Monday, November 14, 2011

Allscripts: Profit Rises and Beats Estimates

Allscripts beat analysts’ Q3 estimates and saw a significant jump in year-over-year growth, accelerating revenue, and net income. For the Q3, Allscripts Healthcare Solutions (MDRX) recorded revenue of $371.4 million, up 13% from last year’s Q3, with about 65% of this revenue noted to be reoccurring. System sales revenue grew 15% year-over-year, reflecting revenue sales from new client sales in the quarter. Professional services revenue increased 22% year-over-year and attributed to the decline in gross margin. Maintenance revenue climbed 9%, due to robust go-live activity in both their acute and ambulatory segments. Transaction processing and other revenue grew approximately 11%. Gross margin was recorded at 45.7% compared to 48.9% in the prior year, due to a broader mix of professional services and higher number of third-party system sales in the third quarter of 2011.

Operating profit margin was 20.3%. Furthermore, net income for Q3 totaled $47.3 million, a 28% increase over the $36.8 million over the last year. Diluted adjusted earnings per share were $0.25, a 32% increase over last year and beat analyst’s estimates of $0.23 earnings per share. For the third quarter of 2011, cash flow from operations totaled $42.2 million. They also eliminated $45.5 million in borrowings, the largest quarterly reduction to date. Allscripts recorded $267 million in bookings, representing a 34% growth year-over-year. It should be noted that these numbers have been adjusted and are non-GAAP, essentially excluding the costs related to its $1.3 billion buyout of Eclipsys last year.

Allscripts sees regulatory issues as an opportunity for growth in the future. The revisions in the healthcare system and adoption of EHR and IT services will likely contribute positively to Allscripts future performance. Because of this and their Q3 earnings, they have increased their non-GAAP revenue for the year to be in the range of $1.455 to $1.46 billion versus a prior range of approximately $1.44 to $1.45 billion. MDRX management slightly adjusted their operating income from $303 to $307 million. They estimate their net income to be in the range of $175 to $179 million, equating to a new EPS range of $0.91 to $0.93 per diluted share. Since their 3Q bookings performance did not reflect any international bookings, they expect their domestic bookings in the 4Q to be up substantially. Furthermore, they anticipate 90% of the balance with South Australian Public Health System to close in the 4Q, contributing to their estimate of 17% to 18% bookings growth for the year.

-Deven Gould, Health Care Sector Head
-Jorge Perez, Junior Health Care Analyst

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