Allscripts swings to $182.2M loss in 2019

Allscripts reported bookings in the fourth quarter of $312 million, up 6% compared to $295 million in the fourth quarter of 2018. (seb_ra/Getty Images)

Allscripts reported a fourth-quarter loss of $19 million after posting a profit in the same period a year earlier.

The electronic health record (EHR) vendor reported net income of $375 million in the fourth quarter of 2018, according to its fourth-quarter and full-year 2019 financial filings.

That was on fourth-quarter revenue of $451 million, up 2% from $442 million during the same period in 2018. Its adjusted revenue in the quarter totaled $451.5 million, which did not meet Wall Street estimates of $458.4 million.

For fiscal year 2019, Allscripts reported a loss of $182.2 million, also swinging to a loss in the period from profits of $407.8 million in 2018. That was despite a 1.2% increase in 2019 revenue to $1.77 billion, up from $1.75 billion in 2018.

RELATED: Allscripts generates $444M in revenue in Q3, bookings up 19% year over year

Company officials blamed the drop primarily on an increase in hosting costs and higher amortization of software development costs as well as recognition of previously deferred costs and the sale of OneContent in 2018, which had higher margins than Allscripts' other businesses.

The Chicago-based company plans to hire a financial advisory firm to develop a margin improvement plan to boost its financial performance, Allscripts President and Chief Financial Officer Rick Poulton said during the company's fourth-quarter and 2019 earnings call Monday.

Allscripts' non-GAAP gross margins were 42.5% in the fourth quarter of 2019, compared to 45.3% in the fourth quarter of 2018 and 43.2% in the third quarter of 2019.

"Gross margins were disappointing, and they suffered from continued higher-than-expected transition and cybersecurity cost in our hosting business, delays in service implementations, which drive unproductive labor costs, and the revenue mix we had in our Veradigm business during the quarter," Poulton said.

Allscripts also finalized the $145 million settlement with the Department of Justice (DOJ) related to its Practice Fusion business. Poulton said the company would pay that settlement in installments throughout 2020.

"We also expect to recover approximately half of that amount from a variety of escrows and insurance policies," he said.

Allscripts expects revenue to be negatively impacted in 2020 by approximately $50 million in year-over-year client attrition from acute care clients, Poulton said.

"Client attrition is not a new issue. We have experienced it in the past and will undoubtedly experience client churn in the future as well just as every competitor in the industry experienced to some level attrition. We call it out now, though, only because the timing of the wind from departing clients aligned in such a way as to create a real bolus that is unusually high and will have a significant impact on year-over-year comparisons, he said.

Still, Allscripts CEO Paul Black said the company's fourth-quarter results show continued strength in new bookings, which positions Allscripts "well for growth across its platforms." 

In November, the company inked a deal with New York City-based health system Northwell Health to extend its Allscripts Sunrise platform through 2027. Allscripts also announced a partnership with Northwell to develop a cloud-hosted, voice-enabled, artificial intelligence-based EHR. 

RELATED: Allscripts reports $145M settlement agreement with DOJ

The company reported bookings in the fourth quarter of $312 million, up 6% compared to $295 million in the fourth quarter of 2018.

Allscripts reported bookings for the year came to $1.1 billion, up 15% year over year and at the high end of its guidance range.

"We announced a number of key client extensions, including managed services at Northwell Health, that demonstrate our strong positioning in the marketplace," Black said in a statement. "Looking ahead, we believe we have positioned Allscripts to benefit from the investments we have made to expand the company’s portfolio outside the EHR while maintaining a disciplined cost structure," he said.

The company said its contract revenue backlog is up $500 million to $4.4 billion as of the end of the fourth quarter.

On a per-share basis, the company said it had a loss of 12 cents in the fourth quarter of 2019 compared with earnings per share of $2.14 in the fourth quarter of 2018,  Earnings, adjusted for non-recurring costs and stock option expense, came to 17 cents per share, falling short of Wall Street expectations. The average estimate of 11 analysts surveyed by Zacks Investment Research was for earnings of 18 cents per share in the fourth quarter of 2019.

Allscripts shares have declined 19% since the beginning of the year. In the final minutes of trading on Monday, shares hit $7.94, a drop of 26% in the last 12 months, according to Zacks Investment Research.