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Allscripts (MDRX) Q2 Earnings In Line, Revenues Top Estimates

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Allscripts Healthcare Solutions, Inc. (MDRX - Free Report) posted second-quarter 2018 adjusted earnings per share of 18 cents, in line with the Zacks Consensus Estimate. Earnings also improved 20% on a year-over-year basis.

Revenues in the quarter came in at $535.8 million on a non-GAAP basis, which edged past the Zacks Consensus Estimate of $535 million and also surged 25.3% year over year. On a reported basis, revenues totaled $525.5 million in the quarter, reflecting an increase of 23.3% year over year.

Bookings in the reported quarter came in at $278 million, significantly down from the prior-year quarter’s $407 million. In fact, management expects to see some volatility in bookings in the quarters ahead.

In a year’s time, shares of Allscripts have rallied 4.5% compared with the industry’s 8.7%.

The stock carries a Zacks Rank #4 (Sell).

Segment Details

Software delivery, Support and Maintenance

Revenues at this segment grossed $336.4 million on a reported basis, up 22.3% from the year-ago quarter. Per management, recurring software revenues saw a year-over-year upside of 32% in the quarter. Furthermore, growth came on the back of consolidation of the EIS (Enterprise Information Solutions) business. However, non-recurring software revenues declined 13% year over year.

Client services

On a reported basis, revenues at the segment came in at $189.1 million, up 25.1% from the year-ago quarter. Per management, non-GAAP revenues were $194 million, up 28% year over year, owing to growth in revenue cycle services and other multiyear service offerings and the addition of EIS.

Moreover, non-recurring service revenues increased 26% year over year, primarily driven by the EIS acquisition.

Margins

In the quarter under review, adjusted gross profit totaled $251.7 million, up 22.6% from the year-ago quarter. Adjusted gross margin was 47%, down 100 basis points (bps).

Adjusted operating income in the quarter was $63.2 million, down 2% year over year. Adjusted operating margin was 11.8%, down 330 bps.

Adjusted EBITDA totaled $97 million in the second quarter.

Financial Condition

Cash flow from operations in the second quarter of 2018 totaled $8 million, compared with $34 million in the year-ago quarter.

Guidance

On a non-GAAP basis, Allscripts expects 2018 revenues within $2.15 billion and $2.25 billion, up 17% to 22% year over year. The Zacks Consensus Estimate is pegged at $2.18 billion, within the guided range.

Adjusted earnings per share are expected between 72 cents and 82 cents, reflecting an increase of 16% to 32% year over year. The Zacks Consensus Estimate is pinned at 76 cents, within the projected range.

Adjusted EBITDA is anticipated between $420 million and $460 million, up 12% to 23% year over year.

Stock Repurchase Update

In the second quarter of 2018, stock repurchases totaled $44 million. The company announced a new stock repurchase program under which it may buy back up to $250 million of its common stock through 2020.

Our Take

Allscripts ended the second quarter on a tepid note. The company continues to gain from the core software, delivery, support and maintenance unit, which saw solid growth. The company’s growth in revenue cycle services and acquisition of McKesson’s EIS business have lent the company a competitive edge. The recently closed acquisition of HealthGrid is likely to expand the company’s FollowMyHealth patient engagement platform. Management is also optimistic about the gain from the sale of OneContent, which was closed earlier this year.

On the flip side, year-over-year decline in bookings raise concern. In fact, management expects to see some volatility in bookings in the quarters ahead. Additionally, Allscripts saw significant contraction in margins. The company is also exposed to integration risks. Intense competition in the niche space adds to the woes.

Q2 Earnings of MedTech Majors at a Glance

A few better-ranked stocks in the broader medical space, which reported solid earnings this season, are Thermo Fisher Scientific Inc. (TMO - Free Report) , Intuitive Surgical, Inc (ISRG - Free Report) and Illumina, Inc (ILMN - Free Report) .

While Intuitive Surgical and Illumina sport a Zacks Rank #1 (Strong Buy), Thermo Fisher carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Intuitive Surgical reported adjusted earnings of $2.76 per share in the second quarter of 2018, which beat the Zacks Consensus Estimate of $2.48. Adjusted earnings improved 38% year over year.

Thermo Fisher reported adjusted earnings per share of $2.75, which beat the Zacks Consensus Estimate by 4.6%.
Illumina reported adjusted earnings of $1.43 per share, beating the consensus mark of $1.11.

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