Allscripts Healthcare Solutions, Inc. (NASDAQ:MDRX) (Allscripts)
announced its financial results for the three- and nine-months
ended September 30, 2016.
Third Quarter and Recent Business
Highlights
- Wise Health System, of Texas, selected Sunrise™ and
CareInMotion™ as it strengthens its focus on population health and
transitions to a new model of integrated care. Wise provides
inpatient and outpatient services to 79 service locations in eight
counties, including hospitals, primary care and specialty clinics,
physical therapy and rehabilitation centers, imaging centers and
bariatric surgery program offices.
- The Bahamian Ministry of Health and the Public Hospitals
Authority selected the Sunrise platform for three hospitals and
more than one hundred clinics. Sunrise will support the inpatient,
ambulatory, emergency and revenue cycle venues with a single
platform and single patient record to help achieve the goal of
positioning the Bahamas as the healthiest country in the
Caribbean.
- Allscripts and King’s College Hospital NHS Foundation Trust (in
the United Kingdom) announced the successful deployment of Sunrise
as the foundation for its new health information system and
completed the deployment in eight months, an unprecedented pace for
such a major implementation in the U.K.
- Allscripts and Baylor Scott & White Health, the largest
not-for-profit healthcare system in Texas, announced Baylor is now
utilizing dbMotion™ Solution to streamline the exchange of
electronic health record data between disparate EHR systems used by
more than 3,800 physicians who care for over 2.7 million
patients.
- 2bPrecise LLC, a wholly owned subsidiary of Allscripts,
announced the launch of a strategic early adopter program at the
National Institutes of Health (NIH), the nation’s leading Care
Institution for clinical research. The program will focus on
deploying a cloud-based genomics and precision medicine solution
that would enable physicians and researchers to use genomic
information in their Sunrise workflow, simplifying and optimizing
the complex process of finding, selecting, ordering and receiving
genomic tests.
- Allscripts acquired CarePort, a pioneer in post-acute outcomes
management, to expand its next-generation care management solution.
The acquisition will enable providers to manage patients from
hospital discharge and across post-acute settings of care.
“Allscripts continued to drive good sales momentum in the third
quarter, adding new clients and growing existing relationships
across the company’s large global installed base,” Paul M. Black,
Chief Executive Officer of Allscripts, said, “We added new Sunrise
EHR and revenue cycle management clients globally and bookings for
revenue cycle management services reached record levels. In
addition, multiple new health care organizations selected our
industry-leading CareInMotion technology as a critical platform for
their population health strategies. Industry demand in
the third quarter drove strong software bookings, which grew 25
percent year-over-year.”
Please see the “Explanation of Non-GAAP
Financial Measures” at the end of this press release for detailed
information on calculating non-GAAP measures.
Third Quarter and Nine-Month Bookings
Highlights
Bookings(1) were $291 million in the third
quarter 2016. This result compares with $272 million in the third
quarter of 2015, a 7 percent increase. Excluding Netsmart
(“Standalone Allscripts”), bookings were $270 million, essentially
equivalent to the record third quarter performance in 2015.
Bookings results in the third quarter were
driven by new Sunrise sales in the U.S. and abroad, Allscripts
CareInMotion suite, as well as significant growth in private cloud
hosting and recurring revenue cycle management services.
In terms of bookings mix, software delivery
bookings increased 25 percent year-over-year while client services
bookings decreased 7 percent. Fifty-two percent of third quarter
2016 bookings related to software delivery, while the remaining
amounts were related to client services.
For the nine-months ended September 30, 2016
bookings totaled $905 million compared with $768 million in the
first nine-months of 2015, an 18 percent increase. Standalone
Allscripts bookings for the nine-months ended September 30, 2016
totaled $840 million or 9 percent growth year-over-year.
Contract revenue backlog as of September 30,
2016, totaled $3.9 billion, down $54 million from the June 30,
2016, amount.
Mr. Black continued, “Allscripts strategic
investments are paying off as illustrated by our continued sales
momentum. Today’s healthcare organizations want a financially
strong technology partner who is closely aligned with their mission
and long-term strategic goals. Allscripts is better positioned than
ever with a comprehensive solutions portfolio addressing clinical
and financial applications, population health management, consumer
engagement and precision medicine. Our consistent strategy to build
Open, Connected Communities of health is proving to be Allscripts
critical market differentiator.”
Third Quarter and Nine-Month 2016
Revenue Details
Third quarter 2016 GAAP revenue was $392
million, an increase of 11 percent year-over-year. Non-GAAP
revenue, which excludes acquisition-related deferred revenue
adjustments related to Netsmart, totaled $404 million, improving 14
percent year-over-year.
Netsmart contributed an incremental $38 million
of revenue on a GAAP basis and $50 million to non-GAAP revenue in
the third quarter.
Software delivery, support and maintenance
revenue totaled $253 million on a GAAP basis and $262 million on a
non-GAAP basis in the third quarter of 2016, an increase of 10 and
14 percent, respectively, compared with the third 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 $140 million on
a GAAP basis and $142 million on a non-GAAP basis in the third
quarter of 2016, up 13 and 15 percent, respectively, compared with
the third 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 19 percent compared with the third
quarter of 2015. Non-recurring revenue, comprised of systems sales
and other project-based client services revenue, decreased two
percent compared with the third quarter of 2015. Growth rates in
recurring and non-recurring revenue are equivalent on both a GAAP
and non-GAAP revenue basis.
For the nine-months ended September 30, 2016,
GAAP revenue totaled $1,125 million, an increase of 8 percent
year-over-year. Non-GAAP revenue totaled $1,146 million, a 10
percent increase from the comparable period in 2015. Netsmart
contributed an incremental $71 million of revenue on a GAAP basis
and $93 million to non-GAAP revenue for the nine-months ended
September 30, 2016.
Third Quarter Gross Profit and Operating
Expenses
Gross margin in the third quarter of 2016 was
42.3 percent on a GAAP basis and 47.6 percent on a non-GAAP basis,
compared with 43.3 and 46.4 percent, respectively, in the third
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 $144 million, or
a 4 percent increase year-over-year. Non-GAAP operating expenses
totaled $134 million, a 10 percent increase year-over-year. The
increase in operating expense was due to incremental expenses from
the consolidation of Netsmart. Allscripts Standalone total
operating expenses were equivalent to the third quarter of 2015 and
second quarter of 2016.
Adjustments made for non-GAAP purposes can
impact the directional trends for GAAP versus non-GAAP financial
metrics. For a reconciliation of GAAP and non-GAAP items, see the
financial tables in this release (Tables 4, 5 and 6).
Period-over-period comparability is also affected by the inclusion
of Netsmart in consolidated results beginning April 19, 2016.
Third Quarter and Nine-Month Net Income,
Adjusted EBITDA and Earnings per Share
GAAP net loss attributable to Allscripts
stockholders in the third quarter of 2016 totaled $10 million
compared with a net loss of $5 million in the third quarter of
2015. The net loss includes a $10 million charge for the accretion
of redemption preference on redeemable convertible preferred stock,
issued in conjunction with the Netsmart transaction in April of
this year. For the nine-months ended September 30, 2016, GAAP net
loss attributable to Allscripts stockholders totaled $18 million
compared with a net loss of $19 million for the nine-months ended
September 30, 2015.
Non-GAAP net income attributable to Allscripts
stockholders in the third quarter of 2016 totaled $26 million, a 6
percent increase compared with the third quarter of 2015.
GAAP loss per share in the third quarter of 2016
was $0.06 compared with a loss per share of $0.03 in the third
quarter of 2015. Non-GAAP earnings per share in the third quarter
of 2016 were $0.14, compared with $0.13 in the third quarter of
2015. GAAP loss per share was $0.10 in both the first nine-months
of 2016 and 2015. Non-GAAP earnings per share were $0.41, compared
with $0.34 for the nine-months ended September 30, 2015, an
increase of 21 percent.
Adjusted EBITDA increased to $80 million in the
third quarter of 2016, a 21 percent increase compared with the
third quarter of 2015. For the nine-months ended September 30,
2016, Adjusted EBITDA totaled $220 million, a 24 percent increase
compared to the nine-months ended September 30, 2015.
Adjusted net EBITDA, net of non-controlling
interest (“Adjusted net EBITDA”), increased to $70 million in the
third quarter of 2016, a 6 percent increase compared with the third
quarter of 2015. For the nine-months ended September 30, 2016,
Adjusted net EBITDA totaled $201 million, a 14 percent increase
compared to the nine- months ended September 30, 2015.
Cash flow from operations for the nine-month
period ended September 30, 2016 totaled $185 million, a 44 percent
increase, compared to the same periods of 2015. Free cash flow for
the nine-month period ended September 30, 2016 totaled $90 million,
an 11 percent increase compared to the same periods of 2015. Free
cash flow was impacted in the quarter by increased investment in
internally developed and purchased software.
Fourth Quarter 2016 Financial
Outlook
With one quarter remaining in the year, Allscripts is providing
financial guidance specifically for the fourth quarter of
2016:
- Non-GAAP revenue of between $420 million and $435 million,
based on sequential quarterly improvement for Standalone Allscripts
and Netsmart;
- Adjusted net EBITDA of between $70 million and $80 million;
and
- Non-GAAP earnings per share of between $0.14 and $0.16 per
diluted share.
Allscripts provides financial guidance for revenue and earnings
per share on a non-GAAP basis and for Adjusted net EBITDA. Our
non-GAAP guidance excludes the impact of acquisition-related
deferred revenue adjustments for Netsmart of $29 million.
Year-to-date, Allscripts recognized $21.8 million, with $2.5
million expected in the fourth quarter of 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 since certain items that impact net income are
either outside of its control and/or cannot be reasonably
predicted.
For a reconciliation of other non-GAAP items,
see the explanation of non-GAAP financial measures as well as the
non-GAAP financial reconciliation tables in this release (Tables 4,
5 and 6).
Conference Call:
Allscripts will conduct a conference call today,
Thursday, November 3, 2016, at 4:30 PM Eastern Daylight 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 # 13646368.
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 # 13646368.
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, client services, private cloud hosting
services, outsourcing and other subscription-based services. |
|
|
|
|
|
|
Note: |
All percentage changes described within this
press release are calculated off of full dollar amounts as
illustrated in the accompanying financial statements and Allscripts
Supplemental Financial Data Workbook, posted on the Investor
Relations website. Rounding differences may occur when
individually calculating percentages or totals from rounded amounts
included within the press release body compared to full dollar
amounts in the tables. |
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 joint 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 most recent 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) |
|
|
|
|
|
|
|
September 30, |
|
December 31, |
|
2016 |
|
2015 |
ASSETS |
|
|
|
|
Current assets: |
|
|
|
|
Cash and cash equivalents |
|
$ |
77.3 |
|
$ |
116.9 |
Accounts receivable, net |
|
|
400.1 |
|
|
327.8 |
Prepaid expenses and other current
assets |
|
|
112.4 |
|
|
93.6 |
Total current assets |
|
|
589.8 |
|
|
538.3 |
Long-term marketable securities (a) |
|
|
197.3 |
|
|
0.0 |
Fixed assets, net |
|
|
144.8 |
|
|
125.6 |
Software development costs, net |
|
|
140.0 |
|
|
85.8 |
Intangible assets, net |
|
|
730.8 |
|
|
347.6 |
Goodwill |
|
|
1,882.2 |
|
|
1,222.6 |
Deferred taxes, net |
|
|
3.0 |
|
|
2.3 |
Other assets (a) |
|
|
122.2 |
|
|
359.7 |
Total assets |
|
$ |
3,810.1 |
|
$ |
2,681.9 |
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’
EQUITY |
|
|
|
|
Current liabilities: |
|
|
|
|
Accounts payable |
|
$ |
93.2 |
|
$ |
60.0 |
Accrued expenses |
|
|
85.3 |
|
|
62.0 |
Accrued compensation and
benefits |
|
|
52.8 |
|
|
62.4 |
Deferred revenue |
|
|
370.8 |
|
|
315.9 |
Current maturities of long-term
debt |
|
|
12.1 |
|
|
12.2 |
Non-recourse current maturities of
long-term debt - Netsmart |
|
|
1.3 |
|
|
0.0 |
Current maturities of capital lease
obligations |
|
|
10.0 |
|
|
0.4 |
Total current liabilities |
|
|
625.5 |
|
|
512.9 |
Long-term debt |
|
|
663.1 |
|
|
612.4 |
Non-recourse long-term debt - Netsmart |
|
|
533.6 |
|
|
0.0 |
Long-term capital lease obligations |
|
|
13.1 |
|
|
0.6 |
Deferred revenue |
|
|
18.2 |
|
|
20.3 |
Deferred taxes, net |
|
|
155.9 |
|
|
22.2 |
Other liabilities |
|
|
52.8 |
|
|
94.5 |
Total liabilities |
|
|
2,062.2 |
|
|
1,262.9 |
Redeemable convertible non-controlling interest -
Netsmart |
|
|
377.5 |
|
|
0.0 |
Total Allscripts Healthcare Solutions, Inc.'s
stockholders' equity |
|
|
1,329.7 |
|
|
1,407.8 |
Non-controlling interest |
|
|
40.7 |
|
|
11.2 |
Total stockholders’ equity |
|
|
1,370.4 |
|
|
1,419.0 |
Total liabilities and stockholders’
equity |
|
$ |
3,810.1 |
|
$ |
2,681.9 |
|
|
|
|
|
(a) As of September 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 EndedSeptember
30, |
|
|
Nine Months EndedSeptember
30, |
|
|
|
|
2016 |
|
|
|
|
2015 |
|
|
|
|
2016 |
|
|
|
|
2015 |
|
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
Software delivery, support and
maintenance |
|
|
$ |
252.7 |
|
|
|
$ |
230.7 |
|
|
|
$ |
731.7 |
|
|
|
$ |
690.8 |
|
Client services |
|
|
|
139.7 |
|
|
|
|
123.8 |
|
|
|
|
392.8 |
|
|
|
|
350.0 |
|
Total revenue |
|
|
|
392.4 |
|
|
|
|
354.5 |
|
|
|
|
1,124.5 |
|
|
|
|
1,040.8 |
|
Cost of
revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
Software delivery, support and
maintenance |
|
|
|
86.6 |
|
|
|
|
70.8 |
|
|
|
|
240.9 |
|
|
|
|
223.2 |
|
Client services |
|
|
|
116.4 |
|
|
|
|
109.0 |
|
|
|
|
336.0 |
|
|
|
|
327.8 |
|
Amortization of software
development and acquisition-related assets (a) |
|
|
|
23.3 |
|
|
|
|
21.3 |
|
|
|
|
62.9 |
|
|
|
|
63.0 |
|
Total cost of revenue |
|
|
|
226.3 |
|
|
|
|
201.1 |
|
|
|
|
639.8 |
|
|
|
|
614.0 |
|
Gross profit |
|
|
|
166.1 |
|
|
|
|
153.4 |
|
|
|
|
484.7 |
|
|
|
|
426.8 |
|
Selling,
general and administrative expenses |
|
|
|
98.8 |
|
|
|
|
91.1 |
|
|
|
|
277.7 |
|
|
|
|
259.9 |
|
Research
and development |
|
|
|
45.2 |
|
|
|
|
47.7 |
|
|
|
|
140.1 |
|
|
|
|
138.8 |
|
Asset
impairment charges |
|
|
|
0.0 |
|
|
|
|
0.0 |
|
|
|
|
4.7 |
|
|
|
|
0.3 |
|
Amortization of intangible and acquisition-related assets |
|
|
|
5.3 |
|
|
|
|
5.7 |
|
|
|
|
14.9 |
|
|
|
|
19.0 |
|
Income from operations |
|
|
|
16.8 |
|
|
|
|
8.9 |
|
|
|
|
47.3 |
|
|
|
|
8.8 |
|
Interest
expense and other, net (b) |
|
|
|
(19.4 |
) |
|
|
|
(8.9 |
) |
|
|
|
(42.3 |
) |
|
|
|
(21.7 |
) |
Equity
in net loss of unconsolidated investments |
|
|
|
0.0 |
|
|
|
|
(1.4 |
) |
|
|
|
(7.5 |
) |
|
|
|
(1.3 |
) |
Loss before income taxes |
|
|
|
(2.6 |
) |
|
|
|
(1.4 |
) |
|
|
|
(2.5 |
) |
|
|
|
(14.2 |
) |
Income
tax benefit (provision) |
|
|
|
2.7 |
|
|
|
|
(3.7 |
) |
|
|
|
2.6 |
|
|
|
|
(4.2 |
) |
Net income (loss) |
|
|
|
0.1 |
|
|
|
|
(5.1 |
) |
|
|
|
0.1 |
|
|
|
|
(18.4 |
) |
Less:
Net income attributable to non-controlling interest |
|
|
|
(0.1 |
) |
|
|
|
(0.1 |
) |
|
|
|
(0.1 |
) |
|
|
|
(0.1 |
) |
Less:
Accretion of redemption preference on redeemable convertible
non-controlling interest - Netsmart |
|
|
|
(10.1 |
) |
|
|
|
0.0 |
|
|
|
|
(18.3 |
) |
|
|
|
0.0 |
|
Net loss attributable to Allscripts
Healthcare Solutions, Inc. stockholders |
|
|
($ |
10.1 |
) |
|
|
($ |
5.2 |
) |
|
|
($ |
18.3 |
) |
|
|
($ |
18.5 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss per
share - basic and diluted |
|
|
($ |
0.06 |
) |
|
|
($ |
0.03 |
) |
|
|
($ |
0.10 |
) |
|
|
($ |
0.10 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average common shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
|
186.2 |
|
|
|
|
188.9 |
|
|
|
|
187.2 |
|
|
|
|
183.7 |
|
Diluted |
|
|
|
186.2 |
|
|
|
|
188.9 |
|
|
|
|
187.2 |
|
|
|
|
183.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) Amortization of
software development and acquisition-related assets includes: |
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of capitalized
software development costs |
|
|
$ |
10.6 |
|
|
|
$ |
12.2 |
|
|
|
$ |
31.2 |
|
|
|
$ |
35.6 |
|
Amortization of acquisition-related
intangible assets |
|
|
|
12.7 |
|
|
|
|
9.1 |
|
|
|
|
31.7 |
|
|
|
|
27.4 |
|
|
|
|
$ |
23.3 |
|
|
|
$ |
21.3 |
|
|
|
$ |
62.9 |
|
|
|
$ |
63.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(b)
Interest expense and other, net are comprised of the following for
the periods presented: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months EndedSeptember
30, |
|
|
Nine Months EndedSeptember
30, |
|
|
|
|
2016 |
|
|
|
|
2015 |
|
|
|
|
2016 |
|
|
|
|
2015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash amortization of 1.25% Cash
Convertible Notes original issue discount |
|
|
$ |
2.9 |
|
|
|
$ |
2.8 |
|
|
|
$ |
8.5 |
|
|
|
$ |
8.1 |
|
Non-cash write-off of unamortized
deferred debt issuance costs |
|
|
|
0.0 |
|
|
|
|
1.4 |
|
|
|
|
0.0 |
|
|
|
|
1.4 |
|
Non-cash charges to interest
expense and other, net |
|
|
|
2.9 |
|
|
|
|
4.2 |
|
|
|
|
8.5 |
|
|
|
|
9.5 |
|
Interest expense |
|
|
|
14.9 |
|
|
|
|
4.4 |
|
|
|
|
30.6 |
|
|
|
|
12.2 |
|
Amortization of discounts and debt
issuance costs |
|
|
|
1.6 |
|
|
|
|
0.7 |
|
|
|
|
3.7 |
|
|
|
|
2.3 |
|
Other income, net |
|
|
|
0.0 |
|
|
|
|
(0.4 |
) |
|
|
|
(0.5 |
) |
|
|
|
(2.3 |
) |
Total interest expense and other,
net |
|
|
$ |
19.4 |
|
|
|
$ |
8.9 |
|
|
|
$ |
42.3 |
|
|
|
$ |
21.7 |
|
|
Table 3 |
Allscripts Healthcare Solutions,
Inc. |
Condensed Consolidated Statements of Cash
Flows |
(In millions) |
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months EndedSeptember
30, |
|
|
Nine Months EndedSeptember
30, |
|
|
|
2016 |
|
|
|
|
2015 |
|
|
|
|
2016 |
|
|
|
|
2015 |
|
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
0.1 |
|
|
|
($ |
5.1 |
) |
|
|
$ |
0.1 |
|
|
|
($ |
18.4 |
) |
Non-cash adjustments to net (loss)
income: |
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
43.9 |
|
|
|
|
41.0 |
|
|
|
|
120.5 |
|
|
|
|
124.5 |
|
Stock-based compensation
expense |
|
|
9.6 |
|
|
|
|
8.9 |
|
|
|
|
29.7 |
|
|
|
|
27.2 |
|
Other non-cash charges, net |
|
|
(1.5 |
) |
|
|
|
4.6 |
|
|
|
|
9.0 |
|
|
|
|
4.6 |
|
Total non-cash adjustments to
income |
|
|
52.0 |
|
|
|
|
54.5 |
|
|
|
|
159.2 |
|
|
|
|
156.3 |
|
Cash impact of changes in operating
assets and liabilities |
|
|
0.9 |
|
|
|
|
(9.9 |
) |
|
|
|
25.8 |
|
|
|
|
(9.6 |
) |
Net cash provided by operating
activities |
|
|
53.0 |
|
|
|
|
39.5 |
|
|
|
|
185.1 |
|
|
|
|
128.3 |
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures |
|
|
(8.4 |
) |
|
|
|
(4.6 |
) |
|
|
|
(25.0 |
) |
|
|
|
(14.2 |
) |
Capitalized software |
|
|
(32.9 |
) |
|
|
|
(11.0 |
) |
|
|
|
(70.0 |
) |
|
|
|
(32.7 |
) |
Purchases of equity securities in
partner entities, business acquisitions, net of cash
acquired and other investments |
|
|
(29.8 |
) |
|
|
|
(2.6 |
) |
|
|
|
(956.0 |
) |
|
|
|
(222.1 |
) |
Sales and maturities of marketable
securities and other investments |
|
|
0.0 |
|
|
|
|
2.5 |
|
|
|
|
0.0 |
|
|
|
|
3.8 |
|
Net cash used in investing
activities |
|
|
(71.1 |
) |
|
|
|
(15.7 |
) |
|
|
|
(1,051.0 |
) |
|
|
|
(265.2 |
) |
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
Repurchase of common stock |
|
|
(19.0 |
) |
|
|
|
0.0 |
|
|
|
|
(71.1 |
) |
|
|
|
0.0 |
|
Proceeds from issuance of
redeemable convertible preferred stock |
|
|
0.0 |
|
|
|
|
0.0 |
|
|
|
|
333.6 |
|
|
|
|
0.0 |
|
Proceeds from sale or issuance of
common stock |
|
|
0.1 |
|
|
|
|
0.7 |
|
|
|
|
0.1 |
|
|
|
|
102.1 |
|
Stock-based compensation-related
payments, net |
|
|
0.0 |
|
|
|
|
(0.2 |
) |
|
|
|
(6.4 |
) |
|
|
|
(5.4 |
) |
Credit facilities and capital lease
borrowings (payments), net |
|
|
23.6 |
|
|
|
|
(8.6 |
) |
|
|
|
569.8 |
|
|
|
|
79.5 |
|
Net cash provided by (used in)
financing activities |
|
|
4.7 |
|
|
|
|
(8.1 |
) |
|
|
|
826.0 |
|
|
|
|
176.2 |
|
Effect of exchange rate changes on
cash and cash equivalents |
|
|
0.0 |
|
|
|
|
(0.8 |
) |
|
|
|
0.3 |
|
|
|
|
(1.1 |
) |
Net (decrease) increase in cash and
cash equivalents |
|
|
(13.4 |
) |
|
|
|
14.9 |
|
|
|
|
(39.6 |
) |
|
|
|
38.2 |
|
Cash and cash equivalents, beginning of
period |
|
|
90.7 |
|
|
|
|
76.5 |
|
|
|
|
116.9 |
|
|
|
|
53.2 |
|
Cash and cash equivalents, end of period |
|
$ |
77.3 |
|
|
|
$ |
91.4 |
|
|
|
$ |
77.3 |
|
|
|
$ |
91.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Table 4 |
Allscripts Healthcare Solutions,
Inc. |
Condensed Non-GAAP Financial
Information |
(In millions, except per share amounts and
percentages) |
(Unaudited) |
|
|
|
|
|
|
|
|
|
Three Months EndedSeptember
30, |
|
Nine Months EndedSeptember 30, |
|
|
2016 |
|
|
|
2015 |
|
|
|
2016 |
|
|
|
2015 |
|
Total revenue, as reported |
$ |
392.4 |
|
|
$ |
354.5 |
|
|
$ |
1,124.5 |
|
|
$ |
1,040.8 |
|
|
|
|
|
|
|
|
|
Acquisition-related deferred
revenue adjustments |
|
11.7 |
|
|
|
0.0 |
|
|
|
21.8 |
|
|
|
0.0 |
|
Total non-GAAP revenue |
$ |
404.1 |
|
|
$ |
354.5 |
|
|
$ |
1,146.3 |
|
|
$ |
1,040.8 |
|
|
|
|
|
|
|
|
|
Gross profit, as reported |
$ |
166.1 |
|
|
$ |
153.4 |
|
|
$ |
484.7 |
|
|
$ |
426.8 |
|
|
|
|
|
|
|
|
|
Acquisition-related deferred
revenue adjustments |
|
11.7 |
|
|
|
0.0 |
|
|
|
21.8 |
|
|
|
0.0 |
|
Acquisition-related
amortization |
|
12.7 |
|
|
|
9.1 |
|
|
|
31.7 |
|
|
|
27.4 |
|
Stock-based compensation
expense |
|
1.9 |
|
|
|
1.8 |
|
|
|
6.8 |
|
|
|
6.8 |
|
Total non-GAAP gross profit |
$ |
192.4 |
|
|
$ |
164.3 |
|
|
$ |
545.0 |
|
|
$ |
461.0 |
|
|
|
|
|
|
|
|
|
Income (loss) from operations, as reported |
$ |
16.8 |
|
|
$ |
8.9 |
|
|
$ |
47.3 |
|
|
$ |
8.8 |
|
|
|
|
|
|
|
|
|
Acquisition-related deferred
revenue adjustments |
|
11.7 |
|
|
|
0.0 |
|
|
|
21.8 |
|
|
|
0.0 |
|
Acquisition-related
amortization |
|
18.0 |
|
|
|
14.8 |
|
|
|
46.6 |
|
|
|
46.4 |
|
Stock-based compensation
expense |
|
9.8 |
|
|
|
9.2 |
|
|
|
30.9 |
|
|
|
28.7 |
|
Non-recurring expenses and
transaction-related costs (a) |
|
2.2 |
|
|
|
9.9 |
|
|
|
6.8 |
|
|
|
23.4 |
|
Non-cash asset impairment
charges |
|
0.0 |
|
|
|
0.0 |
|
|
|
4.7 |
|
|
|
0.3 |
|
Total non-GAAP operating
income |
$ |
58.5 |
|
|
$ |
42.8 |
|
|
$ |
158.1 |
|
|
$ |
107.6 |
|
|
|
|
|
|
|
|
|
Net loss attributable to Allscripts Healthcare
Solutions, Inc. stockholders, as reported |
($ |
10.1 |
) |
|
($ |
5.2 |
) |
|
($ |
18.3 |
) |
|
($ |
18.5 |
) |
Less: Net loss attributable to
non-controlling interest |
|
0.1 |
|
|
|
0.1 |
|
|
|
0.1 |
|
|
|
0.1 |
|
Less: Accretion of redemption
preference on redeemable convertible non-controlling interest -
Netsmart |
|
10.1 |
|
|
|
0.0 |
|
|
|
18.3 |
|
|
|
0.0 |
|
Net income (loss), as reported |
$ |
0.1 |
|
|
($ |
5.1 |
) |
|
$ |
0.1 |
|
|
($ |
18.4 |
) |
|
|
|
|
|
|
|
|
Acquisition-related deferred
revenue adjustments |
|
11.7 |
|
|
|
0.0 |
|
|
|
21.8 |
|
|
|
0.0 |
|
Acquisition-related
amortization |
|
18.0 |
|
|
|
14.8 |
|
|
|
46.6 |
|
|
|
46.4 |
|
Stock-based compensation
expense |
|
9.8 |
|
|
|
9.2 |
|
|
|
30.9 |
|
|
|
28.7 |
|
Non-recurring expenses and
transaction-related costs (a) |
|
2.2 |
|
|
|
9.9 |
|
|
|
6.8 |
|
|
|
23.4 |
|
Non-cash asset impairment
charges |
|
0.0 |
|
|
|
0.0 |
|
|
|
4.7 |
|
|
|
0.3 |
|
Non-cash charges to interest
expense and other |
|
2.9 |
|
|
|
4.2 |
|
|
|
8.5 |
|
|
|
9.5 |
|
Equity in net earnings of
unconsolidated investments |
|
0.0 |
|
|
|
1.4 |
|
|
|
7.5 |
|
|
|
1.7 |
|
Tax effect of adjustments to
reconcile GAAP to non-GAAP net income |
|
(15.6 |
) |
|
|
(14.0 |
) |
|
|
(44.4 |
) |
|
|
(38.4 |
) |
Tax rate alignment |
|
(1.8 |
) |
|
|
4.2 |
|
|
|
(1.7 |
) |
|
|
9.2 |
|
Total Non-GAAP net income |
$ |
27.3 |
|
|
$ |
24.6 |
|
|
$ |
80.8 |
|
|
$ |
62.4 |
|
Less: Non-GAAP net income
attributable to non-controlling interest |
|
(1.4 |
) |
|
|
(0.1 |
) |
|
|
(3.1 |
) |
|
|
(0.1 |
) |
Non-GAAP net income attributable to
Allscripts Healthcare Solutions, Inc. |
$ |
25.9 |
|
|
$ |
24.5 |
|
|
$ |
77.7 |
|
|
$ |
62.3 |
|
|
|
|
|
|
|
|
|
Non-GAAP effective tax rate |
|
35 |
% |
|
|
35 |
% |
|
|
35 |
% |
|
|
35 |
% |
|
|
|
|
|
|
|
|
Weighted shares outstanding - diluted |
|
189.1 |
|
|
|
191.2 |
|
|
|
189.3 |
|
|
|
185.1 |
|
|
|
|
|
|
|
|
|
Loss per share - basic and diluted, as
reported |
($ |
0.06 |
) |
|
($ |
0.03 |
) |
|
($ |
0.10 |
) |
|
($ |
0.10 |
) |
|
|
|
|
|
|
|
|
Non-GAAP earnings per share attributable
to Allscripts Healthcare Solutions, Inc. - diluted |
$ |
0.14 |
|
|
$ |
0.13 |
|
|
$ |
0.41 |
|
|
$ |
0.34 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 EndedSeptember
30, |
|
Nine Months EndedSeptember 30, |
|
|
2016 |
|
|
|
2015 |
|
|
|
2016 |
|
|
|
2015 |
|
|
|
|
|
|
|
|
|
Operating
expenses: |
|
|
|
|
|
|
|
Severance and other
costs |
|
0.0 |
|
|
|
9.9 |
|
|
|
0.2 |
|
|
|
23.3 |
|
Transaction-related
costs |
|
2.2 |
|
|
|
0.0 |
|
|
|
6.6 |
|
|
|
0.1 |
|
Total non-recurring expenses and transaction related
costs |
$ |
2.2 |
|
|
$ |
9.9 |
|
|
$ |
6.8 |
|
|
$ |
23.4 |
|
|
|
|
|
|
|
|
|
Table 5 |
Allscripts Healthcare Solutions,
Inc. |
Non-GAAP Financial Information - Adjusted
EBITDA |
(In millions, except percentages) |
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
Three Months EndedSeptember
30, |
|
Nine Months EndedSeptember 30, |
|
|
|
2016 |
|
|
|
2015 |
|
|
|
2016 |
|
|
|
2015 |
|
Total revenue, as reported |
|
$ |
392.4 |
|
|
$ |
354.5 |
|
|
$ |
1,124.5 |
|
|
$ |
1,040.8 |
|
Acquisition-related deferred
revenue adjustments |
|
|
11.7 |
|
|
|
0.0 |
|
|
|
21.8 |
|
|
|
0.0 |
|
Total non-GAAP revenue |
|
$ |
404.1 |
|
|
$ |
354.5 |
|
|
$ |
1,146.3 |
|
|
$ |
1,040.8 |
|
|
|
|
|
|
|
|
|
|
Net income (loss), as reported |
|
$ |
0.1 |
|
|
($ |
5.1 |
) |
|
$ |
0.1 |
|
|
($ |
18.4 |
) |
|
|
|
|
|
|
|
|
|
Acquisition-related deferred
revenue adjustments |
|
|
11.7 |
|
|
|
0.0 |
|
|
|
21.8 |
|
|
|
0.0 |
|
Depreciation and amortization |
|
|
43.9 |
|
|
|
41.0 |
|
|
|
120.5 |
|
|
|
124.5 |
|
Stock-based compensation
expense |
|
|
9.8 |
|
|
|
9.2 |
|
|
|
30.9 |
|
|
|
28.7 |
|
Non-recurring expenses and
transaction-related costs |
|
|
2.2 |
|
|
|
9.9 |
|
|
|
6.8 |
|
|
|
23.4 |
|
Non-cash asset impairment
charges |
|
|
0.0 |
|
|
|
0.0 |
|
|
|
4.7 |
|
|
|
0.3 |
|
Interest expense and other, net
(a) |
|
|
14.9 |
|
|
|
5.8 |
|
|
|
30.1 |
|
|
|
13.4 |
|
Equity in net earnings of
unconsolidated investments |
|
|
0.0 |
|
|
|
1.4 |
|
|
|
7.5 |
|
|
|
1.3 |
|
Tax (benefit)/provision |
|
|
(2.7 |
) |
|
|
3.7 |
|
|
|
(2.6 |
) |
|
|
4.2 |
|
Adjusted EBITDA |
|
|
79.9 |
|
|
|
65.9 |
|
|
|
219.8 |
|
|
|
177.4 |
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA margin (b) |
|
|
20 |
% |
|
|
19 |
% |
|
|
19 |
% |
|
|
17 |
% |
|
|
|
|
|
|
|
|
|
Less: Adjusted EBITDA attributable to
non-controlling interest |
|
|
10.1 |
|
|
|
0.2 |
|
|
|
19.0 |
|
|
|
0.5 |
|
|
|
|
|
|
|
|
|
|
Adjusted net EBITDA, net of
non-controlling interest |
|
$ |
69.8 |
|
|
$ |
65.7 |
|
|
$ |
200.8 |
|
|
$ |
176.9 |
|
|
|
|
|
|
|
|
|
|
Adjusted net EBITDA margin, net of
non-controlling interest (c) |
|
|
17 |
% |
|
|
19 |
% |
|
|
18 |
% |
|
|
17 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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 non-GAAP revenue. |
|
|
|
|
|
|
|
|
|
(c) Adjusted net EBITDA margin, net of non-controlling
interest is calculated by dividing adjusted net EBITDA, net of
non-controlling interest by non-GAAP revenue. |
|
|
|
|
Table 6 |
|
Allscripts Healthcare Solutions,
Inc. |
|
Non-GAAP Financial Information - Free Cash
Flow |
|
(In millions) |
|
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months EndedSeptember
30, |
|
|
Nine Months EndedSeptember 30, |
|
|
|
|
2016 |
|
|
|
2015 |
|
|
|
|
2016 |
|
|
|
2015 |
|
|
Net cash
provided by operating activities |
|
$ |
53.0 |
|
|
$ |
39.5 |
|
|
|
$ |
185.1 |
|
|
$ |
128.3 |
|
|
Cash flows
from investing activities: |
|
|
|
|
|
|
|
|
|
|
Capital expenditures |
|
|
(8.4 |
) |
|
|
(4.6 |
) |
|
|
|
(25.0 |
) |
|
|
(14.2 |
) |
|
Capitalized software |
|
|
(32.9 |
) |
|
|
(11.0 |
) |
|
|
|
(70.0 |
) |
|
|
(32.7 |
) |
|
Free cash
flow |
|
$ |
11.7 |
|
|
$ |
23.9 |
|
|
|
$ |
90.1 |
|
|
$ |
81.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
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
recognized 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
third quarter of 2016, non-GAAP gross margin totaled 47.6 percent,
consisting of non-GAAP gross profit of $192.4 million divided by
non-GAAP revenue of $404.1 million. For the third quarter of 2015,
non-GAAP gross margin totaled 46.4 percent, consisting of non-GAAP
gross profit of $164.3 million divided by revenue of $354.5
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 third quarter of 2016,
non-GAAP operating expense totaled $133.9 million, consisting of
$98.8 million of GAAP SG&A and $45.2 million of GAAP R&D
expense and excludes $2.2 million of total non-recurring expenses
and transaction-related costs and $7.9 million of stock-based
compensation expense recorded to SG&A and R&D. For the
third quarter of 2015, non-GAAP operating expense totaled $121.5
million consisting of $91.1 million of GAAP SG&A and $47.7
million of GAAP R&D expense and excludes $9.9 million of total
non-recurring expense and transaction-related costs and $7.4
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 in consolidated
subsidiaries. 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.
Standalone Allscripts. Standalone
Allscripts refers to Allscripts, excluding the financial
contribution from Netsmart for the specified period.
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 acquisition-related
deferred revenue 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. 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 third quarter of 2016,
Allscripts incurred $2.2 million of transaction-related expenses
associated with the Netsmart joint business entity and other
transactions closed in the quarter.
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 non-consolidated 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 nine- months ended September 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, 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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