Allscripts Healthcare Q2 Earnings Beat but Revenues Miss - Analyst Blog

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Allscripts Healthcare Solutions, Inc. ( MDRX ) posted adjusted earnings per share of 5 cents in the second quarter of 2014, up from a penny in the same quarter of 2013. With this, adjusted earnings beat the Zacks Consensus Estimate of 4 cents by 25%.

On a reported basis, MDRX incurred a net loss of $17.8 million in the quarter, narrower than the year-ago level of $22.9 million by 22.3%. On a per share basis, net loss declined 30.8% to 9 cents from 13 cents in the second quarter of 2013.

Allscripts Healthcare Solutions, Inc - Earnings Surprise | FindTheBest


Revenues in the second quarter came in at $351.3 million, up 1.9% from $344.8 million a year ago but fell shy of the Zacks Consensus Estimate of $353 million. After considering deferred revenues and other adjustments, revenues stood at $353.8 million, up 1.9% from $347.1 million in the prior-year quarter.

Revenues from System sales declined 20.4% to $25.8 million and from Maintenance 2.2% to $113.6 million. On the other hand, revenues from Professional services increased 5.2% to $62.3 million while the same from Transaction processing and other rose 9.2% to $149.6 million.


Bookings improved 9.3% to $234.0 million in the quarter from $214.0 million in the second quarter of 2013. Booking growth was driven by higher client demand for new and enhanced solution functionality across the entire Allscripts product portfolio by healthcare systems, hospitals, and ambulatory markets.

The impressive bookings performance in the second quarter reflects strong Allscripts Sunrise electronic health record ("EHR") platform sales to new domestic and international clients.

Further, MDRX signed two new Sunrise contracts, including a major new international client, reaching the total count to 25 new Allscripts Sunrise client sites since Jan 2013. Contract backlog continued to expand and grew over $3.3 billion as of Jun 30, 2014.


In the second quarter, adjusted gross profits inched up 1% to $152.7 million while adjusted gross margin fell 40 basis points (bps) year over year to 43.2%.

Adjusted operating earnings surged 101.2% to $17.1 million while adjusted operating margin expanded 240 bps to 4.8%. The upside was driven by lower operating expenses as operational efficiency initiatives that commenced last year started to pay off.

Financial Position

MDRX had cash and cash equivalents of $39.3 million as of Jun 30, 2014, down 37.6% from $63.0 million as of Dec 31, 2013. Long-term debt (including capital lease obligations) declined a marginal 0.5% to $558.8 million from $561.5 million as of Dec 31, 2013. However, long-term debt to capitalization ratio increased 20 bps to 30.1% from 29.9% as of Dec 31, 2013.

For the first six months ended Jun 30, 2014, cash flow from operating activities deteriorated 24.6% to $38.3 million from $50.8 million in the same period of 2013. Capital expenditure decreased 62.1% to $17.3 million from $45.7 million in the first half of 2013.

Our Take

We are impressed with the company's strong year-over-year rise in adjusted earnings, which beat the estimates. In the second quarter of 2014, revenues and adjusted EBITDA improved from the year-earlier quarter for the first time after a span of over two years.

MDRX signed several contracts with new and existing clients during the quarter reflecting strong demand for its population health management solutions and managed IT services offerings, specifically remote hosting and outsourcing.

However, we remain concerned about the company's liquidity position which seems to be deteriorating as hinted by a declining cash balance and a wider long-term debt to capitalization ratio.

Presently, MDRX carries a Zacks Rank #4 (Sell). Better-ranked stocks include Accuray Inc. ( ARAY ) in the medical instruments industry and Merge Healthcare Inc. ( MRGE ) and Omnicell, Inc. ( OMCL ) in the medical information systems industry. While Accuray sports a Zacks Rank #1 (Strong Buy), both Merge Healthcare and Omnicell carry a Zacks Rank #2 (Buy).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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