Allscripts Healthcare Solutions, Inc. (NASDAQ:MDRX) (Allscripts)
announced its financial results for the three months and year ended
December 31, 2016.
Fourth Quarter and Recent Business
Highlights
- Allscripts had an exceptional performance in international
markets during the quarter, with double-digit bookings
growth. The company added three new Sunrise clients,
including two National Health Services trusts in the United
Kingdom, totaling nine new international Sunrise hospitals in Q4.
These new sales, on top of a successful go-live at King’s College
Hospital in London as well as other operational successes, is
driving excellent momentum for the company across its major
targeted international markets including Canada, the U.K.,
Australia, and Singapore.
- Value based care solutions demand was strong in the
quarter. The company generated double-digit sales growth in
2016 for Allscripts dbMotion™ into several large healthcare
enterprises. The company also enjoyed solid sell-through of
its comprehensive population health solution, CareInMotion™ both
inside and outside Allscripts core client base. This momentum is
driven in part by strong client satisfaction and a comprehensive
offering. CareInMotion earned top honors from Black Book 2017
Rankings™ for 2017, including the highest rank in 10 of 18
individual criteria for Population Health Management solutions. In
addition, 2bPrecise expanded deployment of its cloud-based genomics
and precision medicine solution at Holston Medical Group and the
National Institutes of Health earlier in the year.
- Allscripts completed several acquisitions during the quarter to
better position the company for future growth. These include:
Core Medical Solutions, a recognized healthcare IT software leader
in both Victoria and Western Australia; Careport, a next generation
care management platform enabling providers to enhance post-acute
outcomes and costs by guiding patients across the care continuum in
real-time; and HealthMEDX, a leading provider of IT solutions for
long-term and post-acute care.
- Advancing its leadership in healthcare interoperability, the
Allscripts Developer Program (ADP), which in January 2017 crossed
two billion data exchange transactions, introduced a new
three-tiered program for independent software developers to connect
to Allscripts clients. This program includes free,
no-approval access to Allscripts FHIR®© enabled application program
interfaces (APIs) for developers looking for basic connectivity as
well as integrator and partner categories for developers seeking
deeper integration with Allscripts.
- The company announced two additions to its executive team. Lisa
Khorey joined Allscripts in the newly created role of Chief Client
Delivery Officer, and Alan Fowles was named President of Allscripts
International.
“2016 marks the second consecutive year we crossed the $1
billion mark for bookings,” Paul M. Black, Chief Executive Officer
of Allscripts, said. “We grew bookings 18 percent for the year,
this off of a record 2015 performance. Our results are a byproduct
of healthy demand for Allscripts solution platforms across core
clinical and financial software and services, population health,
global and post-acute segments. Allscripts' ongoing
commitment to sustainable investment across our offerings is
driving accelerating bookings and revenue performance. We have
excellent momentum heading into 2017.”
Please see the “Explanation of Non-GAAP
Financial Measures” at the end of this press release for detailed
information on calculating non-GAAP measures.
Fourth Quarter and Year-End 2016
Bookings, Backlog Highlights
Bookings(1) were $406 million in the fourth
quarter 2016. This result compares with $343 million in the fourth
quarter of 2015, an 18 percent increase. Excluding Netsmart
bookings of $57 million (“Standalone Allscripts”), bookings were
$349 million, an increase over the record fourth quarter bookings
performance in 2015.
Bookings results in the fourth quarter were
driven by new and add-on Sunrise sales in the U.S. and
international markets and TouchWorks™ ambulatory suite. In
addition, the company had growth in services, Payer and Life
Sciences, the CareInMotion value-based care suite as well as
Netsmart’s post-acute technology solutions. The company also
continues to experience rapid sales growth inside and outside its
ambulatory client base for its private cloud-based Allscripts
Revenue Cycle Management Services™ offering.
In terms of bookings mix, software delivery
bookings increased 30 percent year-over-year while client services
bookings increased 9 percent. Forty-nine percent of fourth quarter
2016 bookings related to software delivery, while the remaining
amounts were related to client services.
For the year ended December 31, 2016 bookings
totaled $1,311 million compared with $1,111 million in 2015, an 18
percent increase. Standalone Allscripts bookings for the year ended
December 31, 2016, which exclude Netsmart bookings of $122 million,
totaled $1,189 million or 7 percent growth year-over-year.
Contract revenue backlog as of December 31,
2016, totaled over $4.0 billion, a $128 million increase from the
September 30, 2016, amount. The backlog improvement reflects the
strong bookings posted in the fourth quarter of 2016. This
also marks the first time Allscripts backlog has eclipsed the $4.0
billion mark.
Mr. Black continued, “Looking to 2017,
Allscripts is in an enviable position to help lead our clients and
the healthcare industry as it undergoes a rapid evolution in
clinical, regulatory and reimbursement models around the
globe. Our strategy, built on interoperability, open systems
and an attractive total cost of ownership, provides a
differentiated, high-value proposition to clients and prospects
alike. Our clients’ satisfaction and third-party recognition are
continuing a multi-year uptrend that drives more business from
health systems, physician groups, payers and others seeking to
improve outcomes and lower costs. We will continue
strengthening our position through innovation and by leveraging
increasingly efficient delivery platforms in 2017 and beyond.”
Fourth Quarter and Year-End 2016 Revenue
Details
Fourth quarter 2016 GAAP revenue was $425
million, an increase of 23 percent year-over-year. Non-GAAP revenue
totaled $429 million, improving 24 percent year-over-year.
Importantly, non-GAAP revenue growth increased 6 percent, compared
to the third quarter of 2016. Non-GAAP revenue excludes
acquisition-related deferred revenue adjustments related to
Netsmart and other non-material consolidating companies.
Netsmart contributed an incremental $56 million
of revenue on a GAAP basis and $60 million to non-GAAP revenue in
the fourth quarter.
Software delivery, support and maintenance
revenue totaled $281 million on a GAAP basis and $284 million on a
non-GAAP basis in the fourth quarter of 2016, an increase of 23 and
25 percent, respectively, compared with the fourth 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 $145 million on
a GAAP basis and $146 million on a non-GAAP basis in the fourth
quarter of 2016, up 23 and 24 percent, respectively, compared with
the fourth 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 23 percent compared with the fourth
quarter of 2015. Importantly, recurring revenue growth increased 4
percent, compared to the third quarter of 2016.
Non-recurring revenue, comprised of systems
sales and other project-based client services revenue, increased 28
percent compared with the fourth quarter of 2015. Non-recurring
revenue grew 16 percent from the third quarter of 2016. Growth
rates in recurring and non-recurring revenue are equivalent on both
a GAAP and non-GAAP revenue basis.
For the year ended December 31, 2016, GAAP
revenue totaled $1,550 million, an increase of 12 percent
year-over-year. Non-GAAP revenue totaled $1,576 million, a 14
percent increase from the comparable period in 2015.
Netsmart contributed an incremental $128 million
of revenue on a GAAP basis and $153 million to non-GAAP revenue for
the year ended December 31, 2016.
Fourth Quarter Gross Profit and
Operating Expenses
Gross margin in the fourth quarter of 2016 was
43.8 percent on a GAAP basis and 48.1 percent on a non-GAAP basis,
compared with 44.5 and 47.3 percent, respectively, in the fourth
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 $163 million, or
a 30 percent increase year-over-year.
Non-GAAP operating expenses totaled $146
million, a 22 percent increase year-over-year, due primarily to the
Netsmart consolidation and previously announced acquisitions
executed by Netsmart and Allscripts.
Quarter-to-quarter, non-GAAP operating expense increased $12
million on a consolidated basis. The increase quarter-to-quarter
was attributable primarily to acquisitions announced during the
fourth quarter of 2016 and investments to support business
growth.
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.
Fourth Quarter and Year-End 2016 Net
Income and Earnings per Share
GAAP net loss attributable to Allscripts
stockholders in the fourth quarter of 2016 totaled $7 million
compared with a net income of $16 million in the fourth quarter of
2015. The net loss includes a $10 million charge for the accretion
of redemption preference on the redeemable convertible preferred
stock, issued in conjunction with the Netsmart transaction in April
2016.
Non-GAAP net income attributable to Allscripts
stockholders in the fourth quarter of 2016 totaled $26 million, a 4
percent increase compared with the fourth quarter of 2015.
GAAP loss per share in the fourth quarter of
2016 was $0.04 compared with earnings per share of $0.09 in the
fourth quarter of 2015. Non-GAAP earnings per share in the fourth
quarter of 2016 were $0.14, compared with $0.13 in the fourth
quarter of 2015.
GAAP loss per share was $0.14, compared with a
loss of $0.01 for the year ended December 31, 2015. Non-GAAP
earnings per share for the year ended December 31, 2016, were
$0.55, compared with $0.47 for the year ended December 31, 2015, an
increase of 17 percent.
Fourth Quarter and Year-End 2016
Adjusted EBITDA and Cash Flow
Adjusted EBITDA increased to $84 million in the
fourth quarter of 2016, a 29 percent increase compared with the
fourth quarter of 2015.
For the year ended December 31, 2016, Adjusted
EBITDA totaled $304 million, a 25 percent increase compared to the
year ended December 31, 2015.
Adjusted EBITDA, net of non-controlling interests for the year
ended December 31, 2016, totaled $273 million, a 13 percent
increase compared to the year ended December 31, 2015.
Cash flow from operations for the year ended
December 31, 2016, totaled $269 million, a 27 percent increase,
compared to the same period of 2015.
Free cash flow for the year ended December 31,
2016, totaled $131 million, a 9 percent decrease compared to the
same period of 2015. 2016 free cash flow was impacted by higher
levels of investment in internally developed and purchased
software.
Share Repurchase Update
During the fourth quarter, Allscripts announced
that its Board approved a new stock purchase program under which
the company could repurchase up to $200 million of Allscripts
common stock through December 31, 2019.
The new stock program supersedes the previously
existing stock repurchase program, which authorized Allscripts to
repurchase $150 million of common stock through December 31, 2018.
Under the prior program, Allscripts repurchased 8.1 million shares
of common stock for a total of $97 million during 2016.
Under the new program, Allscripts purchased 2.2
million shares of common stock for a total of $24 million at an
average cost of $10.63 per share during the fourth quarter of
2016. As of December 31, 2016, there was $176 million
remaining under the current authorization.
2017 Financial Outlook
Allscripts affirms the following financial outlook for 2017,
published originally on January 9, 2017:
- Non-GAAP revenue of between $1.71 billion and $1.74
billion;
- Adjusted EBITDA of between $345 million and $365 million,
consisting of:
- Allscripts, excluding Netsmart, Adjusted EBITDA between
$255-265 million, and;
- Netsmart Adjusted EBITDA between $90-100 million
- Non-GAAP earnings per share growth of between 10 to 15 percent
Allscripts financial outlook going forward is based on Adjusted
EBITDA, reflecting 100 percent contribution from
Netsmart.
Allscripts provides financial guidance for
revenue, Adjusted EBITDA and earnings per share on a non-GAAP
basis. Allscripts non-GAAP revenue guidance excludes the impact of
acquisition-related deferred revenue adjustments.
For the purpose of providing financial guidance,
the Company does not reconcile non-GAAP revenue, Adjusted 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 GAAP
revenue and 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, February 16, 2017, 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 # 13652687.
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 # 13652687.
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.
© 2017 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, including the statements under “2017 Financial Outlook”.
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
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) |
|
|
|
|
|
|
|
|
|
December 31, |
|
December 31, |
|
|
2016 |
|
2015 |
|
ASSETS |
|
|
|
|
|
Current
assets: |
|
|
|
|
|
Cash and
cash equivalents |
|
$ |
96.6 |
|
$ |
116.9 |
|
Accounts
receivable, net |
|
|
405.1 |
|
|
327.8 |
|
Prepaid
expenses and other current assets |
|
|
102.6 |
|
|
93.6 |
|
Total current assets |
|
|
604.3 |
|
|
538.3 |
|
Available
for sale marketable securities (a) |
|
|
149.1 |
|
|
0.0 |
|
Fixed
assets, net |
|
|
148.8 |
|
|
125.6 |
|
Software
development costs, net |
|
|
163.9 |
|
|
85.8 |
|
Intangible assets, net |
|
|
741.4 |
|
|
347.6 |
|
Goodwill |
|
|
1,924.1 |
|
|
1,222.6 |
|
Deferred
taxes, net |
|
|
2.8 |
|
|
2.3 |
|
Other
assets (a) |
|
|
97.8 |
|
|
359.7 |
|
Total assets |
|
$ |
3,832.2 |
|
$ |
2,681.9 |
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
|
Current
liabilities: |
|
|
|
|
|
Accounts
payable |
|
$ |
126.1 |
|
$ |
60.0 |
|
Accrued
expenses |
|
|
86.1 |
|
|
62.0 |
|
Accrued
compensation and benefits |
|
|
64.3 |
|
|
62.4 |
|
Deferred
revenue |
|
|
363.8 |
|
|
315.9 |
|
Current
maturities of long-term debt |
|
|
15.2 |
|
|
12.2 |
|
Non-recourse current maturities of long-term debt - Netsmart |
|
|
2.5 |
|
|
0.0 |
|
Current
maturities of capital lease obligations |
|
|
9.1 |
|
|
0.4 |
|
Total current liabilities |
|
|
667.1 |
|
|
512.9 |
|
Long-term
debt |
|
|
717.9 |
|
|
612.4 |
|
Non-recourse long-term debt - Netsmart |
|
|
576.9 |
|
|
0.0 |
|
Long-term
capital lease obligations |
|
|
9.9 |
|
|
0.6 |
|
Deferred
revenue |
|
|
18.0 |
|
|
20.3 |
|
Deferred
taxes, net |
|
|
141.8 |
|
|
22.2 |
|
Other
liabilities |
|
|
39.7 |
|
|
94.5 |
|
Total liabilities |
|
|
2,171.3 |
|
|
1,262.9 |
|
Redeemable convertible non-controlling interest - Netsmart |
|
|
387.7 |
|
|
0.0 |
|
Total
Allscripts Healthcare Solutions, Inc.'s stockholders' equity |
|
|
1,232.5 |
|
|
1,407.8 |
|
Non-controlling interest |
|
|
40.7 |
|
|
11.2 |
|
Total
stockholders’ equity |
|
|
1,273.2 |
|
|
1,419.0 |
|
Total
liabilities and stockholders’ equity |
|
$ |
3,832.2 |
|
$ |
2,681.9 |
|
|
|
|
|
|
|
(a) As of December 31, 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 December
31, |
|
Year Ended December 31, |
|
|
|
|
2016 |
|
|
|
2015 |
|
|
|
2016 |
|
|
|
2015 |
|
|
Revenue: |
|
|
|
|
|
|
|
|
|
Software
delivery, support and maintenance |
|
$ |
280.7 |
|
|
$ |
227.6 |
|
|
$ |
1,012.4 |
|
|
$ |
918.4 |
|
|
Client
services |
|
|
144.7 |
|
|
|
118.0 |
|
|
|
537.5 |
|
|
|
468.0 |
|
|
Total
revenue |
|
|
425.4 |
|
|
|
345.6 |
|
|
|
1,549.9 |
|
|
|
1,386.4 |
|
|
Cost of
revenue: |
|
|
|
|
|
|
|
|
|
Software
delivery, support and maintenance |
|
|
90.2 |
|
|
|
68.6 |
|
|
|
331.1 |
|
|
|
291.8 |
|
|
Client
services |
|
|
123.2 |
|
|
|
104.2 |
|
|
|
459.2 |
|
|
|
432.0 |
|
|
Amortization of software development and acquisition-related assets
(a) |
|
|
25.7 |
|
|
|
19.0 |
|
|
|
88.6 |
|
|
|
82.0 |
|
|
Total
cost of revenue |
|
|
239.1 |
|
|
|
191.8 |
|
|
|
878.9 |
|
|
|
805.8 |
|
|
Gross
profit |
|
|
186.3 |
|
|
|
153.8 |
|
|
|
671.0 |
|
|
|
580.6 |
|
|
Selling,
general and administrative expenses |
|
|
115.1 |
|
|
|
79.3 |
|
|
|
392.8 |
|
|
|
339.2 |
|
|
Research
and development |
|
|
47.8 |
|
|
|
46.0 |
|
|
|
187.9 |
|
|
|
184.8 |
|
|
Asset
impairment charges |
|
|
0.0 |
|
|
|
1.2 |
|
|
|
4.7 |
|
|
|
1.5 |
|
|
Amortization of intangible and acquisition-related assets |
|
|
10.9 |
|
|
|
4.2 |
|
|
|
25.8 |
|
|
|
23.2 |
|
|
Income
from operations |
|
|
12.5 |
|
|
|
23.1 |
|
|
|
59.8 |
|
|
|
31.9 |
|
|
Interest
expense and other, net (b) |
|
|
(24.8 |
) |
|
|
(7.5 |
) |
|
|
(67.1 |
) |
|
|
(29.2 |
) |
|
Equity in
net loss of unconsolidated investments |
|
|
0.0 |
|
|
|
(0.8 |
) |
|
|
(7.5 |
) |
|
|
(2.1 |
) |
|
(Loss)
income before income taxes |
|
|
(12.3 |
) |
|
|
14.8 |
|
|
|
(14.8 |
) |
|
|
0.6 |
|
|
Income
tax benefit (provision) |
|
|
15.2 |
|
|
|
1.6 |
|
|
|
17.8 |
|
|
|
(2.6 |
) |
|
Net
income (loss) |
|
|
2.9 |
|
|
|
16.4 |
|
|
|
3.0 |
|
|
|
(2.0 |
) |
|
Less: Net
income attributable to non-controlling interest |
|
|
(0.1 |
) |
|
|
(0.1 |
) |
|
|
(0.2 |
) |
|
|
(0.2 |
) |
|
Less:
Accretion of redemption preference on redeemable convertible
non-controlling interest - Netsmart |
|
|
(10.2 |
) |
|
|
0.0 |
|
|
|
(28.5 |
) |
|
|
0.0 |
|
|
Net
(loss) income attributable to Allscripts Healthcare Solutions, Inc.
stockholders |
|
($ |
7.4 |
) |
|
$ |
16.3 |
|
|
($ |
25.7 |
) |
|
($ |
2.2 |
) |
|
|
|
|
|
|
|
|
|
|
|
(Loss)
earnings per share - basic and diluted |
|
($ |
0.04 |
) |
|
$ |
0.09 |
|
|
($ |
0.14 |
) |
|
($ |
0.01 |
) |
|
|
|
|
|
|
|
|
|
|
|
Weighted
average common shares outstanding: |
|
|
|
|
|
|
|
|
|
Basic |
|
|
183.2 |
|
|
|
189.1 |
|
|
|
186.2 |
|
|
|
185.1 |
|
|
Diluted |
|
|
183.2 |
|
|
|
191.5 |
|
|
|
186.2 |
|
|
|
185.1 |
|
|
|
|
|
|
|
|
|
|
|
|
(a) Amortization of
software development and acquisition-related assets includes: |
|
|
|
|
|
|
|
|
|
Amortization of capitalized software development costs |
|
$ |
12.1 |
|
|
$ |
11.3 |
|
|
$ |
43.3 |
|
|
$ |
46.9 |
|
|
Amortization of acquisition-related intangible assets |
|
|
13.6 |
|
|
|
7.7 |
|
|
|
45.3 |
|
|
|
35.1 |
|
|
|
|
$ |
25.7 |
|
|
$ |
19.0 |
|
|
$ |
88.6 |
|
|
$ |
82.0 |
|
|
|
|
|
|
|
|
|
|
|
|
(b)
Interest expense and other, net are comprised of the following for
the periods presented: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended December
31, |
|
Year Ended December 31, |
|
|
|
|
2016 |
|
|
|
2015 |
|
|
|
2016 |
|
|
|
2015 |
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash
amortization of 1.25% Cash Convertible Notes original issue
discount |
|
$ |
2.9 |
|
|
$ |
2.7 |
|
|
$ |
11.4 |
|
|
$ |
10.8 |
|
|
Non-cash
write-off of unamortized deferred debt issuance costs |
|
|
5.2 |
|
|
|
0.0 |
|
|
|
5.2 |
|
|
|
1.4 |
|
|
Non-cash charges to interest expense and other, net |
|
|
8.1 |
|
|
|
2.7 |
|
|
|
16.6 |
|
|
|
12.2 |
|
|
Interest
expense |
|
|
15.8 |
|
|
|
4.1 |
|
|
|
46.4 |
|
|
|
16.3 |
|
|
Amortization of discounts and debt issuance costs |
|
|
1.5 |
|
|
|
0.6 |
|
|
|
5.2 |
|
|
|
2.9 |
|
|
Other
(income) expense, net |
|
|
(0.6 |
) |
|
|
0.1 |
|
|
|
(1.1 |
) |
|
|
(2.2 |
) |
|
Total interest expense and other, net |
|
$ |
24.8 |
|
|
$ |
7.5 |
|
|
$ |
67.1 |
|
|
$ |
29.2 |
|
|
|
|
Table 3 |
|
Allscripts Healthcare Solutions,
Inc. |
|
Condensed Consolidated Statements of Cash
Flows |
|
(In millions) |
|
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended December
31, |
|
Year Ended December 31, |
|
|
|
|
2016 |
|
|
|
2015 |
|
|
|
2016 |
|
|
|
2015 |
|
|
Cash
flows from operating activities: |
|
|
|
|
|
|
|
|
|
Net
income (loss) |
|
$ |
2.9 |
|
|
$ |
16.4 |
|
|
$ |
3.0 |
|
|
($ |
2.0 |
) |
|
Non-cash
adjustments to net (loss) income: |
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
51.9 |
|
|
|
36.5 |
|
|
|
172.4 |
|
|
|
161.0 |
|
|
Stock-based compensation expense |
|
|
13.2 |
|
|
|
7.5 |
|
|
|
42.9 |
|
|
|
34.7 |
|
|
Other non-cash charges, net |
|
|
(12.7 |
) |
|
|
(3.0 |
) |
|
|
(3.7 |
) |
|
|
1.6 |
|
|
Total non-cash adjustments to income |
|
|
52.4 |
|
|
|
41.0 |
|
|
|
211.6 |
|
|
|
197.3 |
|
|
Cash
impact of changes in operating assets and liabilities |
|
|
28.6 |
|
|
|
25.9 |
|
|
|
54.4 |
|
|
|
16.3 |
|
|
Net cash provided by operating
activities |
|
|
83.9 |
|
|
|
83.3 |
|
|
|
269.0 |
|
|
|
211.6 |
|
|
Cash
flows from investing activities: |
|
|
|
|
|
|
|
|
|
Capital
expenditures |
|
|
(10.4 |
) |
|
|
(4.1 |
) |
|
|
(35.4 |
) |
|
|
(18.3 |
) |
|
Capitalized software |
|
|
(32.5 |
) |
|
|
(16.6 |
) |
|
|
(102.5 |
) |
|
|
(49.3 |
) |
|
Purchases
of equity securities in partner entities,
business acquisitions, net of cash acquired and other
investments |
|
|
(60.1 |
) |
|
|
(3.1 |
) |
|
|
(1,016.1 |
) |
|
|
(225.2 |
) |
|
Sales and
maturities of marketable securities and other investments |
|
|
0.0 |
|
|
|
0.0 |
|
|
|
0.0 |
|
|
|
3.8 |
|
|
Net cash used in investing
activities |
|
|
(103.0 |
) |
|
|
(23.8 |
) |
|
|
(1,154.0 |
) |
|
|
(289.0 |
) |
|
Cash
flows from financing activities: |
|
|
|
|
|
|
|
|
|
Repurchase of common stock |
|
|
(50.1 |
) |
|
|
0.0 |
|
|
|
(121.2 |
) |
|
|
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 |
|
|
0.0 |
|
|
|
1.6 |
|
|
|
0.1 |
|
|
|
103.7 |
|
|
Stock-based compensation-related payments, net |
|
|
(0.8 |
) |
|
|
(1.1 |
) |
|
|
(7.2 |
) |
|
|
(6.5 |
) |
|
Credit
facilities and capital lease borrowings (payments), net |
|
|
90.2 |
|
|
|
(34.4 |
) |
|
|
660.0 |
|
|
|
45.1 |
|
|
Net cash provided by (used in)
financing activities |
|
|
39.3 |
|
|
|
(33.9 |
) |
|
|
865.3 |
|
|
|
142.3 |
|
|
Effect of
exchange rate changes on cash and cash equivalents |
|
|
(0.9 |
) |
|
|
(0.1 |
) |
|
|
(0.6 |
) |
|
|
(1.2 |
) |
|
Net increase (decrease) in cash and
cash equivalents |
|
|
19.3 |
|
|
|
25.5 |
|
|
|
(20.3 |
) |
|
|
63.7 |
|
|
Cash and
cash equivalents, beginning of period |
|
|
77.3 |
|
|
|
91.4 |
|
|
|
116.9 |
|
|
|
53.2 |
|
|
Cash and
cash equivalents, end of period |
|
$ |
96.6 |
|
|
$ |
116.9 |
|
|
$ |
96.6 |
|
|
$ |
116.9 |
|
|
|
|
|
|
|
|
|
|
|
|
Table 4 |
|
Allscripts Healthcare Solutions,
Inc. |
|
Condensed Non-GAAP Financial
Information |
|
(In millions, except per share amounts and
percentages) |
|
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended December
31, |
|
Year Ended December 31, |
|
|
|
|
2016 |
|
|
|
2015 |
|
|
|
2016 |
|
|
|
2015 |
|
|
Total
revenue, as reported |
$ |
425.4 |
|
|
$ |
345.6 |
|
|
$ |
1,549.9 |
|
|
$ |
1,386.4 |
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition-related deferred revenue adjustments |
|
4.0 |
|
|
|
0.0 |
|
|
|
25.8 |
|
|
|
0.0 |
|
|
Total non-GAAP revenue |
$ |
429.4 |
|
|
$ |
345.6 |
|
|
$ |
1,575.7 |
|
|
$ |
1,386.4 |
|
|
|
|
|
|
|
|
|
|
|
|
Gross
profit, as reported |
$ |
186.3 |
|
|
$ |
153.8 |
|
|
$ |
671.0 |
|
|
$ |
580.6 |
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition-related deferred revenue adjustments |
|
4.0 |
|
|
|
0.0 |
|
|
|
25.8 |
|
|
|
0.0 |
|
|
Acquisition-related amortization |
|
13.6 |
|
|
|
7.7 |
|
|
|
45.3 |
|
|
|
35.1 |
|
|
Stock-based compensation expense |
|
2.0 |
|
|
|
1.9 |
|
|
|
8.8 |
|
|
|
8.7 |
|
|
Non-recurring expenses and transaction-related costs (a) |
|
0.6 |
|
|
|
0.0 |
|
|
|
0.6 |
|
|
|
0.0 |
|
|
Total non-GAAP gross profit |
$ |
206.5 |
|
|
$ |
163.4 |
|
|
$ |
751.5 |
|
|
$ |
624.4 |
|
|
|
|
|
|
|
|
|
|
|
|
Income from
operations, as reported |
$ |
12.5 |
|
|
$ |
23.1 |
|
|
$ |
59.8 |
|
|
$ |
31.9 |
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition-related deferred revenue adjustments |
|
4.0 |
|
|
|
0.0 |
|
|
|
25.8 |
|
|
|
0.0 |
|
|
Acquisition-related amortization |
|
24.5 |
|
|
|
11.9 |
|
|
|
71.1 |
|
|
|
58.3 |
|
|
Stock-based compensation expense |
|
13.3 |
|
|
|
7.9 |
|
|
|
44.2 |
|
|
|
36.6 |
|
|
Non-recurring expenses and transaction-related costs (a) |
|
6.6 |
|
|
|
0.0 |
|
|
|
13.4 |
|
|
|
23.4 |
|
|
Non-cash asset impairment charges |
|
0.0 |
|
|
|
1.2 |
|
|
|
4.7 |
|
|
|
1.5 |
|
|
Total non-GAAP operating income |
$ |
60.9 |
|
|
$ |
44.1 |
|
|
$ |
219.0 |
|
|
$ |
151.7 |
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss)
income attributable to Allscripts Healthcare Solutions, Inc.
stockholders, as reported |
($ |
7.4 |
) |
|
$ |
16.3 |
|
|
($ |
25.7 |
) |
|
($ |
2.2 |
) |
|
Less: Net loss attributable to non-controlling interest |
|
0.1 |
|
|
|
0.1 |
|
|
|
0.2 |
|
|
|
0.2 |
|
|
Less: Accretion of redemption preference on redeemable
convertible non-controlling interest - Netsmart |
|
10.2 |
|
|
|
0.0 |
|
|
|
28.5 |
|
|
|
0.0 |
|
|
Net income
(loss), as reported |
$ |
2.9 |
|
|
$ |
16.4 |
|
|
$ |
3.0 |
|
|
($ |
2.0 |
) |
|
|
|
|
|
|
|
|
|
|
|
Acquisition-related deferred revenue adjustments |
|
4.0 |
|
|
|
0.0 |
|
|
|
25.8 |
|
|
|
0.0 |
|
|
Acquisition-related amortization |
|
24.5 |
|
|
|
11.9 |
|
|
|
71.1 |
|
|
|
58.3 |
|
|
Stock-based compensation expense |
|
13.3 |
|
|
|
7.9 |
|
|
|
44.2 |
|
|
|
36.6 |
|
|
Non-recurring expenses and transaction-related costs (a) |
|
6.6 |
|
|
|
0.0 |
|
|
|
13.4 |
|
|
|
23.4 |
|
|
Non-cash asset impairment charges |
|
0.0 |
|
|
|
1.2 |
|
|
|
4.7 |
|
|
|
1.5 |
|
|
Non-cash charges to interest expense and other |
|
8.1 |
|
|
|
2.3 |
|
|
|
16.6 |
|
|
|
12.0 |
|
|
Equity in net earnings of unconsolidated investments |
|
0.0 |
|
|
|
1.2 |
|
|
|
7.5 |
|
|
|
3.2 |
|
|
Tax effect of adjustments to reconcile GAAP to non-GAAP net
income |
|
(19.7 |
) |
|
|
(8.6 |
) |
|
|
(64.1 |
) |
|
|
(47.4 |
) |
|
Tax rate alignment |
|
(10.9 |
) |
|
|
(6.7 |
) |
|
|
(12.6 |
) |
|
|
2.5 |
|
|
Total Non-GAAP net income |
$ |
28.8 |
|
|
$ |
25.6 |
|
|
$ |
109.6 |
|
|
$ |
88.1 |
|
|
Less: Non-GAAP net income attributable to non-controlling
interest |
|
(2.4 |
) |
|
|
(0.1 |
) |
|
|
(5.5 |
) |
|
|
(0.1 |
) |
|
Non-GAAP net income attributable to Allscripts Healthcare
Solutions, Inc. |
$ |
26.4 |
|
|
$ |
25.5 |
|
|
$ |
104.1 |
|
|
$ |
88.0 |
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP
effective tax rate |
|
35 |
% |
|
|
35 |
% |
|
|
35 |
% |
|
|
35 |
% |
|
|
|
|
|
|
|
|
|
|
|
Weighted
shares outstanding - diluted |
|
185.7 |
|
|
|
191.5 |
|
|
|
187.9 |
|
|
|
186.5 |
|
|
|
|
|
|
|
|
|
|
|
|
(Loss)
earnings per share - basic and diluted, as reported |
($ |
0.04 |
) |
|
$ |
0.09 |
|
|
($ |
0.14 |
) |
|
($ |
0.01 |
) |
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP earnings per share attributable to Allscripts
Healthcare Solutions, Inc. - diluted |
$ |
0.14 |
|
|
$ |
0.13 |
|
|
$ |
0.55 |
|
|
$ |
0.47 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 December
31, |
|
Year Ended December 31, |
|
|
|
|
2016 |
|
|
|
2015 |
|
|
|
2016 |
|
|
|
2015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Severance
and other costs |
|
2.5 |
|
|
|
0.0 |
|
|
|
2.7 |
|
|
|
23.3 |
|
|
Transaction-related costs |
|
4.1 |
|
|
|
0.0 |
|
|
|
10.7 |
|
|
|
0.1 |
|
|
Total non-recurring expenses and transaction related
costs |
$ |
6.6 |
|
|
$ |
0.0 |
|
|
$ |
13.4 |
|
|
$ |
23.4 |
|
|
|
|
|
|
|
|
|
|
|
|
Table 5 |
|
|
Allscripts Healthcare Solutions,
Inc. |
|
|
Non-GAAP Financial Information - Adjusted
EBITDA |
|
|
(In millions, except percentages) |
|
|
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended December
31, |
|
Year Ended December 31, |
|
|
|
|
|
2016 |
|
|
|
2015 |
|
|
|
2016 |
|
|
|
2015 |
|
|
|
Total revenue, as
reported |
|
$ |
425.4 |
|
|
$ |
345.6 |
|
|
$ |
1,549.9 |
|
|
$ |
1,386.4 |
|
|
|
Acquisition-related deferred revenue adjustments |
|
|
4.0 |
|
|
|
0.0 |
|
|
|
25.8 |
|
|
|
0.0 |
|
|
|
Total non-GAAP
revenue |
|
$ |
429.4 |
|
|
$ |
345.6 |
|
|
$ |
1,575.7 |
|
|
$ |
1,386.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss), as
reported |
|
$ |
2.9 |
|
|
$ |
16.4 |
|
|
$ |
3.0 |
|
|
($ |
2.0 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition-related deferred revenue adjustments |
|
|
4.0 |
|
|
|
0.0 |
|
|
|
25.8 |
|
|
|
0.0 |
|
|
|
Depreciation and amortization |
|
|
51.9 |
|
|
|
36.5 |
|
|
|
172.4 |
|
|
|
161.0 |
|
|
|
Stock-based compensation expense |
|
|
13.3 |
|
|
|
7.9 |
|
|
|
44.2 |
|
|
|
36.6 |
|
|
|
Non-recurring expenses and transaction-related costs |
|
|
6.6 |
|
|
|
- |
|
|
|
13.4 |
|
|
|
23.4 |
|
|
|
Non-cash
asset impairment charges |
|
|
0.0 |
|
|
|
1.2 |
|
|
|
4.7 |
|
|
|
1.5 |
|
|
|
Interest
expense and other, net (a) |
|
|
20.4 |
|
|
|
3.8 |
|
|
|
50.5 |
|
|
|
17.4 |
|
|
|
Equity in
net earnings of unconsolidated investments |
|
|
0.0 |
|
|
|
0.8 |
|
|
|
7.5 |
|
|
|
2.1 |
|
|
|
Tax
(benefit)/provision |
|
|
(15.2 |
) |
|
|
(1.6 |
) |
|
|
(17.8 |
) |
|
|
2.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
(c) |
|
$ |
83.9 |
|
|
$ |
65.0 |
|
|
$ |
303.7 |
|
|
$ |
242.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
margin (b) |
|
|
20 |
% |
|
|
19 |
% |
|
|
19 |
% |
|
|
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) Reconciliation to adjusted net EBITDA, as consistent with
Allscripts guidance for 2016, is as follows: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended December
31, |
|
Year Ended December 31, |
|
|
|
|
|
2016 |
|
|
|
2015 |
|
|
|
2016 |
|
|
|
2015 |
|
|
|
Adjusted
EBITDA |
|
$ |
83.9 |
|
|
$ |
65.0 |
|
|
$ |
303.7 |
|
|
$ |
242.6 |
|
|
|
Less: Adjusted EBITDA
attributable to non-controlling interest |
|
|
11.8 |
|
|
|
0.3 |
|
|
|
30.8 |
|
|
|
0.8 |
|
|
|
Adjusted net
EBITDA |
|
$ |
72.1 |
|
|
$ |
64.7 |
|
|
$ |
272.9 |
|
|
$ |
241.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Table 6 |
|
Allscripts Healthcare Solutions,
Inc. |
|
Non-GAAP Financial Information - Free Cash
Flow |
|
(In millions) |
|
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended December
31, |
|
Year Ended December 31, |
|
|
|
|
2016 |
|
|
|
2015 |
|
|
|
2016 |
|
|
|
2015 |
|
|
Net cash
provided by operating activities |
|
$ |
83.9 |
|
|
$ |
83.3 |
|
|
$ |
269.0 |
|
|
$ |
211.6 |
|
|
Cash
flows from investing activities: |
|
|
|
|
|
|
|
|
|
Capital
expenditures |
|
|
(10.4 |
) |
|
|
(4.1 |
) |
|
|
(35.4 |
) |
|
|
(18.3 |
) |
|
Capitalized software |
|
|
(32.5 |
) |
|
|
(16.6 |
) |
|
|
(102.5 |
) |
|
|
(49.3 |
) |
|
Free cash
flow |
|
$ |
41.0 |
|
|
$ |
62.6 |
|
|
$ |
131.1 |
|
|
$ |
144.0 |
|
|
|
|
|
|
|
|
|
|
|
|
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, Adjusted EBITDA, Adjusted net EBITDA, non-GAAP effective
income tax rate, net income, including non-GAAP earnings per share
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, stock-based compensation expense
and non-recurring expenses and transaction-related costs. Non-GAAP
gross margin consists of non-GAAP gross profit as a percentage of
non-GAAP revenue in the applicable period. For the fourth quarter
of 2016, non-GAAP gross margin totaled 48.1 percent, consisting of
non-GAAP gross profit of $206.5 million divided by non-GAAP revenue
of $429.4 million. For the fourth quarter of 2015, non-GAAP gross
margin totaled 47.3 percent, consisting of non-GAAP gross profit of
$163.4 million divided by revenue of $345.6 million.
Reconciliations to GAAP gross profit are found in Table 4 within
this press release.
- Non-GAAP operating expense consists of GAAP selling, general
and administrative expenses (SG&A) and research and development
expense (R&D), as reported, and excludes non-recurring expenses
and transaction-related costs and stock-based compensation expense
recorded to SG&A and R&D. For the fourth quarter of 2016,
non-GAAP operating expense totaled $145.6 million, consisting of
$115.1 million of GAAP SG&A and $47.8 million of GAAP R&D
expense and excluding $6.0 million of total non-recurring expenses
and transaction-related costs and $11.3 million of stock-based
compensation expense recorded to SG&A and R&D. For the
fourth quarter of 2015, non-GAAP operating expense totaled $119.3
million consisting of $79.3 million of GAAP SG&A and $46.0
million of GAAP R&D expense and excluding $6.0 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 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 asset impairment charges,
non-cash charges to interest expense and other, 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 consist 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 reported results,
excluding the financial contribution from Netsmart for the
specified period. Allscripts provides this measure to assist
investors in comparing period over period results.
Acquisition-Related Deferred Revenue
Adjustments. 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 operating expense,
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 fourth quarter of 2016,
Allscripts incurred $6.6 million of non-recurring and
transaction-related expenses associated with the Netsmart joint
business entity, other transactions closed in the quarter as well
as other non-recurring business activities.
Allscripts excludes non-recurring expenses and
transaction-related costs, in whole or in part, from non-GAAP gross
profit, non-GAAP operating income, non-GAAP operating expense,
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 include the
write-off of deferred debt issuance costs for Netsmart in the
fourth quarter of 2016 and 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 represents Allscripts 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 year ended December
31, 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, gross margin, operating expense, Adjusted EBITDA,
Adjusted net EBITDA, non-GAAP effective income tax rate, net
income, non-GAAP net income on a per share basis, 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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