Allscripts Healthcare Solutions, Inc. (NASDAQ:MDRX) (Allscripts)
announced its financial results for the three and six months ended
June 30, 2016.
Second Quarter Business
Highlights
- OptumCare, part of Optum and UnitedHealth Group, signed a
strategic 10-year agreement to deploy the Allscripts TouchWorks®
suite as its exclusive electronic health record (EHR) and practice
management (PM) solution for physicians. OptumCare is a national
health care delivery organization serving more than 8 million
people in 49 geographic markets.
- On April 19, Allscripts completed the previously announced
transaction that combines the Allscripts Homecare™ business with
Netsmart, establishing the combined business as the largest human
services and post-acute technology provider in health care. The
results of the combined business since April 19 are being
consolidated.
- Wyckoff Heights Medical Center, of Brooklyn, New York,
substantially expanded its relationship with Allscripts by
selecting Sunrise™ to replace its legacy EHR and provide an
integrated patient record and support revenue cycle management. In
addition, the Medical Center also chose Allscripts for its Managed
Services and Professional Services Implementation and Operational
support needs.
- The company announced new clients and additional client
expansions for its flagship Sunrise suite, managed IT and revenue
cycle management services as well as for the Allscripts
CareInMotion™ suite of solutions.
- Allscripts earned top scores for the third year in a row, in
multiple categories and criteria for its ambulatory EHR, including
Allscripts Professional EHR™, Allscripts TouchWorks EHR and
Allscripts Sunrise™ Ambulatory Care, from research company Black
Book Rankings™.
- Allscripts accelerated investment and growth in the Allscripts
EPSi™ solution, the industry’s flagship budgeting, cost accounting
and financial decision support platform.
- Wrightington, Wigan and Leigh NHS Foundation Trust (in the
United Kingdom) successfully deployed Sunrise as the foundation for
its new health information system across five sites, expanding the
number of live sites across the National Health Service utilizing
Sunrise for patient care.
Paul M. Black, Chief Executive Officer of
Allscripts, said, “I am exceptionally pleased with Allscripts
second quarter results and accomplishments. Bookings were an
all-time company record, driven by significant new wins in our core
business as well as the addition of Netsmart. The new partnership
we announced today with OptumCare is a major achievement, creating
a long-term opportunity to significantly expand our physician and
provider network nationally. We also continue to grow stronger via
client expansions and new client adds for our integrated enterprise
platform, Sunrise, as well as for Allscripts CareInMotion platform,
enabling the transition to value-based care.”
Please see the “Explanation of Non-GAAP
Financial Measures” at the end of this press release for detailed
information on calculating non-GAAP
measures.
Second Quarter and Six-Month Bookings
Highlights
Bookings(1) were $362 million in the second
quarter 2016, an all-time record for Allscripts and the sixth
consecutive quarterly bookings record. This result compares with
$260 million in the second quarter of 2015, a 39 percent increase.
The Netsmart transaction, which closed on April 19, 2016,
contributed $44 million to second quarter bookings. Excluding the
Netsmart transaction (“Standalone Allscripts”), bookings totaled
$318 million or 22 percent growth.
Bookings results in the second quarter were
driven by a significant increase in both new client sales,
including the new relationship with OptumCare, as well as add-on
sales of the company’s core EHR platforms to clients in both the
ambulatory and acute markets. Bookings also benefited from sales of
recurring service agreements for remote hosting and revenue cycle
management services.
As a result of these factors, software delivery
bookings were very strong, increasing 49 percent year-over-year
while client services bookings increased 26 percent. Sixty-one
percent of second quarter 2016 bookings related to software
delivery, while the remaining 39 percent were related to client
services.
For the six months ended June 30, 2016, bookings
totaled $614 million compared with $496 million in the first six
months of 2015, a 24 percent increase. Standalone Allscripts
bookings for the six months ended June 30, 2016, totaled $570
million or 15 percent growth year-over-year.
Contract revenue backlog as of June 30, 2016,
totaled $4.0 billion, an increase of $443 million from the March
31, 2016, amount.
Mr. Black continued, “I am very encouraged by
the momentum we have at Allscripts as we look ahead to the second
half of 2016. We are financially strong and growing. Allscripts is
pursuing multiple strategic initiatives across the globe to
positively impact the critical work our clients perform every day.
In particular, the addition of Netsmart creates a unique and
comprehensive platform across every venue of care, enabling
physicians, health systems and post-acute providers of every type
to better connect, collaborate, optimize outcomes and thrive in the
rapidly evolving transition to value-based care.”
Second Quarter and Six Month 2016
Revenue Details
Second quarter 2016 GAAP revenue was $387
million, an increase of ten percent year-over-year. Non-GAAP
revenue, excluding acquisition-related deferred revenue adjustments
related to Netsmart, totaled $397 million, improving 13 percent
year-over-year.
The Netsmart transaction contributed an
incremental $33 million of revenue on a GAAP basis and $43 million
to non-GAAP revenue in the second quarter.
Software delivery, support and maintenance
revenue totaled $250 million on a GAAP basis and $258 million on a
non-GAAP basis in the second quarter of 2016, an increase of 8 and
11 percent, respectively, compared with the second quarter of 2015.
Software delivery, support and maintenance revenue consists of all
software, hardware, subscription and transaction-related revenue as
well as support and maintenance.
Client services revenue totaled $137 million on
a GAAP basis and $139 million on a non-GAAP basis in the second
quarter of 2016, up 15 and 16 percent, respectively, compared with
the second quarter of 2015. Client services revenue consists of
recurring managed services and other project-based client services
revenue.
Recurring revenue, consisting of subscriptions,
recurring transactions, support and maintenance and recurring
managed services, increased 15 percent compared with the second
quarter of 2015. Non-recurring revenue, comprised of systems sales
and other project-based client services revenue, increased five
percent, compared with the second quarter of 2015. Growth rates in
recurring and non-recurring revenue are equivalent on both a GAAP
and non-GAAP revenue basis.
For the six months ended June 30, 2016, GAAP
revenue totaled $732 million, an increase of 7 percent
year-over-year.
Second Quarter Gross Profit and
Operating Expenses
Gross margin in the second quarter of 2016 was
43.1 percent on a GAAP basis and 48.1 percent on a non-GAAP basis,
compared with 40.8 and 44.2 percent, respectively, in the second
quarter of 2015.
On a GAAP basis, total operating expenses,
consisting of selling, general and administrative (SG&A) and
research and development (R&D) expenses, were $143 million, or
9 percent increase year-over-year. Non-GAAP operating expenses
totaled $133 million, a 15 percent increase in the second quarter
of 2016 year-over-year. The increase in operating expense was
primarily due to incremental expenses from the consolidation of
Netsmart.
Second Quarter and Six Month Net Income,
Adjusted EBITDA and Earnings per Share
GAAP net loss attributable to Allscripts
stockholders in the second quarter 2016 totaled $10 million
compared with a net loss of $3 million in the second quarter of
2015. The net loss includes an $8 million charge for the
accretion of redemption preference on redeemable convertible
preferred stock, issued in conjunction with the Netsmart
transaction. Non-GAAP net income attributable to Allscripts
stockholders in the second quarter of 2016 totaled $27 million, an
18 percent increase compared with the second quarter of 2015. The
increase in non-GAAP net income was driven by higher gross margin,
strong operating expense control in the quarter and the Netsmart
transaction.
GAAP loss per share in the second quarter of
2016 was $0.05 compared with a loss per share of $0.01 in the
second quarter of 2015. Non-GAAP earnings per share in the second
quarter of 2016 were $0.14, compared with $0.12, an increase of 17
percent compared with the second quarter of 2015. For the six
months ended June 30, 2016, GAAP loss per share was $0.04 compared
with a $0.07 GAAP loss per share in the first six months of 2015.
Non-GAAP earnings per share were $0.27, compared with $0.21, an
increase of 29 percent versus the first six months of
2015.
Adjusted EBITDA increased to $78 million in the
second quarter of 2016, a 26 percent increase compared with the
second quarter of 2015. For the six months ended June 30, 2016,
Adjusted EBITDA totaled $140 million, a 25 percent increase
compared to the six months ended June 30, 2015.
Adjusted net EBITDA, net of non-controlling
interest (“Adjusted net EBITDA”), increased to $70 million in the
second quarter of 2016, a 13 percent increase compared with the
second quarter of 2015. For the six months ended June 30, 2016,
Adjusted net EBITDA totaled $131 million, a 17 percent increase
compared to the six months ended June 30, 2015.
Cash flow from operations in the second quarter
of 2016 totaled $56 million and $132 million for the six month
period ended June 30, 2016, an 85 and 49 percent increase,
respectively, compared to the same periods of 2015. Free cash flow
in the second quarter of 2016 totaled $25 million and $78 million
for the six month period ended June 30, 2016, a 76 and 36 percent
increase, respectively, compared to the same periods of
2015.
Share Repurchase Update
Year-to-date, Allscripts repurchased 4.1 million
shares for a total of $52 million, at an average cost of $12.84 per
share, pursuant to the previously authorized $150 million stock
repurchase program through December 31, 2018.
As of June 30, 2016, there was $98 million
remaining under the current authorization.
2016 Financial Guidance
Allscripts affirmed its prior financial guidance for 2016 as
follows:
- Non-GAAP revenue of between $1.580 billion and $1.610
billion;
- Adjusted net EBITDA of between $280 million and $300 million;
and
- Non-GAAP earnings per share guidance of between $0.55 and $0.62
per diluted share.
Allscripts provides guidance for revenue on a
non-GAAP basis and guidance for Adjusted net EBITDA. Our non-GAAP
revenue guidance for 2016 excludes the impact of
acquisition-related deferred revenue adjustments as a result of the
Netsmart transaction totaling approximately $29 million, most of
which will be accounted for as a reduction to revenue for GAAP
purposes in 2016.
For the purpose of providing financial guidance,
the Company does not reconcile Adjusted net EBITDA or non-GAAP
earnings per share guidance to the corresponding GAAP financial
measures. Allscripts does not provide guidance for the various
reconciling items as it is unable to provide guidance for these
reconciling items since certain items that impact both Adjusted net
EBITDA and net income are either outside of its control and/or
cannot be reasonably predicted.
For a reconciliation of other 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 (Tables 4, 5 and 6).
Conference Call:
Allscripts will conduct a conference call today,
Thursday, August 4, 2016, 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. Participants also may access the
conference call by dialing +1 (877) 269-7756 or +1 (201) 689-7817
(international) and requesting Conference ID # 13640622.
A replay of the call will be available
approximately two hours after the conclusion of the call, for a
period of four weeks, on the Allscripts Investor Relations website
or by calling +1 (877) 660-6853 or +1 (201) 612-7415 - Conference
ID # 13640622.
Supplemental and non-GAAP financial information
is also available at http://investor.allscripts.com.
Footnotes
(1) Bookings reflect the value of executed contracts for
software, hardware, other client services, remote hosting,
outsourcing and subscription-based services.
About AllscriptsAllscripts
(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.
© 2016 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 press 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: the
response of customers and competitors to the Netsmart joint
business entity; the expected financial contribution and results of
the Netsmart business entity, including consolidation for financial
reporting purposes; 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, including under the caption
“Risk Factors” in the Allscripts Annual Report on Form 10-K and
subsequent Form 10-Qs. 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) |
|
|
|
|
|
|
|
|
|
June 30, |
|
December 31, |
|
|
|
2016 |
|
2015 |
|
ASSETS |
|
|
|
|
|
Current
assets: |
|
|
|
|
|
Cash and cash equivalents |
|
$ |
90.7 |
|
|
$ |
116.9 |
|
|
Accounts receivable, net |
|
|
395.7 |
|
|
|
327.8 |
|
|
Prepaid expenses and other current
assets |
|
|
107.8 |
|
|
|
93.6 |
|
|
Total current assets |
|
|
594.2 |
|
|
|
538.3 |
|
|
Long-term marketable securities (a) |
|
|
187.5 |
|
|
|
0.0 |
|
|
Fixed
assets, net |
|
|
143.7 |
|
|
|
125.6 |
|
|
Software
development costs, net |
|
|
97.6 |
|
|
|
85.8 |
|
|
Intangible assets, net |
|
|
715.7 |
|
|
|
347.6 |
|
|
Goodwill |
|
|
1,846.9 |
|
|
|
1,222.6 |
|
|
Deferred
taxes, net |
|
|
2.5 |
|
|
|
2.3 |
|
|
Other
assets (a) |
|
|
122.0 |
|
|
|
359.7 |
|
|
Total assets |
|
$ |
3,710.1 |
|
|
$ |
2,681.9 |
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
|
Current
liabilities: |
|
|
|
|
|
Accounts payable |
|
$ |
84.5 |
|
|
$ |
60.0 |
|
|
Accrued expenses |
|
|
65.7 |
|
|
|
62.0 |
|
|
Accrued compensation and
benefits |
|
|
52.4 |
|
|
|
62.4 |
|
|
Deferred revenue |
|
|
373.5 |
|
|
|
315.9 |
|
|
Current maturities of long-term
debt |
|
|
12.1 |
|
|
|
12.2 |
|
|
Non-recourse current maturities of
long-term debt - Netsmart |
|
|
11.6 |
|
|
|
0.0 |
|
|
Current maturities of capital lease
obligations |
|
|
7.5 |
|
|
|
0.4 |
|
|
Total current liabilities |
|
|
607.3 |
|
|
|
512.9 |
|
|
Long-term debt |
|
|
632.7 |
|
|
|
612.4 |
|
|
Non-recourse long-term debt - Netsmart |
|
|
523.4 |
|
|
|
0.0 |
|
|
Long-term capital lease obligations |
|
|
10.0 |
|
|
|
0.6 |
|
|
Deferred
revenue |
|
|
20.0 |
|
|
|
20.3 |
|
|
Deferred
taxes, net |
|
|
144.2 |
|
|
|
22.2 |
|
|
Other
liabilities |
|
|
54.0 |
|
|
|
94.5 |
|
|
Total liabilities |
|
|
1,991.6 |
|
|
|
1,262.9 |
|
|
Redeemable convertible non-controlling interest - Netsmart |
|
|
367.3 |
|
|
|
0.0 |
|
|
Total
Allscripts Healthcare Solutions, Inc.'s stockholders' equity |
|
|
1,340.0 |
|
|
|
1,407.8 |
|
|
Non-controlling interest |
|
|
11.2 |
|
|
|
11.2 |
|
|
Total stockholders’ equity |
|
|
1,351.2 |
|
|
|
1,419.0 |
|
|
Total liabilities and stockholders’
equity |
|
$ |
3,710.1 |
|
|
$ |
2,681.9 |
|
|
|
|
|
|
|
|
(a) As of June 30, 2016, long-term available-for-sale
marketable securities represent the value of NantHealth common
stock subsequent to its IPO. As of December 31, 2015, this
investment was included in other assets as it was accounted for
under the equity method of accounting prior to the IPO. |
|
|
|
Table 2 |
|
Allscripts Healthcare Solutions,
Inc. |
|
Condensed Consolidated Statements of
Operations |
|
(In millions, except per-share amounts) |
|
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Six Months Ended |
|
|
|
June 30, |
|
June 30, |
|
|
|
|
2016 |
|
|
|
2015 |
|
|
|
2016 |
|
|
|
2015 |
|
|
Revenue: |
|
|
|
|
|
|
|
|
|
Software delivery, support and
maintenance |
|
$ |
249.8 |
|
|
$ |
232.5 |
|
|
$ |
479.0 |
|
|
$ |
460.1 |
|
|
Client services |
|
|
136.7 |
|
|
|
119.2 |
|
|
|
253.1 |
|
|
|
226.2 |
|
|
Total revenue |
|
|
386.5 |
|
|
|
351.7 |
|
|
|
732.1 |
|
|
|
686.3 |
|
|
Cost of
revenue: |
|
|
|
|
|
|
|
|
|
Software delivery, support and
maintenance |
|
|
79.1 |
|
|
|
75.7 |
|
|
|
154.3 |
|
|
|
152.4 |
|
|
Client services |
|
|
118.7 |
|
|
|
111.6 |
|
|
|
219.6 |
|
|
|
218.8 |
|
|
Amortization of software
development and acquisition-related assets (a) |
|
|
22.0 |
|
|
|
20.8 |
|
|
|
39.6 |
|
|
|
41.7 |
|
|
Total cost of revenue |
|
|
219.8 |
|
|
|
208.1 |
|
|
|
413.5 |
|
|
|
412.9 |
|
|
Gross profit |
|
|
166.7 |
|
|
|
143.6 |
|
|
|
318.6 |
|
|
|
273.4 |
|
|
Selling,
general and administrative expenses |
|
|
94.8 |
|
|
|
86.7 |
|
|
|
178.9 |
|
|
|
168.8 |
|
|
Research
and development |
|
|
47.9 |
|
|
|
44.4 |
|
|
|
94.9 |
|
|
|
91.1 |
|
|
Asset
impairment charges |
|
|
0.0 |
|
|
|
0.3 |
|
|
|
4.7 |
|
|
|
0.3 |
|
|
Amortization of intangible and acquisition-related assets |
|
|
5.4 |
|
|
|
6.6 |
|
|
|
9.6 |
|
|
|
13.3 |
|
|
Income (loss) from operations |
|
|
18.6 |
|
|
|
5.6 |
|
|
|
30.5 |
|
|
|
(0.1 |
) |
|
Interest
expense and other, net (b) |
|
|
(16.3 |
) |
|
|
(7.5 |
) |
|
|
(22.9 |
) |
|
|
(12.9 |
) |
|
Equity
in net (loss) earnings of unconsolidated investments |
|
|
(4.9 |
) |
|
|
0.2 |
|
|
|
(7.5 |
) |
|
|
0.2 |
|
|
Income (loss) before income
taxes |
|
|
(2.6 |
) |
|
|
(1.7 |
) |
|
|
0.1 |
|
|
|
(12.8 |
) |
|
Income
tax benefit (provision) |
|
|
0.5 |
|
|
|
(1.5 |
) |
|
|
(0.1 |
) |
|
|
(0.5 |
) |
|
Net (loss) income |
|
|
(2.1 |
) |
|
|
(3.2 |
) |
|
|
0.0 |
|
|
|
(13.3 |
) |
|
Less:
Net loss attributable to non-controlling interest |
|
|
0.1 |
|
|
|
0.0 |
|
|
|
0.0 |
|
|
|
0.0 |
|
|
Less:
Accretion of redemption preference on redeemable convertible
non-controlling interest - Netsmart |
|
|
(8.2 |
) |
|
|
0.0 |
|
|
|
(8.2 |
) |
|
|
0.0 |
|
|
Net loss attributable to Allscripts
Healthcare Solutions, Inc. stockholders |
|
($ |
10.2 |
) |
|
($ |
3.2 |
) |
|
($ |
8.2 |
) |
|
($ |
13.3 |
) |
|
|
|
|
|
|
|
|
|
|
|
Loss per
share - basic and diluted |
|
($ |
0.05 |
) |
|
($ |
0.01 |
) |
|
($ |
0.04 |
) |
|
($ |
0.07 |
) |
|
|
|
|
|
|
|
|
|
|
|
Weighted
average common shares outstanding: |
|
|
|
|
|
|
|
|
|
Basic |
|
|
186.8 |
|
|
|
181.6 |
|
|
|
187.7 |
|
|
|
181.1 |
|
|
Diluted |
|
|
186.8 |
|
|
|
181.6 |
|
|
|
187.7 |
|
|
|
181.1 |
|
|
|
|
|
|
|
|
|
|
|
|
(a) Amortization of
software development and acquisition-related assets includes: |
|
|
|
|
|
|
|
|
|
Amortization of capitalized
software development costs |
|
$ |
10.4 |
|
|
$ |
11.6 |
|
|
$ |
20.6 |
|
|
$ |
23.4 |
|
|
Amortization of acquisition-related
intangible assets |
|
|
11.6 |
|
|
|
9.2 |
|
|
|
19.0 |
|
|
|
18.3 |
|
|
|
|
$ |
22.0 |
|
|
$ |
20.8 |
|
|
$ |
39.6 |
|
|
$ |
41.7 |
|
|
|
|
|
|
|
|
|
|
|
|
(b) Interest expense and other, net are comprised of the
following for the periods presented: |
|
|
|
Three Months Ended |
|
Six Months Ended |
|
|
|
June 30, |
|
June 30, |
|
|
|
|
2016 |
|
|
|
2015 |
|
|
|
2016 |
|
|
|
2015 |
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash amortization of 1.25% Cash
Convertible Notes original issue discount |
|
$ |
2.8 |
|
|
$ |
2.9 |
|
|
$ |
5.6 |
|
|
$ |
5.6 |
|
|
Interest expense |
|
|
12.1 |
|
|
|
4.1 |
|
|
|
15.7 |
|
|
|
8.0 |
|
|
Amortization of discounts and debt
issuance costs |
|
|
1.5 |
|
|
|
0.5 |
|
|
|
2.1 |
|
|
|
1.2 |
|
|
Other income, net |
|
|
(0.1 |
) |
|
|
- |
|
|
|
(0.5 |
) |
|
|
(1.9 |
) |
|
Total interest expense and other,
net |
|
$ |
16.3 |
|
|
$ |
7.5 |
|
|
$ |
22.9 |
|
|
$ |
12.9 |
|
|
|
|
|
|
|
|
|
|
|
|
Table 3 |
|
Allscripts Healthcare Solutions,
Inc. |
|
Condensed Consolidated Statements of Cash
Flows |
|
(In millions) |
|
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Six Months Ended |
|
|
|
June 30, |
|
June 30, |
|
|
|
|
2016 |
|
|
|
2015 |
|
|
|
2016 |
|
|
|
2015 |
|
|
Cash
flows from operating activities: |
|
|
|
|
|
|
|
|
|
Net (loss) income |
|
($ |
2.1 |
) |
|
($ |
3.2 |
) |
|
$ |
0.0 |
|
|
($ |
13.3 |
) |
|
Non-cash adjustments to net (loss)
income: |
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
42.1 |
|
|
|
41.8 |
|
|
|
76.6 |
|
|
|
83.5 |
|
|
Stock-based compensation
expense |
|
|
10.2 |
|
|
|
9.2 |
|
|
|
20.1 |
|
|
|
18.3 |
|
|
Other non-cash charges, net |
|
|
3.4 |
|
|
|
0.0 |
|
|
|
10.5 |
|
|
|
0.0 |
|
|
Total non-cash adjustments to
income |
|
|
55.7 |
|
|
|
51.0 |
|
|
|
107.2 |
|
|
|
101.8 |
|
|
Cash impact of changes in operating
assets and liabilities |
|
|
2.6 |
|
|
|
(17.5 |
) |
|
|
24.9 |
|
|
|
0.3 |
|
|
Net cash provided by operating
activities |
|
|
56.2 |
|
|
|
30.3 |
|
|
|
132.1 |
|
|
|
88.8 |
|
|
Cash
flows from investing activities: |
|
|
|
|
|
|
|
|
|
Capital expenditures |
|
|
(8.8 |
) |
|
|
(3.5 |
) |
|
|
(16.6 |
) |
|
|
(9.6 |
) |
|
Capitalized software |
|
|
(22.0 |
) |
|
|
(12.4 |
) |
|
|
(37.1 |
) |
|
|
(21.7 |
) |
|
Purchases of equity securities in
partner entities, business acquisitions, net of cash
acquired and other investments |
|
|
(925.7 |
) |
|
|
(218.8 |
) |
|
|
(926.2 |
) |
|
|
(219.5 |
) |
|
Sales and maturities of marketable
securities and other investments |
|
|
0.0 |
|
|
|
0.0 |
|
|
|
0.0 |
|
|
|
1.3 |
|
|
Net cash used in investing
activities |
|
|
(956.5 |
) |
|
|
(234.7 |
) |
|
|
(979.9 |
) |
|
|
(249.5 |
) |
|
Cash
flows from financing activities: |
|
|
|
|
|
|
|
|
|
Repurchase of common stock |
|
|
(14.6 |
) |
|
|
0.0 |
|
|
|
(52.1 |
) |
|
|
0.0 |
|
|
Proceeds from issuance of
redeemable convertible preferred stock |
|
|
333.6 |
|
|
|
0.0 |
|
|
|
333.6 |
|
|
|
0.0 |
|
|
Proceeds from sale or issuance of
common stock |
|
|
0.0 |
|
|
|
101.4 |
|
|
|
0.0 |
|
|
|
101.4 |
|
|
Stock-based compensation-related
payments, net |
|
|
(2.5 |
) |
|
|
(3.0 |
) |
|
|
(6.4 |
) |
|
|
(5.2 |
) |
|
Senior secured debt borrowings,
net |
|
|
574.6 |
|
|
|
93.8 |
|
|
|
546.2 |
|
|
|
88.1 |
|
|
Net cash provided by financing
activities |
|
|
891.1 |
|
|
|
192.2 |
|
|
|
821.3 |
|
|
|
184.3 |
|
|
Effect of exchange rate changes on
cash and cash equivalents |
|
|
(0.2 |
) |
|
|
0.2 |
|
|
|
0.3 |
|
|
|
(0.3 |
) |
|
Net (decrease) increase in cash and
cash equivalents |
|
|
(9.4 |
) |
|
|
(12.0 |
) |
|
|
(26.2 |
) |
|
|
23.3 |
|
|
Cash and
cash equivalents, beginning of period |
|
|
100.1 |
|
|
|
88.5 |
|
|
|
116.9 |
|
|
|
53.2 |
|
|
Cash and
cash equivalents, end of period |
|
$ |
90.7 |
|
|
$ |
76.5 |
|
|
$ |
90.7 |
|
|
$ |
76.5 |
|
|
|
|
|
|
|
|
|
|
|
|
Table 4 |
|
|
Allscripts Healthcare Solutions,
Inc. |
|
|
Condensed Non-GAAP Financial
Information |
|
|
(In millions, except per share amounts and
percentages) |
|
|
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended |
|
Six Months Ended |
|
|
|
|
June 30, |
|
June 30, |
|
|
|
|
|
2016 |
|
|
|
2015 |
|
|
|
2016 |
|
|
|
2015 |
|
|
|
Total
revenue, as reported |
$ |
386.5 |
|
|
$ |
351.7 |
|
|
$ |
732.1 |
|
|
$ |
686.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition-related
deferred revenue adjustments |
|
10.1 |
|
|
|
0.0 |
|
|
|
10.1 |
|
|
|
0.0 |
|
|
|
Total non-GAAP revenue |
$ |
396.6 |
|
|
$ |
351.7 |
|
|
$ |
742.2 |
|
|
$ |
686.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
profit, as reported |
$ |
166.7 |
|
|
$ |
143.6 |
|
|
$ |
318.6 |
|
|
$ |
273.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition-related
deferred revenue adjustments |
|
10.1 |
|
|
|
0.0 |
|
|
|
10.1 |
|
|
|
0.0 |
|
|
|
Acquisition-related
amortization |
|
11.6 |
|
|
|
9.2 |
|
|
|
19.0 |
|
|
|
18.3 |
|
|
|
Stock-based
compensation expense |
|
2.2 |
|
|
|
2.5 |
|
|
|
4.9 |
|
|
|
5.0 |
|
|
|
Total non-GAAP gross profit |
$ |
190.6 |
|
|
$ |
155.3 |
|
|
$ |
352.6 |
|
|
$ |
296.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(loss) from operations, as reported |
$ |
18.6 |
|
|
$ |
5.6 |
|
|
$ |
30.5 |
|
|
($ |
0.1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition-related
deferred revenue adjustments |
|
10.1 |
|
|
|
0.0 |
|
|
|
10.1 |
|
|
|
0.0 |
|
|
|
Acquisition-related
amortization |
|
17.0 |
|
|
|
15.8 |
|
|
|
28.6 |
|
|
|
31.6 |
|
|
|
Stock-based
compensation expense |
|
10.7 |
|
|
|
10.0 |
|
|
|
21.1 |
|
|
|
19.5 |
|
|
|
Non-recurring expenses
and transaction-related costs (a) |
|
0.9 |
|
|
|
7.4 |
|
|
|
4.6 |
|
|
|
13.5 |
|
|
|
Non-cash asset
impairment charges |
|
0.0 |
|
|
|
0.3 |
|
|
|
4.7 |
|
|
|
0.3 |
|
|
|
Total non-GAAP operating income |
$ |
57.3 |
|
|
$ |
39.1 |
|
|
$ |
99.6 |
|
|
$ |
64.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
attributable to Allscripts Healthcare Solutions, Inc. stockholders,
as reported |
($ |
10.2 |
) |
|
($ |
3.2 |
) |
|
($ |
8.2 |
) |
|
($ |
13.3 |
) |
|
|
Less: Net loss
attributable to non-controlling interest |
|
(0.1 |
) |
|
|
0.0 |
|
|
|
0.0 |
|
|
|
0.0 |
|
|
|
Less: Accretion of
redemption preference on redeemable convertible non-controlling
interest |
|
8.2 |
|
|
|
0.0 |
|
|
|
8.2 |
|
|
|
0.0 |
|
|
|
Net (loss)
income, as reported |
($ |
2.1 |
) |
|
($ |
3.2 |
) |
|
$ |
0.0 |
|
|
($ |
13.3 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition-related deferred revenue adjustments |
|
10.1 |
|
|
|
0.0 |
|
|
|
10.1 |
|
|
|
0.0 |
|
|
|
Acquisition-related
amortization |
|
17.0 |
|
|
|
15.8 |
|
|
|
28.6 |
|
|
|
31.6 |
|
|
|
Stock-based
compensation expense |
|
10.7 |
|
|
|
10.0 |
|
|
|
21.1 |
|
|
|
19.5 |
|
|
|
Non-recurring expenses
and transaction-related costs (a) |
|
0.9 |
|
|
|
7.4 |
|
|
|
4.6 |
|
|
|
13.5 |
|
|
|
Non-cash asset
impairment charges |
|
0.0 |
|
|
|
0.3 |
|
|
|
4.7 |
|
|
|
0.3 |
|
|
|
Non-cash charges to
interest expense and other |
|
2.8 |
|
|
|
3.1 |
|
|
|
5.6 |
|
|
|
5.7 |
|
|
|
Equity in net earnings
of unconsolidated investments |
|
4.9 |
|
|
|
0.0 |
|
|
|
7.5 |
|
|
|
0.0 |
|
|
|
Tax effect of
adjustments to reconcile GAAP to non-GAAP net income |
|
(16.2 |
) |
|
|
(12.7 |
) |
|
|
(28.7 |
) |
|
|
(24.5 |
) |
|
|
Tax rate alignment |
|
0.4 |
|
|
|
2.1 |
|
|
|
0.1 |
|
|
|
5.0 |
|
|
|
Total Non-GAAP net income |
$ |
28.5 |
|
|
$ |
22.8 |
|
|
$ |
53.6 |
|
|
$ |
37.8 |
|
|
|
Less: Non-GAAP net
income attributable to non-controlling interest |
|
(1.7 |
) |
|
|
0.0 |
|
|
|
(1.8 |
) |
|
|
0.0 |
|
|
|
Non-GAAP net income attributable to Allscripts Healthcare
Solutions, Inc. |
$ |
26.8 |
|
|
$ |
22.8 |
|
|
$ |
51.8 |
|
|
$ |
37.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP
effective tax rate |
|
35 |
% |
|
|
35 |
% |
|
|
35 |
% |
|
|
35 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
shares outstanding - diluted |
|
189.6 |
|
|
|
183.6 |
|
|
|
189.7 |
|
|
|
182.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss per
share - basic and diluted, as reported |
($ |
0.05 |
) |
|
($ |
0.01 |
) |
|
($ |
0.04 |
) |
|
($ |
0.07 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP earnings per share attributable to Allscripts
Healthcare Solutions, Inc. - diluted |
$ |
0.14 |
|
|
$ |
0.12 |
|
|
$ |
0.27 |
|
|
$ |
0.21 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note: Adjustments to reconcile GAAP to non-GAAP net income are
presented gross of tax, with net tax effects included in row titled
"Tax effect of adjustments to reconcile GAAP to non-GAAP net
income". |
|
|
(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 |
|
Six Months Ended |
|
|
|
|
June 30, |
|
June 30, |
|
|
|
|
|
2016 |
|
|
|
2015 |
|
|
|
2015 |
|
|
|
2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
Severance
and other costs |
|
0.2 |
|
|
|
7.4 |
|
|
|
0.2 |
|
|
|
13.4 |
|
|
|
Transaction-related costs |
|
0.7 |
|
|
|
0.0 |
|
|
|
4.4 |
|
|
|
0.1 |
|
|
|
Total non-recurring expenses and transaction related
costs |
$ |
0.9 |
|
|
$ |
7.4 |
|
|
$ |
4.6 |
|
|
$ |
13.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Table 5 |
|
|
Allscripts Healthcare Solutions,
Inc. |
|
|
Non-GAAP Financial Information - Adjusted
EBITDA |
|
|
(In millions, except percentages) |
|
|
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Six Months Ended |
|
|
|
|
June 30, |
|
June 30, |
|
|
|
|
|
2016 |
|
|
|
2015 |
|
|
|
2016 |
|
|
|
2015 |
|
|
|
Total revenue, as
reported |
|
$ |
386.5 |
|
|
$ |
351.7 |
|
|
$ |
732.1 |
|
|
$ |
686.3 |
|
|
|
Acquisition-related deferred
revenue adjustments |
|
|
10.1 |
|
|
|
0.0 |
|
|
|
10.1 |
|
|
|
0.0 |
|
|
|
Total non-GAAP
revenue |
|
$ |
396.6 |
|
|
$ |
351.7 |
|
|
$ |
742.2 |
|
|
$ |
686.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income, as
reported |
|
($ |
2.1 |
) |
|
($ |
3.2 |
) |
|
$ |
0.0 |
|
|
($ |
13.3 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition-related deferred
revenue adjustments |
|
|
10.1 |
|
|
|
0.0 |
|
|
|
10.1 |
|
|
|
0.0 |
|
|
|
Depreciation and amortization |
|
|
42.1 |
|
|
|
41.8 |
|
|
|
76.6 |
|
|
|
83.5 |
|
|
|
Stock-based compensation
expense |
|
|
10.7 |
|
|
|
10.0 |
|
|
|
21.1 |
|
|
|
19.5 |
|
|
|
Non-recurring expenses and
transaction-related costs |
|
|
0.9 |
|
|
|
7.4 |
|
|
|
4.6 |
|
|
|
13.5 |
|
|
|
Non-cash asset impairment
charges |
|
|
0.0 |
|
|
|
0.3 |
|
|
|
4.7 |
|
|
|
0.3 |
|
|
|
Interest expense and other, net
(a) |
|
|
12.0 |
|
|
|
4.0 |
|
|
|
15.2 |
|
|
|
7.7 |
|
|
|
Equity in net earnings of
unconsolidated investments |
|
|
4.9 |
|
|
|
0.0 |
|
|
|
7.5 |
|
|
|
0.0 |
|
|
|
Tax (benefit)/provision |
|
|
(0.5 |
) |
|
|
1.5 |
|
|
|
0.1 |
|
|
|
0.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA |
|
|
78.1 |
|
|
|
61.8 |
|
|
|
139.9 |
|
|
|
111.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA margin
(b) |
|
|
20 |
% |
|
|
18 |
% |
|
|
19 |
% |
|
|
16 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Adjusted EBITDA
attributable to non-controlling interest |
|
|
8.6 |
|
|
|
0.0 |
|
|
|
8.8 |
|
|
|
0.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted net
EBITDA, net of non-controlling interest |
|
$ |
69.5 |
|
|
$ |
61.8 |
|
|
$ |
131.1 |
|
|
$ |
111.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted net EBITDA margin, net of
non-controlling interest (c) |
|
|
18 |
% |
|
|
18 |
% |
|
|
18 |
% |
|
|
16 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) Interest expense and other, net 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. |
|
|
|
|
|
|
|
|
|
|
|
|
|
(b) Adjusted EBITDA margin is calculated by dividing adjusted
EBITDA by total revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(c)
Adjusted net EBITDA margin, net of non-controlling interest is
calculated by dividing adjusted net EBITDA, net of non-controlling
interest by total revenue. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Table 6 |
|
Allscripts Healthcare Solutions,
Inc. |
|
Non-GAAP Financial Information - Free Cash
Flow |
|
(In millions) |
|
(Unaudited) |
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Six Months Ended |
|
|
|
June 30, |
|
June 30, |
|
|
|
|
2016 |
|
|
|
2015 |
|
|
|
2016 |
|
|
|
2015 |
|
|
Net cash
provided by operating activities |
|
$ |
56.2 |
|
|
$ |
30.3 |
|
|
$ |
132.1 |
|
|
$ |
88.8 |
|
|
Cash flows
from investing activities: |
|
|
|
|
|
|
|
|
|
Capital expenditures |
|
|
(8.8 |
) |
|
|
(3.5 |
) |
|
|
(16.6 |
) |
|
|
(9.6 |
) |
|
Capitalized software |
|
|
(22.0 |
) |
|
|
(12.4 |
) |
|
|
(37.1 |
) |
|
|
(21.7 |
) |
|
Free cash
flow |
|
$ |
25.4 |
|
|
$ |
14.4 |
|
|
$ |
78.4 |
|
|
$ |
57.5 |
|
|
|
|
|
|
|
|
|
|
|
|
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, gross margin, operating
expense, net income, including non-GAAP earnings per share,
non-GAAP effective income tax rate, Adjusted EBITDA and free cash
flow, which are considered non-GAAP financial measures under
Section 101 of Regulation G under the Securities Exchange Act of
1934, as amended. The definitions of non-GAAP financial measures
used throughout this document are presented below:
- Non-GAAP revenue consists of GAAP revenue and adds back
deferred revenue from the Netsmart transaction that is eliminated
for GAAP purposes due to purchase accounting
adjustments.
- Non-GAAP gross profit consists of GAAP gross profit as reported
and excludes acquisition-related deferred revenue adjustments,
acquisition-related amortization and stock-based compensation
expense. Non-GAAP gross margin consists of non-GAAP gross profit as
a percentage of GAAP revenue in the applicable period. For the
second quarter of 2016, non-GAAP gross margin totaled 48.1 percent,
consisting of non-GAAP gross profit of $190.6 million divided by
revenue of $396.6 million. For the second quarter of 2015, non-GAAP
gross margin totaled 44.2 percent consisting of non-GAAP gross
profit of $155.3 million divided by revenue of $351.7 million.
Reconciliations to 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 second quarter of 2016,
non-GAAP operating expense totaled $133.3 million consisting of
$94.8 million of GAAP SG&A and $47.9 million of GAAP R&D
expense and excludes $0.9 million of total non-recurring expenses
and transaction-related costs and $8.5 million of stock-based
compensation expense recorded to SG&A and R&D. For the
second quarter of 2015, non-GAAP operating expense totaled $116.2
million consisting of $86.7 million of GAAP SG&A and $44.4
million of GAAP R&D expense and excludes $7.4 million of total
non-recurring expense and transaction-related costs and $7.5
million of stock-based compensation expense recorded to SG&A
and R&D.
- Adjusted EBITDA is a non-GAAP measure and consists of GAAP net
income (loss) as reported and adjusts for: acquisition-related
deferred revenue adjustments; depreciation and amortization;
stock-based compensation expense; non-recurring expenses and
transaction-related costs; non-cash asset impairment charges;
interest expense and other, net; equity in net earnings of
unconsolidated investments; and tax provision (benefit).
- Adjusted net EBITDA, net of non-controlling interest, is a
non-GAAP measure and consists of Adjusted EBITDA as described
above, with an adjustment to reduce Adjusted EBITDA for the
percentage of non-controlling interest outside Allscripts ownership
position. For this presentation, Netsmart preferred stock is
treated as if it was converted to common stock.
- Non-GAAP effective income tax rate is based on non-GAAP pre-tax
earnings and consists of the statutory federal income tax rate,
Allscripts effective state income tax rate, and adjustments for
permanent differences.
- Non-GAAP net income consists of GAAP net income/(loss) as
reported, and adds back acquisition-related deferred revenue
adjustments, acquisition-related amortization, stock-based
compensation expense, non-recurring expenses and
transaction-related costs, non-cash charges to interest expense and
other, non-cash asset impairment charges, and equity in net
earnings of unconsolidated investments and the related tax effect
of the aforementioned adjustments. Non-GAAP net income also
includes a tax rate alignment adjustment.
- Non-GAAP net income attributable to Allscripts Healthcare
Solutions, Inc. is a non-GAAP measure and consists of Non-GAAP net
income as described above, with an adjustment to reduce Non-GAAP
net income for the percentage of non-controlling interest outside
Allscripts ownership position. For this presentation, Netsmart
preferred stock is treated as if it was converted to common stock.
- Non-GAAP earnings per share consists of non-GAAP net income, as
defined above, divided by weighted shares outstanding – diluted in
the applicable period.
- Free cash flow consists of GAAP cash flows provided by
operating activities in the applicable period, net of capital
expenditures and capitalized software costs.
Deferred Revenue. Deferred revenue adjustments
include acquisition-related deferred revenue adjustments, which
reflect the fair value adjustments to deferred revenue acquired in
a business acquisition. The fair value of acquired 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. Allscripts adds back deferred revenue 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. 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 and valuation 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. For the second quarter of
2016, Allscripts and Netsmart incurred $0.7 million of
transaction-related expenses associated with the Netsmart joint
business entity.
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.
Non-Cash Asset Impairment
Charges. Asset impairment charges relate primarily to
product consolidation activities and the write-down of the carrying
value of equity investments in third parties.
Equity in Net Earnings of Unconsolidated
Investments. Equity in net earnings of unconsolidated
investments represent our share of the equity earnings (losses) of
our investments in third parties accounted for under the equity
method, including the amortization of cost basis adjustments. The
amounts recognized during the three and six months ended June 30,
2016 represent our share of the net loss incurred by NantHealth LLC
along with the amortization of cost basis adjustments prior to its
initial public offering in June 2016.
Tax Rate Alignment. Tax
adjustment aligns the applicable period’s effective tax rate to the
expected annual non-GAAP effective tax rate.
Management also believes that non-GAAP revenue,
gross profit, SG&A, operating expense, operating income, net
income, non-GAAP net income on a per share basis, Adjusted EBITDA,
Adjusted EBITDA, net of non-controlling interest and free cash
flow, 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
gross profit, 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 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. Allscripts considers free cash
flow to be a liquidity measure that provides useful information to
management and investors about the amount of cash generated by the
business after capital expenditures and capitalized software costs.
Free cash flow provides management and investors a valuable measure
to determine the quantity of capital generated that can be deployed
to create additional shareholder value by a variety of means.
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
definitions and reconciliations of non-GAAP financial measures with
GAAP financial measures contained within the attached condensed
consolidated financial statements.
For more information contact:
Investors:
Seth Frank
312-506-1213
seth.frank@allscripts.com
Media:
Concetta DiFranco
312-447-2466
concetta.difranco@allscripts.com
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