Allscripts Healthcare Solutions (MDRX), a leading player in the health care information technology (“HCIT”) market, reported second quarter adjusted (excluding one-time items other than stock-based compensation expense) earnings per share of 19 cents matching the Zacks Consensus Estimate.
Reported net income for the quarter was $15.9 million (8 cents per share) compared with $13.1 million (9 cents per share) in the year-ago period, about 21.4% increase.
Revenues
Allscripts reported sales of $356.8 million in the second quarter beating the Zacks Consensus Estimate of $353 million. Adjusted sales were $363.5 million, up 11% year over year. Bookings amounted to $244.6 million, up 15% on a sequential basis.
Data by Segment
Reported sales comprised System Sales, Professional Services, Maintenance and Transaction Processing, each of which contributed a respective 18.1%, 16.3%, 28.9% and 36.6% of sales in the reported quarter.
Margin
Adjusted gross margin was 48% of revenues in the reported quarter compared with 49.3% in the prior-year period. Adjusted operating margin was 20.5% of sales in the reported quarter compared with 17.7% in the year-ago quarter.
Balance Sheet
As of June 30, 2011, Allscripts had cash and marketable securities of $117 million and $422.8 million of outstanding borrowings.
During the reported quarter, Allscripts repurchased about $50 million of shares leaving $150 million outstanding under its share repurchase program.
Outlook
The company adjusted its guidance for 2011 to the high end of its previously disclosed guidance range. It expects adjusted revenues in a range of $1,440 million to $1,450 million (earlier $1,425 million to $1,450 million) for fiscal 2011.
Adjusted operating margin is still projected at about 21%. Adjusted earnings per share are forecast between 88 cents and 90 cents (earlier 86 and 90 cents).
The health care information technology market is competitive and price sensitive. Among others, Allscripts faces strong competition from Cerner Corp. (CERN), Quality Systems (QSII) and Athenahealth (ATHN).
However, optimism about the growth prospects of select HCIT service providers is high under the Obama Administration, which passed the Stimulus package in May 2009, aimed at increasing the use of electronic health record (“EHR”) systems by medical practitioners.
The company has widened its user base after its mergers with Misys and Eclipsys and increased cross-selling opportunities. We believe that Allscripts is well positioned in the fast growing business of selling EHR/EMR to physician practices and other ambulatory care settings.
The acquisition of Eclipsys provides the company with an acute care product for sale in concert with its ambulatory services. We opine that acute and ambulatory care will continue to converge in future and that Allscripts is well positioned to provide integrated clinical applications that will permit health care providers to satisfy HITECH Act requirements and eventually comply with an outcomes-based reimbursement system.
Strong bookings currently taking place, with both ambulatory and acute products doing well, may indicate that the Eclipsys products are popular in the market and that cross-selling synergies are for real. Currently, we are Neutral on Allscripts.
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