Allscripts posts strong year-end results, but fourth quarter misses expectations

Following selling its stake in Netsmart for $525 million last year, Allscripts posted a 16% revenue boost for 2018. (FiercePharma)

After selling its stake in Netsmart for $525 million last year, Allscripts posted a 16% revenue boost for 2018. However, despite record bookings last quarter, Allscripts’ earnings missed Wall Street expectations.

Allscripts reported its 2018 fourth-quarter and full-year results Thursday, reporting fourth-quarter adjusted revenue was $538 million, a 2% decrease from $530 million in the fourth quarter of 2017. For the year, the company reported net income of $363.7 million, or $2.04 per share, swinging to a profit in the period. Revenue was reported as $2.13 billion, up 16% from 2017.

The company also reported record fourth-quarter bookings of $531 million, up 69% from the prior year period.

During a call with analysts, Allscripts' Chief Financial Officer Dennis Olis said total software revenue in the fourth quarter was flat year-over-year, totaling $350 million. Client services revenue declined 5% year-over-year to $188 million in the fourth quarter, with the decline primarily driven by delays in upgrade activity.

The company also reported adjusted EBITDA totaled $104 million in the fourth quarter of 2018, compared with $107 million in the fourth quarter of 2017.

“Adjusted EBITDA in the quarter was negatively impacted by higher than expected employee healthcare costs, higher expenses at Netsmart from acquired businesses and additional investments in Veradigm,” Olis said.

Allscripts has been on an acquisitions spree in the past 18 months, purchasing McKesson’s health IT, including its Paragon electronic health record platform, in late 2017, Practice Fusion, another EHR vendor, in early 2018 and then Health Grid, a patient engagement platform, last May. Practice Fusion has since been rebranded as Veradigm.

Allscripts executives said they are optimistic that these acquisitions will diversify its business in a competitive EHR market.

Allscripts president Richard Poulton said during a call with analysts on Thursday the acquisitions position the company for future growth in the form of new customers, new solutions and new end markets.

The former McKesson business has brought in more than 200 new clinical client relationships and an additional 250 financial clients, he said. During the fourth quarter, Allscripts had 12 new Sunrise facility wins, bringing its total hospital wins for 2018 up to 23 facilities, three times more than in 2017. “These wins demonstrate our ability to win new clients in a slow-growing hospital EHR replacement market,” he said.

Allscripts also had some competitive wins in the ambulatory EHR space, driven in some part by its competitor, Athenahealth, recently being acquired by two private equity firms. “We think our competitive standing has never been stronger in the last few years in the ambulatory space,” Poulson said.

In January, Allscripts’ Veradigm business, a payer and life sciences-focused platform, announced a partnership with NextGen Healthcare to enable data exchange between providers and health plans, insurance companies, laboratories and research organizations. Veradigm also announced a collaboration with Microsoft to develop a platform for clinical research.

Allscripts CEO Paul Black noted that 95% of U.S. hospitals and 87% of physician practices now have EHRs, which is driving the company to focus on solutions outside of the EHR market. “Our electronic health record footprint, along with the investments that we've made, have allowed us to develop key platforms in consumer and patient engagement, community connectivity, precision medicine and payer life sciences. These platforms distinguish Allscripts from other EHR vendors and open significant market opportunities for us,” he said.

Black said Allscripts has scale that gives it access to significant capital. “There's a lot of good innovation and technology happening around the industry that we can bring to market faster than let's just say some of our larger competitors who have shunned acquisitions and have a model where they tend to want to do everything on a native integrated basis.”

“We see additional opportunities for Allscripts as the competitive landscape remains in flux for some stand-alone EHR companies,” Black said.