9 million of divesture-related loss previously reported as part
of transaction-related and other costs during the quarter ended
March 31, 2018.
Equity in Net loss (income) of Unconsolidated
Investments. Equity in net loss (income) of unconsolidated
investments represents Allscripts share of the equity earnings of
our investments in third parties accounted for under the equity
method, including the amortization of cost basis adjustments.
Tax Rate Alignment. Tax rate alignment aligns the
applicable period’s effective tax rate to the expected annual
non-GAAP effective tax rate.
Management also believes that non-GAAP revenue, gross profit,
gross margin, operating expense, income from operations, effective
income tax rate, net income, earnings per share, Adjusted EBITDA,
and free cash flow provide useful supplemental information to
management and investors regarding the underlying performance of
Allscripts business operations. Acquisition accounting adjustments
made in accordance with GAAP can make it difficult to make
meaningful comparisons of the underlying operations of the business
without considering the non-GAAP adjustments provided and discussed
herein.
Management also uses this information internally for forecasting
and budgeting, as it believes that these measures are indicative of
core operating results. In addition, management may use non-GAAP
gross profit, operating expense, operating income, net income,
earnings per share and/or Adjusted EBITDA to measure achievement
under Allscripts stock and cash incentive compensation plans. Note,
however, that non-GAAP gross profit, operating income, net income
earnings per share and Adjusted EBITDA are performance measures
only, and they do not provide any measure of cash flow or
liquidity. Allscripts considers free cash flow to be a liquidity
measure that provides useful information to management and
investors about the amount of cash generated by the business after
capital expenditures and capitalized software costs. Free cash flow
provides management and investors a valuable measure to determine
the quantity of capital generated that can be deployed to create
additional shareholder value by a variety of means. Non-GAAP
financial measures are not in accordance with, or an alternative
for, measures of financial performance prepared in accordance with
GAAP and may be different from non-GAAP measures used by other
companies. Non-GAAP measures have limitations in that they do not
reflect all of the amounts associated with Allscripts results of
operations as determined in accordance with GAAP. Investors and
potential investors are encouraged to review the definitions and
reconciliations of non-GAAP financial measures with GAAP financial
measures contained within the attached condensed consolidated
financial statements.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190808005790/en/
For more information contact: Investors: Stephen Shulstein 312-386-6735
stephen.shulstein@allscripts.com Media: Concetta Rasiarmos 312-447-2466
concetta.rasiarmos@allscripts.com
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