Allscripts ramps up Netsmart sale as Q3 losses reach $36M

Allscripts is accelerating efforts to sell off its ownership stake in Netsmart, an EHR company that targets post-acute care providers and behavioral health.

Citing “significant market interest” in the company, Allscripts has hired financial advisors to run a formal sale process, Chief Financial Officer Richard Poulton said during an earnings call on Thursday.

Allscripts has completed the formal auction process and is finalizing late-stage negotiations with “a group of financial sponsors,” he said. Over the next several months, management will decide whether or not to close the deal.

“I would think, sitting here today, we'll know something before the year is over,” Poulton said.

But the sale is complex, in part because Allscripts isn’t selling the full controlling interest in Netsmart. Currently, Allscripts owns a $468 million stake in the company. The ownership structure, which was set up in a joint venture with GI Netsmart Holdings in 2016, is “difficult for some parties to accept without modification,” Poulton added.

“Modifying these provisions require some negotiation not just with Allscripts but also our existing JV partner and this complexity has created a lengthier process,” he said.

RELATED: Allscripts plans to sell off its stake in Netsmart

Management’s focus on the sale “clearly impacted third quarter results” for Netsmart with a slump in bookings. Overall, Allscripts saw a 16% boost in revenue compared to the third quarter last year with $522 million. 

But that missed Wall Street’s projections, driving shares down almost 17% on Friday.

The company reported a net loss of $36 million, bringing total losses to $11 million for the year. That’s markedly better than the $202 million is lost during the first nine months last year. Last quarter, the company reported $64.7 million in net profits.

Still, CEO Paul Black insisted the company was well-positioned in a post-Meaningful Use environment where providers were more focused on tools that could help facilitate value-based care.