Allscripts (MDRX) Q1 Earnings & Revenues Lag, Bookings Rise

Allscripts Healthcare Solutions, Inc. MDRX posted first-quarter 2018 adjusted earnings per share of 16 cents per share, missing the Zacks Consensus Estimate by a penny. However, earnings improved from the year-ago figure of 13 cents.

Revenues in the reported quarter came in at $519 million, missing the Zacks Consensus Estimate by 2.3%. However, revenues improved 24.9% year over year.

In the quarter under review, bookings grew 6.3% to $304 million.

Shares of Allscripts have lost 8.9%, compared with the industry’s decline of 4% over the past six months.

Allscripts carries a Zacks Rank #3 (Hold).

Allscripts Healthcare Solutions, Inc. Price, Consensus and EPS Surprise

Allscripts Healthcare Solutions, Inc. Price, Consensus and EPS Surprise | Allscripts Healthcare Solutions, Inc. Quote

Segment Details

Software delivery, Support and Maintenance

Revenues in this segment totaled $329.8 million, up 23% on a year-over-year basis. Per management, recurring software revenue consisting of subscriptions, recurring transactions, support and new maintenance increased 30% year over year. A large part of this growth was driven by consolidation of the Enterprise Information Solutions (EIS) business.

Client services

Revenues in the segment came in at $184.2 million, up 26.8%. Recurring service revenues increased 20% year over year, driven by the addition of EIS, revenue cycle services and other multiyear service offerings.

Margins

Gross margin in the first quarter was 47.3%, compared with 47.5% in the prior-year quarter.

Total operating expenses were $182 million, up 29% on a year-over-year basis. The year-over-year increase can be attributed to the acquisition of EIS business from McKesson Corporation. Additionally, the company recorded $24 million of legal, transaction-related and other costs in the quarter under review.

Adjusted EBITDA totaled $96 million in the first quarter.

Financial Condition

Allscripts exited the quarter with a cash flow of $58 million, compared with $76 million in the year-ago quarter. Free cash flow totaled $17 million, down 37% on a year-over-year basis.

Latest Developments

Allscripts has announced a definitive agreement to acquire HealthGrid Holding Company (HealthGrid), a mobile enterprise patient engagement platform business. Management expects to close the deal in the second quarter of 2018.

Stock Repurchase Update

Stock repurchases totaled $58 million in the first quarter of 2018.

Guidance

For 2018, Allscripts anticipates revenues between $2.15 billion and $2.25 billion, up 17-22% from 2017. Notably, the Zacks Consensus Estimate for 2018 revenues is pegged at $2.2 billion, which lies within the expected range.

Earnings per share are expected between 72 cents and 82 cents, which reflects an increase of 16-32% year over year. The Zacks Consensus Estimate for earnings per share is pinned at 77 cents, which lies within the guided range.

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

Our Take

Allscripts had a dull start to 2018, with first-quarter earnings and revenues missing estimates. However, strong segmental revenues buoy optimism. The year-over-year rise in bookings is also a major positive. The company rides on a plethora of strategic acquisitions and partnerships, which are likely to prove accretive to earnings in the quarters ahead. On the flip side, declining margins and rising operating expenses raise concern. The company is also exposed to integration risks. Intense competition in the niche space adds to the woes.

Key Picks

A few better-ranked stocks in the broader medical space which have reported solid results this season are Intuitive Surgical ISRG, Chemed Corporation CHE and Baxter International Inc. BAX. While Intuitive Surgical sports a Zacks Rank #1 (Strong Buy), Chemed and Baxter carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Intuitive Surgical reported first-quarter 2018 adjusted earnings per share of $2.44, which beat the Zacks Consensus Estimate by 22.6%. Revenues totaled $848 million, also surpassing the consensus estimate by 10.6%.

Chemed posted first-quarter 2018 adjusted earnings per share of $2.72, surpassing the Zacks Consensus Estimate of $2.37. Revenues came in at $439.2 million, beating the Zacks Consensus Estimate of $420 million.

Baxter posted first-quarter 2018 adjusted earnings per share of 70 cents, which beat the Zacks Consensus Estimate by 12.9%. Revenues of $2.68 billion also edged past the Zacks Consensus Estimate of $2.62 billion.

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