Allscripts (MDRX) Tops Q4 Earnings by a Penny, Revenues Lag - Analyst Blog

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Allscripts Healthcare Solutions Inc. ( MDRX ) reported adjusted EPS of 8 cents in the fourth quarter of 2014, which beat the Zacks Consensus Estimate by a penny. Adjusted EPS was also significantly higher than 4 cents reported in the year-ago quarter.

Allscripts Healthcare Solutions Inc. - Earnings Surprise | FindTheCompany

Quarter Details

Revenues (including deferred revenues) came in at $343.2 million, down nearly 3% on a year-over-year basis and also lagged the Zacks Consensus Estimate of $359 million. The downside may be attributed to the declining revenues at almost every segment.

Revenues from System sales plunged 29.8% year over year to $9.2 million. Revenues from Professional services declined 14.6% to $45.1 million although the same from Transaction processing and other increased 7.8% to $95 million. Maintenance revenues declined 1.7% from the year-ago quarter to $35.5 million.

Bookings declined 11% year over year to $244 million. Bookings in the fourth quarter of 2014 reflect double-digit growth in ambulatory solutions, managed IT services, and international sales. However, the improvement was offset by a decline in client demand for patient portal solutions.

Adjusted gross margin contracted 40 basis points (bps) on a year-over-year basis to 43.9%.

Selling, general and administrative (SG&A) expenses, as percentage of revenues, contracted 610 bps year over year to 24.8%, whereas research and development (R&D) expenses contracted 300 bps to 27.5%.

Operating expenses (down 9% on a year-over-year basis) declined primarily on the back of the company's initiative to decrease SG&A expenses, streamline business functions and leverage prior investments in R&D.

Adjusted operating margin, as a result, expanded 240 bps to 6.9%.

Financial Outlook

Allscripts exited the fourth quarter with cash and cash equivalents of $53.2 million, compared to $37.3 at the end of the previous quarter. Long-term debt, as of Dec 31, 2014 was $548.7, compared with $562.5 as of Sep 30, 2014.

2015 Guidance

Revenues for 2015 are expected to lie in the range of $1.43-$1.46 billion. Adjusted EBITDA is anticipated in the band of $230-$250 million. Management expects adjusted EPS of 42-50 cents for the full year.

Our Take

Allscripts reported a mixed fourth quarter, recording an earnings beat despite weaker-than-expected revenues.

We feel the new proposed collaboration with MaineHealth will help Allscripts gain better market traction since the joint unit can play a vital role in population health management.

We believe that the Sunrise Electronic Health Record (EHR) platform is an important growth driver for the company. On the back of Best in KLAS recognition, the Sunrise platform can surely garner more business for Allscripts in the form of new clients.

Moreover, we are impressed with the company's cost curtailment efforts, which bore fruit in this quarter's results. Lower operating expenses will allow the company to have better margins in the long run.

However, having said that, there still exists sluggishness in the international market, which adds to our concerns. Allscripts also needs to address the dwindling top line which is a potent headwind for the company, at present.

Zacks Rank

Currently, Allscripts has a Zacks Rank #2 (Buy). Some other top-ranked stocks in the medical sector are Affymetrix ( AFFX ), Luminex ( LMNX ) and Abaxis ( ABAX ). All the three stocks sport a Zacks Rank #1 (Strong 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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