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Allscripts Lags Q1 Earnings, Revenues; Cuts '15 Sales View - Analyst Blog

Allscripts Healthcare Solutions Inc.MDRX reported first-quarter 2015 adjusted earnings per share (EPS) of 4 cents, short of the Zacks Consensus Estimate of 6 cents. However, adjusted EPS jumped 33.3% from the year-earlier quarter, on the back of lower operating expenses.

Allscripts Healthcare Solutions Inc. - Earnings Surprise | FindTheCompany

Quarter's Details

Revenues (including deferred revenues and other adjustments) of $334.6 million were down nearly 3% year over year and lagged the Zacks Consensus Estimate of $348 million.

The downside was primarily due to lower revenues from non-recurring project-based professional services and lower system sales. Lower demand for hardware coupled with clients' preference to purchase software on a subscription basis contributed to the downside in system sales.

Revenues from Software delivery, support and maintenance segment amounted to $227.6, million almost flat on a year-over-year basis. Software delivery, support & maintenance revenues comprise all software, hardware, and transaction-related revenues as well as support & maintenance.

Client services segment revenues, on the other hand, declined 5.2% to $107 million. Client services revenue consists of both managed IT services as well as other client services.

Bookings increased 6% year over year to $236 million, on the back of higher sales of Sunrise Acute Care clinical solution as well as population health management and Allscripts payer life sciences solutions.

Of the total bookings, 63% were related to software delivery and recurring transactions, while the remaining 37% were derived from sales of client services solutions. Bookings were particularly low in the non-recurring other client services, primarily due to a transition in the business model and lower regulatory demand for project-based services.

Contract revenue backlog as of Mar 31, 2015, totaled $3.5 billion, unchanged year over year.

Adjusted gross margin contracted 360 basis points (bps) on a year-over-year basis to 41.5%. The contraction was primarily due to a decline in client services margin.

Selling, general and administrative (SG&A) expenses declined 8.7% year over year to $82.1 million, whereas research and development (R&D) expenses fell 10.7% to $46.7 million.

Adjusted operating income increased 24.6% to $16.2 million, on the back of management's successful cost curtailment efforts.

Cash and cash equivalents, as of Mar 31, 2015, amounted to $88.5 million, compared to $53.2 million, as of Dec 31, 2014. Long-term debt, as of Mar 31, 2015 was $542.4, compared with $548.7 as of Dec 31, 2014.

Guidance

Management lowered its revenue projection for full year 2015. Revenues for the full year are now expected to lie in the range of $1.40-$1.43 billion, compared with the previous guidance of $1.43-$1.46 billion.

Lower revenues from the non-recurring business are expected to hurt the top line. However, this being a low margin business, Allscripts does not expect a similar impact on the bottom line. Management has thus retained its adjusted EBITDA and adjusted EPS guidance for the full year.

Adjusted EBITDA is anticipated in the band of $230-$250 million while adjusted EPS is projected in the range of 40-50 cents for the full year.

Our Take

Allscripts reported a disappointing first quarter, with both revenues and EPS falling short of expectations.

We feel the dwindling top line is a potent headwind for the company at present. That the trend is expected to continue in the near term as reflected by management's trimmed guidance for 2015.

Lower revenues from non-recurring project-based professional services and lower demand for hardware are expected to trouble the company, going forward.

We are also concerned about the existing sluggishness in the international market. Allscripts has not secured any new client in the international market during the first quarter.

However, we are impressed with the company's cost curtailment efforts. We believe the Sunrise Electronic Health Record (EHR) platform will continue to be an important growth driver for the company. On the back of the Best in KLAS recognition, the Sunrise platform can surely rake in better business at Allscripts in the form of new clients.

Zacks Rank

Currently, Allscripts has a Zacks Rank #3 (Hold). Better-ranked stocks in the medical sector include INC Research Holdings INCR , Biocept BIOC and ICON plc ICLR . While INC Research sports a Zacks Rank #1 (Strong Buy), ICON and Biocept hold 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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