Health IT company Allscripts' data analytics business is ramping up, delivering double-digit gains in the second quarter of 2021.
The company's overall revenue was flat for the quarter, with a modest 1% bump from $369 million a year ago to $374 million, Allscripts announced in its second-quarter earnings report (PDF).
"Our revenue results, though, were really a tale of two different stories," said Rick Poulton, president and chief financial officer at Allscripts, during the second-quarter earnings call.
"In our core clinical and financial segment, revenue was essentially flat on both a year-over-year and sequential basis, and this continues to reflect a conscious effort on our part to boost gross margins by emphasizing quality of revenue and acceptable levels of client profitability," he said.
Allscripts reported a particularly strong quarter in its life sciences data business within the Veradigm segment, both for in-quarter revenue as well as new partnership development, Poulton said.
The company's Veradigm business has the largest linked electronic health records claims patient database available for research, sourced from and directly connected to clinical platforms.
Allscripts expects those double-digit gains to continue for the rest of 2021.
Allscripts signed a partnership agreement with PRA Health Sciences to create an EHR-based clinical research network, reaching more than 25,000 physicians and 40 million patients across the U.S., according to Poulton.
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"The partnership will use Veradigm's study source platform alongside PRA's clinical research technology support, so that physicians can offer clinical research as a care option for their patients. This is another example of the value of the last-mile connection to the physician and patient that Veradigm brings to life science companies and at a scale that is unmatched in the industry," he said.
The life sciences leg of the Veradigm business is gaining traction as the industry shifts to real-world evidence as a fundamental pillar of drug discovery, Poulton told investors on the call.
Allscripts' ambulatory footprint combined with data from third-party partnerships creates an "unparalleled network of access to the point of care," he said.
He added, "And that is really getting the interest of almost everybody in the life science space right now. So we're riding that wave, and it is absolutely a big part of what's behind our revenue outlook for Veradigm. It's not the only thing Veradigm's doing, but that's a big piece of it right now."
As it looks to invest further in its data analytics business, Allscripts will potentially look for bolt-on acquisitions to boost its capabilities, CEO Paul Black said during the earnings call.
"We see long-term growth opportunities there. Assets in that space tend to be expensive, but at smaller scales, it may make sense for us to augment some of our assets. That could be around data registries, it could be around some other capabilities, rather than build them organically," he said.
The company also is investing heavily in its EHR software through a five-year cloud partnership with tech giant Microsoft.
"We expect to benefit from the investments we've made to deliver Sunrise as the platform of health, delivered in the cloud through our partnership with Microsoft. This is resonating with our client base, and we believe it will be a critical driver to help us win new logos in the U.S. replacement market and in the international greenfield market," Black said during the call.
The company anticipates the cloud-based Sunrise EHR will drive new sales due to high availability, cybersecurity, disaster recovery and business continuity capabilities, he said.
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The Chicago-based company reported a quarterly profit of $22 million compared with a net loss of $8 million in the second quarter of 2020. Earnings, adjusted for nonrecurring costs and stock option expense, came to 23 cents in the quarter compared to 17 cents in the same period a year ago.
Allscripts' quarterly earnings beat Wall Street estimates and revenue for the quarter also beat analysts' expectations, according to Zacks Consensus Estimate.
Bookings during the quarter grew 10% from $164 million a year ago to $180 million in the second quarter of 2021.
Allscripts also booked a $5 million recovery related to its Department of Justice settlement over Practice Fusion.
The company hired a financial advisory firm in 2020 to develop a margin improvement plan to boost its financial performance.
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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 $69 million in the second quarter of 2021, compared with $54 million in the second quarter of 2020. The company reported an adjusted EBITDA margin of 18.4% compared to 14.6% a year ago.
The company generated $69 million of cash flow from continuing operations and $51 million of free cash flow in the second quarter.
“In the second quarter, Allscripts continued to benefit from the actions we took to position the company on a sustainable path to improve margins, generate free cash flow and serve our clients with strategic innovations as they continue to manage through the pandemic. Our strong results enabled us to continue investing in our platforms to deliver value for our clients while at the same time maintaining disciplined cost management and returning a significant amount of capital to our shareholders,” Black said in a statement.
The company expects to pull in $1.5 billion in revenue for 2021.
Allscripts raised its outlook for full-year 2021 adjusted EBITDA between $265 million and $275 million, an increase from the prior outlook of between $240 million and $260 million. The company also expects free cash flow between $115 million and $125 million, an increase from the prior outlook of between $90 million and $100 million.
“Looking ahead, we expect to benefit as health care providers, payors and life sciences companies shift their focus to acquiring best in class solutions from vendors that can deliver an integrated clinical and financial solution along with data and analytics that drive improved outcomes at the point of care," Black said.