Allscripts Healthcare Solutions (MDRX), a leading player in the health care information technology (:HCIT) market, reported fourth-quarter 2012 adjusted (excluding one-time items other than stock-based compensation expense) earnings per share of 8 cents, missing the Zacks Consensus Estimate of 17 cents. For 2012, adjusted earnings per share of 49 cents missed the Zacks Consensus Estimate of 57 cents.
Reported net loss was $24.3 million (or loss of 14 cents per share) in the fourth quarter compared with net income of $26 million (or 14 cents per share) in the prior-year quarter.
Revenues were $350.9 million, down 9.6% year over year in the fourth quarter, trailing the Zacks Consensus Estimate of $367 million. Adjusted revenues came in at $368 million, down 5.4% on a year-over-year basis. For 2012, revenues were $1,446.3 million, approximately flat on a y/y basis.
Backlog was $2.8 billion in the fourth quarter. Bookings in the reported quarter were $180.7 million, a decrease of 44.8%.
Total revenues consisted of System Sales ($29.1 million, down 53.4%), Professional Services ($68.9 million, down 3.4%), Maintenance ($122.6 million, up 7.9%) and Transaction Processing ($147.1 million, up 4.5%), which constituted 7.9%, 18.7%, 33.3% and 40% respectively, of total revenues in the fourth quarter.
Adjusted gross margin decreased to 41.7% of sales in the reported quarter, lower than 45.5% in the prior-year quarter. Adjusted EBITDA was 14.5% below 24.6% a year ago. Adjusted operating margin was 8.3% of sales, lower than 20.2% in the year-ago quarter.
Allscripts exited the fourth quarter with cash and cash equivalents of $105.7 million, down 33.7% on a year-over-year basis. The company had long term debt of $362.7 million, up 12.4%. Cash flow from operations was $58.1 million in the reported quarter.
The board concluded assessment of strategic alternatives in late Dec 2012. Subsequently, the company is preparing to reform the delivery of health care on a worldwide basis.
The health care information technology market is competitive and price sensitive. Among others, Allscripts faces strong competition from Cerner Corporation (CERN), Quality Systems (QSII) and Athenahealth (ATHN).
However, optimism about the growth prospects of select HCIT service providers remains high under the Obama administration, which passed a Stimulus package in May 2009. The Stimulus package was aimed at increasing the use of electronic health record (:EHR) systems by medical practitioners. While greenfield opportunities are shrinking, the replacement market is growing.
We are of the opinion that acute and ambulatory care will continue to converge in future. Also, that Allscripts is positioned to provide integrated clinical applications for health care providers to satisfy HITECH Act requirements and eventually comply with an outcomes-based reimbursement system.
As a potential takeover target, Allscripts presents a lucrative opportunity for firms seeking entry into the HCIT industry. It has a wide user base and enjoys many opportunities vis-à-vis its peers. Its mergers with Misys and Eclipsys has expanded opportunities and reach in practice management (PM) and EHR markets substantially and increased cross-selling opportunities. We believe that Allscripts is well positioned in the fast growing business of selling EHR to physician practices as well as inpatient settings. The stock carries a Zacks Rank #4 (Sell).
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