Allscripts Healthcare Solutions (MDRX)

Q3 2011 Earnings Call

November 03, 2011 4:30 pm ET

Executives

Steve Shute - Executive Vice President of Sales

Unknown Executive -

Glen E. Tullman - Chief Executive Officer, Executive Vice President and Director

William J. Davis - Chief Financial Officer and Principal Accounting Officer

Seth Frank - Vice President of Investor Relations

Analysts

Richard C. Close - Avondale Partners, LLC, Research Division

Atif A Rahim - JP Morgan Chase & Co, Research Division

Michael Cherny - Deutsche Bank AG, Research Division

Jeremy Lopez - William Blair & Company

Sean W. Wieland - Piper Jaffray Companies, Research Division

Jamie Stockton - Morgan Keegan & Company, Inc., Research Division

George Hill - Citigroup Inc, Research Division

Lawrence C. Marsh - Barclays Capital, Research Division

Charles Rhyee - Cowen and Company, LLC, Research Division

Sebastian Paquette - Goldman Sachs Group Inc., Research Division

Presentation

Operator

Good afternoon. My name is Rob, and I will be your conference operator today. At this time,, I would like to welcome everyone to the Allscripts Q3 2011 Earnings Call. [Operator Instructions] Mr. Seth Frank, Vice President of Investor Relations, you may begin your call.

Seth Frank

Thank you, Rob. 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 Steve Shute, our Executive Vice President of Sales.

Before we begin the call, let me briefly 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 companies 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 www.sec.gov.

The company undertakes no obligation to publicly, pardon me, publicly any -- to update publicly any forward-looking statement whether as a result of new information, future events or otherwise.

Now I'd like to turn the call over to Glen Tullman, Chief Executive Officer of Allscripts.

Glen E. Tullman

Thanks, Seth, and welcome to our Third Quarter 2011 Earnings Call. In the next few minutes, I will review our results, discuss what we're seeing in the market and why we're winning, and then turn it over to Bill Davis to provide more color on the numbers. So let's go ahead and get started with a brief review of our financial results.

Bookings were very strong in the quarter at $267 million, a 34% increase over the third quarter of 2010. That level of growth is indicative of strong demand and performance across all of our segments. Notably, this is a record bookings figure, something we are obviously very pleased with.

Turning to revenue, our non-GAAP revenue was approximately $371 million, reflecting 13% growth over the third quarter of 2010, and an acceleration from the second quarter. We've made impressive progress on the upgrade front, while also continuing to bring new clients online. Our non-GAAP net income was approximately $47 million, which equals $0.25 per share, a 32% increase in diluted earnings per share over the third quarter of 2010.

Bill will get into the details in a few minutes, but overall, I'm very pleased with our financial results and believe this was a great quarter for Allscripts. Moreover, it's a great market to be in. As you all know, while healthcare is highly complex, information technology has now taken center stage as a significant solution to the challenges facing healthcare. Relative to what we see driving the market, regulatory influences continue to be front and center. While Meaningful Use is on everyone's mind today, attention is beginning to shift to the required adoption of ICD-10 in 2013.

Another influential factor is the significant revision to reimbursement under way at the federal level, fostering the move to a value-based system of care. As an example, the Centers for Medicare and Medicaid Services, better known as CMS, published the final rule for accountable care organizations in October. Our clients need solutions like ours to shift from fee-for-service to fee-for-value. You can't get paid for quality outcomes unless you can capture, communicate, measure and share patient-centric information. And that's the essence of what we do at Allscripts.

One more example is the readmission rule, which takes effect January 1, 2012. The rule requires hospitals to cover the cost of care, provided to discharged patients who are readmitted to the hospital for the same problem within 30 days. As a result, more hospitals are expressing interest in our Care Management and discharge management products. These solutions streamline the flow of patient information from the hospital to community providers. Taken together, these trends have made healthcare IT a strategic board-level discussion for healthcare providers everywhere.

There are 2 key points: first, each one of these different regulatory issues is an opportunity for Allscripts. And second, we're bullish on the healthcare IT market and believe it is poised for many years of growth ahead. One of the reasons we are confident is that our client base continues to grow. In August, at our annual Users Conference, we hosted close to 5,000 attendees. The event created both great momentum, interaction with our new solutions, and support in the base. We also have over 26,000 clients who use our ClientConnect portal to learn, exchange best practices, and to explore new products.

Beyond our success within our base, our third quarter results reflect the addition of literally hundreds of new clients. Now I love every client, but I want to call out 3 new Sunrise Clinical Manager clients that we added in the third quarter: Atlantic General Hospital, Lompoc Valley Medical Center and Flagler Hospital. Atlantic General Hospital in Ocean City, Maryland was a highly-competitive win. There were 3 primary reasons Atlantic General selected Allscripts. First, they are an existing Allscripts client that has been very successful using our Professional Electronic Health Record and Practice Management system for all of their employed physicians. Second, Atlantic General was attracted by the clinical sophistication of Sunrise and our strong focus on delivering meaningful insights and outcomes for our clients. And the final differentiator was our ability to protect Atlantic General's existing investments without having to rip and replace their legacy systems. The ability to provide Sunrise at a total cost of ownership that is manageable for mid-sized community hospitals is a model that we believe represents a significant market opportunity.

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