View:
Download DOC
Download PDF
Download XLS
 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________

Form 8-K
______________________

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event Reported): February 18, 2016  

ALLSCRIPTS HEALTHCARE SOLUTIONS, INC.
(Exact Name of Registrant as Specified in Charter)

DELAWARE 001-3554736-4392754
(State or Other Jurisdiction of Incorporation)(Commission File Number)(I.R.S. Employer Identification Number)

 

222 Merchandise Mart Plaza, Suite 2024 , Chicago, Illinois 60654
(Address of Principal Executive Offices) (Zip Code)

(312) 506-1200
(Registrant's telephone number, including area code)

Not Applicable
(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 [   ]  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 [   ]  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 [   ]  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 [   ]  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
 

 

Item 2.02. Results of Operations and Financial Condition.

         On February 18, 2016, Allscripts Healthcare Solutions, Inc. (the “Company”) issued a press release regarding the Company’s financial results for the three and twelve months ended December 31, 2015. A copy of the Company’s press release is attached hereto as Exhibit 99.1.

         The information furnished pursuant to this Item shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

 

Item 9.01. Financial Statements and Exhibits.

      (d) Exhibits.

The following exhibit is furnished herewith:

Exhibit No. Description
   
99.1 Press release issued by Allscripts Healthcare Solutions, Inc. on February 18, 2016

 

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 ALLSCRIPTS HEALTHCARE SOLUTIONS, INC.
   
   
Date: February 18, 2016By: /s/ Richard J. Poulton        
  Name: Richard J. Poulton
  Title: President and Chief Financial Officer
  

 

EXHIBIT INDEX

 

Exhibit No. Description
   
99.1 Press release issued by Allscripts Healthcare Solutions, Inc. on February 18, 2016

EdgarFiling

EXHIBIT 99.1

Allscripts Announces Fourth Quarter 2015 and Full-Year Results

CHICAGO, Feb. 18, 2016 (GLOBE NEWSWIRE) -- Allscripts Healthcare Solutions, Inc. (NASDAQ:MDRX) (Allscripts) announced its financial results for the three months and year ended December 31, 2015. 

Fourth Quarter Bookings Highlights and Management Commentary

Bookings(1) were $343 million in the fourth quarter 2015, a corporate record, compared with $244 million in the fourth quarter of 2014, a 41 percent increase. The company experienced strong demand for software and services across all client segments including health systems, hospitals, physician practices and the post-acute market.  International sales also contributed meaningfully to the bookings performance, reaching the highest level in four years. 

Forty-five percent of fourth quarter bookings related to software delivery, while the remaining 55 percent related to client services.  This compares with 57 and 43 percent of bookings attributable to these revenue categories, respectively, in the fourth quarter of 2014.  Software delivery bookings increased 12 percent and client services bookings increased 78 percent year-over-year in the fourth quarter of 2015. 

Contract revenue backlog as of December 31, 2015, totaled $3.65 billion, a six percent increase over the prior-year amount. 

Paul M. Black, Chief Executive Officer of Allscripts, stated, “2015 was a significant year of execution for Allscripts across key financial metrics including bookings, recurring revenue, Adjusted EBITDA and earnings per share.  In addition, free cash flow increased four-fold in 2015 year-over-year – an outstanding performance and a reflection of Allscripts financial strength.”  

Mr. Black continued, “2015 finished strong, and we have excellent momentum as we enter 2016.  The company is financially fit, profitable and positioned well, offering a robust and complete solutions portfolio to enable the transformation to value-based care across the healthcare industry in the United States and globally.” 

Fourth Quarter Financial Highlights

Fourth quarter 2015 revenue totaled $346 million, an increase of one percent year-over-year. 

Software delivery, support and maintenance revenue totaled $228 million in the fourth quarter of 2015, a slight increase compared with the fourth quarter of 2014.  Software delivery, support and maintenance revenue consists of all software, hardware, subscription and transaction-related revenue as well as support and maintenance. 

Client services revenue totaled $118 million in the fourth quarter of 2015, up two percent compared with the fourth quarter of 2014.  Client services revenue consists of recurring managed services and other project-based client services revenue. 

Recurring revenue, consisting of subscriptions, recurring transactions, support and maintenance, and recurring managed services, increased five percent compared with the fourth quarter of 2014.  Non-recurring revenue, consisting of systems sales and other project-based client services revenue, declined 13 percent, compared with the fourth quarter of 2014.   Lower non-recurring revenue was primarily driven by lower revenue from project-based client services. 

Gross margin in the fourth quarter of 2015 was 47.3 percent on a non-GAAP basis and 44.5 percent on a GAAP basis, compared with 44.0 percent and 40.0 percent, respectively, in the fourth quarter of 2014. 

Operating expenses, consisting of selling, general and administrative (SG&A) and research and development (R&D) expenses, declined one percent on a non-GAAP and GAAP basis in the fourth quarter of 2015 compared with the fourth quarter of 2014.   

Reflecting year-over-year revenue growth, gross margin expansion and management of operating expenses, Adjusted EBITDA increased to $65 million in the fourth quarter of 2015, a 24 percent increase compared with the fourth quarter of 2014.

Non-GAAP net income attributable to Allscripts stockholders in the fourth quarter of 2015 totaled $26 million, a 52 percent increase compared with the fourth quarter of 2014.  GAAP net income attributable to Allscripts stockholders in the fourth quarter 2015 totaled $16 million compared with a net loss of $2 million in the fourth quarter of 2014.

Non-GAAP earnings per share in the fourth quarter of 2015 were $0.13, growth of 44 percent year-over-year.  GAAP earnings per share were $0.09 compared with a loss per share of $0.01 in the fourth quarter of 2014. 

Cash flow from operations in the fourth quarter of 2015 totaled $83 million compared with $52 million in the fourth quarter of 2014. 

Fourth Quarter Business Highlights 

Full Year 2015 Highlights

For the full year, bookings totaled $1,111 million, a 20 percent year-over-year increase.

Revenue totaled $1,386 million, flat compared with 2014. 

Software delivery, support and maintenance revenue totaled $918 million in 2015, a one percent increase compared with 2014.  Client services revenue totaled $468 million for 2015, a two percent decline compared with 2014. 

Recurring revenue increased six percent and non-recurring revenue declined 15 percent year-over-year.

Gross margin was 45.0 percent on a non-GAAP basis and 41.9 percent on a GAAP basis, compared with 43.7 percent and 39.6 percent, respectively, in 2014. 

Adjusted EBITDA increased to $242 million, a 21 percent increase compared with 2014.

Non-GAAP net income totaled $88 million, a 56 percent increase, compared with 2014.  GAAP net loss in 2015 totaled $2 million compared with a net loss of $66 million in 2014.

Non-GAAP earnings per share were $0.47, growth of 52% compared with 2014.  GAAP loss per share in 2015 was $0.01 compared with $0.37 in 2014. 

For the full year 2015, cash flow from operations totaled $212 million, a 104 percent increase year-over-year.   Free cash flow totaled $144 million, a four-fold improvement compared with 2014.

2016 Financial Guidance

Allscripts is presenting annual guidance for revenue, Adjusted EBITDA and non-GAAP earnings per share.  Allscripts currently expects to achieve the following financial results in 2016:

For a complete reconciliation of GAAP and non-GAAP items, see the explanation of non-GAAP financial measures as well as the GAAP and non-GAAP reconciliation financial tables in this release (Tables 4, 5 and 6).

Conference Call:

Allscripts will conduct a conference call today, Thursday, February 18, 2016, at 4:30 PM Eastern Standard Time to discuss its earnings release and other information.  Participants may access the conference call via webcast at http://investor.allscripts.com. Participants also may access the conference call by dialing +1 (877) 269-7756 or +1 (201) 689-7817 (international) and requesting Conference ID # 13629461.

A replay of the call will be available approximately two hours after the conclusion of the call, for a period of four weeks, on the Allscripts Investor Relations website or by calling +1 (877) 660-6853 or +1 (201) 612-7415 - Conference ID # 13629461.

Supplemental and non-GAAP financial information is also available at http://investor.allscripts.com. 

Footnotes

(1) Bookings reflect the value of executed contracts for software, hardware, other client services, remote hosting, outsourcing and subscription-based services.

About Allscripts

Allscripts (NASDAQ:MDRX) is a leader in healthcare information technology solutions that advance clinical, financial and operational results. Our innovative solutions connect people, places and data across an Open, Connected Community of Health™. Connectivity empowers caregivers to make better decisions and deliver better care for healthier populations. To learn more, visit www.allscripts.com, Twitter, YouTube and It Takes A Community: The Allscripts Blog.

© 2016 Allscripts Healthcare, LLC and/or its affiliates. All Rights Reserved.

Allscripts, the Allscripts logo, and other Allscripts marks are trademarks of Allscripts Healthcare, LLC and/or its affiliates. All other products are trademarks of their respective holders, all rights reserved. Reference to these products is not intended to imply affiliation with or sponsorship of Allscripts Healthcare, LLC and/or its affiliates.

Forward-Looking Statements

This earnings release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  These forward-looking statements are based on the current beliefs and expectations of Allscripts management, only speak as of the date that they are made, and are subject to significant risks and uncertainties.  Such statements can be identified by the use of words such as  “future,” “anticipates,” “believes,” “estimates,” “expects,” “intends,” “plans,” “predicts,” “will,” “would,” “could,” “can,” “may,” and similar terms. Actual results could differ from those set forth in the forward-looking statements, and reported results should not be considered an indication of future performance.  Certain factors that could cause Allscripts’ actual results to differ materially from those described in the forward-looking statements include, but are not limited to: Allscripts’ failure to compete successfully; consolidation in Allscripts’ industry; current and future laws, regulations and industry initiatives; increased government involvement in Allscripts’ industry; the failure of markets in which Allscripts operates to develop as quickly as expected; Allscripts’ or its customers’ failure to see the benefits of government programs; changes in interoperability or other regulatory standards; the effects of the realignment of Allscripts’ sales, services, and support organizations; market acceptance of Allscripts’ products and services; the unpredictability of the sales and implementation cycles for Allscripts’ products and services; Allscripts’ ability to manage future growth; Allscripts’ ability to introduce new products and services; Allscripts’ ability to establish and maintain strategic relationships; risks related to the acquisition of new companies or technologies; the performance of Allscripts’ products; Allscripts’ ability to protect its intellectual property rights; the outcome of legal proceedings involving Allscripts; Allscripts’ ability to hire, retain and motivate key personnel; performance by Allscripts’ content and service providers; liability for use of content; security breaches; price reductions; Allscripts’ ability to license and integrate third party technologies; Allscripts’ ability to maintain or expand its business with existing customers; risks related to international operations; changes in tax rates or laws; business disruptions; Allscripts’ ability to maintain proper and effective internal controls; and asset impairment charges.  Additional information about these and other risks, uncertainties, and factors affecting Allscripts’ business is contained in Allscripts’ filings with the Securities and Exchange Commission.  Allscripts does not undertake to update forward-looking statements to reflect changed assumptions, the impact of circumstances or events that may arise after the date of the forward-looking statements, or other changes in its business, financial condition, or operating results over time. 

Table 1 
Allscripts Healthcare Solutions, Inc. 
Condensed Consolidated Balance Sheets 
(In millions) 
(Unaudited) 
      
  December 31, December 31, 
  2015   2014  
ASSETS     
Current assets:     
Cash and cash equivalents $116.9  $53.2  
Accounts receivable, net  327.8   331.6  
Prepaid expenses and other current assets  93.6   102.4  
Total current assets  538.3   487.2  
Long-term marketable securities    -    1.3  
Fixed assets, net  125.6   145.8  
Software development costs, net  85.8   86.2  
Intangible assets, net  347.6   403.4  
Goodwill  1,222.6   1,200.7  
Deferred taxes, net (a)  2.3   2.0  
Other assets  359.7   137.8  
Total assets $2,681.9  $2,464.4  
      
LIABILITIES AND STOCKHOLDERS’ EQUITY     
Current liabilities:     
Accounts payable $60.0  $70.8  
Accrued expenses  62.0   79.0  
Accrued compensation and benefits  62.4   51.1  
Deferred revenue  315.9   293.0  
Current maturities of long-term debt and capital lease obligations  12.6   27.5  
Total current liabilities  512.9   521.4  
Long-term debt  612.4   539.2  
Deferred revenue  20.3   23.2  
Deferred taxes, net (a)  22.2   21.1  
Other liabilities  95.1   75.3  
Total liabilities  1,262.9   1,180.2  
Total Allscripts Healthcare Solutions, Inc.'s stockholders' equity  1,407.8   1,284.2  
Non-controlling interest  11.2     -   
Total stockholders’ equity  1,419.0   1,284.2  
Total liabilities and stockholders’ equity $2,681.9  $2,464.4  
      
(a) Deferred taxes, net reflects the early adoption of ASU 2015-17 effective December 31, 2015, which requires the presentation of deferred tax assets ("DTA") and liabilities ("DTL") as noncurrent in a classified balance sheet. The December 31, 2014 balance sheet was revised and reflects the reclassification of approximately $35.6 million previously reported as current DTA to $1.3 million noncurrent DTA and $34.3 million noncurrent DTL. 

 

Table 2 
Allscripts Healthcare Solutions, Inc. 
Condensed Consolidated Statements of Operations 
(In millions, except per-share amounts) 
(Unaudited) 
          
  Three Months Ended
December 31,		 Year Ended
December 31,		 
   2015   2014   2015   2014  
Revenue:         
Software delivery, support and maintenance $227.6  $226.9  $918.4  $907.4  
Client services  118.0   114.0   468.0   470.5  
Total revenue  345.6   340.9   1,386.4   1,377.9  
Cost of revenue:         
Software delivery, support and maintenance  68.6   77.0   291.8   312.9  
Client services  104.2   107.8   432.0   437.8  
Amortization of software development and acquisition-related assets (a)  19.0   19.7   82.0   81.2  
Total cost of revenue  191.8   204.5   805.8   831.9  
Gross profit  153.8   136.4   580.6   546.0  
Selling, general and administrative expenses   79.3   85.1   339.2   358.7  
Research and development  46.0   41.5   184.8   192.8  
Asset impairment charges  1.2   0.3     1.5   2.4  
Amortization of intangible and acquisition-related assets  4.2   8.9   23.2   31.3  
Income (loss) from operations  23.1   0.6   31.9   (39.2) 
Interest expense and other, net (b)  (7.5)  (7.2)  (29.2)  (28.9) 
Equity in net earnings of unconsolidated investments  (0.8)    -      (2.1)    -   
Income (loss) before income taxes  14.8   (6.6)  0.6   (68.1) 
Income tax benefit (provision)  1.6   4.4     (2.6)  1.6  
Net income (loss)  16.4   (2.2)  (2.0)  (66.5) 
Less: Net income attributable to non-controlling interest  (0.1)    -      (0.2)    -   
Net income (loss) attributable to Allscripts Healthcare Solutions, Inc. stockholders $16.3  ($2.2) ($2.2) ($66.5) 
          
Earnings (loss) per share - basic and diluted $0.09  ($0.01) ($0.01) ($0.37) 
          
Weighted average common shares outstanding:         
Basic  189.1   180.3   185.1   179.8  
Diluted  191.5   180.3   185.1   179.8  
          
(a) Amortization of software development and acquisition-related assets includes:         
Amortization of capitalized software development costs $11.3  $11.0  $46.9  $46.1  
Amortization of acquisition-related intangible assets  7.7   8.7   35.1   35.1  
  $19.0  $19.7  $82.0  $81.2  
          
(b) Interest expense and other, net are comprised of the following for the periods presented: 
  
  Three Months Ended
December 31,		 Year Ended
December 31,		 
   2015   2014   2015   2014  
          
Non-cash amortization of 1.25% Cash Convertible Notes original issue discount $2.7  $2.6  $10.8  $10.3  
Non-cash write-off of unamortized deferred debt issuance costs    -      -      1.4     -   
Non-cash charges to interest expense and other, net    2.7     2.6     12.2     10.3  
Interest expense    4.1     3.9     16.3     16.0  
Amortization of discounts and debt issuance costs  0.6   0.8   2.9   3.0  
Other expense (income), net    0.1     (0.1)    (2.2)    (0.4) 
Total interest expense and other, net $7.5  $7.2  $29.2  $28.9  

 

Table 3 
Allscripts Healthcare Solutions, Inc. 
Condensed Consolidated Statements of Cash Flows 
(In millions) 
(Unaudited) 
          
  Three Months Ended
December 31,		 Year Ended
December 31,		 
   2015   2014   2015   2014  
Cash flows from operating activities:         
Net income (loss) $16.4  ($2.2) ($2.0) ($66.5) 
Non-cash adjustments to net loss:         
Depreciation and amortization  36.5   42.7   161.0   174.3  
Stock-based compensation expense  7.5   7.1   34.7   39.3  
Other non-cash charges, net  (3.0)  (2.8)  1.6   6.3  
Total non-cash adjustments to income  41.0   47.0   197.3   219.9  
Cash impact of changes in operating assets and liabilities  25.9   6.7   16.3   (49.9) 
Net cash provided by operating activities  83.3   51.5   211.6   103.5  
Cash flows from investing activities:         
Capital expenditures  (4.1)  (5.7)  (18.3)  (26.4) 
Capitalized software  (16.6)  (12.4)  (49.3)  (40.7) 
Purchases of non-marketable securities in partner entities, business acquisition, net of cash acquired and other investments  (3.1)    -    (225.2)  (41.7) 
Sales and maturities of marketable securities and other investments    -      -    3.8     -   
Proceeds from sale of fixed assets    -      -      -    0.1  
Net cash used in investing activities  (23.8)  (18.1)  (289.0)  (108.7) 
Cash flows from financing activities:         
Proceeds from sale or issuance of common stock  1.6     -    103.7   1.7  
Stock-based compensation-related payments, net  (1.1)  (3.9)  (6.5)  (10.6) 
Senior secured debt (payments) borrowings, net  (34.4)  (13.3)  45.1   4.6  
Net cash (used in) provided by financing activities  (33.9)  (17.2)  142.3   (4.3) 
Effect of exchange rate changes on cash and cash equivalents  (0.1)  (0.3)  (1.2)  (0.3) 
Net increase (decrease) in cash and cash equivalents  25.5   15.9   63.7   (9.8) 
Cash and cash equivalents, beginning of period  91.4   37.3   53.2   63.0  
Cash and cash equivalents, end of period $116.9  $53.2  $116.9  $53.2  

 

Table 4
Allscripts Healthcare Solutions, Inc.
Condensed Non-GAAP Financial Information
(In millions, except per share amounts and percentages)
(Unaudited)
         
  Three Months Ended
December 31,		 Year Ended
December 31,
   2015   2014   2015   2014 
Total revenue, as reported$345.6  $340.9  $1,386.4  $1,377.9 
         
Deferred revenue and other adjustments   -   2.3     -   11.6 
Total non-GAAP revenue$345.6  $343.2  $1,386.4  $1,389.5 
         
Gross profit, as reported$153.8  $136.4  $580.6  $546.0 
         
Deferred revenue and other adjustments   -   2.3     -   11.6 
Acquisition-related amortization 7.7   8.7   35.1   35.1 
Stock-based compensation expense  1.9   1.3   8.7   5.9 
Non-recurring expenses and transaction-related costs (a)    -   2.2     -    8.6 
Total non-GAAP gross profit $163.4  $150.9  $624.4  $607.2 
         
Income (loss) from operations, as reported $23.1  $0.6  $31.9  ($39.2)
         
Deferred revenue and other adjustments    -   2.3     -   11.6 
Acquisition-related amortization    11.9   17.6     58.3   66.4 
Stock-based compensation expense     7.9   7.1     36.6   39.3 
Non-recurring expenses and transaction-related costs (a)    -   2.7     23.4   25.1 
Non-cash asset impairment charges    1.2   0.3     1.5   2.4 
Total non-GAAP operating income $44.1  $30.6  $151.7  $105.6 
         
Net income (loss) attributable to Allscripts Healthcare Solutions, Inc. stockholders, as reported $16.3  ($2.2) ($2.2) ($66.5)
         
Deferred revenue and other adjustments    -   1.6     -   7.6 
Acquisition-related amortization    7.7   11.5     37.9   43.2 
Stock-based compensation expense     5.1   4.6     23.8   25.6 
Non-recurring expenses and transaction-related costs    -   1.6     15.1   16.1 
Non-cash asset impairment charges    0.8   0.2     1.0   1.6 
Non-cash charges to interest expense and other    1.5   1.7     7.8   6.5 
Equity in net earnings of unconsolidated investments    0.8     -     2.1     - 
Tax rate alignment    (6.7)  (2.1)    2.5   22.2 
Non-GAAP net income attributable to Allscripts Healthcare Solutions, Inc. $25.5  $16.9  $88.0  $56.3 
         
Non-GAAP effective tax rate  35%  35%  35%  35%
         
Weighted shares outstanding - diluted  191.5   180.3   186.5   179.8 
         
Earnings (loss) per share - basic and diluted, as reported $0.09  ($0.01) ($0.01) ($0.37)
         
Non-GAAP earnings per share - diluted $0.13  $0.09  $0.47  $0.31 
         
Note: all adjustments to reconcile GAAP to non-GAAP net income are net of tax.        
(a) Non-recurring expenses and transaction-related costs included in cost of revenue and operating expenses are comprised of the following for the periods presented:
 
  Three Months Ended
December 31,		 Year Ended
December 31,
   2015   2014   2015   2014 
         
Cost of revenue:       
MyWay and other product consolidation costs included in cost of revenue   -  $2.2     -  $8.6 
Operating expenses:       
Severance and other costs   -  $0.4  $23.3  $6.3 
MyWay product consolidation   -     -      -   6.4 
Transaction-related costs   -   0.1   0.1   3.8 
Total non-recurring expenses and transaction-related costs included in operating expenses   -  $0.5  $23.4  $16.5 
         
Total non-recurring expenses and transaction related costs   -  $2.7  $23.4  $25.1 

 

Table 5
Allscripts Healthcare Solutions, Inc.
Non-GAAP Financial Information - Adjusted EBITDA
(In millions, except percentages)
(Unaudited)
         
  Three Months Ended
December 31, 		 Year Ended
December 31,
   2015   2014   2015   2014 
Total revenue, as reported $345.6  $340.9  $1,386.4  $1,377.9 
Deferred revenue and other adjustments    -   2.3     -     11.6 
Total non-GAAP revenue $345.6  $343.2  $1,386.4  $1,389.5 
         
Net income (loss), as reported $16.4  ($2.2) ($2.0) ($66.5)
         
Deferred revenue and other adjustments    -   2.3     -     11.6 
Depreciation and amortization    36.5     42.7     161.0     174.3 
Stock-based compensation expense    7.9     7.1     36.6     39.3 
Non-recurring expenses and transaction-related costs    -     2.7     23.4     24.2 
Non-cash asset impairment charges    1.2     0.3     1.5     2.4 
Interest expense and other, net (a)    3.8     3.8     17.4     15.3 
Equity in net earnings of unconsolidated investments    0.8     -     2.1     - 
Tax provision/(benefit)    (1.6)    (4.4)    2.6     (1.6)
Adjusted EBITDA  65.0   52.3   242.6   199.0 
         
Adjusted EBITDA attributable to non-controlling interest  0.3   0.0   0.8   0.0 
         
Adjusted EBITDA, net of non-controlling interest $64.7  $52.3  $241.8  $199.0 
         
Adjusted EBITDA margin (b)   19%  15%  17%  14%
         
(a) Interest expense and other, net has been adjusted from the amounts presented in the statements of operations in order to remove the amortization of the fair value of the cash conversion option embedded in the 1.25% Cash Convertible Notes and deferred debt issuance costs from interest expense since such amortization is also included in depreciation and amortization. 
         
(b) Adjusted EBITDA margin is calculated by dividing adjusted EBITDA by total non-GAAP revenue. 

 

Table 6 
Allscripts Healthcare Solutions, Inc. 
Non-GAAP Financial Information - Free Cash Flow 
(In millions) 
(Unaudited) 
          
  Three Months Ended
December 31,		 Year Ended
December 31,		 
   2015   2014   2015   2014  
Net cash provided by operating activities $83.3  $51.5  $211.6  $103.5  
Cash flows from investing activities:         
Capital expenditures  (4.1)  (5.7)  (18.3)  (26.4) 
Capitalized software  (16.6)  (12.4)  (49.3)  (40.7) 
Free cash flow $62.6  $33.4  $144.0  $36.4  
          

Explanation of Non-GAAP Financial Measures

Allscripts reports its financial results in accordance with U.S. generally accepted accounting principles, or GAAP.  To supplement this information, Allscripts presents in this release non-GAAP revenue, gross profit, gross margin, operating expense, net income, including non-GAAP earnings per share, non-GAAP effective income tax rate, Adjusted EBITDA and free cash flow, which are considered non-GAAP financial measures under Section 101 of Regulation G under the Securities Exchange Act of 1934, as amended. The definition of non-GAAP financial measures used throughout this document is presented below:

Deferred Revenue and Other Adjustments. Deferred revenue and other adjustments includes acquisition-related deferred revenue adjustments, which reflect the fair value adjustments to deferred revenues acquired in business acquisitions. The fair value of deferred revenue represents an amount equivalent to the estimated cost plus an appropriate profit margin, to perform services related to the acquiree's software and product support, which assumes a legal obligation to do so, based on the deferred revenue balances as of the acquisition date. Also included are adjustments for the vesting of a warrant issued to a commercial partner and the effects of straight-lining contractual pricing adjustments over the performance period. Allscripts adds back deferred revenue and other adjustments for its non-GAAP financial measures because it believes the inclusion of this amount directly correlates to the underlying performance of Allscripts operations.

Acquisition-Related Amortization.  Acquisition-related amortization expense is a non-cash expense arising primarily from the acquisition of intangible assets in connection with acquisitions or investments. Allscripts excludes acquisition-related amortization expense from non-GAAP gross profit, non-GAAP operating income and non-GAAP net income because it believes (i) the amount of such expenses in any specific period may not directly correlate to the underlying performance of Allscripts business operations and (ii) such expenses can vary significantly between periods as a result of new acquisitions and full amortization of previously acquired intangible assets.  Investors should note that the use of these intangible assets contributed to revenue in the periods presented and will contribute to future revenue generation, and the related amortization expense will recur in future periods.

Stock-Based Compensation Expense. Stock-based compensation expense is a non-cash expense arising from the grant of stock-based awards. Allscripts excludes stock-based compensation expense from non-GAAP gross profit, non-GAAP operating income, non-GAAP net income and Adjusted EBITDA because it believes (i) the amount of such expenses in any specific period may not directly correlate to the underlying performance of Allscripts business operations and (ii) such expenses can vary significantly between periods as a result of the timing and valuation of grants of new stock-based awards, including grants in connection with acquisitions. Investors should note that stock-based compensation is a key incentive offered to employees whose efforts contributed to the operating results in the periods presented and are expected to contribute to operating results in future periods, and such expense will recur in future periods.

Non-Recurring Expenses and Transaction-Related Costs.  Non-recurring expenses relate to certain severance, product consolidation, legal proceedings, consulting, and other charges incurred in connection with activities that are considered one-time.  Transaction-related costs include deferred compensation expenses incurred in connection with the acquisition of dbMotion, Ltd. 

Allscripts excludes non-recurring expenses and transaction-related costs from non-GAAP gross profit, non-GAAP operating income, non-GAAP net income and Adjusted EBITDA because it believes (i) the amount of such expenses in any specific period may not directly correlate to the underlying performance of Allscripts business operations and (ii) such expenses can vary significantly between periods.  

Non-Cash Charges to Interest Expense and Other.  Non-cash charges to interest expense and other includes non-cash amortization of the fair value of the cash conversion option embedded in the 1.25 percent Cash Convertible Notes issued by Allscripts during the second quarter of 2013.  Also included in this amount are non-cash adjustments to reflect changes in the fair value of derivative financial instruments related to the 1.25 percent Cash Convertible Notes that do not qualify for hedge accounting treatment.   The amount for 2015 includes $1.4 million for the non-cash write-off of unamortized deferred debt issuance costs. 

Non-Cash Asset Impairment Charges. Asset impairment charges relate primarily to product consolidation activities.

Equity in Net Earnings of Unconsolidated Investments. Equity in net earnings of unconsolidated investments relates primarily to Allscripts’ share of net losses from Nant Health, LLC for the respective period.

Tax Rate Alignment.  Tax adjustment aligns the applicable period’s effective tax rate to the expected annual non-GAAP effective tax rate. 

Management also believes that non-GAAP revenue, gross profit, SG&A, operating expense, operating income, net income and non-GAAP net income on a per share basis, and Adjusted EBITDA, provide useful supplemental information to management and investors regarding the underlying performance of Allscripts business operations. Acquisition accounting adjustments made in accordance with GAAP can make it difficult to make meaningful comparisons of the underlying operations of the business without considering the non-GAAP adjustments provided and discussed herein.  Management also uses this information internally for forecasting and budgeting, as it believes that these measures are indicative of core operating results. In addition, management may use non-GAAP revenue, SG&A, operating expense, operating income, net income and/or Adjusted EBITDA to measure achievement under Allscripts stock and cash incentive compensation plans. Note, however, that non-GAAP revenue, gross profit, operating income and net income and non-GAAP net income on a per share basis and Adjusted EBITDA are performance measures only, and they do not provide any measure of cash flow or liquidity. Non-GAAP financial measures are not in accordance with, or an alternative for, measures of financial performance prepared in accordance with GAAP and may be different from non-GAAP measures used by other companies. Non-GAAP measures have limitations in that they do not reflect all of the amounts associated with Allscripts results of operations as determined in accordance with GAAP.  Investors and potential investors are encouraged to review the reconciliation of non-GAAP financial measures with GAAP financial measures contained within the attached condensed consolidated financial statements.

 

For more information contact:

Investors:
Seth Frank
312-506-1213
seth.frank@allscripts.com

Media: 
Concetta DiFranco
312-447-2466
concetta.difranco@allscripts.com