Allscripts Healthcare Solutions Management Discusses Q2 2012 Results - Earnings Call Transcript

Allscripts Healthcare Solutions (MDRX)

Q2 2012 Earnings Call

August 08, 2012 4:30 pm ET

Executives

Seth Frank - Vice President of Investor Relations

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

W. David Morgan - Interim Chief Financial Officer and Senior Vice President of Finance

Analysts

Michael Cherny - ISI Group Inc., Research Division

Jamie Stockton - Wells Fargo Securities, LLC, Research Division

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

Gregory T. Bolan - Sterne Agee & Leach Inc., Research Division

Andrew O'Hara

Charles Rhyee - Cowen and Company, LLC, Research Division

George Hill - Citigroup Inc, Research Division

Lawrence C. Marsh - Barclays Capital, Research Division

Alexander Y. Draper - Raymond James & Associates, Inc., Research Division

Eric W. Coldwell - Robert W. Baird & Co. Incorporated, Research Division

Sean W. Wieland - Piper Jaffray Companies, Research Division

Stephen B. Shankman - UBS Investment Bank, Research Division

Presentation

Operator

Good afternoon. My name is Sarah, and I will be your conference operator today. At this time, I would like to welcome everyone to the Second Quarter 2012 Earnings Conference Call. [Operator Instructions] Seth Frank, Vice President of Investor Relations with Allscripts, you may begin your conference.

Seth Frank

Thanks, Sarah. Good afternoon, and thanks for joining us. With me on the call today are Glen Tullman, Allscripts' Chief Executive Officer; Dave Morgan, our interim Chief Financial Officer; and Lee Shapiro, our President.

[Operator Instructions] Before we begin, I'll 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 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 factors outlined from time to time in our most recent report on Form 10-K, 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 update publicly any forward-looking statement whether as a result of new information, future events or otherwise.

And with that complete, I'd now like to turn the call over to Glen Tullman, Allscripts' CEO. Glen?

Glen E. Tullman

Thanks, Seth. Good afternoon. Thank you for joining us on our second quarter 2012 earnings call. I'll begin with the highlights of our results and our focus on operating performance. Dave Morgan, our interim Chief Financial Officer, will then provide more detail and review our guidance.

Our second quarter results demonstrate progress in several key areas and opportunities for improvements and others. I'm confident we are moving in the right direction.

Looking at the highlights, bookings reflect an improvement in mix versus the first quarter. Specifically, we had strong results in the mid-sized physician market with our professional Electronic Health Record solution. Total ambulatory bookings were also up significantly quarter-over-quarter. And we capitalized on key opportunities in the enterprise Electronic Health Record physician market, particularly through competitive replacements.

Our acute business also performed well. We closed 2 net new Sunrise Clinical Manager agreement, plus 1 footprint expansion with one of our larger clients. Revenue was also up sequentially and slightly year-over-year at approximately $371 million. Our non-GAAP operating margin increased over Q1, heading in the right direction, and we expect continued improvement in the second half of the year.

Total R&D expense increased year-over-year, reflecting significant investments in our core Electronic Health Record assets to improve performance and our increased focus on new product development and innovation.

Our operating cash flow remains strong with close to $60 million generated in Q2 and free cash flows in excess of $25 million. Also, our board doubled the size of our share repurchase program in April to $400 million.

We repurchased a total of 21 million shares in the quarter. Dave will provide more information about our share repurchase program and the impact on our financial guidance for 2012.

Now let's turn to a more detailed upgrade or update within several areas of our business.

We continue to see ample opportunity for Allscripts to grow market share across the entire continuum of care. Our vision of a connected community of health continues to be a differentiator for us. Cape Cod Healthcare's decision in Q2 to replace their incumbent clinical vendor demonstrates the power of pairing robust clinical solutions with the ability to connect to a local community. This was a major new enterprise win for us, covering more than 300 physicians.

Within the acute arena, we expanded our Sunrise footprint by 2 hospitals in Q2, including Salford Royal NHS Foundation Trust, our second acute care win in the United Kingdom. In addition, we signed a new SCM client in the Northeast, as well as an SCM footprint expansion with Ascension Health, one of our largest national clients. We also had a strong bookings quarter in care management, another area where Allscripts differentiates itself from our competition. The quarter included wins at North Shore Long Island Jewish Medical Center and New York-Presbyterian Hospital. New client sales of our care management solution were also up during the quarter.

Turning to product delivery. Our solutions development team continue to make progress enhancing the performance and integration of our portfolio. The next releases of our core Electronic Health Record systems are currently in the early adopter phase at multiple client sites and on target for general availability in the fourth quarter of this year.

SCM 6.0 and Enterprise EHR 11.4 include major development enhancements in new functionality such as ICD-10 compliance, improved stability and performance, along with enhanced upgrade experience for our clients.

Read the rest of this transcript for free on seekingalpha.com

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