Allscripts Beats Squarely

Allscripts Healthcare Solutions (MDRX), a leading player in the health care information technology (“HCIT”) market, reported first quarter adjusted (excluding one-time items other than stock-based compensation expense) earnings per share of 18 cents, beating the Zacks Consensus Estimate of 17 cents.

Reported net income for the quarter was $12.6 million (6 cents per share) compared with $18.6 million (12 cents per share) in the year-ago period, a roughly 32% decline.

On August 24, 2010, Allscripts accomplished its merger with Eclipsys Corporation, following which its board altered the fiscal year end from May 31 to December 31.

Revenues

Allscripts reported revenues of $335.3 million in the first quarter. Adjusted revenues were $346.1 million, up 10.5% year over year, beating the Zacks Consensus Estimate of $343 million. Bookings amounted to $227.6 million, including acute care software maintenance agreements, in the reported quarter while backlog stood at $2.7 billion at the end of the quarter.

Segment-wise Data

Reported revenue comprised System Sales, Professional Services, Maintenance and Transaction Processing, each of which contributed a respective 16.3%, 16.6%, 29.9% and 37.2% of sales in the latest quarter.

Margin

Adjusted gross profit was $170.6 million, up 6.5% year over year. Adjusted operating margin was 20.8%, up from 19.1% in the year-ago quarter.

Balance Sheet

As of March 31, 2011, Allscripts had cash and marketable securities of $147 million and $448 million of outstanding borrowings.

Outlook

The company affirmed its earnings per share guidance for 2011. It expects adjusted revenues in a range of $1,425 million to $1,450 million for fiscal 2011. Adjusted operating margin is projected at 21%. Adjusted earnings per share are forecast between 86 cents 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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