- Allscripts reported revenue lower than Wall Street expectations in the third quarter of $402.1 million, down almost 10% year over year in results released Thursday amid continued pandemic challenges and a soft buying environment.
- Management said on a Thursday call with investors the third quarter is typically seasonally weaker, and that's being compounded by the pandemic environment. The Chicago-based vendor is seeing lessening demand in software, and fewer clients looking for consulting and IT upgrades. Bookings of $187 million were down 21% year over year and about flat sequentially, but still better than some analysts expected.
- Allscripts continues to withhold formal revenue guidance after withdrawing it in the first quarter over COVID-19 volatility, but the fourth quarter is historically Allscripts' strongest yearly quarter for sales and revenue. The vendor expects revenue "up modestly" in the fourth quarter, CFO Rick Poulton said on the call, and adjusted EBITDA margin between 19.5% to 20%. Allscripts shares were down slightly aftermarket on the results.
Allscripts' quarter was mixed, with a sizable revenue miss amid COVID-19 headwinds offset by ongoing cost control initiatives delivering a slight earnings per share beat. Allscripts reported net income of $0.5 million, compared with a net loss of $5.7 million same time last year.
The majority of the revenue miss was in Allscripts' software delivery, support and maintenance segment, which delivered revenue of $250.6 million, down 12% year over year, while its client services segment reported revenue of $151.5 million, down 5% year over year.
However, Black said he expects revenue to increase in the fourth quarter and beyond, as most large for-profit hospitals and health systems are either breaking even or making a slight profit year-to-date, Black said. That can be reinvested in IT solutions.
Allscripts announced in July it's selling hospital financial decision support business EPSi to cloud-based tech company Strata Decision Technology for $365 million. Allscripts is also divesting its care coordination business, CarePort, for $1.35 billion.
"These platforms generated above company average growth rates and margins, but it was clear to us that this was not being reflected in Allscripts' overall valuation," Poulton said. "And as a result, we made the decision to unlock shareholder value."
Collectively, the two business units represent less than 10% of Allscripts consolidated revenue. The vendor expects to generate about $1.25 billion in after-tax proceeds from the sales, Poulton said, and plans to use the funds to pare down debt and return cash to shareholders.
After the sales, Allscripts will have about half its market capitalization in cash on hand, which "opens the door to meaningful deleveraging... and potential for buybacks," SVB Leerink analyst Stephanie Davis said in a Friday note.
Allscripts also paid $15.7 million in the quarter as part of a $145 million settlement with the Department of Justice to settle claims a subsidiary, Practice Fusion, falsified EHR certification and violated anti-kickback laws.