Allscripts Healthcare Solutions (MDRX)

Q1 2011 Earnings Call

May 05, 2011 4:30 pm ET


William Davis - Chief Financial Officer and Principal Accounting Officer

Glen Tullman - Chief Executive Officer and Director

Seth Frank - Vice President of Investor Relations


Bret Jones - Oppenheimer & Co. Inc.

Michael Cherny - Deutsche Bank AG

Atif Rahim - JP Morgan Chase & Co

George Hill - Leerink Swann

Jeremy Lopez - William Blair & Company

Lawrence Marsh - Barclays Capital

Jamie Stockton - Morgan Keegan & Company, Inc.



Good afternoon. My name is Andrea, and I will be your conference operator today. At this time, I would like to welcome everyone to the Allscripts First Quarter Conference Call. [Operator Instructions] I would now like to turn the call over to Mr. Seth Frank, Vice President of Investor Relations with Allscripts. You may begin your conference.

Seth Frank

Thank you, Andrea. Good afternoon. This is Seth Frank, Allscripts' Vice President of Investor Relations. On the call today are Glen Tullman, our Chief Executive Officer; Bill Davis, our Chief Financial Officer; and Lee Shapiro, our President. To start the call, I'll read the Safe Harbor statement.

This presentation will contain forward-looking statements within the meaning of the Federal Securities laws. Statements regarding future events and developments, the company's future performance, as well as management's expectations, beliefs, intentions, plans, estimates or projections relating to the future are forward-looking statements within the meaning of these laws. These forward-looking statements are subject to a number of risks and uncertainties, including our ability to achieve the strategic benefits of the merger with Eclipsys, and other factors outlined from time-to-time in our most recent transition report on Form 10-KT, our earnings announcements and other reports we file with the Securities and Exchange Commission. These are available at The company undertakes no obligation to update publicly any forward-looking statement, whether as a result of new information, future events or otherwise.

And now I'd like to introduce Glen Tullman, Chief Executive Officer of Allscripts.

Glen Tullman

Thanks, Seth. I want to welcome all of you to the Allscripts 2011 First Quarter Earnings Call. This is an amazing time in healthcare. The industry is transforming as we speak, and Allscripts is incredibly well-positioned with solutions that improve the quality of care and better manage costs. We provide the broadest suite of applications to connect caregivers, deliver information where and when it's needed and to generate insights, actionable suggestions at the point of care that lead to better outcomes. And we can prove it.

Here are just a few examples from our lengthy list of Sunrise reference clients. At Blessing Hospital in Quincy, Illinois, they achieved a 95% reduction in the rate of transcription-related medication errors. At Orlando Health in Orlando, Florida, they achieved a significant 25% decrease in the relative risk of mortality due to sepsis, one of the leading causes of death in U.S. hospitals. And at University Hospital in San Antonio, Texas, they were able to achieve a significant improvement on a few key metrics related to diabetic patients, including 74% more compliance with medication therapy to prevent cardiovascular disease and a 50% improvement in eye exams. And those are just a handful of the clinical outcomes our clients have achieved using our solutions. You can read about many more of them on our website.

The news of our ability to help our clients improve clinical and operational outcome is beginning to resonate in the market today, and it shows in our performance. It's also increasingly clear that our strategy is aligned with the direction of the market.

Last month, CMS released their draft rules governing accountable care organizations or ACOs. Some of our largest clients see ACOs or bundled payments as the future of healthcare, and they are already working with payors to formulate new reimbursement strategies. The rules for ACOs make one point very clear, coordinated care will require an interoperable Electronic Health Record that connects providers across the entire continuum of care and entire communities. And every part of the community is important, which makes our footprint in 50,000 ambulatory practices, our relationships with over 1,500 acute care hospitals and our strong penetration of the post-acute-care world even more strategic.

When you consider the new payment models like ACOs, along with the $30 billion in federal incentives available between now and 2015 for hospitals and physicians who adopt and meaningfully use Electronic Health Records, you can better understand why the momentum in our market is increasing. When we brought together Allscripts and Eclipsys, it was in direct response to the fundamental shifts we saw occurring in the market, and I'm very pleased with our progress to date.

We have delivered on the commitments we made. We said we would continue to execute on a significant cross-sell opportunity in our combined client base, and we have. We said we would demonstrate success integrating our product portfolio, and we have. We said we would deliver on cost synergies, and we have.

And we now have one new factor to add. We told you we would deliver net new Sunrise Enterprise sales in 2011, and we have. The best evidence of excitement in the market relative to our merger is that in our first 2 full quarters as a combined company, we sold over $500 million in products and services, representing a 22% year-over-year growth. And as you can see from some of our announcements, that momentum isn't slowing down.

From a financial standpoint, the quarter was strong. Specifically, we reported non-GAAP revenues of $346.1 million, a 10.5% increase over the same quarter last year.

Non-GAAP net income of $40.6 million, representing a 12% growth year-over-year, and non-GAAP earnings per share of $0.21 per diluted share, up $0.02 year-over-year. We also demonstrated strong year-over-year operating margin improvement, growing from 19.1% in the first quarter last year to 20.8% in 2011, as we leveraged our size and benefited from merger-related cost synergies.

And we had another strong quarter of cash flow from operations, reducing our debt by another $41 million. Total bookings were $227.6 million in the first quarter of 2011. To add some perspective to our bookings, in the first quarter, we signed approximately 600 agreements with new clients, representing robust sales across every one of our product lines.

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