Allscripts Healthcare Solutions Misses, Earnings Continue to Dip - Analyst Blog

Allscripts Healthcare Solutions, Inc. MDRX posted adjusted earnings per share of 3 cents for the first quarter of 2014, exactly halved from 6 cents in the same quarter of 2013 and missed the Zacks Consensus Estimate by a penny. Adjusted earnings exclude stock based compensation and deferred revenues and other adjustments.

Adjusted net earnings plunged 86.4% to $5.9 million from $11.0 million in the first quarter of 2013. On a reported basis, MDRX incurred a broader loss of $20.7 million or 12 cents per share compared with $11.6 million or 7 cents in the first quarter of 2013, mainly due to lower revenues.

Revenues

Revenues in the quarter slid 2.0% to $340.3 million, also lagging the Zacks Consensus Estimate of $348 million. After considering deferred revenues and other adjustments, revenues stood at $344.8 million, down 0.9% from the prior-year quarter. The decrease can be attributable to lower revenues generated from all the operating segments, except Transaction processing and other.

Revenues declined 13.3% to $23.4 million from System sales, 17.5% to $50.4 million from Professional services, and 0.5% to $117.1 million from Maintenance but grew 5.7% to $149.4 million from Transaction processing and other.

Bookings

Bookings went up 25.5% to $223.0 million in the quarter from $177.7 million in the first quarter of 2013. About 36% of total bookings in the quarter were derived from Allscripts' Population Health Management solutions. Contract backlog continued to expand. It grew 25.4% to $3.4 billion as of Mar 31, 2014.

Margins

In the first quarter, adjusted gross profits edged up 2.3% to $148.9 million while adjusted gross margin rose 190 basis points (bps) year over year to 43.8%. Adjusted operating earnings declined 2.3% to $8.5 million while adjusted operating margin was flat at 2.5% during the quarter.

Financial Position

MDRX had cash and cash equivalents of $41.6 million as of Mar 31, 2014, down 34.0% from $63.0 million as of Dec 31, 2013. Long-term debt (including capital lease obligations) fell 2.2% to $548.9 million from $561.5 million as of Dec 31, 2013. Consequently, long-term debt to capitalization ratio decreased 30 bps to 29.6% from 29.9% as of Dec 31, 2013.

In the quarter, cash flow from operating activities significantly declined by 45.8% to $21.3 million from $39.3 million in the 2013-quarter. Capital expenditure decreased 27.4% to $11.9 million compared with $16.4 million a year ago.

Our Take

MDRX, a Zacks Rank #4 (Sell) stock, is a leading provider of clinical software and information solutions for physicians. The company serves approximately 180,000 physician practices, 1,500 hospitals, and 10,000 post acute care facilities. It had 5,500 employees with facilities in 24 U.S. states, Canada, India, The Philippines and Middle East.

Some better-ranked stocks in the medical products industry include Enzymotec Ltd. ENZY, INSYS Therapeutics, Inc. INSY, and Mead Johnson Nutrition Company MJN. All of these carry a Zacks Rank #2 (Buy).