Allscripts looks to leverage Microsoft partnership as tech giant expands healthcare ambitions

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As Microsoft pushes further into healthcare, Allscripts expects to strategically benefit from its partnership with the tech giant as it looks to strengthen its position in the health IT market.

Earlier this month, Microsoft announced plans to buy speech recognition company Nuance Communications for $19.7 billion. Nuance is considered a pioneer in speech recognition and artificial intelligence technology used in healthcare.

"Microsoft is getting into healthcare in a very big way," said Allscripts CEO Paul Black during the company's first-quarter 2021 earnings call Thursday.

"They will continue to be an enterprise software player. They’ll continue to have, if you will, an operating system that resides inside of their cloud. That’s an interesting distinction between them and the other people out there in the marketplace," Black said.

He added, "Microsoft can also layer in capabilities that people are extraordinarily interested in when they go the cloud, things around AI, things around voice, things around ambient technologies. That is a big piece as to why I think we’re going to get a lot of traction as a result of that."

RELATED: Allscripts, Microsoft strike 5-year cloud partnership to enhance EHR software

In July, Allscripts inked a five-year strategic partnership with Microsoft to use the tech giant's cloud technology to enhance its Sunrise electronic health record (EHR) software.

The partnership with Microsoft presents opportunities for Allscripts in the provider space as well as with its Veradigm business targeting life sciences and payer organizations, Black said.

"Going hand in hand with Microsoft as we are calling on these large institutions, they are all interested in listening to what a joint relationship might look like as they think about additional capabilities that sit either sit on top of or in replacement of existing historic electronic health-only opportunities," he said.

He added, "Microsoft is interested in what we can do with payers and pharma. They also see it as unique in that we have payer relationships, provider relationships and life sciences relationships."

Allscripts' strong growth in its data and analytics business, along with market "wins" for its cloud-based Sunrise EHR platform, helped drive $194 million in bookings in the first quarter of 2021, up 6% from $183 million in bookings the same period a year ago, the company reported.

The company added several new hospital and ambulatory clients for its EHR solutions during the quarter.

Allscripts posted $368 million in revenue in the quarter, down 3% from $381 million in the first quarter of 2020.

RELATED: Allscripts reports $414M in Q4 with strong growth in its Veradigm data business

The Chicago-based company reported a quarterly profit of $9 million compared with a net loss of $20 million in the first quarter of 2020. Earnings, adjusted for nonrecurring costs and stock option expense, came to 19 cents in the quarter compared to 2 cents in the same period a year ago.

Allscripts' quarterly earnings beat Wall Street estimates, but revenue fell short. The consensus revenue estimate was for $371 million in the quarter.

“Entering 2021, Allscripts continued to benefit from our strategic investments in distinctive, relevant and comprehensive solutions for our clients across the provider, payer and life sciences end markets," Black said.

Allscripts hired a financial advisory firm in 2020 to develop a margin improvement plan to boost its financial performance.

The company has set a long-term target goal of achieving an 18% to 20% adjusted EBITDA margin for the core clinical and financial solutions segment of its business. Allscripts also set a goal of achieving a 30% adjusted EBITDA margin for the data, analytics and care coordination segment.

Adjusted EBITDA totaled $67 million in the first quarter of 2021, compared with $37 million in the first quarter of 2020. The company reported an adjusted EBITDA margin of 18.3% compared to 9.6% a year ago.

RELATED: Allscripts sells EPSi business to Strata Decision Technology for $365M

"We were pleased with our strong first quarter results, as we gained from a more robust selling environment and a determined discipline around our cost structure. Looking forward expect a steady, purposeful focus on improving margins, generating free cash flow and serving our clients as they lead their organizations through the pandemic," he said.

The company generated $56 million of cash flow from continuing operations and $35 million of free cash flow in the first quarter.

Allscripts' cash flow in the quarter represents a "dramatic improvement" and "great start to the company's full-year goal for 2021," Allscripts Chief Financial Officer Rick Poulton said.

The company reaffirmed its previous guidance and expects 2021 revenue to reach $1.5 billion. Allscripts expects adjusted EBITDA between $240 million and $260 million for the year and free cash flow between $90 million and $100 million.

While regional uncertainty remains regarding the trajectory of COVID-19, company executives are optimistic as the pace of vaccinations increases and patient volumes recover and the company sees expanded demand for closed loop connectivity to real-world data, Black said.