Allscripts Healthcare Solutions, Inc. (NASDAQ:MDRX) (Allscripts)
announced its financial results for the three and nine months ended
September 30, 2017.
Third Quarter and Recent Business
Highlights
- U.S. Core Solutions and Services: Allscripts
saw continued success during the quarter as health care
organizations grew their Allscripts partnerships across the
portfolio spectrum. For example, one of the largest faith-based
health systems in the United States continued its investment in
Allscripts Sunrise™ inpatient solutions. In addition, a teaching
hospital in Brooklyn, New York elected to consolidate its
outpatient physician environment onto Sunrise Ambulatory care. In
the independent ambulatory market, Allscripts saw continued demand
for replacement electronic health record (EHR) systems, adding new
clients and cross-selling additional solutions and services within
its client base. Third quarter results also included new revenue
cycle management services clients and additional practice
management system sales.As anticipated, on October 2, 2017, the
company closed its acquisition of McKesson Corporation's hospital
and health system IT business, known as the Enterprise Information
Solutions (EIS) business. The transaction increases Allscripts
electronic health record presence approximately two-fold in U.S.
hospitals and health systems.
- Value-Based Care: Allscripts payer and
life-sciences business had a strong sales quarter powered by the
shift to value-based care, acceleration in delivering real-time
information at the point of care and increasing investments by the
life sciences industry to bring new therapeutics to market faster.
The company signed a new partnership to develop and deploy
preauthorization solutions for medical procedures at the point of
care and facilitate the delivery of drug price transparency
information to clinicians and patients at the point of
care.
- Allscripts Global: In the third quarter, the
company expanded its international client roster. In the United
Kingdom, Bolton NHS Foundation Trust signed to implement the
Sunrise platform across a 750+ bed teaching hospital and more than
20 health centers and clinics. In the Asia-Pacific region,
dbMotion™ was selected by South Western Sydney Primary Health
Network as the clinical interoperability solution within New South
Wales. Additionally, in Western Australia, the Sunrise-BOSSNet EHR
platform was selected by several hospitals, expanding Allscripts
geographic reach across the continent. Operationally, Sunrise went
live at Royal Adelaide Hospital, a new, 800-bed state-of-the-art
hospital and the largest Sunrise installation to date in Australia.
Allscripts sees strong interest and enhanced competitive
positioning for its solutions across multiple geographic regions
outside the Unites States.
- Post-Acute Care (Netsmart): The company saw
continued strength in demand for Netsmart’s technology and services
from behavioral-health, social services and long-term and home
health care community providers. During the third quarter, Netsmart
achieved strong bookings, driven by a balance of business from
existing and new clients and across the multiple provider segments
it serves.
“Allscripts achieved double-digit growth across
revenue, Adjusted EBITDA and non-GAAP earnings, in the third
quarter of 2017,” Paul M. Black, Chief Executive Officer of
Allscripts, said. “We are especially pleased that non-GAAP revenue
growth accelerated to 12 percent, year-over-year. In addition, we
recorded another quarterly bookings record. I am proud of the
alignment Allscripts, our clients and our associates have forged to
deliver on the promise of better outcomes and improved efficiency
in health care delivery.”
Black continued, “With the closing of the
McKesson Enterprise Information Solutions acquisition, we are
entering an important new phase in Allscripts corporate evolution.
I believe the company is positioned the best it has been in its
history to meet the ever-changing and complex needs of health care
organizations across the globe. Initial client feedback across the
Enterprise Information Solutions portfolio, starting with Paragon,
has been encouraging, as has unbiased commentary from third-party
surveys. We will fully integrate EIS into the Allscripts family,
delivering on our vision of an Open, Connected Community of Health
for the benefit of clients, associates and shareholders.”
Please see the “Explanation of Non-GAAP
Financial Measures” at the end of this press release for detailed
information on calculating non-GAAP measures.
Third Quarter 2017 Bookings, Backlog
Highlights
Bookings(1) were $304 million in the third
quarter of 2017. This result compares with $291 million in the
third quarter of 2016, a 4 percent increase. In terms of bookings
mix, 50 percent of third quarter 2017 bookings related to software
delivery, while the remaining amounts were related to client
services. For 2017 year-to-date, total bookings were $997 million,
a 10 percent increase year-over-year.
Contract revenue backlog as of September 30,
2017, totaled more than $4.1 billion, up 5% compared to the
September 30, 2016, amount.
Third Quarter 2017 Revenue
Details
Third quarter 2017 GAAP revenue was $449
million, an increase of 15 percent year-over-year. Non-GAAP revenue
totaled $451 million, improving 12 percent year-over-year. Non-GAAP
revenue excludes acquisition-related deferred revenue adjustments
related to Netsmart, NantHealth and non-material consolidated
affiliates.
Software delivery, support and maintenance
revenue totaled $294 million on a GAAP basis and $295 million on a
non-GAAP basis in the third quarter of 2017, a 16 and 12 percent
increase, respectively, compared with the third quarter of 2016.
Software delivery, support and maintenance revenue consists of all
software, hardware, subscription and transaction-related revenue as
well as support and maintenance.
Client services revenue totaled $155 million on
a GAAP basis and $156 million on a non-GAAP basis, up 11 and 10
percent, respectively, compared with the third quarter of 2016.
Client services revenue consists of recurring managed services and
other project-based client services revenue.
Recurring revenue, consisting of subscriptions,
recurring transactions, support and maintenance and recurring
managed services, increased 11 percent on a GAAP basis and 7
percent on a non-GAAP basis compared with the third quarter of
2016. Non-recurring revenue, comprised of systems sales and other
project-based client services revenue, increased 28 percent on a
GAAP basis and 27 percent on a non-GAAP basis compared with the
third quarter of 2016.
Third Quarter Gross Profit and Operating
Expenses
Gross margin in the third quarter of 2017 was
44.9 percent on a GAAP basis and 48.4 percent on a non-GAAP basis,
compared with 42.3 and 47.6 percent, respectively, in the third
quarter of 2016.
On a GAAP basis, total operating expenses,
consisting of selling, general and administrative and research and
development expenses, were $169 million, or a 17 percent increase
year-over-year. Non-GAAP operating expenses totaled $148 million,
an 11 percent increase year-over-year. The year-over-year increase
reflects growth in research and development expense, amortization
of capitalized software and higher SG&A expense.
Adjustments made for non-GAAP purposes can
impact the directional trends for GAAP versus non-GAAP financial
metrics. For a reconciliation of GAAP and non-GAAP items, see the
financial tables in this release (Tables 4, 5 and 6).
Third Quarter 2017 Net Income and
Earnings per Share
GAAP net loss attributable to Allscripts
stockholders in the third quarter of 2017 totaled $29 million
compared with net loss of $10 million in the third quarter of 2016.
Included in the GAAP net loss are multiple items that are excluded
for non-GAAP purposes.
The company recorded $11 million of legal,
transaction-related and other costs in the third quarter of 2017.
This compares with $2 million of such costs in the third quarter of
2016. Approximately half of these expenses are related to severance
accruals, recorded as legal and other expenses in the financial
schedules of this earnings release, as the company continued its
ongoing strategy to streamline costs and increase operational
efficiency.
Additionally, the GAAP net loss includes an $11
million charge for the accretion of redemption preference on the
redeemable convertible preferred stock, issued in conjunction with
the Netsmart transaction in April 2016.
The GAAP net loss also includes a $21 million
loss on the final disposition of the company’s position in
NantHealth common stock related to the NantHealth provider/patient
solutions business acquisition, completed in August 2017.
Non-GAAP net income attributable to Allscripts
stockholders in the third quarter of 2017 totaled $30 million, up
14% when compared with the third quarter of 2016.
GAAP loss per share in the third quarter of 2017
was $0.16, compared with loss per share of $0.06 in the third
quarter of 2016. Non-GAAP earnings per share in the third quarter
of 2017 were $0.16, compared with $0.14 in the third quarter of
2016.
Third Quarter 2017 Adjusted EBITDA and
Cash Flow
Adjusted EBITDA increased to $97 million in the
third quarter of 2017, a 22 percent increase compared with the
third quarter of 2016.
Cash flow from operations for the quarter ended
September 30, 2017, totaled $64 million, compared to $53 million
during the same period of 2016. Cash flow from operations for the
nine-month period ended September 30, 2017, totaled $173 million,
compared to $185 million the same period of 2016, due largely to
higher working capital requirements in 2017. Free cash flow totaled
$13 million for the third quarter of 2017, an improvement compared
to the prior year period even as capital expenditures nearly
doubled compared to the third quarter of 2016.
2017 Financial Outlook
Update
The company is positively adjusting its 2017 financial outlook,
reflecting the company’s year-to-date performance and expectations
for the one remaining quarter in 2017.
- The company anticipates non-GAAP revenue to be at the high end
of the prior range of between $1.79 billion and $1.82 billion;
- The company anticipates Adjusted EBITDA to be at the high end
of the prior range of between $345 million and $365 million;
and
- The company affirms its non-GAAP earnings per share growth
target of between 10 and 15 percent, or between $0.61 and $0.63 per
diluted share.
As announced in August, Allscripts 2017 outlook
includes three months of financial contribution from the EIS
acquisition in the fourth quarter of 2017. Also, as disclosed
previously, the company expects to incur approximately $50 million
in severance and transaction costs beginning in the fourth quarter
of 2017 from the EIS transaction, which are expected to be
recognized quarterly until no later than the fourth quarter of
2018. The 2017 outlook above excludes the impact of such
transaction and related costs in the fourth quarter of 2017.
Allscripts provides financial guidance for
revenue, Adjusted EBITDA and earnings per share on a non-GAAP
basis. Allscripts non-GAAP revenue guidance excludes the impact of
acquisition-related deferred revenue adjustments.
In providing financial guidance, the company
does not reconcile non-GAAP revenue, Adjusted EBITDA or non-GAAP
earnings per share guidance to the corresponding GAAP financial
measures. Allscripts does not provide guidance for the various
reconciling items since certain items that impact GAAP revenue and
net income are either outside of its control and/or cannot be
reasonably predicted.
For a reconciliation of other non-GAAP items,
see the explanation of non-GAAP financial measures as well as the
non-GAAP financial reconciliation tables in this release (Tables 4,
5 and 6).
Conference Call:
Allscripts will conduct a conference call today,
Thursday, November 2, 2017, at 4:30 PM Eastern Daylight 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 # 13672149.
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 # 13672149.
Supplemental and non-GAAP financial information
is also available at http://investor.allscripts.com.
Footnotes
- Bookings reflect the value of executed contracts for software,
hardware, client services, private cloud hosting services,
outsourcing and other 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 AllscriptsAllscripts
(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.
© 2017 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.
For more information
contact:
Investors:Seth
Frank312-506-1213seth.frank@allscripts.com
Media: Concetta
Rasiarmos312-447-2466Concetta.Rasiarmos@allscripts.com
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 “2017 Financial Outlook
Update”. 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 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
expected financial contribution and results of the Netsmart joint
business entity, including consolidation for financial reporting
purposes, the EIS business, and the provider/patient solutions
business acquired from NantHealth; the successful integration of
the EIS and the provider/patient solutions businesses; the
anticipated and unanticipated expenses and liabilities related to
the acquisition and the acquired EIS and provider/patient solutions
businesses; 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 companies 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; security breaches;
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) |
|
|
|
|
|
September 30, |
|
December 31, |
2017 |
|
2016 |
ASSETS |
|
|
|
Current
assets: |
|
|
|
Cash and
cash equivalents |
$104.3 |
|
$95.6 |
Restricted cash |
$5.1 |
|
$1.0 |
Accounts
receivable, net |
442.9 |
|
405.1 |
Prepaid
expenses and other current assets |
115.7 |
|
102.6 |
Total
current assets |
668.0 |
|
604.3 |
Available
for sale marketable securities |
0.0 |
|
149.1 |
Fixed
assets, net |
165.4 |
|
148.8 |
Software
development costs, net |
207.1 |
|
163.9 |
Intangible assets, net |
717.2 |
|
741.4 |
Goodwill |
1,972.0 |
|
1,924.1 |
Deferred
taxes, net |
4.2 |
|
2.8 |
Other
assets |
149.5 |
|
97.8 |
Total
assets |
$3,883.4 |
|
$3,832.2 |
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
Current
liabilities: |
|
|
|
Accounts
payable |
$114.3 |
|
$126.1 |
Accrued
expenses |
71.8 |
|
86.1 |
Accrued
compensation and benefits |
70.0 |
|
64.3 |
Deferred
revenue |
392.5 |
|
363.8 |
Current
maturities of long-term debt |
24.6 |
|
15.2 |
Non-recourse current maturities of long-term debt - Netsmart |
2.7 |
|
2.5 |
Current
maturities of capital lease obligations |
8.5 |
|
9.1 |
Total
current liabilities |
684.4 |
|
667.1 |
Long-term
debt |
747.4 |
|
717.9 |
Non-recourse long-term debt - Netsmart |
625.5 |
|
576.9 |
Long-term
capital lease obligations |
7.7 |
|
9.9 |
Deferred
revenue |
19.3 |
|
18.0 |
Deferred
taxes, net |
145.4 |
|
141.8 |
Other
liabilities |
86.6 |
|
39.7 |
Total
liabilities |
2,316.3 |
|
2,171.3 |
Redeemable convertible non-controlling interest - Netsmart |
420.6 |
|
387.7 |
Total
Allscripts Healthcare Solutions, Inc.'s stockholders' equity |
1,105.4 |
|
1,232.5 |
Non-controlling interest |
41.1 |
|
40.7 |
Total
stockholders’ equity |
1,146.5 |
|
1,273.2 |
Total
liabilities and stockholders’ equity |
$3,883.4 |
|
$3,832.2 |
|
|
|
|
|
Table 2 |
Allscripts Healthcare Solutions,
Inc. |
Condensed Consolidated Statements of
Operations |
(In millions, except per-share amounts) |
(Unaudited) |
|
|
|
|
|
|
|
|
|
Three Months EndedSeptember
30, |
|
Nine Months EndedSeptember 30, |
|
2017 |
|
2016 |
|
2017 |
|
2016 |
Revenue: |
|
|
|
|
|
|
|
Software
delivery, support and maintenance |
$294.2 |
|
|
$252.7 |
|
|
$846.0 |
|
|
$731.7 |
|
Client
services |
155.2 |
|
|
139.7 |
|
|
443.0 |
|
|
392.8 |
|
Total
revenue |
449.4 |
|
|
392.4 |
|
|
1,289.0 |
|
|
1,124.5 |
|
Cost of revenue: |
|
|
|
|
|
|
|
Software
delivery, support and maintenance |
86.8 |
|
|
86.6 |
|
|
259.3 |
|
|
240.9 |
|
Client
services |
132.6 |
|
|
116.4 |
|
|
379.8 |
|
|
336.0 |
|
Amortization of software development and acquisition-related assets
(a) |
28.0 |
|
|
23.3 |
|
|
81.8 |
|
|
62.9 |
|
Total
cost of revenue |
247.4 |
|
|
226.3 |
|
|
720.9 |
|
|
639.8 |
|
Gross
profit |
202.0 |
|
|
166.1 |
|
|
568.1 |
|
|
484.7 |
|
Selling, general and
administrative expenses |
117.4 |
|
|
98.8 |
|
|
340.4 |
|
|
277.7 |
|
Research and
development |
51.1 |
|
|
45.2 |
|
|
146.7 |
|
|
140.1 |
|
Asset impairment
charges |
0.0 |
|
|
0.0 |
|
|
0.0 |
|
|
4.7 |
|
Amortization of
intangible and acquisition-related assets |
8.1 |
|
|
5.3 |
|
|
23.3 |
|
|
14.9 |
|
Income
from operations |
25.4 |
|
|
16.8 |
|
|
57.7 |
|
|
47.3 |
|
Interest expense and
other, net (b) |
(22.8 |
) |
|
(19.4 |
) |
|
(63.2 |
) |
|
(42.3 |
) |
Impairment of and
losses on long-term investments |
(20.7 |
) |
|
0.0 |
|
|
(165.3 |
) |
|
|
Equity in net income
(loss) of unconsolidated investments |
0.4 |
|
|
0.0 |
|
|
0.7 |
|
|
(7.5 |
) |
Income
(loss) before income taxes |
(17.7 |
) |
|
(2.6 |
) |
|
(170.1 |
) |
|
(2.5 |
) |
Income tax benefit
(provision) |
0.3 |
|
|
2.7 |
|
|
1.1 |
|
|
2.6 |
|
Net
income (loss) |
(17.4 |
) |
|
0.1 |
|
|
(169.0 |
) |
|
0.1 |
|
Less: Net loss (income)
attributable to non-controlling interest |
(0.2 |
) |
|
(0.1 |
) |
|
(0.4 |
) |
|
(0.1 |
) |
Less: Accretion of
redemption preference on redeemable convertible
non-controlling interest - Netsmart |
(11.0 |
) |
|
(10.1 |
) |
|
(32.9 |
) |
|
(18.3 |
) |
Net loss
attributable to Allscripts Healthcare Solutions, Inc.
stockholders |
($28.6 |
) |
|
($10.1 |
) |
|
($202.3 |
) |
|
($18.3 |
) |
|
|
|
|
|
|
|
|
Loss per share - basic
and diluted |
($0.16 |
) |
|
($0.06 |
) |
|
($1.12 |
) |
|
($0.10 |
) |
|
|
|
|
|
|
|
|
Weighted average common
shares outstanding: |
|
|
|
|
|
|
|
Basic |
180.6 |
|
|
186.2 |
|
|
180.9 |
|
|
187.2 |
|
Diluted |
180.6 |
|
|
186.2 |
|
|
180.9 |
|
|
187.2 |
|
|
|
|
|
|
|
|
|
(a) Amortization of
software development and acquisition-related assets includes: |
|
|
|
|
|
|
|
Amortization of capitalized software development costs |
$14.7 |
|
|
$10.6 |
|
|
$40.3 |
|
|
$31.2 |
|
Amortization of acquisition-related intangible assets |
13.3 |
|
|
12.7 |
|
|
41.5 |
|
|
31.7 |
|
|
$28.0 |
|
|
$23.3 |
|
|
$81.8 |
|
|
$62.9 |
|
|
|
|
|
|
|
|
|
(b) Interest expense and other, net are comprised of the
following for the periods presented: |
|
Three Months EndedSeptember
30, |
|
Nine Months EndedSeptember 30, |
|
2017 |
|
2016 |
|
2017 |
|
2016 |
|
|
|
|
|
|
|
|
Non-cash
amortization of 1.25% Cash Convertible Notes original issue
discount |
$3.1 |
|
|
$2.9 |
|
|
$9.0 |
|
|
$8.5 |
|
Non-cash
write-off of unamortized deferred debt issuance costs |
0.0 |
|
|
0.0 |
|
|
- |
|
|
- |
|
Non-cash
charges to interest expense and other, net |
3.1 |
|
|
2.9 |
|
|
9.0 |
|
|
8.5 |
|
Interest
expense |
17.7 |
|
|
14.9 |
|
|
49.3 |
|
|
30.6 |
|
Amortization of discounts and debt issuance costs |
1.4 |
|
|
1.6 |
|
|
4.4 |
|
|
3.7 |
|
Other
income, net |
0.6 |
|
|
- |
|
|
0.5 |
|
|
(0.5 |
) |
Total
interest expense and other, net |
$22.8 |
|
|
$19.4 |
|
|
$63.2 |
|
|
$42.3 |
|
|
|
|
|
|
|
|
|
|
Table 3 |
Allscripts Healthcare Solutions,
Inc. |
Condensed Consolidated Statements of Cash
Flows |
(In millions) |
(Unaudited) |
|
|
|
|
|
|
|
|
|
Three Months EndedSeptember
30, |
|
Nine Months EndedSeptember 30, |
|
2017 |
|
2016 |
|
2017 |
|
2016 |
Cash flows from
operating activities: |
|
|
|
|
|
|
|
Net
(loss) income |
($17.4 |
) |
|
$0.1 |
|
|
($169.0 |
) |
|
$0.1 |
|
Non-cash
adjustments to net (loss) income: |
|
|
|
|
|
|
|
Depreciation and amortization |
53.8 |
|
|
43.9 |
|
|
155.1 |
|
|
120.5 |
|
Stock-based compensation expense |
9.6 |
|
|
9.6 |
|
|
28.1 |
|
|
29.7 |
|
Impairment of and losses on long-term investments |
20.7 |
|
|
0.0 |
|
|
165.3 |
|
|
0.0 |
|
Other non-cash charges, net |
0.3 |
|
|
(1.5 |
) |
|
(2.3 |
) |
|
9.0 |
|
Total non-cash adjustments to income |
84.4 |
|
|
52.0 |
|
|
346.2 |
|
|
159.2 |
|
Cash
impact of changes in operating assets and liabilities |
(3.2 |
) |
|
0.9 |
|
|
(4.0 |
) |
|
25.8 |
|
Net cash
provided by operating activities |
63.8 |
|
|
53.0 |
|
|
173.2 |
|
|
185.1 |
|
Cash flows from
investing activities: |
|
|
|
|
|
|
|
Capital
expenditures |
(15.2 |
) |
|
(8.4 |
) |
|
(40.2 |
) |
|
(25.0 |
) |
Capitalized software |
(35.5 |
) |
|
(32.9 |
) |
|
(107.1 |
) |
|
(70.0 |
) |
Purchases
of equity securities in partner entities, business
acquisitions, net of cash acquired and other investments |
(54.4 |
) |
|
(29.8 |
) |
|
(59.7 |
) |
|
(956.0 |
) |
Other
proceeds from investing activities |
0.2 |
|
|
0.0 |
|
|
0.2 |
|
|
0.0 |
|
Net cash
used in investing activities |
(104.9 |
) |
|
(71.1 |
) |
|
(206.8 |
) |
|
(1,051.0 |
) |
Cash flows from
financing activities: |
|
|
|
|
|
|
|
Repurchase of common stock |
0.0 |
|
|
(19.0 |
) |
|
(12.1 |
) |
|
(71.1 |
) |
Proceeds
from issuance of redeemable convertible preferred stock |
0.0 |
|
|
0.0 |
|
|
0.0 |
|
|
333.6 |
|
Proceeds
from sale or issuance of common stock |
0.0 |
|
|
0.1 |
|
|
0.0 |
|
|
0.1 |
|
Stock-based compensation-related payments, net |
(0.2 |
) |
|
0.0 |
|
|
(6.8 |
) |
|
(6.4 |
) |
Credit
facilities and capital lease borrowings, net |
62.3 |
|
|
23.6 |
|
|
65.4 |
|
|
569.8 |
|
Other,
net |
(0.9 |
) |
|
0.0 |
|
|
(0.9 |
) |
|
0.0 |
|
Net cash
used in financing activities |
61.2 |
|
|
4.7 |
|
|
45.6 |
|
|
826.0 |
|
Effect of
exchange rate changes on cash and cash equivalents |
0.2 |
|
|
0.0 |
|
|
0.8 |
|
|
0.3 |
|
Net
increase (decrease) in cash and cash equivalents |
20.3 |
|
|
(13.4 |
) |
|
12.8 |
|
|
(39.6 |
) |
Cash, cash equivalents
and restricted cash, beginning of period |
89.1 |
|
|
90.7 |
|
|
96.6 |
|
|
116.9 |
|
Cash, cash equivalents
and restricted cash, end of period |
$109.4 |
|
|
$77.3 |
|
|
$109.4 |
|
|
$77.3 |
|
|
|
|
|
|
|
|
|
|
Table 4 |
Allscripts Healthcare Solutions,
Inc. |
Condensed Non-GAAP Financial
Information |
(In millions, except per share amounts and
percentages) |
(Unaudited) |
|
|
|
|
|
|
|
|
|
Three Months EndedSeptember
30, |
|
Nine Months EndedSeptember
30, |
|
2017 |
|
2016 |
|
2017 |
|
2016 |
Total revenue, as
reported |
$449.4 |
|
|
$392.4 |
|
|
$1,289.0 |
|
|
$1,124.5 |
|
|
|
|
|
|
|
|
|
Acquisition-related deferred revenue adjustments |
1.8 |
|
|
11.7 |
|
|
5.0 |
|
|
21.8 |
|
Total non-GAAP
revenue |
$451.2 |
|
|
$404.1 |
|
|
$1,294.0 |
|
|
$1,146.3 |
|
|
|
|
|
|
|
|
|
Gross profit, as
reported |
$202.0 |
|
|
$166.1 |
|
|
$568.1 |
|
|
$484.7 |
|
|
|
|
|
|
|
|
|
Acquisition-related deferred revenue adjustments |
1.8 |
|
|
11.7 |
|
|
5.0 |
|
|
21.8 |
|
Acquisition-related amortization |
13.3 |
|
|
12.7 |
|
|
41.5 |
|
|
31.7 |
|
Stock-based compensation expense |
1.3 |
|
|
1.9 |
|
|
6.0 |
|
|
6.8 |
|
Transaction-related and other costs (a) |
0.0 |
|
|
0.0 |
|
|
0.2 |
|
|
0.0 |
|
Total non-GAAP
gross profit |
$218.4 |
|
|
$192.4 |
|
|
$620.8 |
|
|
$545.0 |
|
|
|
|
|
|
|
|
|
Income from operations,
as reported |
$25.4 |
|
|
$16.8 |
|
|
$57.7 |
|
|
$47.3 |
|
|
|
|
|
|
|
|
|
Acquisition-related deferred revenue adjustments |
1.8 |
|
|
11.7 |
|
|
5.0 |
|
|
21.8 |
|
Acquisition-related amortization |
21.4 |
|
|
18.0 |
|
|
64.8 |
|
|
46.6 |
|
Stock-based compensation expense |
10.4 |
|
|
9.8 |
|
|
30.4 |
|
|
30.9 |
|
Transaction-related and other costs (a) |
11.2 |
|
|
2.2 |
|
|
32.6 |
|
|
6.8 |
|
Non-cash
asset impairment charges |
0.0 |
|
|
0.0 |
|
|
0.0 |
|
|
4.7 |
|
Total non-GAAP
operating income |
$70.2 |
|
|
$58.5 |
|
|
$190.5 |
|
|
$158.1 |
|
|
|
|
|
|
|
|
|
Net loss attributable
to Allscripts Healthcare Solutions, Inc. stockholders, as
reported |
($28.6 |
) |
|
($10.1 |
) |
|
($202.3 |
) |
|
($18.3 |
) |
Net
income (loss) attributable to non-controlling interest |
0.2 |
|
|
0.1 |
|
|
0.4 |
|
|
0.1 |
|
Accretion
of redemption preference on redeemable convertible non-controlling
interest - Netsmart |
11.0 |
|
|
10.1 |
|
|
32.9 |
|
|
18.3 |
|
Net loss, as
reported |
($17.4 |
) |
|
$0.1 |
|
|
($169.0 |
) |
|
$0.1 |
|
|
|
|
|
|
|
|
|
Acquisition-related deferred revenue adjustments |
1.8 |
|
|
11.7 |
|
|
5.0 |
|
|
21.8 |
|
Acquisition-related amortization |
21.4 |
|
|
18.0 |
|
|
64.8 |
|
|
46.6 |
|
Stock-based compensation expense |
10.4 |
|
|
9.8 |
|
|
30.4 |
|
|
30.9 |
|
Transaction-related and other costs (a) |
11.2 |
|
|
2.2 |
|
|
32.6 |
|
|
6.8 |
|
Non-cash
asset impairment charges |
0.0 |
|
|
0.0 |
|
|
0.0 |
|
|
4.7 |
|
Non-cash
charges to interest expense and other |
3.1 |
|
|
2.9 |
|
|
9.0 |
|
|
8.5 |
|
Impairment of and losses on long-term investments |
20.7 |
|
|
0.0 |
|
|
165.3 |
|
|
0.0 |
|
Equity in
net (income) loss of unconsolidated investments |
(0.4 |
) |
|
0.0 |
|
|
(0.7 |
) |
|
7.5 |
|
Tax
effect of adjustments to reconcile GAAP to non-GAAP net income |
(23.8 |
) |
|
(15.6 |
) |
|
(107.1 |
) |
|
(44.4 |
) |
Tax rate
alignment |
5.9 |
|
|
(1.8 |
) |
|
58.4 |
|
|
(1.7 |
) |
Total Non-GAAP
net income |
$32.9 |
|
|
$27.3 |
|
|
$88.7 |
|
|
$80.8 |
|
Less:
Non-GAAP net income attributable to non-controlling interest |
(3.3 |
) |
|
(1.4 |
) |
|
(8.8 |
) |
|
(3.1 |
) |
Non-GAAP net
income attributable to Allscripts Healthcare Solutions,
Inc. |
$29.6 |
|
|
$25.9 |
|
|
$79.9 |
|
|
$77.7 |
|
|
|
|
|
|
|
|
|
Non-GAAP effective tax
rate |
35 |
% |
|
35 |
% |
|
35 |
% |
|
35 |
% |
|
|
|
|
|
|
|
|
Weighted shares
outstanding - diluted |
183.8 |
|
|
189.1 |
|
|
183.0 |
|
|
189.3 |
|
|
|
|
|
|
|
|
|
(Loss) earnings per
share - basic and diluted, as reported |
($0.16 |
) |
|
($0.06 |
) |
|
($1.12 |
) |
|
($0.10 |
) |
|
|
|
|
|
|
|
|
Non-GAAP
earnings per share attributable to Allscripts Healthcare Solutions,
Inc. - diluted |
$0.16 |
|
|
$0.14 |
|
|
$0.44 |
|
|
$0.41 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note: Adjustments to reconcile GAAP to non-GAAP net income are
presented gross of tax, with net tax effects included in row titled
"Tax effect of adjustments to reconcile GAAP to non-GAAP net
income". |
(a) Transaction-related and other costs included in cost of
revenue and operating expenses are comprised of the following for
the periods presented: |
|
|
Three Months EndedSeptember
30, |
|
Nine Months EndedSeptember
30, |
|
2017 |
|
2016 |
|
2017 |
|
2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Legal and other
costs |
7.3 |
|
|
0.0 |
|
|
20.7 |
|
|
0.2 |
|
Transaction-related
costs |
3.9 |
|
|
2.2 |
|
|
11.9 |
|
|
6.6 |
|
Total
transaction-related and other costs |
$11.2 |
|
|
$2.2 |
|
|
$32.6 |
|
|
$6.8 |
|
|
|
|
|
|
|
|
|
|
Table 5 |
Allscripts Healthcare Solutions,
Inc. |
Non-GAAP Financial Information - Adjusted
EBITDA |
(In millions, except percentages) |
(Unaudited) |
|
|
|
|
|
|
|
|
|
Three Months EndedSeptember
30, |
|
Nine Months EndedSeptember 30, |
|
2017 |
|
2016 |
|
2017 |
|
2016 |
Total revenue, as
reported |
$449.4 |
|
|
$392.4 |
|
|
$1,289.0 |
|
|
$1,124.5 |
|
Acquisition-related deferred revenue adjustments |
1.8 |
|
|
11.7 |
|
|
5.0 |
|
|
21.8 |
|
Total non-GAAP
revenue |
$451.2 |
|
|
$404.1 |
|
|
$1,294.0 |
|
|
$1,146.3 |
|
|
|
|
|
|
|
|
|
Net loss, as
reported |
($17.4 |
) |
|
$0.1 |
|
|
(169.0 |
) |
|
$0.1 |
|
|
|
|
|
|
|
|
|
Acquisition-related deferred revenue adjustments |
1.8 |
|
|
11.7 |
|
|
5.0 |
|
|
21.8 |
|
Depreciation and amortization |
53.8 |
|
|
43.9 |
|
|
155.1 |
|
|
120.5 |
|
Stock-based compensation expense |
10.4 |
|
|
9.8 |
|
|
30.4 |
|
|
30.9 |
|
Transaction-related and other costs (a) |
10.3 |
|
|
2.2 |
|
|
31.7 |
|
|
6.8 |
|
Non-cash
asset impairment charges |
0.0 |
|
|
0.0 |
|
|
0.0 |
|
|
4.7 |
|
Interest
expense and other, net (b) |
18.3 |
|
|
14.9 |
|
|
49.8 |
|
|
30.1 |
|
Impairment of and losses on long-term investments |
20.7 |
|
|
0.0 |
|
|
165.3 |
|
|
0.0 |
|
Equity in
net loss of unconsolidated investments |
(0.4 |
) |
|
0.0 |
|
|
(0.7 |
) |
|
7.5 |
|
Tax
(benefit)/provision |
(0.3 |
) |
|
(2.7 |
) |
|
(1.1 |
) |
|
(2.6 |
) |
Adjusted
EBITDA |
$97.2 |
|
|
$79.9 |
|
|
$266.5 |
|
|
$219.8 |
|
|
|
|
|
|
|
|
|
Adjusted EBITDA margin (c) |
22 |
% |
|
20 |
% |
|
21 |
% |
|
19 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) Transaction-related and other costs has been adjusted from
the amounts presented in the reconciliation of GAAP and non-GAAP
income from operations, as shown in Table 4, in order to remove the
accelerated amortization of assets to be disposed from
transaction-related and other costs since such amortization is also
included in depreciation and amortization. |
|
|
|
|
|
|
|
|
(b) 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. |
|
|
|
|
|
|
|
|
(c) Adjusted EBITDA margin is calculated by dividing adjusted
EBITDA by non-GAAP revenue. |
|
|
|
|
|
|
|
|
|
Table 6 |
Allscripts Healthcare Solutions,
Inc. |
Non-GAAP Financial Information - Free Cash
Flow |
(In millions) |
(Unaudited) |
|
|
|
|
|
|
|
|
|
Three Months EndedSeptember
30, |
|
Nine Months EndedSeptember 30, |
|
2017 |
|
2016 |
|
2017 |
|
2016 |
Net cash provided by
operating activities |
$63.8 |
|
|
$53.0 |
|
|
$173.2 |
|
|
$185.1 |
|
Cash flows from
investing activities: |
|
|
|
|
|
|
|
Capital
expenditures |
(15.2 |
) |
|
(8.4 |
) |
|
(40.2 |
) |
|
(25.0 |
) |
Capitalized software |
(35.5 |
) |
|
(32.9 |
) |
|
(107.1 |
) |
|
(70.0 |
) |
Free cash flow |
$13.1 |
|
|
$11.7 |
|
|
$25.9 |
|
|
$90.1 |
|
|
|
|
|
|
|
|
|
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, 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 Netsmart transaction
that is eliminated for GAAP purposes due to purchase accounting
adjustments.
- 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 transaction-related and other costs.
Non-GAAP gross margin consists of non-GAAP gross profit as a
percentage of non-GAAP revenue in the applicable period. For the
third quarter of 2017, non-GAAP gross margin totaled 48.4 percent,
consisting of non-GAAP gross profit of $218.4 million divided by
non-GAAP revenue of $451.2 million. For the third quarter of 2016,
non-GAAP gross margin totaled 47.6 percent, consisting of non-GAAP
gross profit of $192.4 million divided by non-GAAP revenue of
$404.1 million. 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 transaction-related
and other costs and stock-based compensation expense recorded to
SG&A and R&D. For the third quarter of 2017, non-GAAP
operating expense totaled $148.2 million, consisting of $117.4
million of GAAP SG&A and $51.1 million of GAAP R&D expense
and excluding $11.2 million of total transaction-related and other
costs and $9.1 million of stock-based compensation expense recorded
to SG&A and R&D. For the third quarter of 2016, non-GAAP
operating expense totaled $133.9 million consisting of $98.8
million of GAAP SG&A and $45.2 million of GAAP R&D expense
and excluding $2.2 million of transaction-related and other costs
and $7.9 million of stock-based compensation expense recorded to
SG&A and R&D. Please note operating expense totals may not
sum due to rounding.
- 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-related and other
costs; non-cash asset and long-term investment impairment charges;
interest expense and other, net; equity in net earnings of
unconsolidated investments; and tax provision (benefit).
- 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-related and other costs, non-cash
asset and long-term investment impairment charges, non-cash charges
to interest expense and other, and equity in net earnings of
unconsolidated investments and the related tax effect of the
aforementioned adjustments. Non-GAAP net income also includes a 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. For this presentation, Netsmart
preferred stock is treated as if it was converted to common stock.
- Non-GAAP earnings per share consist of non-GAAP net income, as
defined above, divided by weighted shares outstanding – diluted in
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.
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.
Transaction-Related and Other
Costs. Transaction-related and other costs relate to
certain legal proceedings, consulting, severance and other charges
incurred in connection with activities that are considered
one-time. For the third quarter of 2017, Allscripts incurred $11
million of transaction-related and other expenses.
Allscripts excludes transaction-related 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.
Non-Cash Asset Impairment
Charges. Asset impairment charges relate primarily to
product consolidation activities and the write-down of the carrying
value of equity investments in non-consolidated third parties.
Impairment of and Losses on Long-Term
Investments. Impairment of and losses on 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 and nine
months ended September 30, 2017 primarily relate to our investment
in NantHealth common stock, which was disposed of in connection
with the NantHealth provider/patient solutions business
acquisition.
Equity in Net Income (loss) of
Unconsolidated Investments. Equity in net income (loss) of
unconsolidated investments represents Allscripts share of the
equity earnings (losses) of our investments in third parties
accounted for under the equity method, including the amortization
of cost basis adjustments. The majority of the amount recognized in
prior periods represents our share of the net loss incurred by
NantHealth LLC, along with the amortization of cost basis
adjustments. Our investment in NantHealth was accounted as an
available-for-sale marketable security after NantHealth’s initial
public offering in June 2016.
Tax Rate Alignment. Tax
adjustment 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, 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.
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