- Fourth quarter bookings of $244 million and $923
million for the full year
- 2014 full-year adjusted EBITDA grows 11 percent and
free cash flow improves by over $70 million for the
year
- Provides 2015 outlook for revenue, adjusted EBITDA and
earnings per share
Allscripts Healthcare Solutions, Inc. (Nasdaq:MDRX) (Allscripts)
announced its financial results for the three months and year ended
December 31, 2014.
Fourth Quarter and Full Year Bookings
Highlights:
Bookings(1) in the fourth quarter were $244 million compared
with $274 million in the fourth quarter of 2013, an 11% decline.
Fourth quarter 2014 bookings reflect double-digit growth in
ambulatory solutions, managed IT services, and international sales
compared with the fourth quarter of 2013. Partially offsetting this
growth was a decline in client demand for patient portal solutions,
a requirement for meeting Meaningful Use 2 (MU2). This demand
positively impacted bookings results during the second half of 2013
as well as the first half of 2014.
On a sequential basis, and consistent with historical seasonal
trends, bookings grew 10 percent in the fourth quarter of 2014
compared with $223 million in the third quarter of 2014. Population
Health Management(2) bookings grew compared with the third quarter
of 2014 and contributed materially to overall bookings results for
the fourth quarter and all of 2014. Fourth quarter
Software-as-a-Service-based or subscription-based (collectively,
SaaS) bookings were 48 percent of total bookings, compared with 44
percent in the fourth quarter of 2013 and 42 percent in the third
quarter of 2014.
For the full year, bookings were $923 million, a 2 percent
increase over 2013. SaaS bookings constituted 44 percent of total
bookings compared with 36 percent in 2013.
Contract revenue backlog as of December 31, 2014 totaled $3.4
billion, which was comparable with the prior-year amount.
Paul M. Black, President and Chief Executive Officer of
Allscripts, stated: "Allscripts fourth quarter non-GAAP EPS
increased despite a lack of revenue growth in the quarter. The
Company also generated strong operating cash flow in the fourth
quarter, which drove a significant improvement in free cash flow
for 2014 compared with 2013. In addition, the investments we have
made to improve our solutions are driving higher client
satisfaction and positioning Allscripts for long-term growth.
"We are optimistic about the sustainability of several business
trends creating a foundation of stability and a trajectory for
growth and continued innovation. We achieved a healthy mix of
add-on sales across Allscripts clients in 2014, reflecting the
nearly half a billion dollars we have spent on research and
development over the last two years. In addition, our improved
client execution is driving an increasing interest in and
recognition of Allscripts advanced, OPEN technology. As a
result, we continue to add new clients globally and across the
continuum of care. We also are adding new services offerings
and positioning Allscripts as the preferred partner for all
healthcare providers to transition, both financially and
clinically, to value-based care."
Fourth Quarter 2014 Highlights
Revenue totaled $343 million and $341 million on a non-GAAP and
GAAP basis, respectively, a decline of 3 percent on both a non-GAAP
and GAAP basis, compared with $354 million and $351 million,
respectively, in the fourth quarter of 2013. Recurring revenue
increased $8 million compared with the fourth quarter of
2013. This includes SaaS revenue, which grew 9 percent
compared with the fourth quarter of 2013. Non-recurring
revenue, consisting of systems sales and professional services
revenue, declined $18 million compared with the fourth quarter of
2013.
Fourth quarter 2014 gross margin was 43.9 percent on a non-GAAP
basis and 40.0 percent on a GAAP basis, compared with 44.4 percent
and 39.4 percent, respectively, in the fourth quarter of
2013.
Total operating expenses declined 9 percent on a non-GAAP basis
and 19 percent on a GAAP basis in the fourth quarter of 2014
compared with the fourth quarter of 2013. The decline in
operating expenses reflects initiatives to decrease corporate
SG&A expenses, streamline business functions, and leverage
prior investments in research and development.
Adjusted EBITDA increased 8 percent to $52 million in the fourth
quarter of 2014, compared with $49 million in the fourth quarter of
2013.
On a non-GAAP basis, Allscripts effective tax rate was 35
percent in the fourth quarter of 2014, compared with 32 percent in
the fourth quarter of 2013. On a GAAP basis, Allscripts
recorded an income tax benefit of approximately $4 million in the
fourth quarter of 2014, compared with an income tax benefit of $14
million in the fourth quarter of 2013.
Fourth quarter 2014 non-GAAP net income totaled $17 million
compared with $14 million in the fourth quarter of
2013. Fourth quarter 2014 GAAP net loss totaled $2 million
compared with a net loss of $21 million in the fourth quarter of
2013.
Fourth quarter 2014 non-GAAP earnings per share were $0.09
compared with $0.08 in the fourth quarter of 2013. Fourth
quarter 2014 GAAP loss per share was $0.01 compared with a loss per
share of $0.12 in the fourth quarter of 2013.
Full Year Financial Highlights:
For the full year 2014, revenue totaled $1.39 billion and $1.38
billion on a non-GAAP and GAAP basis, respectively, compared with
$1.38 billion and $1.37 billion, respectively, in 2013. 2014
revenue performance was impacted, in part, by a decline of
approximately $28 million of predominantly low-margin,
non-recurring revenue in 2014, including lower hardware revenue
resulting from Allscripts ongoing transition to a predominantly
SaaS-based business model.
For the full year 2014, Allscripts recurring revenue totaled 77
percent of total revenue compared with 74 percent in
2013. This increase was driven in part by a 13 percent
increase in SaaS revenue in 2014 compared with 2013.
For 2014, operating expenses declined 5 percent on a non-GAAP
basis and 11 percent on a GAAP basis compared with 2013.
For 2014, Adjusted EBITDA increased 11 percent to $199 million,
compared with $180 million in 2013.
On a non-GAAP basis, Allscripts effective tax rate was 35
percent in 2014, compared with 28 percent in 2013. On a GAAP
basis, Allscripts recorded an income tax benefit of approximately
$2 million in 2014, compared with an income tax benefit of $44
million in 2013.
For the full year 2014, non-GAAP net income totaled $56 million
compared with $48 million in 2013. 2014 GAAP net loss totaled
$67 million compared with a net loss of $104 million in 2013.
For the full year 2014, non-GAAP earnings per share were $0.31
compared with $0.27 in 2013 and GAAP loss per share was $0.37
compared with a loss per share of $0.59 in
2013.
Financial Guidance:
Allscripts is introducing annual guidance that replaces
Allscripts prior three-year guidance for revenue and Adjusted
EBITDA, which was issued in the first quarter of
2014. Allscripts currently expects to achieve the following
financial results in 2015:
- Revenue between $1.43 billion and $1.46 billion.
- Adjusted EBITDA between $230 million and $250 million.
- 2015 non-GAAP earnings per share between $0.42 and $0.50 per
diluted share.
A reconciliation of reported net income to adjusted EBITDA, as
well as GAAP and non-GAAP earnings per share, is expected to be
provided consistent with the reconciling items provided in this
earnings release within Tables 4 and 5.
For a complete reconciliation of GAAP and non-GAAP
items, see the explanation of non-GAAP financial measures as well
as the GAAP and non-GAAP reconciliation financial tables in this
release.
Conference Call:
Allscripts will conduct a conference call today, Thursday,
February 26, 2015, at 4:30 PM Eastern Standard Time to discuss its
earnings release and other information. Participants may
access the conference call via webcast at
http://investor.allscripts.com.
A replay of the call will be available approximately two hours
after the conclusion of the call, for a period of two weeks, on the
Allscripts investor relations website or by calling (855) 859-2056
or +1 (404) 537-3406 - Conference ID # 62359194.
Supplemental and non-GAAP financial information also will be
available at http://investor.allscripts.com.
Footnotes
(1) Bookings reflect the value of executed contracts for
software, hardware, professional services, remote hosting,
outsourcing and subscription-based services.
(2) Population health management solutions are comprised of
Allscripts Care Management™, Allscripts dbMotion, Allscripts
FollowMyHealth™, Allscripts Patient Flow™, and Allscripts Care
Director™, as well as Allscripts post-acute, decision support and
clinical analytics solutions.
About Allscripts
Allscripts (Nasdaq:MDRX) is a leader in healthcare information
technology solutions that advance clinical, financial and
operational results. Our innovative solutions connect people,
places and data across an Open, Connected Community of Health™.
Connectivity empowers caregivers to make better decisions and
deliver better care for healthier populations. To learn more, visit
www.allscripts.com, Twitter, YouTube and It Takes A Community: The
Allscripts Blog.
© 2015 Allscripts Healthcare, LLC and/or its affiliates. All
Rights Reserved.
Allscripts, the Allscripts logo, and other Allscripts marks are
trademarks of Allscripts Healthcare, LLC and/or its affiliates. All
other products are trademarks of their respective holders, all
rights reserved. Reference to these products is not intended to
imply affiliation with or sponsorship of Allscripts Healthcare, LLC
and/or its affiliates.
Forward-Looking Statements
This earnings release contains forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of
1995. These forward-looking statements are based on the
current beliefs and expectations of Allscripts management, only
speak as of the date that they are made, and are subject to
significant risks and uncertainties. Such statements can be
identified by the use of words such as "future,"
"anticipates," "believes," "estimates," "expects," "intends,"
"plans," "predicts," "will," "would," "could," "can," "may," and
similar terms. Actual results could differ from those set forth in
the forward-looking statements, and reported results should not be
considered an indication of future performance. Certain
factors that could cause Allscripts' actual results to differ
materially from those described in the forward-looking statements
include, but are not limited to: Allscripts' failure to compete
successfully; consolidation in Allscripts' industry; current and
future laws, regulations and industry initiatives; increased
government involvement in Allscripts' industry; the failure of
markets in which Allscripts operates to develop as quickly as
expected; Allscripts' or its customers' failure to see the benefits
of government programs; changes in interoperability or other
regulatory standards; the effects of the realignment of Allscripts'
sales, services, and support organizations; market acceptance of
Allscripts' products and services; the unpredictability of the
sales and implementation cycles for Allscripts' products and
services; Allscripts' ability to manage future growth; Allscripts'
ability to introduce new products and services; Allscripts' ability
to establish and maintain strategic relationships; risks related to
the acquisition of new companies or technologies; the performance
of Allscripts' products; Allscripts' ability to protect its
intellectual property rights; the outcome of legal proceedings
involving Allscripts; Allscripts' ability to hire, retain and
motivate key personnel; performance by Allscripts' content and
service providers; liability for use of content; security breaches;
price reductions; Allscripts' ability to license and integrate
third party technologies; Allscripts' ability to maintain or expand
its business with existing customers; risks related to
international operations; changes in tax rates or laws; business
disruptions; Allscripts' ability to maintain proper and effective
internal controls; and asset impairment charges. Additional
information about these and other risks, uncertainties, and factors
affecting Allscripts' business is contained in Allscripts' filings
with the Securities and Exchange Commission. Allscripts does
not undertake to update forward-looking statements to reflect
changed assumptions, the impact of circumstances or events that may
arise after the date of the forward-looking statements, or other
changes in its business, financial condition, or operating results
over time.
Table 1 |
Allscripts Healthcare
Solutions, Inc. |
Condensed Consolidated
Balance Sheets |
(In millions) |
(Unaudited) |
|
|
|
|
December 31, |
December 31, |
|
2014 |
2013 |
ASSETS |
|
|
Current assets: |
|
|
Cash and cash equivalents |
$53.2 |
$63.0 |
Accounts receivable, net |
331.6 |
313.5 |
Deferred taxes, net |
35.6 |
55.5 |
Prepaid expenses and other current
assets |
102.4 |
107.9 |
Total current assets |
522.8 |
539.9 |
Long-term marketable securities |
1.3 |
1.3 |
Fixed assets, net |
145.8 |
174.0 |
Software development costs, net |
86.2 |
88.2 |
Intangible assets, net |
403.4 |
456.0 |
Goodwill |
1,200.7 |
1,189.6 |
Deferred taxes, net |
0.7 |
7.4 |
Other assets |
147.3 |
163.3 |
Total assets |
$2,508.2 |
$2,619.7 |
|
|
|
LIABILITIES AND STOCKHOLDERS'
EQUITY |
|
|
Current liabilities: |
|
|
Accounts payable |
$70.8 |
$73.0 |
Accrued expenses |
79.0 |
96.5 |
Accrued compensation and benefits |
51.1 |
80.2 |
Deferred revenue |
293.0 |
251.0 |
Current maturities of long-term debt and
capital lease obligations |
27.5 |
16.4 |
Total current liabilities |
521.4 |
517.1 |
Long-term debt |
548.7 |
545.1 |
Deferred revenue |
23.2 |
29.1 |
Deferred taxes, net |
55.4 |
79.7 |
Other liabilities |
75.3 |
130.6 |
Total liabilities |
1,224.0 |
1,301.6 |
Total stockholders' equity |
1,284.2 |
1,318.1 |
Total liabilities and stockholders'
equity |
$2,508.2 |
$2,619.7 |
|
|
Table 2 |
Allscripts Healthcare
Solutions, Inc. |
Condensed Consolidated
Statements of Operations |
(In millions, except per-share
amounts) |
(Unaudited) |
|
|
|
|
|
|
Three
Months Ended |
Year
Ended |
|
December
31, |
December
31, |
|
2014 |
2013 |
2014 |
2013 |
Revenue: |
|
|
|
|
System sales |
$21.6 |
$27.6 |
$92.2 |
$113.6 |
Professional services |
50.5 |
61.2 |
218.1 |
230.5 |
Maintenance |
118.0 |
120.1 |
466.1 |
471.9 |
Transaction processing and other |
150.8 |
142.1 |
601.5 |
557.1 |
Total revenue |
340.9 |
351.0 |
1,377.9 |
1,373.1 |
Cost of revenue: |
|
|
|
|
System sales |
9.2 |
13.1 |
35.1 |
54.3 |
Professional services |
45.1 |
52.8 |
191.9 |
215.1 |
Maintenance |
35.5 |
36.1 |
146.7 |
143.9 |
Transaction processing and other |
95.0 |
88.1 |
377.0 |
340.1 |
Amortization of software development and
acquisition-related assets (a) |
19.7 |
22.7 |
81.2 |
85.2 |
Total cost of revenue |
204.5 |
212.8 |
831.9 |
838.6 |
Gross profit |
136.4 |
138.2 |
546.0 |
534.5 |
Selling, general and administrative
expenses |
85.1 |
109.2 |
358.7 |
419.6 |
Research and development |
41.5 |
47.9 |
192.8 |
199.8 |
Asset impairment charges |
0.3 |
1.0 |
2.4 |
11.5 |
Amortization of acquisition-related
intangible assets |
8.9 |
7.6 |
31.3 |
31.2 |
Income (loss) from operations |
0.6 |
(27.5) |
(39.2) |
(127.6) |
Interest expense (b) |
(7.3) |
(7.0) |
(29.3) |
(28.0) |
Other income (expense), net |
0.1 |
(0.2) |
0.4 |
7.3 |
Loss before income taxes |
(6.6) |
(34.7) |
(68.1) |
(148.3) |
Income tax benefit |
4.4 |
14.1 |
1.6 |
44.3 |
Net loss |
($2.2) |
($20.6) |
($66.5) |
($104.0) |
|
|
|
|
|
Loss per share - basic and diluted |
($0.01) |
($0.12) |
($0.37) |
($0.59) |
|
|
|
|
|
Weighted average common shares
outstanding: |
|
|
|
|
Basic |
180.3 |
178.5 |
179.8 |
177.0 |
Diluted |
180.3 |
178.5 |
179.8 |
177.0 |
|
|
|
|
|
(a) Amortization of software development and
acquisition-related assets includes: |
|
|
|
|
Amortization of capitalized software
development costs |
$11.0 |
$11.4 |
$46.1 |
$44.1 |
Amortization of acquisition-related
intangible assets |
8.7 |
11.3 |
35.1 |
41.1 |
|
$19.7 |
$22.7 |
$81.2 |
$85.2 |
|
|
|
|
|
(b) Interest expense includes the
following non-cash expenses for the periods presented: |
|
|
Three
Months Ended |
Year
Ended |
|
December
31, |
December
31, |
|
2014 |
2013 |
2014 |
2013 |
|
|
|
|
|
Amortization of 1.25% Cash Convertible
Notes original issue discount |
$ 2.6 |
$ 2.5 |
$ 10.3 |
$ 5.3 |
Write-off of unamortized deferred debt
issuance costs |
0.0 |
0.0 |
0.0 |
3.9 |
|
$ 2.6 |
$ 2.5 |
$ 10.3 |
$ 9.2 |
|
|
Table 3 |
Allscripts Healthcare
Solutions, Inc. |
Condensed Consolidated
Statements of Cash Flows |
(In millions) |
(Unaudited) |
|
|
|
|
|
|
Three
Months Ended |
Year
Ended |
|
December
31, |
December
31, |
|
2014 |
2013 |
2014 |
2013 |
Cash flows from operating activities: |
|
|
|
|
Net loss |
($2.2) |
($20.6) |
($66.5) |
($104.0) |
Non-cash adjustments to net loss: |
|
|
|
|
Depreciation and amortization |
42.7 |
47.0 |
174.3 |
178.8 |
Stock-based compensation expense |
7.1 |
9.2 |
39.3 |
37.0 |
Other non-cash charges (credits),
net |
(2.8) |
(9.6) |
6.3 |
(34.9) |
Total non-cash adjustments to income |
47.0 |
46.6 |
219.9 |
180.9 |
Cash impact of changes in operating
assets and liabilities |
6.7 |
(8.3) |
(49.9) |
4.1 |
Net cash provided by operating
activities |
51.5 |
17.7 |
103.5 |
81.0 |
Cash flows from investing activities: |
|
|
|
|
Capital expenditures |
(5.7) |
(17.1) |
(26.4) |
(74.1) |
Capitalized software |
(12.4) |
(11.6) |
(40.7) |
(42.1) |
Cash paid for business acquisitions, net
of cash acquired |
0.0 |
0.0 |
(20.2) |
(148.8) |
Purchases of marketable securities, other
investments and related intangible assets |
0.0 |
0.0 |
(21.5) |
0.0 |
Sales and maturities of other
investments |
0.0 |
0.1 |
0.0 |
12.9 |
Proceeds from sale of fixed assets |
0.0 |
0.0 |
0.1 |
0.0 |
Net cash used in investing
activities |
(18.1) |
(28.6) |
(108.7) |
(252.1) |
Cash flows from financing activities: |
|
|
|
|
Net proceeds from issuance of 1.25%
senior cash convertible notes, net of issuance costs |
0.0 |
(0.4) |
0.0 |
305.1 |
Stock-based compensation-related
(payments) receipts, net |
(3.9) |
(1.1) |
(8.9) |
5.6 |
Payments of acquisition financing
obligations |
0.0 |
0.0 |
0.0 |
(29.7) |
Senior secured debt borrowings
(payments), net of financing costs |
(13.3) |
14.7 |
4.6 |
(149.1) |
Net cash (used in) provided by financing
activities |
(17.2) |
13.2 |
(4.3) |
131.9 |
Effect of exchange rate changes on cash and
cash equivalents |
(0.3) |
(0.1) |
(0.3) |
(1.8) |
Net increase (decrease) in cash and cash
equivalents |
15.9 |
2.2 |
(9.8) |
(41.0) |
Cash and cash equivalents, beginning of
period |
37.3 |
60.8 |
63.0 |
104.0 |
Cash and cash equivalents, end of period |
$53.2 |
$63.0 |
$53.2 |
$63.0 |
|
|
Table 4 |
Allscripts Healthcare
Solutions, Inc. |
Condensed Non-GAAP
Financial Information |
(In millions, except per share
amounts) |
(Unaudited) |
|
|
|
|
|
|
Three
Months Ended |
Year Ended |
|
December
31, |
December
31, |
|
2014 |
2013 |
2014 |
2013 |
Total revenue, as reported |
$340.9 |
$351.0 |
$1,377.9 |
$1,373.1 |
|
|
|
|
|
Deferred revenue and other
adjustments |
2.3 |
2.6 |
11.6 |
9.8 |
Total non-GAAP revenue |
$343.2 |
$353.6 |
$1,389.5 |
$1,382.9 |
|
|
|
|
|
Gross profit, as reported |
$136.4 |
$138.2 |
$546.0 |
$534.5 |
|
|
|
|
|
Deferred revenue and other
adjustments |
2.3 |
2.6 |
11.6 |
9.8 |
Acquisition-related amortization |
8.7 |
11.3 |
35.1 |
41.1 |
Stock-based compensation expense |
1.3 |
1.3 |
5.9 |
5.6 |
Non-recurring expenses and
transaction-related costs (a) |
2.2 |
3.5 |
8.6 |
12.2 |
Total non-GAAP gross
profit |
$150.9 |
$156.9 |
$607.2 |
$603.2 |
|
|
|
|
|
Operating income (loss), as reported |
$0.6 |
($27.5) |
($39.2) |
($127.6) |
|
|
|
|
|
Deferred revenue and other
adjustments |
2.3 |
2.6 |
11.6 |
9.8 |
Acquisition-related amortization |
17.6 |
18.9 |
66.4 |
72.3 |
Stock-based compensation
expense |
7.1 |
9.2 |
39.3 |
37.0 |
Non-recurring expenses and
transaction-related costs (a) |
2.7 |
20.8 |
25.1 |
74.0 |
Non-cash asset impairment charges |
0.3 |
1.0 |
2.4 |
11.5 |
Total non-GAAP operating
income |
$30.6 |
$25.0 |
$105.6 |
$77.0 |
|
|
|
|
|
Net loss, as reported |
($2.2) |
($20.6) |
($66.5) |
($104.0) |
|
|
|
|
|
Deferred revenue and other
adjustments |
1.6 |
1.8 |
7.6 |
7.2 |
Acquisition-related amortization |
11.5 |
12.9 |
43.2 |
52.5 |
Stock-based compensation
expense |
4.6 |
6.3 |
25.6 |
26.8 |
Non-recurring expenses and
transaction-related costs |
1.6 |
14.2 |
16.1 |
54.0 |
Non-cash asset impairment charges |
0.2 |
0.6 |
1.6 |
8.6 |
Non-cash charges to interest expense and
other |
1.7 |
1.8 |
6.5 |
7.4 |
Tax rate alignment |
(2.1) |
(3.0) |
22.2 |
(4.3) |
Non-GAAP net income |
$16.9 |
$14.0 |
$56.3 |
$48.2 |
|
|
|
|
|
Non-GAAP effective tax rate |
35% |
32% |
35% |
28% |
|
|
|
|
|
Weighted shares outstanding - diluted |
180.3 |
178.5 |
179.8 |
177.0 |
|
|
|
|
|
Loss per share - diluted, as reported |
($0.01) |
($0.12) |
($0.37) |
($0.59) |
|
|
|
|
|
Non-GAAP earnings per share -
diluted |
$0.09 |
$0.08 |
$0.31 |
$0.27 |
|
|
|
|
|
Note: all adjustments to
reconcile GAAP to non-GAAP net income are net of tax. |
(a) Non-recurring expenses and
transaction-related costs included in cost of revenue and operating
expenses are comprised of the following for the periods
presented: |
|
|
|
|
Three
Months Ended |
Year Ended |
|
December
31, |
December
31, |
|
2014 |
2013 |
2014 |
2013 |
|
|
|
|
|
Cost of revenue: |
|
|
|
|
MyWay and other product consolidation costs
included in cost of revenue |
$2.2 |
$3.5 |
$8.6 |
$12.2 |
Operating expenses: |
|
|
|
|
Severance and other costs |
$0.4 |
$11.1 |
$6.3 |
$42.5 |
MyWay product consolidation |
-- |
4.5 |
6.4 |
11.3 |
Transaction-related costs |
0.1 |
1.7 |
3.8 |
8.0 |
Total non-recurring expenses and
transaction-related costs included in operating
expenses |
$0.5 |
$17.3 |
$16.5 |
$61.8 |
|
|
|
|
|
Total non-recurring expenses and
transaction related costs |
$2.7 |
$20.8 |
$25.1 |
$74.0 |
|
|
Table 5 |
Allscripts Healthcare
Solutions, Inc. |
Non-GAAP Financial
Information - Adjusted EBITDA |
(In millions) |
(Unaudited) |
|
|
|
|
Three
Months Ended |
Year Ended |
|
December
31, |
December
31, |
|
2014 |
2013 |
2014 |
2013 |
Total revenue, as reported |
$340.9 |
$351.0 |
$1,377.9 |
$1,373.1 |
Deferred revenue and other
adjustments |
2.3 |
2.6 |
11.6 |
9.8 |
Total non-GAAP revenue |
$343.2 |
$353.6 |
$1,389.5 |
$1,382.9 |
|
|
|
|
|
Net loss, as reported |
($2.2) |
($20.6) |
($66.5) |
($104.0) |
|
|
|
|
|
Deferred revenue and other
adjustments |
2.3 |
2.6 |
11.6 |
9.8 |
Depreciation and amortization |
42.7 |
47.0 |
174.3 |
178.8 |
Stock-based compensation expense |
7.1 |
9.2 |
39.3 |
37.0 |
Non-recurring expenses and
transaction-related costs (a) |
2.7 |
19.5 |
24.2 |
71.5 |
Non-cash asset impairment charges |
0.3 |
1.0 |
2.4 |
11.5 |
Interest expense and other income net
(b) |
3.8 |
3.9 |
15.3 |
19.5 |
Tax provision/(benefit) |
(4.4) |
(14.1) |
(1.6) |
(44.3) |
|
|
|
|
|
Adjusted EBITDA |
$52.3 |
$48.5 |
$199.0 |
$179.8 |
|
|
|
|
|
Adjusted EBITDA margin
(c) |
15% |
14% |
14% |
13% |
|
|
|
|
|
(a) Depreciation expense
totaling $0.0 million and $1.3 million has been excluded from
non-recurring expenses for the three months ended December 31, 2014
and 2013, respectively, and $0.9 million and $2.5 million for the
year ended December 31, 2014 and 2013, respectively, since these
amounts are also included in depreciation and
amortization. |
(b) Interest expense (income) and
other (income) expense has been adjusted from the amounts presented
in the statements of operations in order to remove the amortization
of the fair value of the cash conversion option embedded in the
1.25% Cash Convertible Notes and deferred debt issuance costs from
interest expense since such amortization is also included in
depreciation and amortization. |
(c) Adjusted EBITDA margin is
calculated by dividing adjusted EBITDA by total non-GAAP
revenue. |
Explanation of Non-GAAP Financial Measures
Allscripts reports its financial results in accordance with U.S.
generally accepted accounting principles, or GAAP. To supplement
this information, Allscripts presents in this release non-GAAP
revenue, gross profit, SG&A, operating expense, operating
income and net income, including non-GAAP net income on a per share
basis, non-GAAP effective income tax rate, and Adjusted EBITDA and
free cash flow, which are non-GAAP financial measures under Section
101 of Regulation G under the Securities Exchange Act of 1934, as
amended.
- Non-GAAP revenue consists of GAAP revenue as reported and adds
back deferred revenue and other adjustments recorded for GAAP
purposes.
- Non-GAAP gross profit consists of GAAP gross profit as reported
and adds back deferred revenue and other adjustments booked for
GAAP purposes and excludes acquisition-related amortization,
stock-based compensation expense, and non-recurring expenses and
transaction-related costs. Non-GAAP gross margin consists of
non-GAAP gross profit as a percentage of non-GAAP revenue, as
defined above. For the fourth quarter of 2014, non-GAAP gross
margin totaled 43.9 percent, consisting of non-GAAP gross profit of
$150.9 million divided by total non-GAAP revenue of $343.2
million. For the fourth quarter of 2013, non-GAAP gross margin
totaled 44.4, percent consisting of non-GAAP gross profit of $156.9
million divided by total non-GAAP revenue of $353.6
million. Reconciliations to total non-GAAP revenue and total
non-GAAP gross profit are found in Table 4 within this press
release.
- Non-GAAP operating expense consists of GAAP selling, general
and administrative expenses (SG&A) and research and development
expense (R&D), as reported, and excludes non-recurring expenses
and transaction-related costs and stock-based compensation expense
recorded to SG&A and R&D. For the fourth quarter of
2014, non-GAAP operating expense totaled $120.2 million consisting
of $85.1 million of GAAP SG&A and $41.5 million of GAAP R&D
expense and excludes $0.5 million of total non-recurring expense
and transaction-related costs and $5.9 million of stock-based
compensation expense recorded to SG&A and R&D. For the
fourth quarter of 2013, non-GAAP operating expense totaled $131.9
million consisting of $109.2 million of GAAP SG&A and $47.9
million of GAAP R&D expense and excludes $17.3 million of total
non-recurring expense and transaction-related costs and $7.9
million of stock-based compensation expense recorded to SG&A
and R&D.
For the full year 2014, non-GAAP operating expense totaled
$501.6 million consisting of $358.7 million of GAAP SG&A and
$192.8 million of GAAP R&D expense and excluding $16.5 million
of total non-recurring expense and transaction-related costs and
$33.4 million of stock-based compensation expense recorded to
SG&A and R&D. For the full year 2013, non-GAAP
operating expense totaled $526.2 million consisting of $419.6
million of GAAP SG&A and $199.8 million of GAAP R&D expense
and excluding $61.8 million of total non-recurring expense and
transaction-related costs and $31.4 million of stock-based
compensation expense recorded to SG&A and R&D.
- Non-GAAP operating income consists of GAAP operating
income/(loss) as reported and adds back deferred revenue and other
adjustments booked for GAAP purposes and excludes
acquisition-related amortization, stock-based compensation expense,
non-recurring expenses and transaction-related costs, and non-cash
asset impairment charges.
- Non-GAAP net income consists of GAAP net income/(loss) as
reported, and adds back deferred revenue and other adjustments,
acquisition-related amortization, stock-based compensation expense,
non-recurring expenses and transaction-related costs, non-cash
charges to interest expense and other, and non-cash asset
impairment charges, in each case net of any related tax
effects. Non-GAAP net income also includes a tax rate
alignment adjustment.
- Non-GAAP effective income tax rate is based on non-GAAP pre-tax
earnings and consists of the statutory federal income rate,
Allscripts effective state income tax rate, and adjustments for
permanent differences.
- Adjusted EBITDA is a non-GAAP measure and consists of GAAP net
income (loss) as reported and adjusts for: tax provision (benefit);
interest expense and other income, net; stock-based compensation
expense; depreciation and amortization; deferred revenue and other
adjustments; non-recurring and transaction-related costs; and
non-cash asset impairment charges.
Deferred Revenue and Other Adjustments.
Deferred revenue and other adjustments includes acquisition-related
deferred revenue adjustments, which reflect the fair value
adjustments to deferred revenues acquired in business acquisitions.
The fair value of deferred revenue represents an amount equivalent
to the estimated cost plus an appropriate profit margin, to perform
services related to the acquiree's software and product support,
which assumes a legal obligation to do so, based on the deferred
revenue balances as of the acquisition date. Also included are
adjustments for the vesting of a warrant issued to a commercial
partner and the effects of straight-lining contractual pricing
adjustments over the performance period. Allscripts adds back
deferred revenue and other adjustments for its non-GAAP financial
measures because it believes the inclusion of this amount directly
correlates to the underlying performance of Allscripts
operations.
Acquisition-Related
Amortization. Acquisition-related amortization
expense is a non-cash expense arising primarily from the
acquisition of intangible assets in connection with acquisitions or
investments. Allscripts excludes acquisition-related amortization
expense from non-GAAP gross profit, non-GAAP operating income and
non-GAAP net income because it believes (i) the amount of such
expenses in any specific period may not directly correlate to the
underlying performance of Allscripts business operations and (ii)
such expenses can vary significantly between periods as a result of
new acquisitions and full amortization of previously acquired
intangible assets. Investors should note that the use of these
intangible assets contributed to revenue in the periods presented
and will contribute to future revenue generation, and the related
amortization expense will recur in future periods.
Stock-Based Compensation Expense. Stock-based
compensation expense is a non-cash expense arising from the grant
of stock-based awards to employees. Allscripts excludes stock-based
compensation expense from non-GAAP gross profit, non-GAAP operating
income, non-GAAP net income and Adjusted EBITDA because it believes
(i) the amount of such expenses in any specific period may not
directly correlate to the underlying performance of Allscripts
business operations and (ii) such expenses can vary significantly
between periods as a result of the timing of grants of new
stock-based awards, including grants in connection with
acquisitions. Investors should note that stock-based compensation
is a key incentive offered to employees whose efforts contributed
to the operating results in the periods presented and are expected
to contribute to operating results in future periods and such
expense will recur in future periods.
Non-Recurring Expenses and Transaction-Related
Costs. Non-recurring expenses relate to certain
severance, product consolidation, legal proceedings, consulting,
and other charges incurred in connection with activities that are
considered one-time. Transaction-related costs include
deferred compensation expenses incurred in connection with the
acquisition of dbMotion, Ltd.
Allscripts excludes non-recurring expenses and
transaction-related costs from non-GAAP gross profit, non-GAAP
operating income, non-GAAP net income and Adjusted EBITDA because
it believes (i) the amount of such expenses in any specific period
may not directly correlate to the underlying performance of
Allscripts business operations and (ii) such expenses can vary
significantly between periods.
Non-Cash Charges to Interest Expense and
Other. Non-cash charges to interest expense and other
includes non-cash amortization of the fair value of the cash
conversion option embedded in the 1.25 percent Cash Convertible
Notes issued by Allscripts during the second quarter of
2013. Also included in this amount are non-cash adjustments to
reflect changes in the fair value of derivative financial
instruments related to the 1.25 percent Cash Convertible Notes that
do not qualify for hedge accounting treatment.
Non-Cash Asset Impairment Charges. Asset
impairment charges relate primarily to product consolidation
activities.
Tax Rate Alignment. Tax adjustment aligns
the applicable period's effective tax rate to the expected annual
non-GAAP effective tax rate. Accordingly, the non-GAAP
effective tax rate for the three months and year ended December 31,
2014 excludes the impact of deferred tax asset valuation allowance
adjustments recorded in the fourth quarter.
Management also believes that non-GAAP revenue, gross profit,
SG&A, operating expense, operating income, net income and
non-GAAP net income on a per share basis, and Adjusted EBITDA,
provide useful supplemental information to management and investors
regarding the underlying performance of Allscripts business
operations. Acquisition accounting adjustments made in accordance
with GAAP can make it difficult to make meaningful comparisons of
the underlying operations of the business without considering the
non-GAAP adjustments provided and discussed herein. Management
also uses this information internally for forecasting and
budgeting, as it believes that these measures are indicative of
core operating results. In addition, management may use non-GAAP
revenue, SG&A, operating expense, operating income, net income
and/or Adjusted EBITDA to measure achievement under Allscripts
stock and cash incentive compensation plans. Note, however, that
non-GAAP revenue, gross profit, operating income and net income and
non-GAAP net income on a per share basis and Adjusted EBITDA are
performance measures only, and they do not provide any measure of
cash flow or liquidity. Non-GAAP financial measures are not in
accordance with, or an alternative for, measures of financial
performance prepared in accordance with GAAP and may be different
from non-GAAP measures used by other companies. Non-GAAP measures
have limitations in that they do not reflect all of the amounts
associated with Allscripts results of operations as determined in
accordance with GAAP. Investors and potential investors are
encouraged to review the reconciliation of non-GAAP financial
measures with GAAP financial measures contained within the attached
condensed consolidated financial statements.
Free Cash Flow. Free cash flow is
calculated based on operating cash flow in the applicable period,
net of capital expenditures and capitalized software costs. For
2014, Allscripts free cash flow equaled $36 million, consisting of
operating cash flow of $103 million minus $26 million of capital
expenditures and $41 million of capitalized software development
costs.
CONTACT: Investors:
Seth Frank
312-506-1213
seth.frank@allscripts.com
Media:
Concetta Di Franco
312-447-2466
Concetta.difranco@allscripts.com
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