MDRX Mixed; Down Y-Y; Cedes View - Analyst Blog

Zacks Investment Research

11/9/2012 11:30:01 AM

 

Allscripts Healthcare Solutions (MDRX), a leading player in the health care information technology (HCIT) market, reported third quarter adjusted (excluding one-time items other than stock-based compensation expense) earnings per share of 19 cents, beating the Zacks Consensus Estimate by a penny.

Reported net income dipped 50.8% year over year to $9.4 million in the quarter (or 5 cents per share).
 
Revenues

Revenues were $360.7 million, down 0.8% year over year in the third quarter, trailing the Zacks Consensus Estimate of $376 million. Adjusted revenues came in at $361 million, down 1.4% on a year-over-year basis.

Backlog was $2.83 billion in the third quarter. Allscripts inked one new Sunrise Clinical Manager agreement in the quarter and also expanded its footprint with other clients.

Bookings in the quarter were $161.9 million, a decrease of 39.3%. Year-over-year decline in bookings was caused by delay in purchase decisions as consumers awaited product launches. Another issue was uncertainty regarding the company’s future autonomy.

Segment-wise Data

Total revenues consisted of System Sales ($35.2 million), Professional Services ($62.7 million), Maintenance ($119.3 million) and Transaction Processing ($143.5 million), which constituted 9.8%, 17.4%, 33.1% and 39.8% respectively, of total revenues in the third quarter. 

Margin

Adjusted gross margin decreased to 43.6% of sales in the reported quarter, lower than 44.9% in the prior-year quarter. Selling, general and administrative expenses were $90.4 million, down almost 2% year over year while research and development expenditure came to $37.8 million, up 45.4%. Adjusted operating margin was 13.8% of sales, lower than 19.7% in the year-ago quarter.

Balance Sheet

Allscripts exited the third quarter with cash and cash equivalents of $93.7 million, up 10.5% on a year-over-year basis. The company had long term debt of $386.8 million, up 14.6%. Cash flow from operations was $31.1 million, down 25.8%.

Outlook

Allscripts retracted its guidance for 2012 as the Board assesses strategic alternatives due to the considerable interest expressed by third parties. The stock climbed 6.85% in after-hours trading to close at $13.10 on November 8.

The health care information technology market is competitive and price sensitive. Among others, Allscripts faces strong competition from Cerner Corp. (CERN), Quality Systems (QSII) and Athenahealth (ATHN).

However, optimism about the growth prospects of select HCIT service providers remains high under the Obama administration, which passed a Stimulus package in May 2009. The Stimulus package was aimed at increasing the use of electronic health record (EHR) systems by medical practitioners.

As a potential takeover target, Allscripts presents a lucrative opportunity for firms seeking entry into the HCIT industry. It has a wide user base and enjoys many greenfield opportunities vis-à-vis its peers. Its mergers with Misys and Eclipsys has expanded opportunities and reach in practice management (PM) and in electronic health record (EHR) markets substantially with increased cross-selling opportunities. We believe that Allscripts is well positioned in the fast growing business of selling EHR/EMR to physician practices as well as inpatient settings.

We have a long-term ‘Neutral’ recommendation on Allscripts. The stock carries a Zacks #4 Rank, which translates into a short-term Sell rating.


 
ATHENAHEALTH IN (ATHN): Free Stock Analysis Report
 
CERNER CORP (CERN): Free Stock Analysis Report
 
ALLSCRIPTS HLTH (MDRX): Free Stock Analysis Report
 
QUALITY SYS (QSII): Free Stock Analysis Report
 
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