- GAAP EPS of ($0.05); 6% year-over-year growth in non-GAAP
diluted EPS to $0.18
- Signed definitive agreement to sell EPSi business unit for
$365 million
Allscripts Healthcare Solutions, Inc. (Nasdaq: MDRX)
(Allscripts) announced its financial results for the three and six
months ended June 30, 2020.
Bookings(1) were $188 million in the second quarter of 2020.
This result compares with $276 million in the second quarter of
2019. Contract revenue backlog totaled $4.4 billion as of June 30,
2020.
Second quarter 2020 revenue was $406 million compared with $445
million in the second quarter of 2019.
On a GAAP basis in the second quarter of 2020 loss from
operations was $5 million and included $28 million of severance and
other restructuring charges related to the Company’s significant
cost reduction actions executed during the quarter. GAAP income
from operations in the second quarter of 2019 was $5 million and
included $9 million of restructuring and other charges. Non-GAAP
income from operations in the second quarter of 2020 was $45
million compared with $45 million in the second quarter of
2019.
GAAP net loss in the second quarter of 2020 totaled $8 million
compared with $150 million in the second quarter of 2019. Non-GAAP
net income in the second quarter of 2020 was $30 million compared
with $29 million in the second quarter of 2019.
GAAP loss per share in the second quarter of 2020 was $0.05
compared with loss per share of $0.90 in the second quarter of
2019. Non-GAAP diluted earnings per share in the second quarter of
2020 were $0.18 compared with $0.17 in the second quarter of
2019.
Adjusted EBITDA totaled $77 million in the second quarter of
2020, compared with $75 million in the second quarter of 2019.
Earlier today, Allscripts signed a definitive agreement to sell
its EPSi business unit to Strata Decision Technology, a unit of
Roper Technologies, Inc. for $365 million. The transaction is
expected to close later in the third quarter once customary closing
conditions are satisfied. Upon transaction close, the EPSi client
base and associates will transition to the buyer. The two companies
will operate independently until the deal closes.
“Our second quarter results showed resilience as Allscripts and
our clients continued to manage through the COVID-19 pandemic,”
commented Paul M. Black, Allscripts Chief Executive Officer. “We
leveraged both new and existing innovative solutions to support our
clients and improve patient outcomes during this challenging time.
At the same time, we remain focused on improving our cost structure
to reflect the current revenue environment and we were successful
in expanding Adjusted EBITDA margins across our business. We expect
to remain disciplined around costs while also delivering for our
clients as we benefit from a nimble operating model and the
investments we have made across our portfolio. We are also pleased
to unlock significant value for our shareholders through the
definitive agreement to sell EPSi.”
Conference Call
Allscripts will conduct a conference call today, Thursday, July
30th, 2020, 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 #
13706228. Allscripts will also provide a supplemental presentation
with an update on the company’s margin improvement initiatives and
segment reporting. The presentation will be available on the
Allscripts Investor Relations website in advance of the call.
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 # 13706228.
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 and reflect the value of executed
contracts for software, hardware, other client services,
private-cloud hosting services, outsourcing and subscription-based
services.
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.
© 2020 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 statements regarding management’s plans in response
to the current revenue environment. 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 timing or ultimate
completion of the sale of our EPSi business, as the transaction is
subject to certain closing conditions, including the expiration or
termination of the waiting period under U.S. antitrust laws; our
use of the proceeds from the contemplated sale of our EPSi
business; our ability to achieve the margin targets associated with
our margin improvement initiatives within the contemplated time
periods, if at all; the magnitude, severity and duration of the
COVID-19 pandemic, including the impacts of the pandemic, along
with the impacts of our responses and the responses by governments
and other businesses to the pandemic, on our business, our
employees, our clients and our suppliers; the failure by Practice
Fusion to comply with the terms of its settlement agreements with
the U.S. Department of Justice (the “DOJ”); the costs and burdens
of compliance by Practice Fusion with the terms of its settlement
agreements with the DOJ; 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
investigations into Practice Fusion’s business practices; our
ability to recover from third parties (including insurers) any
amounts required to be paid in connection with Practice Fusion’s
settlement agreements with the DOJ and related inquiries; the
expected financial results of businesses acquired by us; the
successful integration of businesses recently acquired by us; the
anticipated and unanticipated expenses and liabilities related to
businesses acquired by us, including the civil investigation by the
U.S. Attorney’s Office involving our Enterprise Information
Solutions business (the “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; our failure to compete successfully;
consolidation in our industry; current and future laws, regulations
and industry initiatives; increased government involvement in our
industry; the failure of markets in which we operate to develop as
quickly as expected; our or our customers’ failure to see the
benefits of government programs; changes in interoperability or
other regulatory standards; the effects of the realignment of our
sales, services and support organizations; market acceptance of our
products and services; the unpredictability of the sales and
implementation cycles for our products and services; our ability to
manage future growth; our ability to introduce new products and
services; our ability to establish and maintain strategic
relationships; the performance of our products; our ability to
protect its intellectual property rights; the outcome of legal
proceedings involving us; our ability to hire, retain and motivate
key personnel; performance by our content and service providers;
liability for use of content; price reductions; our ability to
license and integrate third party technologies; our ability to
maintain or expand our business with existing customers; risks
related to international operations; changes in tax rates or laws;
business disruptions; our 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 our business is contained in
our filings with the Securities and Exchange Commission, including
under the caption “Risk Factors” in our most recent Allscripts
Annual Report on Form 10-K and subsequent Quarterly Reports on 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,
2020
2019
ASSETS Current assets: Cash and cash equivalents
$199.0
$129.6
Restricted cash
$6.2
$7.9
Accounts receivable, net
$415.8
$459.8
Contract assets
$99.7
$96.0
Prepaid expenses and other current assets
$149.1
$148.0
Total current assets
$869.8
$841.3
Fixed assets, net
$75.7
$88.3
Software development costs, net
$253.4
$243.9
Intangible assets, net
$343.6
$374.1
Goodwill
$1,361.4
$1,362.0
Deferred taxes, net
$5.3
$5.7
Contract assets - long-term
$47.6
$67.6
Right-of-use assets - operating leases
$107.7
$98.0
Other assets
$124.3
$124.8
Total assets
$3,188.8
$3,205.7
LIABILITIES AND STOCKHOLDERS’ EQUITY Current
liabilities: Accounts payable
$75.6
$104.0
Accrued expenses
$190.6
$270.7
Accrued compensation and benefits
$82.1
$68.6
Deferred revenue
$366.4
$379.8
Current maturities of long-term debt
$374.5
$364.5
Current operating lease liabilities
$22.1
$23.1
Total current liabilities
$1,111.3
$1,210.7
Long-term debt
$661.7
$551.0
Deferred revenue
$12.1
$12.3
Deferred taxes, net
$23.9
$21.0
Long-term operating lease liabilities
$104.8
$95.2
Other liabilities
$32.1
$30.3
Total liabilities
$1,945.9
$1,920.5
Total stockholders’ equity
$1,242.9
$1,285.2
Total liabilities and stockholders’ equity
$3,188.8
$3,205.7
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,
2020
2019
2020
2019
Revenue: Software delivery, support and maintenance
$256.0
$285.0
$519.6
$560.5
Client services
150.2
159.5
303.3
316.0
Total revenue
406.2
444.5
822.9
876.5
Cost of revenue: Software delivery, support and maintenance
74.2
84.1
150.5
165.1
Client services
135.5
147.3
288.3
296.0
Amortization of software development and acquisition-related assets
(a)
32.1
29.0
62.7
57.2
Total cost of revenue
241.8
260.4
501.5
518.3
Gross profit
164.4
184.1
321.4
358.2
Selling, general and administrative expenses
114.6
105.6
211.9
205.8
Research and development
48.2
63.4
110.4
127.7
Impairments (recovery)
0.0
3.7
0.0
3.8
Amortization of intangible and acquisition-related assets
6.3
6.7
13.0
13.5
Income (loss) from operations
(4.7
)
4.7
(13.9
)
7.4
Interest expense and other, net (b)
(12.2
)
(155.4
)
(23.9
)
(165.1
)
Recovery (impairment) on long-term investments
(0.6
)
0.0
(0.6
)
1.0
Equity in net income (loss) of unconsolidated investments
16.8
0.3
17.0
0.2
Income (loss) before income taxes
(0.7
)
(150.4
)
(21.4
)
(156.5
)
Income tax (provision) benefit
(6.8
)
0.5
(6.5
)
(1.4
)
Net income (loss)
(7.5
)
(149.9
)
(27.9
)
(157.9
)
Net (income) loss attributable to non-controlling interest
0.0
0.0
0.0
0.4
Net Income (loss) attributable to Allscripts Healthcare Solutions,
Inc. stockholders
($7.5
)
($149.9
)
($27.9
)
($157.5
)
Income (loss) earnings per share - basic
($0.05
)
($0.90
)
($0.17
)
($0.94
)
Income (loss) earnings per share - diluted
($0.05
)
($0.90
)
($0.17
)
($0.94
)
Weighted average common shares outstanding: Basic
162.7
166.5
162.6
168.2
Diluted
162.7
166.5
162.6
168.2
Three Months Ended June
30,
Six Months Ended June
30,
2020
2019
2020
2019
(a) Amortization of software development and
acquisition-related assets includes: Amortization of capitalized
software development costs
$23.6
$20.0
$45.6
$39.2
Amortization of acquisition-related intangible assets
8.5
9.0
17.1
18.0
Total amortization of software development and acquisition-related
assets
$32.1
$29.0
$62.7
$57.2
(b) Interest expense and other, net are comprised of the
following for the periods presented: Non-cash charges to
interest expense
$4.8
$3.3
9.6
$6.6
Interest expense
5.6
6.4
12.1
$12.6
Amortization of discounts and debt issuance costs
0.9
0.7
1.8
$1.4
Other (income) loss, net
0.9
145.0
0.4
144.5
Total interest expense and other, net
$12.2
$155.4
$23.9
$165.1
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,
2020
2019
2020
2019
Cash flows from operating activities: Net income (loss)
($7.5
)
($149.9
)
($27.9
)
($157.9
)
Non-cash adjustments to net income (loss): Depreciation and
amortization
52.4
50.5
104.5
100.6
Operating right-to-use asset amortization
5.3
5.7
10.9
11.0
Stock-based compensation expense
7.1
10.1
17.1
21.8
Deferred Taxes
5.2
0.0
3.1
(1.5
)
Asset impairment charges
0.0
3.7
0.0
3.8
Impairment (recovery) of long-term investments
0.6
0.0
0.6
(1.0
)
Other (income) loss, net
(17.4
)
0.1
(17.1
)
1.8
Total non-cash adjustments to net income (loss)
53.2
70.1
119.1
136.5
Cash impact of changes in operating assets and liabilities: Assets
11.6
(10.4
)
36.9
25.5
Liabilities
(18.9
)
82.5
(36.1
)
(121.0
)
Accrued DOJ settlement
(15.7
)
0.0
(73.0
)
145.0
Total cash impact of changes on operating assets and liabilities
(23.0
)
72.1
(72.2
)
49.5
Net cash provided by (used in) operating activities - continuing
operations
22.7
(7.7
)
19.0
28.1
Net cash provided by (used in) operating activities - discontinued
operations
0.0
0.0
0.0
(30.0
)
Net cash provided by (used in) operating activities
22.7
(7.7
)
19.0
(1.9
)
Cash flows from investing activities: Capital expenditures
(2.1
)
(4.6
)
(4.9
)
(9.4
)
Capitalized software
(26.7
)
(26.6
)
(55.3
)
(55.2
)
Sales (purchases) of equity securities in partner entities,
businessacquisitions, net of cash acquired and other investments
22.4
(12.9
)
19.4
(12.9
)
Other proceeds from investing activities
0.0
0.0
0.0
0.0
Net cash provided by (used in) investing activities
(6.4
)
(44.1
)
(40.8
)
(77.5
)
Cash flows from financing activities: Taxes paid related to net
share settlement of equity awards
(2.3
)
(1.4
)
(5.5
)
(6.7
)
Repayment of Convertible Senior Notes
(7.3
)
0.0
(7.3
)
0.0
Payments for issuance costs on 0.875% Convertible Senior Notes
0.0
0.0
(0.8
)
0.0
Credit facility payments
(87.5
)
(5.0
)
(167.5
)
(10.0
)
Credit facility borrowings, net of issuance costs
75.0
60.0
285.0
180.0
Repurchase of common stock
0.0
0.0
(9.7
)
(65.1
)
Payment of acquisition and other financing obligations
(1.5
)
(1.5
)
(4.4
)
(1.6
)
Purchases of subsidiary shares owned by non-controlling interest
0.0
0.0
0.0
(54.0
)
Net cash provided by (used in) financing activities
(23.6
)
52.1
89.8
42.6
Effect of exchange rate changes on cash and cash equivalents
0.4
(0.1
)
(0.3
)
0.1
Net increase (decrease) in cash and cash equivalents
(6.9
)
0.2
67.7
(36.7
)
Cash, cash equivalents and restricted cash, beginning of period
212.1
147.9
137.5
184.8
Cash, cash equivalents and restricted cash, end of period
$205.2
$148.1
$205.2
$148.1
Table 4 Allscripts Healthcare Solutions, Inc.
Condensed Non-GAAP Financial Information (In millions,
except per share amounts and percentages) (Unaudited)
Three Months Ended June
30,
Six Months Ended June
30,
2020
2019
2020
2019
Total revenue, as reported
$406.2
$444.5
$822.9
$876.5
Acquisition-related deferred revenue adjustments
0.0
0.5
0.0
1.1
Total non-GAAP revenue
$406.2
$445.0
$822.9
$877.6
Gross profit, as reported
$164.4
$184.1
$321.4
$358.2
Acquisition-related deferred revenue adjustments
0.0
0.5
0.0
1.1
Acquisition-related amortization
8.5
9.0
17.1
18.0
Stock-based compensation expense
1.1
1.8
2.8
3.4
Restructuring and other
(1.1
)
1.0
3.0
2.2
Total non-GAAP gross profit
$172.9
$196.4
$344.3
$382.9
Income (loss) from operations, as reported
($4.7
)
$4.7
($13.9
)
$7.4
Acquisition-related deferred revenue adjustments
0.0
0.5
0.0
1.1
Acquisition-related amortization
14.8
15.7
30.1
31.5
Stock-based compensation expense
7.6
11.2
18.7
24.0
Impairments (recovery)
0.0
3.7
0.0
3.8
Restructuring and other
27.6
9.0
36.7
18.7
Total non-GAAP income from operations
$45.3
$44.8
$71.6
$86.5
Net income (loss) attributable to Allscripts Healthcare
Solutions, Inc. stockholders, as reported
($7.5
)
($149.9
)
($27.9
)
($157.9
)
Net (income) loss attributable to non-controlling interest
0.0
0.0
0.0
0.4
Income (loss), net of tax
($7.5
)
($149.9
)
($27.9
)
($157.5
)
Acquisition-related deferred revenue adjustments
0.0
0.5
0.0
1.1
Acquisition-related amortization
14.8
15.7
30.1
31.5
Stock-based compensation expense
7.6
11.2
18.7
24.0
Restructuring and other
27.6
154.0
36.7
163.7
Non-cash charges to interest expense and other
5.9
3.3
11.6
6.6
Impairments (recovery)
0.6
3.7
0.6
2.8
Equity in net loss (income) of unconsolidated investments
(16.8
)
(0.3
)
(17.0
)
(0.2
)
Tax rate alignment
(2.6
)
(9.5
)
(7.8
)
(16.1
)
Non-GAAP net (income)/loss attributable to non-controlling interest
0.0
0.0
0.0
(0.3
)
Non-GAAP net income attributable to Allscripts Healthcare
Solutions, Inc.
$29.6
$28.7
$45.0
$55.6
Non-GAAP effective tax rate
24
%
24
%
24
%
24
%
Weighted shares outstanding - basic
162.7
166.5
162.6
168.2
Weighted shares outstanding - diluted
163.1
167.5
163.8
169.6
GAAP Income (loss) earnings per share - basic
($0.05
)
($0.90
)
($0.17
)
($0.94
)
Non-GAAP Income (loss) earnings per share - diluted
$0.18
$0.17
$0.27
$0.33
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,
2020
2019
2020
2019
Net income (loss), as reported
($7.5
)
($149.9
)
($27.9
)
($157.9
)
Plus: Interest expense and other, net (a)
6.4
6.4
12.2
12.1
Depreciation and amortization
52.4
50.5
104.5
100.6
Equity in net (income) loss of unconsolidated investments
(16.8
)
(0.3
)
(17.0
)
(0.2
)
Tax provision/(benefit)
6.8
(0.5
)
6.5
1.4
EBITDA
$41.3
($93.8
)
$78.3
($44.0
)
Plus: Acquisition-related deferred revenue adjustments
0.0
0.5
0.0
1.1
Stock-based compensation expense
7.6
11.2
18.7
24.0
Restructuring and other
27.6
153.7
36.7
163.4
Impairments (recovery)
0.6
3.7
0.6
2.8
Adjusted EBITDA
$77.1
$75.3
$134.3
$147.3
Adjusted EBITDA margin (b)
19.0
%
16.9
%
16.3
%
16.8
%
(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% and .875% 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.
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 non-GAAP revenue, gross
profit, gross margin, operating expense, income from operations,
Adjusted EBITDA, Adjusted EBITDA margin, effective income tax rate,
net income, diluted earnings per share and free cash flow, 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 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 Table 4
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 and restructuring 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 Table 4 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 restructuring 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 (loss)
from operations, as reported, and excludes acquisition-related
deferred revenue adjustments, acquisition-related amortization,
stock-based compensation expense, impairment charges and
restructuring and other costs. Reconciliations to GAAP income from
operations are found in Table 4 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; restructuring and other costs;
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.
- Adjusted EBITDA margin is a non-GAAP measure that is calculated
by dividing Adjusted EBITDA by non-GAAP revenue. See the
reconciliations in Table 4 within this press release with respect
to non-GAAP revenue and in Table 5 within this press release with
respect to Adjusted EBITDA.
- 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; restructuring and other costs; non-cash
charges to interest expense and other; impairment charges and
equity in net earnings of unconsolidated investments. Non-GAAP net
income also includes a GAAP to non-GAAP tax rate alignment
adjustment.
- 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. Reconciliations to GAAP net
income/(loss) attributable to Allscripts Healthcare Solutions, Inc.
are found in Table 4 within this press release.
- Non-GAAP diluted 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.
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.
Impairments (recovery). Impairment charges reflect the
write-off of the book value of certain fixed assets that resulted
from consolidating business functions and data centers and non-cash
impairment charges associated with long-term investments based on
management’s assessment of the likelihood of near-term recovery of
the investments’ value.
Restructuring and Other Costs. Restructuring 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 restructuring 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 conversion option embedded in the 1.25 percent Cash
Convertible Notes and 0.875 percent Convertible Notes issued by
Allscripts during the second quarter of 2013 and fourth quarter of
2019, respectively.
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, diluted earnings per share, Adjusted
EBITDA, Adjusted EBITDA margin and free cash flow provide useful
supplemental information to management and investors regarding the
underlying performance of Allscripts business operations.
Acquisition accounting adjustments and restructuring and other
costs 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, Adjusted EBITDA and/or Adjusted EBITDA margin
to measure achievement under Allscripts stock and cash incentive
compensation plans. Note, however, that non-GAAP gross profit,
operating income, net income, diluted earnings per share Adjusted
EBITDA and Adjusted EBITDA margin 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/20200730006045/en/
Investors: Stephen Shulstein
312-386-6735 stephen.shulstein@allscripts.com
Media: Concetta Rasiarmos
312-447-2466 concetta.rasiarmos@allscripts.com
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