MDRX Earnings Continue to Dip, Lag Ests

Zacks

Allscripts Healthcare Solutions, Inc. (MDRX) posted a significant fall in adjusted earnings to $1.4 million or a penny per share in the third quarter of 2013 from $31.9 million or 19 cents in the comparable quarter of 2012. With this, earnings also missed the Zacks Consensus Estimate of 4 cents for the quarter.

On a reported basis, Allscripts Healthcare Solutions incurred a loss of $48.9 million or 5 cents per share compared with earnings of $9.4 million or 23 cents in the third quarter of 2012.

Revenues in the quarter ebbed 8.5% to $330.2 million, while after considering deferred revenues and other adjustments, revenues stood at $334.2 million, up 7.4% from the prior-year quarter. With this, revenues also missed the Zacks Consensus Estimate of $355 million. The decrease can be attributable to lower revenues generated from all the operating segments.

Revenues declined 24.7% to $26.5 million from System sales, 21.9% to $49.0 million from Professional services, 1.2% to $117.9 million from Maintenance, and 4.7% to $136.8 million from Transaction processing and other.

Adjusted gross profits slid 12.3% to $144.3 million from $164.5 million a year ago while adjusted gross margin fell 240 basis points (bps) to 43.2% from 45.6% a year ago. Adjusted operating income for the quarter plunged 85.4% to $6.0 million from $41.2 million a year ago while adjusted operating margin nosedived 960 bps to 1.8% from 11.4% in the third quarter of 2012.

Bookings surged 45.6% to $235.8 million in the quarter from $161.9 million in the third quarter of 2012. About 40% of total bookings in the quarter were derived from Allscripts’ Population Health Management solutions, which are sold within as well as outside the Allscripts core Electronic Health Record (:EHR) client base.

Allscripts cloud-based, EHR-agnostic solutions accounted for more than 25% of bookings and roughly 15% of revenues in the quarter. Contract revenue backlog rose 17.1% year-over-year to $3.3 billion as of Sep 30, 2013.

MDRX had cash and cash equivalents of $60.8 million as of Sep 30, 2013, down from $104.0 million as of Dec 31, 2012. Long-term debt (including capital lease obligations) rose to $544.1 million as of Sep 30, 2013 compared with $442.0 million as of Dec 31, 2012. Consequently, long-term debt to capitalization ratio increased 340 bps to 29.0% from 25.6% as of Dec 31, 2012.

In the first nine months of 2013, cash flow from operating activities more than halved to $63.3 million from $164.5 million in the same period of 2012, mainly driven by lower earnings. Capital expenditure increased 2.7% to $57.0 million compared with $55.5 million a year ago.

Allscripts Healthcare Solutions, a Zacks Rank #3 (Hold) 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.

While we avoid MDRX, we see no other stocks from the medical information systems industry that is worth a look. As a result, we consider NuVasive, Inc. (NUVA), Hill-Rom Holdings, Inc. (HRC), and Bio-Rad Laboratories, Inc. (BIO) from the medical products industry. All of them carry a Zacks Rank #1 (Strong Buy).
 

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