UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
|
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
|
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission file number
(Exact Name of Registrant as Specified in Its Charter)
|
|
|
|
|
(State or Other Jurisdiction of Incorporation or Organization) |
|
(I.R.S. Employer Identification No.) |
(Address of Principal Executive Offices, Zip Code)
(
(Registrant's Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
|
Title of Each Class |
Trading Symbol |
Name of Each Exchange on which Registered |
|
|
|
(Nasdaq Global Select Market) |
|
|
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
|
Large accelerated filer |
|
☒ |
|
Accelerated filer |
|
☐ |
|
|
|
|
|
|||
|
Non-accelerated filer |
|
☐ |
|
Smaller reporting company |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Emerging growth company |
|
|
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
As of October 31, 2019, there were
ALLSCRIPTS HEALTHCARE SOLUTIONS, INC.
FORM 10-Q
For the Fiscal Quarter Ended September 30, 2019
TABLE OF CONTENTS
|
|
|
|
|
PAGE |
||
|
|
3 |
|||||
|
Item 1. |
|
|
3 |
|||
|
Item 2. |
|
Management's Discussion and Analysis of Financial Condition and Results of Operations |
|
29 |
||
|
Item 3. |
|
|
42 |
|||
|
Item 4. |
|
|
42 |
|||
|
|
43 |
|||||
|
Item 1. |
|
|
43 |
|||
|
Item 1A. |
|
|
43 |
|||
|
Item 2. |
|
|
43 |
|||
|
Item 6. |
|
|
44 |
|||
|
|
45 |
|||||
2
PART I. FINANCIAL INFORMATION
|
Item 1. |
Financial Statements |
ALLSCRIPTS HEALTHCARE SOLUTIONS, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
|
(In thousands, except per share amounts) |
|
September 30, 2019 |
|
|
December 31, 2018 |
|
||
|
ASSETS |
|
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
|
|
|
$ |
|
|
|
Restricted cash |
|
|
|
|
|
|
|
|
|
Accounts receivable, net of allowance of $ September 30, 2019 and December 31, 2018, respectively |
|
|
|
|
|
|
|
|
|
Contract assets |
|
|
|
|
|
|
|
|
|
Prepaid expenses and other current assets |
|
|
|
|
|
|
|
|
|
Total current assets |
|
|
|
|
|
|
|
|
|
Fixed assets, net |
|
|
|
|
|
|
|
|
|
Software development costs, net |
|
|
|
|
|
|
|
|
|
Intangible assets, net |
|
|
|
|
|
|
|
|
|
Goodwill |
|
|
|
|
|
|
|
|
|
Deferred taxes, net |
|
|
|
|
|
|
|
|
|
Contract assets - long-term |
|
|
|
|
|
|
|
|
|
Right-of-use assets - operating leases |
|
|
|
|
|
|
|
|
|
Other assets |
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
|
|
|
$ |
|
|
3
ALLSCRIPTS HEALTHCARE SOLUTIONS, INC.
CONSOLIDATED BALANCE SHEETS (CONTINUED)
(Unaudited)
|
(In thousands, except per share amounts) |
|
September 30, 2019 |
|
|
December 31, 2018 |
|
||
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
|
|
|
$ |
|
|
|
Accrued expenses |
|
|
|
|
|
|
|
|
|
Accrued compensation and benefits |
|
|
|
|
|
|
|
|
|
Income tax payable |
|
|
|
|
|
|
|
|
|
Deferred revenue |
|
|
|
|
|
|
|
|
|
Current maturities of long-term debt |
|
|
|
|
|
|
|
|
|
Current operating lease liabilities |
|
|
|
|
|
|
|
|
|
Current liabilities attributable to discontinued operations |
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
|
|
|
|
|
|
|
Long-term debt |
|
|
|
|
|
|
|
|
|
Deferred revenue |
|
|
|
|
|
|
|
|
|
Deferred taxes, net |
|
|
|
|
|
|
|
|
|
Long-term operating lease liabilities |
|
|
|
|
|
|
|
|
|
Other liabilities |
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
|
|
|
|
|
|
|
Commitments and contingencies |
|
|
|
|
|
|
|
|
|
Stockholders’ equity: |
|
|
|
|
|
|
|
|
|
Preferred stock: $ |
|
|
|
|
|
|
|
|
|
Common stock: $ and December 31, 2018; September 30, 2019, respectively; as of December 31, 2018, respectively |
|
|
|
|
|
|
|
|
|
Treasury stock: at cost, December 31, 2018, respectively |
|
|
( |
) |
|
|
( |
) |
|
Additional paid-in capital |
|
|
|
|
|
|
|
|
|
(Accumulated deficit) retained earnings |
|
|
( |
) |
|
|
|
|
|
Accumulated other comprehensive loss |
|
|
( |
) |
|
|
( |
) |
|
Total Allscripts Healthcare Solutions, Inc.'s stockholders' equity |
|
|
|
|
|
|
|
|
|
Non-controlling interest |
|
|
|
|
|
|
|
|
|
Total stockholders’ equity |
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders’ equity |
|
$ |
|
|
|
$ |
|
|
The accompanying notes are an integral part of these consolidated financial statements.
4
ALLSCRIPTS HEALTHCARE SOLUTIONS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
|
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
(In thousands, except per share amounts) |
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
||||
|
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Software delivery, support and maintenance |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Client services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Software delivery, support and maintenance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Client services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of software development and acquisition-related assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cost of revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset impairment charges |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of intangible and acquisition-related assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
Interest expense |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Other income (loss), net |
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Gain on sale of businesses, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recovery (impairment) of long-term investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
Equity in net income (loss) of unconsolidated investments |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
(Loss) income from continuing operations before income taxes |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
Income tax benefit (provision) |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
(Loss) income from continuing operations, net of tax |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
Loss from discontinued operations |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
Income tax effect on discontinued operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from discontinued operations, net of tax |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
Net (loss) income |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
Net loss attributable to non-controlling interests |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accretion of redemption preference on redeemable convertible non-controlling interest - discontinued operations |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
Net loss attributable to Allscripts Healthcare Solutions, Inc. stockholders |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income attributable to Allscripts Healthcare Solutions, Inc. stockholders per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
|
Discontinued operations |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
Net loss attributable to Allscripts Healthcare Solutions, Inc. stockholders per share |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
|
Discontinued operations |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
Net loss attributable to Allscripts Healthcare Solutions, Inc. stockholders per share |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
The accompanying notes are an integral part of these consolidated financial statements.
5
ALLSCRIPTS HEALTHCARE SOLUTIONS, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
|
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
(In thousands) |
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
||||
|
Net (loss) income |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
|
Other comprehensive (loss) income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustments |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Change in fair value of derivatives qualifying as cash flow hedges |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Other comprehensive (loss) income before income tax (expense) benefit |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Income tax (expense) benefit related to items in other comprehensive (loss) income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other comprehensive income (loss) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Comprehensive (loss) income |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
Comprehensive loss attributable to non-controlling interests |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive (loss) income, net |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
The accompanying notes are an integral part of these consolidated financial statements.
6
ALLSCRIPTS HEALTHCARE SOLUTIONS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited)
|
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
(In thousands) |
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
||||
|
Number of common shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of period |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued under stock compensation plans, net of shares withheld for employee taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of period |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of period |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Common stock issued under stock compensation plans, net of shares withheld for employee taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of period |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Number of treasury stock shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of period |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Issuance of treasury stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of treasury stock |
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Balance at end of period |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Treasury stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of period |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
Issuance of treasury stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of treasury stock |
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Balance at end of period |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
Additional paid-in capital |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of period |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Stock-based compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued under stock compensation plans, net of shares withheld for employee taxes |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Accretion of redemption preference on redeemable convertible non-controlling interest - discontinued operations |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
Subsidiary issuance of common stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of treasury stock |
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Warrants issued |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition of non-controlling interest |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
Balance at end of period |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Retained earnings (accumulated deficit) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of period |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
|
Net (loss) income less net loss attributable to non-controlling interests |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
ASC 606 implementation adjustments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASC 606 implementation adjustments - discontinued operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of period |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
Accumulated other comprehensive loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of period |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
Foreign currency translation adjustments, net |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Unrecognized gain (loss) on derivatives qualifying as cash flow hedges, net of tax |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Balance at end of period |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
Non-controlling interest |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of period |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Acquisition of non-controlling interest |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Net loss attributable to non-controlling interests |
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Balance at end of period |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Total Stockholders’ Equity at beginning of period |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Total Stockholders’ Equity at end of period |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
The accompanying notes are an integral part of these consolidated financial statements.
7
ALLSCRIPTS HEALTHCARE SOLUTIONS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
|
|
|
Nine Months Ended September 30, |
|
|||||
|
(In thousands) |
|
2019 |
|
|
2018 |
|
||
|
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
Net (loss) income |
|
$ |
( |
) |
|
$ |
|
|
|
Less: Loss from discontinued operations |
|
|
|
|
|
|
( |
) |
|
(Loss) income from continuing operations |
|
|
( |
) |
|
|
|
|
|
Adjustments to reconcile net (loss) income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
Operating right-of-use asset amortization |
|
|
|
|
|
|
|
|
|
Stock-based compensation expense |
|
|
|
|
|
|
|
|
|
Deferred taxes |
|
|
( |
) |
|
|
|
|
|
Asset impairment charges |
|
|
|
|
|
|
|
|
|
(Recovery) impairment of long-term investments |
|
|
( |
) |
|
|
|
|
|
Equity in net (loss) income of unconsolidated investments |
|
|
( |
) |
|
|
( |
) |
|
Gain on sale of businesses, net |
|
|
|
|
|
|
( |
) |
|
Other loss (income), net |
|
|
|
|
|
|
( |
) |
|
Changes in operating assets and liabilities (net of businesses acquired): |
|
|
|
|
|
|
|
|
|
Accounts receivable and contract assets, net |
|
|
|
|
|
|
|
|
|
Prepaid expenses and other assets |
|
|
|
|
|
|
( |
) |
|
Accounts payable |
|
|
|
|
|
|
|
|
|
Accrued expenses |
|
|
|
|
|
|
|
|
|
Accrued compensation and benefits |
|
|
( |
) |
|
|
|
|
|
Deferred revenue |
|
|
( |
) |
|
|
( |
) |
|
Other liabilities |
|
|
( |
) |
|
|
( |
) |
|
Operating leases |
|
|
( |
) |
|
|
|
|
|
Net cash provided by operating activities - continuing operations |
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by operating activities - discontinued operations |
|
|
( |
) |
|
|
|
|
|
Net cash provided by operating activities |
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
Capital expenditures |
|
|
( |
) |
|
|
( |
) |
|
Capitalized software |
|
|
( |
) |
|
|
( |
) |
|
Cash paid for business acquisitions, net of cash acquired |
|
|
( |
) |
|
|
( |
) |
|
Cash received from sale of businesses, net |
|
|
|
|
|
|
|
|
|
Purchases of equity securities, other investments and related intangible assets, net |
|
|
( |
) |
|
|
( |
) |
|
Other proceeds from investing activities |
|
|
|
|
|
|
|
|
|
Net cash used in investing activities - continuing operations |
|
|
( |
) |
|
|
( |
) |
|
Net cash used in investing activities - discontinued operations |
|
|
|
|
|
|
( |
) |
|
Net cash used in investing activities |
|
|
( |
) |
|
|
( |
) |
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
Proceeds from sale or issuance of common stock |
|
|
|
|
|
|
|
|
|
Taxes paid related to net share settlement of equity awards |
|
|
( |
) |
|
|
( |
) |
|
Payments of lease obligations |
|
|
( |
) |
|
|
( |
) |
|
Credit facility payments |
|
|
( |
) |
|
|
( |
) |
|
Credit facility borrowings, net of issuance costs |
|
|
|
|
|
|
|
|
|
Repurchase of common stock |
|
|
( |
) |
|
|
( |
) |
|
Repurchase of unsettled common stock |
|
|
( |
) |
|
|
|
|
|
Payment of acquisition and other financing obligations |
|
|
( |
) |
|
|
( |
) |
|
Purchases of subsidiary shares owned by non-controlling interest |
|
|
( |
) |
|
|
( |
) |
|
Net cash provided by (used in) financing activities - continuing operations |
|
|
|
|
|
|
( |
) |
|
Net cash provided by financing activities - discontinued operations |
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities |
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash and cash equivalents |
|
|
( |
) |
|
|
( |
) |
|
Net decrease in cash and cash equivalents |
|
|
( |
) |
|
|
( |
) |
|
Cash, cash equivalents and restricted cash, beginning of period |
|
|
|
|
|
|
|
|
|
Cash, cash equivalents and restricted cash, end of period |
|
|
|
|
|
|
|
|
|
Less: Cash and cash equivalents included in current assets attributable to discontinued operations |
|
|
|
|
|
|
( |
) |
|
Cash, cash equivalents and restricted cash, end of period, excluding discontinued operations |
|
$ |
|
|
|
$ |
|
|
The accompanying notes are an integral part of these consolidated financial statements.
8
ALLSCRIPTS HEALTHCARE SOLUTIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation and Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of Allscripts Healthcare Solutions, Inc. (“Allscripts”) and its wholly-owned subsidiaries and controlled affiliates. All significant intercompany balances and transactions have been eliminated. Each of the terms “we,” “us,” “our” or the “Company” as used herein refers collectively to Allscripts Healthcare Solutions, Inc. and its wholly-owned subsidiaries and controlled affiliates, unless otherwise stated.
Unaudited Interim Financial Information
The unaudited interim consolidated financial statements as of September 30, 2019 and for the three and nine months ended September 30, 2019 and 2018 have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim financial reporting. These interim consolidated financial statements are unaudited and, in the opinion of our management, include all adjustments, consisting of normal recurring adjustments and accruals, necessary to present fairly the consolidated financial statements for the periods presented in accordance with generally accepted accounting principles in the United States of America (“GAAP”). The consolidated results of operations for the three and nine months ended September 30, 2019 are not necessarily indicative of the results to be expected for the full year ending December 31, 2019.
Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted in accordance with the SEC's rules and regulations for interim reporting. The Company believes that the disclosures made are adequate to make these unaudited interim consolidated financial statements not misleading. They should be read in conjunction with the consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2018 (our “Form 10-K”).
Use of Estimates
The preparation of consolidated financial statements in accordance with GAAP requires us to make estimates and assumptions that affect the amounts reported and disclosed in the consolidated financial statements and the accompanying notes. Actual results could differ materially from these estimates.
Change in Presentation
During the first quarter of 2019, we changed our reportable segments from Clinical and Financial Solutions, Population Health and Unallocated to Provider, Veradigm and Unallocated. The business units reported within the historical segments have been reallocated into the new segments. Refer to Note 15 “Business Segments” for further discussion on the impact of the change.
Significant Accounting Policies
We adopted Financial Accounting Standards Board (“FASB”) Accounting Standards Update No. 2016-02, “Leases (Topic 842)” (“ASU 2016-02”) on January 1, 2019 using the cumulative-effect adjustment transition method. This method requires us to recognize an adoption impact as a cumulative-effect adjustment to the January 1, 2019 retained earnings balance. Prior period balances were not adjusted upon adoption of this standard. The standard requires that leased assets and corresponding lease liabilities be recognized within the consolidated balance sheets as right-of-use assets and operating or financing lease liabilities. Please refer to Note 3 “Leases” for further discussion on the impact of adoption.
Recently Adopted Accounting Pronouncements
In August 2017, the FASB issued Accounting Standards Update No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities” (“ASU 2017-12”), which provides new accounting guidance to simplify and improve the reporting of hedging relationships to better portray the economic results of an entity’s risk management activities in its financial statements. In addition to that main objective, the amendments in ASU 2017-12 make certain targeted improvements to simplify the application of the hedge accounting guidance in current GAAP. We adopted ASU 2017-12 on January 1, 2019, and the adoption did not have any effect on our consolidated financial statements.
In June 2018, the FASB issued Accounting Standards Update No. 2018-07, “Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting” (“ASU 2018-07”), which expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. ASU 2018-07 specifies that Topic 718 applies to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in its own operations by issuing share-based payment awards. ASU 2018-07 also clarifies that Topic 718 does not apply to share-based payments used to effectively provide (1) financing to the issuer or (2) awards granted in conjunction with selling goods or services to customers. We adopted this standard on January 1, 2019, and the adoption did not have any effect on our consolidated financial statements.
9
Accounting Pronouncements Not Yet Adopted
In August 2018, the FASB issued Accounting Standards Update No. 2018-13, “Fair Value Measurement (Topic 820) – Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement” (“ASU 2018-13”), which eliminates, adds and modifies certain disclosure requirements for fair value measurements. Entities will no longer be required to disclose the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, but public companies will be required to disclose the range and weighted-average of significant unobservable inputs used to develop Level 3 fair value measurements. ASU 2018-13 will be effective for all entities for interim and annual periods beginning after December 15, 2019, with early adoption permitted. We are currently evaluating the disclosure impact of this accounting guidance.
In June 2016, the FASB issued Accounting Standards Update No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”). The guidance in ASU 2016-13 replaces the incurred loss impairment methodology under current GAAP. The new impairment model requires immediate recognition of estimated credit losses expected to occur for most financial assets and certain other instruments. For available-for-sale debt securities with unrealized losses, the losses will be recognized as allowances rather than reductions in the amortized cost of the securities. ASU 2016-13 is effective for annual periods beginning after December 15, 2019, and interim periods within those annual periods. Early adoption is permitted for fiscal years beginning after December 15, 2018. We are currently in the process of evaluating this new guidance, which we expect to have an impact on our consolidated financial statements and results of operations.
We do not believe that any other recently issued, but not yet effective accounting standards, if adopted, will have a material impact on our consolidated financial statements.
2. Revenue from Contracts with Customers
Our
At September 30, 2019 and December 31, 2018, we had capitalized costs to obtain or fulfill a contract of $
The timing of revenue recognition, billings and cash collections results in billed and unbilled accounts receivable, contract assets and customer advances and deposits. Accounts receivable, net includes both billed and unbilled amounts where the right to receive payment is unconditional and only subject to the passage of time. Contract assets include amounts where revenue recognized exceeds the amount billed to the customer and the right to payment is not solely subject to the passage of time. Deferred revenue includes advanced payments and billings in excess of revenue recognized. Our contract assets and deferred revenue are reported in a net position on an individual contract basis at the end of each reporting period. Contract assets are classified as current or long-term based on the timing of when we expect to complete the related performance obligations and bill the customer. Deferred revenue is classified as current or long-term based on the timing of when we expect to recognize revenue.
The breakdown of revenue recognized related based on the origination of performance obligations and elected accounting expedients is presented in the table below:
|
(In thousands) |
|
Three Months Ended March 31, 2019 |
|
|
Three Months Ended June 30, 2019 |
|
|
Three Months Ended September 30, 2019 |
|
|||
|
Revenue related to deferred revenue balance at beginning of period |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Revenue related to new performance obligations satisfied during the period |
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue recognized under "right-to-invoice" expedient |
|
|
|
|
|
|
|
|
|
|
|
|
|
Reimbursed travel expenses, shipping and other revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
10
|
(In thousands) |
|
Three Months Ended March 31, 2018 |
|
|
Three Months Ended June 30, 2018 |
|
|
Three Months Ended September 30, 2018 |
|
|||
|
Revenue related to deferred revenue balance at beginning of period |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Revenue related to new performance obligations satisfied during the period |
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue recognized under "right-to-invoice" expedient |
|
|
|
|
|
|
|
|
|
|
|
|
|
Reimbursed travel expenses, shipping and other revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
The aggregate amount of contract transaction price related to remaining unsatisfied performance obligations (commonly referred to as “backlog”) represents contracted revenue that has not yet been recognized and includes both deferred revenue and amounts that will be invoiced and recognized as revenue in future periods. Total backlog equaled $
Revenue Recognition
We recognize revenue only when we satisfy an identified performance obligation (or bundle of obligations) by transferring control of a promised product or service to a customer. We consider a product or service to be transferred when a customer obtains control because a customer has sole possession of the right to use (or the right to direct the use of) the product or service for the remainder of its economic life or to consume the product or service in its own operations. We evaluate the transfer of control primarily from the customer’s perspective as this reduces the risk that revenue is recognized for activities that do not transfer control to the customer.
The majority of our revenue is recognized over time because a customer continuously and simultaneously receives and consumes the benefits of our performance. The exceptions to this pattern are our sales of perpetual and term software licenses, and hardware, where we determined that a customer obtains control of the asset upon granting of access, delivery or shipment.
We disaggregate our revenue from contracts with customers based on the type of revenue and nature of revenue stream, as we believe those categories best depict how the nature, amount, timing and uncertainty of our revenue and cash flows are affected by economic factors.
|
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
(In thousands) |
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
||||
|
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recurring revenue |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Non-recurring revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
Three Months Ended September 30, 2019 |
|
|||||||||||||
|
(In thousands) |
|
Provider |
|
|
Veradigm |
|
|
Unallocated |
|
|
Total |
|
||||
|
Software delivery, support and maintenance |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Client services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
Three Months Ended September 30, 2018 |
|
|||||||||||||
|
(In thousands) |
|
Provider |
|
|
Veradigm |
|
|
Unallocated |
|
|
Total |
|
||||
|
Software delivery, support and maintenance |
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
Client services |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
Total revenue |
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
|
|
Nine Months Ended September 30, 2019 |
|
|||||||||||||
|
(In thousands) |
|
Provider |
|
|
Veradigm |
|
|
Unallocated |
|
|
Total |
|
||||
|
Software delivery, support and maintenance |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Client services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
11
|
|
|
Nine Months Ended September 30, 2018 |
|
|||||||||||||
|
(In thousands) |
|
Provider |
|
|
Veradigm |
|
|
Unallocated |
|
|
Total |
|
||||
|
Software delivery, support and maintenance |
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
Client services |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
Total revenue |
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
3. Leases
We adopted ASU 2016-02 on January 1, 2019 using the cumulative-effect adjustment transition method. The new guidance requires the recognition of leased arrangements on the balance sheet as right-of-use assets and liabilities pertaining to the rights and obligations created by the leased assets.
We determine whether an arrangement is a lease at inception. Assets leased under an operating lease arrangement are recorded in Right-of-use assets – operating leases and the associated lease liabilities are included in Current operating lease liabilities and Long-term operating lease liabilities within the consolidated balance sheets. Assets leased under finance lease arrangements are recorded within fixed assets and the associated lease liabilities are recorded within Accrued expenses and Other liabilities within the consolidated balance sheets.
Right-of-use assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease right-of-use assets and liabilities are recognized at commencement date based on the present value of lease payments over the expected lease term. Since our lease arrangements do not provide an implicit rate, we use our incremental borrowing rate in conjunction with the market swap rate for the expected remaining lease team at commencement date for new leases, or as of January 1, 2019 for existing leases, in determining the present value of future lease payments. Our expected lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Operating lease expense is recognized on a straight-line basis over the lease term.
We have elected the group of practical expedients under ASU 2016-02 to forego assessing upon adoption: (1) whether any expired contracts are or contain leases; (2) the lease classification for any existing or expired leases and (3) any indirect costs that would have qualified for capitalization for any existing leases. We have lease agreements with lease and non-lease components, which are generally accounted for separately except for real estate and vehicle leases, which we have elected to combine through a practical expedient under ASU 2016-02. Non-lease components for our leases typically comprise of executory costs, which under the practical expedient allows for all executory costs to be recorded as lease payments. Additionally, for certain equipment leases, we apply a portfolio approach to effectively record right-of-use assets and liabilities.
Our operating leases mainly include office leases and our finance leases include office and computer equipment leases. Our leases have remaining lease terms of approximately
|
(In thousands) |
|
Three Months Ended September 30, 2019 |
|
|
Nine Months Ended September 30, 2019 |
|
||
|
Operating lease cost (1) |
|
$ |
|
|
|
$ |
|
|
|
Less: Sublease income |
|
|
( |
) |
|
|
( |
) |
|
Total operating lease costs |
|
$ |
|
|
|
$ |
|
|
|
Finance lease costs: |
|
|
|
|
|
|
|
|
|
Amortization of right-of-use assets (2) |
|
$ |
|
|
|
$ |
|
|
|
Interest on lease liability (3) |
|
|
|
|
|
|
|
|
|
Total finance lease costs |
|
$ |
|
|
|
$ |
|
|
|
(1) |
|
|
(2) |
|
|
(3) |
|
12
Supplemental information for operating and finance leases is as follows:
|
(In thousands) |
|
Nine Months Ended September 30, 2019 |
|
|
|
Cash paid for amounts included in the measurement of lease liabilities: |
|
|
|
|
|
Operating cash flows from operating leases |
|
$ |
|
|
|
Operating cash flows from finance leases |
|
$ |
|
|
|
Financing cash flows from finance leases |
|
$ |
|
|
|
Right-of-use assets obtained in exchange for lease obligations: |
|
|
|
|
|
Operating leases |
|
$ |
|
|
|
Finance leases |
|
$ |
|
|
The balance sheet location and balances for operating and finance leases are as follows:
|
(In thousands, except lease term and discount rate) |
|
September 30, 2019 |
|
|
|
Operating leases: |
|
|
|
|
|
Right-of-use assets - operating leases |
|
$ |
|
|
|
Current operating lease liabilities |
|
$ |
|
|
|
Long-term operating lease liabilities |
|
$ |
|
|
|
|
|
|
|
|
|
Finance leases: |
|
|
|
|
|
Fixed assets, gross |
|
$ |
|
|
|
Accumulated depreciation |
|
|
|
|
|
Fixed assets, net |
|
$ |
|
|
|
|
|
|
|
|
|
Current finance lease liabilities (1) |
|
$ |
|
|
|
Long-term finance lease liabilities (2) |
|
$ |
|
|
|
|
|
|
|
|
|
Weighted average remaining lease term (in years) |
|
|
|
|
|
Operating leases |
|
|
6 |
|
|
Finance leases |
|
|
2 |
|
|
|
|
|
|
|
|
Weighted average discount rate |
|
|
|
|
|
Operating leases |
|
|
|
% |
|
Finance leases |
|
|
|
% |
|
(1) |
|
|
(2) |
|
The future maturities of our leasing arrangements including lease and non-lease components are shown in the below table. The maturities are calculated using foreign currency exchange rates in effect as of September 30, 2019.
|
|
|
September 30, 2019 |
|
|||||
|
(In thousands) |
|
Operating Leases |
|
|
Finance Leases |
|
||
|
Remainder of 2019 |
|
$ |
|
|
|
$ |
|
|
|
2020 |
|
|
|
|
|
|
|
|
|
2021 |
|
|
|
|
|
|
|
|
|
2022 |
|
|
|
|
|
|
|
|
|
2023 |
|
|
|
|
|
|
|
|
|
Thereafter |
|
|
|
|
|
|
|
|
|
Total lease liabilities |
|
|
|
|
|
|
|
|
|
Less: Amount representing interest |
|
|
( |
) |
|
|
( |
) |
|
Less: Short-term lease liabilities |
|
|
( |
) |
|
|
( |
) |
|
Total long-term lease liabilities |
|
$ |
|
|
|
$ |
|
|
13
4. Business Combinations
On July 2, 2019, we acquired the Pinnacle and Diabetes Collaborative Registries from the American College of Cardiology (“ACC”) as part of our broader strategic partnership with the ACC. The total purchase price was $
On June 10, 2019, we acquired the assets of a business engaged in the development, implementation, customization, marketing, licensing and sale of a specialty prescription drug platform including software that collects, saves and transmits information required to fill a prescription. The drug platform and software will enable healthcare providers, pharmacists and payors to digitally interact with one another to fill a prescription. The business is included in our Veradigm business segment.
On March 1, 2019, we acquired all of the outstanding minority interest in Pulse8, Inc., a healthcare analytics and technology company that provides business intelligence software solutions for health plans and at-risk providers to enable them to analyze their risk adjustment and quality management programs, for $
Other Acquisitions and Divestiture
On June 15, 2018, we acquired all the outstanding minority interest in a third party for $
On
5. Fair Value Measurements and Long-term Investments
Fair value measurements are based upon observable and unobservable inputs.
Level 1: Inputs are unadjusted quoted prices in active markets for identical assets or liabilities at the measurement date.
Level 2: Inputs, other than quoted prices included in Level 1, are observable for the asset or liability, either directly or indirectly.
Level 3: Unobservable inputs are significant to the fair value of the asset or liability, and include situations where there is little, if any, market activity for the asset or liability.
The following table summarizes our financial assets and liabilities measured at fair value on a recurring basis as of the respective balance sheet dates:
|
|
|
Balance Sheet |
|
September 30, 2019 |
|
|
December 31, 2018 |
|
||||||||||||||||||||||||||
|
(In thousands) |
|
Classifications |
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||||||
|
Foreign exchange derivative assets
|
|
Prepaid expenses and other current assets |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
Other assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contingent consideration - current |
|
Accrued expenses |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Contingent consideration - long-term |
|
Other liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
cash conversion option |
|
Other liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
14
The changes in Level 3 assets and liabilities measured at fair value on a recurring basis at September 30, 2019 are summarized as follows:
|
(In thousands) |
|
Contingent Consideration |
|
|
1.25% Notes Call Spread Overlay |
|
||
|
Balance at December 31, 2018 |
|
$ |
|
|
|
$ |
( |
) |
|
Additions |
|
|
|
|
|
|
|
|
|
Payments |
|
|
( |
) |
|
|
|
|
|
Fair value adjustments |
|
|
( |
) |
|
|
|
|
|
Balance at September 30, 2019 |
|
$ |
|
|
|
$ |
( |
) |
Long-term Investments
The following table summarizes our long-term equity investments which are included in Other assets in the accompanying consolidated balance sheets:
|
|
|
Number of Investees |
|
|
Original |
|
|
Carrying Value at |
|
|||||||
|
(In thousands, except for number of investees) |
|
at September 30, 2019 |
|
|
Cost |
|
|
September 30, 2019 |
|
|
December 31, 2018 |
|
||||
|
Equity method investments (1) |
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Cost method and available-for-sale investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total long-term equity investments |
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
(1) |
|
As of September 30, 2019, it is not possible to estimate the fair value of our non-marketable cost and equity method investments, primarily because of their illiquidity and restricted marketability. The factors we considered in trying to determine fair value include, but are not limited to, available financial information, the issuer’s ability to meet its current obligations, the issuer’s subsequent or planned raises of capital and observable price changes in orderly transactions.
15
We acquired a $
Recovery and Impairment of Long-term Investments
During the nine months ended September 30, 2019, we recovered $
Long-term Financial Liabilities
Our long-term financial liabilities include amounts outstanding under our senior secured credit facility (as defined in Note 9, “Debt”), with carrying values that approximate fair value since the interest rates approximate current market rates. The carrying amount of our
6. Stockholders' Equity
Stock-based Compensation Expense
Stock-based compensation expense recognized during the three and nine months ended September 30, 2019 and 2018 is included in our consolidated statements of operations as shown in the below table. Stock-based compensation expense includes both non-cash expense related to grants of stock-based awards as well as cash expense related to the employee discount applied to purchases of our common stock under our employee stock purchase plan.
|
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
(In thousands) |
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
||||
|
Cost of revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Software delivery, support and maintenance |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Client services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cost of revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stock-based compensation expense |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Allscripts Long-Term Incentive Plan
We measure stock-based compensation expense at the grant date based on the fair value of the award. We recognize the expense for service-based share awards over the requisite service period on a straight-line basis, net of estimated forfeitures. We recognize the expense for performance-based and market-based share awards over the vesting period under the accelerated attribution method, net of estimated forfeitures. In addition, we recognize stock-based compensation cost for awards with performance conditions if and when we conclude that it is probable that the performance conditions will be achieved.
The fair value of service-based and performance-based restricted stock units is measured at the underlying closing share price of our common stock on the date of grant. The fair value of market-based restricted stock units is measured using the Monte Carlo pricing model.
16
We granted stock-based awards as follows:
|
|
|
Three Months Ended September 30, 2019 |
|
|
Nine Months Ended September 30, 2019 |
|
||||||||||
|
|
|
|
|
|
|
Weighted-Average |
|
|
|
|
|
|
Weighted-Average |
|
||
|
|
|
|
|
|
|
Grant Date |
|
|
|
|
|
|
Grant Date |
|
||
|
(In thousands, except per share amounts) |
|
Shares |
|
|
Fair Value |
|
|
Shares |
|
|
Fair Value |
|
||||
|
Service-based restricted stock units |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
Market-based restricted stock units with a service condition |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
During the nine months ended September 30, 2019 and the year ended December 31, 2018,
Net Share-settlements
Upon vesting, restricted stock units are generally net share-settled to cover the required withholding tax and the remaining amount is converted into an equivalent number of shares of common stock. The majority of restricted stock units and awards that vested during the nine months ended September 30, 2019 and 2018 were net-share settled such that we withheld shares with fair value equivalent to the employees’ minimum statutory obligation for the applicable income and other employment taxes and remitted the cash to the appropriate taxing authorities. Total payments for the employees' minimum statutory tax obligations to the taxing authorities are reflected as a financing activity within the accompanying consolidated statements of cash flows. The total shares withheld for the nine months ended September 30, 2019 and 2018 were
Stock Repurchases
On November 17, 2016, we announced that our Board of Directors approved a stock purchase program (the “2016 Program”) under which we may repurchase up to $
7. Earnings (Loss) Per Share
Basic earnings (loss) per share is computed by dividing net income (loss) by the weighted-average shares of common stock outstanding. For purposes of calculating diluted earnings (loss) per share, the denominator includes both the weighted-average shares of common stock outstanding and dilutive common stock equivalents. Dilutive common stock equivalents consist of stock options, restricted stock unit awards and warrants calculated under the treasury stock method.
17
The calculations of earnings (loss) per share are as follows:
|
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
(In thousands, except per share amounts) |
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
||||
|
Basic earnings (loss) per Common Share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from continuing operations, net of tax |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
|
Net loss attributable to non-controlling interests |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income from continuing operations attributable to Allscripts Healthcare Solutions, Inc. stockholders |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
|
Loss from discontinued operations, net of tax |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
|
Accretion of redemption preference on redeemable convertible non-controlling interest - discontinued operations |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
Net loss from discontinued operations attributable to Allscripts Healthcare Solutions, Inc. stockholders |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
Net loss attributable to Allscripts Healthcare Solutions, Inc. stockholders |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average common shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic (loss) earnings from continuing operations per Common Share |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
|
Basic loss from discontinued operations per Common Share |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
Net (loss) income attributable to Allscripts Healthcare Solutions, Inc. stockholders per Common Share |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings (loss) per Common Share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from continuing operations, net of tax |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
|
Net loss attributable to non-controlling interests |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income from continuing operations attributable to Allscripts Healthcare Solutions, Inc. stockholders |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
|
Loss from discontinued operations, net of tax |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
|
Accretion of redemption preference on redeemable convertible non-controlling interest - discontinued operations |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
Net loss from discontinued operations attributable to Allscripts Healthcare Solutions, Inc. stockholders |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
Net (loss) income attributable to Allscripts Healthcare Solutions, Inc. stockholders |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average common shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plus: Dilutive effect of stock options, restricted stock unit awards and warrants |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average common shares outstanding assuming dilution |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted (loss) earnings from continuing operations per Common Share |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
|
Diluted loss from discontinued operations per Common Share |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
Net (loss) income attributable to Allscripts Healthcare Solutions, Inc. stockholders per Common Share |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Due to the net loss attributable to Allscripts Healthcare Solutions, Inc. stockholders for the three and nine months ended September 30, 2019 and 2018, we used basic weighted-average common shares outstanding in the calculation of diluted loss per share for those periods, since the inclusion of any stock equivalents would be anti-dilutive.
18
The following stock options, restricted stock unit awards and warrants are not included in the computation of diluted earnings (loss) per share as the effect of including such stock options, restricted stock unit awards and warrants in the computation would be anti-dilutive:
|
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
(In thousands) |
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
||||
|
Shares subject to anti-dilutive stock options, restricted stock unit awards and warrants excluded from calculation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8. Goodwill and Intangible Assets
Goodwill and intangible assets consist of the following:
|
|
|
September 30, 2019 |
|
|
December 31, 2018 |
|
||||||||||||||||||
|
|
|
Gross |
|
|
|
|
|
|
|
|
|
|
Gross |
|
|
|
|
|
|
|
|
|
||
|
|
|
Carrying |
|
|
Accumulated |
|
|
Intangible |
|
|
Carrying |
|
|
Accumulated |
|
|
Intangible |
|
||||||
|
(In thousands) |
|
Amount |
|
|
Amortization |
|
|
Assets, Net |
|
|
Amount |
|
|
Amortization |
|
|
Assets, Net |
|
||||||
|
Intangibles subject to amortization: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proprietary technology |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
Customer contracts and relationships |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
Total |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangibles not subject to amortization: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Registered trademarks |
|
|
|
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
Goodwill |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
Changes in the carrying amounts of goodwill by reportable segment for the nine months ended September 30, 2019 were as follows:
|
(In thousands) |
|
Provider |
|
|
Veradigm |
|
|
Total |
|
|||
|
Balance as of December 31, 2018 |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Additions |
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange translation |
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
Balance as of September 30, 2019 |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
There are $
19
9. Debt
Debt outstanding, excluding lease obligations, consists of the following:
|
|
|
September 30, 2019 |
|
|
December 31, 2018 |
|
||||||||||||||||||
|
(In thousands) |
|
Principal Balance |
|
|
Unamortized Discount and Debt Issuance Costs |
|
|
Net Carrying Amount |
|
|
Principal Balance |
|
|
Unamortized Discount and Debt Issuance Costs |
|
|
Net Carrying Amount |
|
||||||
|
1.25% Cash Convertible Senior Notes |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Senior Secured Credit Facility |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debt |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Less: Debt payable within one year |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total long-term debt, less current maturities |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Interest expense consists of the following:
|
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
(In thousands) |
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
||||
|
Interest expense |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Amortization of discounts and debt issuance costs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest expense |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Interest expense related to 1.25% Notes, included in the table above, consists of the following:
|
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
(In thousands) |
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
||||
|
Coupon interest at 1.25% |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Amortization of discounts and debt issuance costs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest expense related to the 1.25% Notes |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Allscripts Senior Secured Credit Facility
On February 15, 2018, Allscripts and Healthcare LLC entered into a Second Amended and Restated Credit Agreement (the “Second Amended Credit Agreement”), with JPMorgan Chase Bank, N.A., as administrative agent. The Second Amended Credit Agreement provides for a $
As of September 30, 2019, $
As of September 30, 2019, the interest rate on the borrowings under the Second Amended Credit Agreement was LIBOR plus
On August 7, 2019, we entered into a First Amendment to the Second Amended Credit Agreement in order to remain compliant with the covenants of our Second Amended Credit Agreement. The First Amendment provides the financial flexibility to settle the U.S. Department of Justice’s investigations as discussed in Note 13, “Contingencies” while maintaining our compliance with the covenants of our Second Amended Credit Agreement. None of the original terms of our Second Amended Credit Agreement relating to scheduled future principal payments, applicable interest rates and margins or borrowing capacity under our Revolving Facility were amended. In connection with this amendment, we incurred fees and other costs totaling $
20
As of September 30, 2019, we had $
1.25% Cash Convertible Senior Notes
As of September 30, 2019, the if-converted value of the
The following table summarizes future debt payment obligations as of September 30, 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands) |
|
Total |
|
|
Remainder of 2019 |
|
|
2020 |
|
|
2021 |
|
|
2022 |
|
|
2023 |
|
|
Thereafter |
|
|||||||
|
1.25% Cash Convertible Senior Notes (1) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Term Loan |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revolving Facility (2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debt |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
(1)
(2)
10. Income Taxes
We account for income taxes under FASB Accounting Standards Codification 740, “Income Taxes” (“ASC 740”). We calculate the quarterly tax provision consistent with the guidance provided by ASC 740-270, whereby we forecast the estimated annual effective tax rate and then apply that rate to the year-to-date pre-tax book (loss) income. The effective tax rate may be subject to fluctuations during the year as new information is obtained, which may affect the assumptions used to estimate the annual effective rate, including factors such as the valuation allowances against deferred tax assets, the recognition or de-recognition of tax benefits related to uncertain tax positions, or changes in or the interpretation of tax laws in jurisdictions where the Company conducts business. There is no tax benefit recognized on certain of the net operating losses incurred due to insufficient evidence supporting the Company’s ability to use these losses in the future. The effective tax rates were as follows:
|
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
(In thousands) |
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
||||
|
(Loss) income from continuing operations before income taxes |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
|
Income tax benefit (provision) |
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
( |
) |
|
Effective tax rate |
|
|
|
% |
|
|
|
% |
|
|
( |
%) |
|
|
|
% |
Our provision for income taxes differs from the tax computed at the U.S. federal statutory income tax rate primarily due to permanent differences, income attributable to foreign jurisdictions taxed at different rates, state taxes, tax credits and certain discrete items. Our effective tax rate for the three and nine months ended September 30, 2019, compared with the prior year comparable periods, differs primarily due to higher tax shortfalls associated with stock-based compensation reflected in the provision for the three and nine months ended September 30, 2019 and release of valuation allowance of $
In evaluating our ability to recover our deferred tax assets within the jurisdictions from which they arise, we consider all available evidence, including scheduled reversals of deferred tax liabilities, tax-planning strategies, and results of recent operations. In evaluating the objective evidence that historical results provide, we consider
Our unrecognized income tax benefits were $
21
11. Derivative Financial Instruments
The following tables provide information about the fair values of our derivative financial instruments as of the respective balance sheet dates:
|
|
|
September 30, 2019 |
|
|||||||||
|
|
|
Asset Derivatives |
|
|
Liability Derivatives |
|
||||||
|
(In thousands) |
|
Balance Sheet Location |
|
Fair Value |
|
|
Balance Sheet Location |
|
Fair Value |
|
||
|
Derivatives qualifying as cash flow hedges: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange contracts |
|
Prepaid expenses and other current assets |
|
$ |
|
|
|
Accrued expenses |
|
$ |
|
|
|
Derivatives not subject to hedge accounting: |
|
|
|
|
|
|
|
|
|
|
|
|
|
1.25% Call Option |
|
Other assets |
|
|
|
|
|
N/A |
|
|
|
|
|
1.25% Embedded cash conversion option |
|
N/A |
|
|
|
|
|
Other liabilities |
|
|
|
|
|
Total derivatives |
|
|
|
$ |
|
|
|
|
|
$ |
|
|
|
|
|
December 31, 2018 |
|
|||||||||
|
|
|
Asset Derivatives |
|
|
Liability Derivatives |
|
||||||
|
(In thousands) |
|
Balance Sheet Location |
|
Fair Value |
|
|
Balance Sheet Location |
|
Fair Value |
|
||
|
Derivatives qualifying as cash flow hedges: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange contracts |
|
Prepaid expenses and other current assets |
|
$ |
|
|
|
Accrued expenses |
|
$ |
|
|
|
Derivatives not subject to hedge accounting: |
|
|
|
|
|
|
|
|
|
|
|
|
|
1.25% Call Option |
|
Other assets |
|
|
|
|
|
N/A |
|
|
|
|
|
1.25% Embedded cash conversion option |
|
N/A |
|
|
|
|
|
Other liabilities |
|
|
|
|
|
Total derivatives |
|
|
|
$ |
|
|
|
|
|
$ |
|
|
N/A – We define “N/A” as disclosure not being applicable
Foreign Exchange Contracts
We have entered into non-deliverable forward foreign currency exchange contracts with reputable banking counterparties to hedge a portion of our forecasted future Indian Rupee-denominated (“INR”) expenses against foreign currency fluctuations between the United States dollar and the INR. These forward contracts cover a percentage of forecasted monthly INR expenses over time. As of September 30, 2019, there were
The following tables show the impact of derivative instruments designated as cash flow hedges on the consolidated statements of operations and the consolidated statements of comprehensive loss:
|
|
|
Amount of Gain (Loss) Recognized in OCI |
|
|
|
|
Amount of Gain (Loss) Reclassified from AOCI into Income |
|
||||||||||
|
(In thousands) |
|
Three Months Ended September 30, 2019 |
|
|
Nine Months Ended September 30, 2019 |
|
|
Location of Gain (Loss) Reclassified from AOCI into Income |
|
Three Months Ended September 30, 2019 |
|
|
Nine Months Ended September 30, 2019 |
|
||||
|
Foreign exchange contracts |
|
$ |
( |
) |
|
$ |
|
|
|
Cost of Revenue |
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development |
|
$ |
|
|
|
$ |
|
|
22
|
|
|
Amount of Gain (Loss) Recognized in OCI |
|
|
|
|
Amount of Gain (Loss) Reclassified from AOCI into Income |
|
||||||||||
|
(In thousands) |
|
Three Months Ended September 30, 2018 |
|
|
Nine Months Ended September 30, 2018 |
|
|
Location of Gain (Loss) Reclassified from AOCI into Income |
|
Three Months Ended September 30, 2018 |
|
|
Nine Months Ended September 30, 2018 |
|
||||
|
Foreign exchange contracts |
|
$ |
( |
) |
|
$ |
( |
) |
|
Cost of Revenue |
|
$ |
( |
) |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative expenses |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development |
|
$ |
( |
) |
|
$ |
|
|
1.25% Call Option
In June 2013, concurrent with the issuance of the 1.25% Notes, we entered into privately negotiated hedge transactions with certain of the initial purchasers of the 1.25% Notes (collectively, the “1.25% Call Option”). Assuming full performance by the counterparties, the 1.25% Call Option is intended to offset cash payments in excess of the principal amount due upon any conversion of the 1.25% Notes.
The 1.25% Call Option, which is indexed to our common stock, is a derivative asset that requires mark-to-market accounting treatment (due to the cash settlement features) until the 1.25% Call Option settles or expires. The 1.25% Call Option is measured and reported at fair value on a recurring basis, within Level 3 of the fair value hierarchy.
The 1.25% Call Option does not qualify for hedge accounting treatment. Therefore, the change in fair value of these instruments is recognized immediately in our consolidated statements of operations in Other income, net. Because the terms of the 1.25% Call Option are substantially similar to those of the 1.25% Notes embedded cash conversion option, discussed below, we expect the net effect of those two derivative instruments on our earnings to be minimal.
1.25% Notes Embedded Cash Conversion Option
The embedded cash conversion option within the 1.25% Notes is required to be separated from the 1.25% Notes and accounted for separately as a derivative liability, with changes in fair value reported in our consolidated statements of operations in Other income, net until the cash conversion option settles or expires. The initial fair value liability of the embedded cash conversion option was $
The following table shows the net impact of the changes in fair values of the
|
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
(In thousands) |
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
||||
|
1.25% Call Option |
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
( |
) |
|
1.25% Embedded cash conversion option |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
Net (loss) income included in other income, net |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
12. Other Comprehensive Income
Accumulated Other Comprehensive Loss
Changes in the balances of each component included in AOCI are presented in the tables below. All amounts are net of tax and exclude non-controlling interest.
|
(In thousands) |
|
Foreign Currency Translation Adjustments |
|
|
Unrealized Net Gains on Foreign Exchange Contracts |
|
|
Total |
|
|||
|
Balance as of December 31, 2018 (1) |
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
|
Other comprehensive income (loss) before reclassifications |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
Net (gains) losses reclassified from accumulated other comprehensive loss |
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Net other comprehensive loss |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Balance as of September 30, 2019 (2) |
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
|
(1) |
Net of taxes of $ |
|
(2) |
Net of taxes of $ |
23
|
(In thousands) |
|
Foreign Currency Translation Adjustments |
|
|
Unrealized Net Gains on Foreign Exchange Contracts |
|
|
Total |
|
|||
|
Balance as of December 31, 2017 (1) |
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
|
Other comprehensive income (loss) before reclassifications |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Net (gains) losses reclassified from accumulated other comprehensive loss |
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Net other comprehensive income |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Balance as of September 30, 2018 (2) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
(1) Net of taxes of $
(2) Net of taxes of $
Income Tax Effects Related to Components of Other Comprehensive Income (Loss)
The following tables reflect the tax effects allocated to each component of other comprehensive income (loss) (“OCI”):
|
|
|
Three Months Ended September 30, |
|
|||||||||||||||||||||
|
|
|
2019 |
|
|
2018 |
|
||||||||||||||||||
|
(In thousands) |
|
Before-Tax Amount |
|
|
Tax Effect |
|
|
Net Amount |
|
|
Before-Tax Amount |
|
|
Tax Effect |
|
|
Net Amount |
|
||||||
|
Foreign currency translation adjustments |
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
|
Foreign exchange contracts: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (losses) gains arising during the period |
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
Net losses (gains) reclassified into income (1) |
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
Net change in unrealized (losses) gains on foreign exchange contracts |
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
Net (loss) gain on cash flow hedges |
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
Other comprehensive (loss) income |
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
|
(1) |
Tax effects for the three months ended September 30, 2018 include $ |
|
|
|
Nine Months Ended September 30, |
|
|||||||||||||||||||||
|
|
|
2019 |
|
|
2018 |
|
||||||||||||||||||
|
(In thousands) |
|
Before-Tax Amount |
|
|
Tax Effect |
|
|
Net Amount |
|
|
Before-Tax Amount |
|
|
Tax Effect |
|
|
Net Amount |
|
||||||
|
Foreign currency translation adjustments |
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
|
Derivatives qualifying as cash flow hedges: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange contracts: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (losses) gains arising during the period |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
Net (gains) losses reclassified into income (1) |
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
Net change in unrealized (losses) gains on foreign exchange contracts |
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
Net (loss) gain on cash flow hedges |
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
Other comprehensive (loss) income |
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
|
(1) |
Tax effects for the nine months ended September 30, 2018 include $ |
13. Contingencies
In addition to commitments and obligations in the ordinary course of business, we are currently subject to various legal proceedings and claims that have not been fully adjudicated. We intend to vigorously defend ourselves, as appropriate, in these matters.
No less than quarterly, we review the status of each significant matter and assess our potential financial exposure. We accrue a liability for an estimated loss if the potential loss from any legal proceeding or claim is considered probable and the amount can be reasonably estimated. Significant judgment is required in both the determination of probability and the determination as to whether the amount of an exposure is reasonably estimable, and accruals are based only on the information available to our management at the time the judgment is made.
24
The outcome of legal proceedings is inherently uncertain, and we may incur substantial defense costs and expenses defending any of these matters. In the opinion of our management, except as set forth below with respected to the expected resolution of the Practice Fusion investigations, the ultimate disposition of pending legal proceedings or claims will not have a material adverse effect on our consolidated financial position, liquidity or results of operations. However, if one or more of these legal proceedings were resolved against or settled by us in a reporting period for amounts in excess of our management’s expectations, our consolidated financial statements for that and subsequent reporting periods could be materially adversely affected. Additionally, the resolution of a legal proceeding against us could prevent us from offering our products and services to current or prospective clients or cause us to incur increased compliance costs, either of which could further adversely affect our operating results.
On May 1, 2012, Physicians Healthsource, Inc. filed a class action complaint in the U.S. District Court for the Northern District of Illinois against us. The complaint alleges that, on multiple occasions between July 2008 and December 2011, we or our agent sent advertisements by fax to the plaintiff and a class of similarly situated persons, without first receiving the recipients’ express permission or invitation in violation of the Telephone Consumer Protection Act, 47 U.S.C. § 227 (the “TCPA”). The plaintiff sought $
The Enterprise Information Solutions business (the “EIS Business”) acquired from McKesson Corporation (“McKesson”) on October 2, 2017 is subject to a May 2017 civil investigative demand (“CID”) from the U.S. Attorney’s Office for the Eastern District of New York. The CID requests documents and information related to the certification McKesson obtained for Horizon Clinicals in connection with the U.S. Department of Health and Human Services’ Electronic Health Record Incentive Program. In August 2018, McKesson received an additional CID seeking similar information for Paragon. McKesson has agreed, with respect to the CIDs, to indemnify Allscripts for amounts paid or payable to the government (or any private relator) involving any products or services marketed, sold or licensed by the EIS Business as of or prior to the closing of the acquisition.
Practice Fusion, acquired by Allscripts on February 13, 2018, received in March 2017 a request for documents and information from the U.S. Attorney’s Office for the District of Vermont pursuant to a CID. Between April 2018 and June 2019, Practice Fusion received from the U.S. Department of Justice (the “DOJ”) seven additional requests for documents and information through four additional CIDs and three Health Insurance Portability and Accountability Act (“HIPAA”) subpoenas. The document and information requests received by Practice Fusion related to both the certification Practice Fusion obtained in connection with the U.S. Department of Health and Human Services’ Electronic Health Record Incentive Program and Practice Fusion’s compliance with the Anti-Kickback Statute (“AKS”) and HIPAA as it relates to certain business practices engaged in by Practice Fusion. In March 2019, Practice Fusion received a grand jury subpoena in connection with a criminal investigation related to Practice Fusion’s compliance with the AKS. On August 6, 2019, Practice Fusion reached an agreement in principle with the DOJ to resolve all of the DOJ’s outstanding civil and criminal investigations, including the investigation by the U.S. Attorney’s Office for the District of Vermont. The terms of this agreement in principle, which is subject to final negotiation of settlement documents with the government, contemplate that Practice Fusion will pay $
25
14. Discontinued Operations
Netsmart
On December 31, 2018, we sold all of the Class A Common Units of Netsmart LLC, a Delaware limited liability company (“Netsmart”), held by the Company. Prior to the sale, Netsmart comprised a separate reportable segment, which due to its significance to our historical consolidated financial statements and results of operations, is reported as a discontinued operation due to the sale.
The following table summarizes Netsmart’s major income and expense line items as reported in the consolidated statements of operations for the three and nine months ended September 30, 2018:
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||
|
(In thousands) |
|
September 30, 2018 |
|
|
September 30, 2018 |
|
||
|
Major income and expense line items related to Netsmart: |
|
|
|
|
|
|
|
|
|
Revenue: |
|
|
|
|
|
|
|
|
|
Software delivery, support and maintenance |
|
$ |
|
|
|
$ |
|
|
|
Client services |
|
|
|
|
|
|
|
|
|
Total revenue |
|
|
|
|
|
|
|
|
|
Cost of revenue: |
|
|
|
|
|
|
|
|
|
Software delivery, support and maintenance |
|
|
|
|
|
|
|
|
|
Client services |
|
|
|
|
|
|
|
|
|
Amortization of software development and acquisition related assets |
|
|
|
|
|
|
|
|
|
Total cost of revenue |
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
|
|
|
|
|
|
|
Selling, general and administrative expenses |
|
|
|
|
|
|
|
|
|
Research and development |
|
|
|
|
|
|
|
|
|
Amortization of intangible and acquisition-related assets |
|
|
|
|
|
|
|
|
|
Income from discontinued operations of Netsmart |
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
( |
) |
|
|
( |
) |
|
Other gain (loss) |
|
|
|
|
|
|
( |
) |
|
Loss from discontinued operations of Netsmart before income taxes |
|
|
( |
) |
|
|
( |
) |
|
Income tax benefit |
|
|
|
|
|
|
|
|
|
Loss from discontinued operations, net of tax for Netsmart |
|
$ |
( |
) |
|
$ |
( |
) |
26
Horizon Clinicals and Series2000 Revenue Cycle
Two of the product offerings (Horizon Clinicals and Series2000 Revenue Cycle) acquired with the business combination with the EIS Business were sunset after March 31, 2018. The decision to discontinue maintaining and supporting these solutions was made prior to our acquisition of the EIS Business and, therefore, are presented below as discontinued operations. Until the end of the first quarter of 2018, we were involved in ongoing maintenance and support for these solutions until customers have transitioned to other platforms.
The following table summarizes the major classes of line items constituting income (loss) of the discontinued operations with the sunset businesses of Horizon Clinicals and Series2000 Revenue Cycle, as reported in the consolidated statements of operations for the three and nine months ended September 30, 2018:
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||
|
(In thousands) |
|
September 30, 2018 |
|
|
September 30, 2018 |
|
||
|
Major classes of line items constituting pretax profit (loss) of discontinued operations for Horizon Clinicals and Series2000 Revenue Cycle: |
|
|
|
|
|
|
|
|
|
Revenue: |
|
|
|
|
|
|
|
|
|
Software delivery, support and maintenance |
|
$ |
|
|
|
$ |
|
|
|
Client services |
|
|
|
|
|
|
|
|
|
Total revenue |
|
|
|
|
|
|
|
|
|
Cost of revenue: |
|
|
|
|
|
|
|
|
|
Software delivery, support and maintenance |
|
|
|
|
|
|
|
|
|
Client services |
|
|
|
|
|
|
|
|
|
Total cost of revenue |
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
|
|
|
|
|
|
|
Research and development |
|
|
|
|
|
|
|
|
|
(Loss) income from discontinued operations for Horizon Clinicals and Series2000 Revenue Cycle before income taxes |
|
|
|
|
|
|
|
|
|
Income tax benefit (provision) |
|
|
|
|
|
|
( |
) |
|
(Loss) income from discontinued operations, net of tax for Horizon Clinicals and Series2000 Revenue Cycle |
|
$ |
|
|
|
$ |
|
|
15. Business Segments
We primarily derive our revenues from sales of our proprietary software (either as a direct license sale or under a subscription delivery model), which also serves as the basis for our recurring service contracts for software support and maintenance and certain transaction-related services. In addition, we provide various other client services, including installation, and managed services such as outsourcing, private cloud hosting and revenue cycle management.
During the first quarter of 2019, we realigned our reporting structure as a result of the divestiture of our investment in Netsmart on December 31, 2018, the evolution of the healthcare IT industry and our increased focus on the payer and life sciences market. As a result, we changed the presentation of our reportable segments to Provider and Veradigm. The new Provider segment is comprised of our core integrated clinical software applications, financial management and patient engagement solutions targeted at clients across the entire continuum of care. The new Veradigm segment primarily focuses on the payer and life sciences market. These changes to our reportable segments had no impact on operating segments. The segment disclosures below for the three and nine months ended September 30, 2018, have been revised to conform to the current year presentation.
As of September 30, 2019, we had
27
Our Chief Operating Decision Maker (“CODM”) uses segment revenues, gross profit and income from operations as measures of performance and to make decisions about the allocation of resources. In determining these performance measures, we do not include in revenue the amortization of acquisition-related deferred revenue adjustments, which reflect the fair value adjustments to deferred revenue acquired in a business combination. We also exclude the amortization of intangible assets, stock-based compensation expense, expenses not reflective of our core business and transaction-related costs, and non-cash asset impairment charges from the operating segment data provided to our CODM. Expenses not reflective of our core business relate to certain severance, product consolidation, legal, consulting and other charges. Accordingly, these amounts are not included in our reportable segment results and are included in an “Unallocated Amounts” category within our segment disclosure. The “Unallocated Amounts” category also includes (i) corporate general and administrative expenses (including marketing expenses) and certain research and development expenses related to common solutions and resources that benefit all of our business units, all of which are centrally managed, and (ii) revenue and the associated cost from the resale of certain ancillary products, primarily hardware. We do not track our assets by segment.
|
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
(In thousands) |
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
||||
|
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provider |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Veradigm |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unallocated Amounts |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
Total revenue |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provider |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Veradigm |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unallocated Amounts |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Total gross profit |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provider |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Veradigm |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unallocated Amounts |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Total income (loss) from operations |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
16. Supplemental Disclosures
Supplemental Consolidated Statements of Cash Flows Information
The majority of the restricted cash balance as of September 30, 2019 and 2018 represents the remaining balance of the escrow account established as part of the acquisition of Netsmart in 2016, to be used by Netsmart to facilitate the integration of Allscripts’ former HomecareTM business.
|
|
|
September 30, |
|
|||||
|
(In thousands) |
|
2019 |
|
|
2018 |
|
||
|
Reconciliation of cash, cash equivalents and restricted cash: |
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
|
|
|
$ |
|
|
|
Restricted cash |
|
|
|
|
|
|
|
|
|
Total cash, cash equivalents and restricted cash |
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, |
|
|||||
|
(In thousands) |
|
2019 |
|
|
2018 |
|
||
|
Supplemental non-cash information: |
|
|
|
|
|
|
|
|
|
Accretion of redemption preference on redeemable convertible non-controlling interest - discontinued operation |
|
$ |
|
|
|
$ |
|
|
|
Contribution of assets in exchange for equity interest |
|
$ |
|
|
|
$ |
|
|
|
Issuance of treasury stock to commercial partner |
|
$ |
|
|
|
$ |
|
|
28
|
Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
This “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section and other sections of this Quarterly Report on Form 10-Q (“Form 10-Q”) contain forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, that involve risks and uncertainties. Forward-looking statements provide current expectations of future events based on certain assumptions and include any statement that does not directly relate to any historical fact or pattern, including statements related to the effect of macroeconomic trends, evolving patient care models, legislative, administrative and regulatory actions on our business and opportunities related to accumulated patient data, and statements regarding our agreement in principle with the DOJ and our expected future investment in research and development efforts. Forward-looking statements can also 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. Forward-looking statements are not guarantees of future performance. Actual results could differ significantly from those set forth in the forward-looking statements and reported results should not be considered an indication of future performance or events. Certain factors that could cause our actual results to differ materially from those described in the forward-looking statements include, but are not limited to, those discussed in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2018 (our “Form 10-K”) and Part II, Item 1A of this Form 10-Q under the headings “Risk Factors” and elsewhere. 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: the final outcome of the criminal and civil investigations by the DOJ involving Practice Fusion, including our ability to negotiate final settlement agreements with the DOJ and the terms of such agreements; potential additional investigations and proceedings from governmental entities or third parties other than the DOJ related to the same or similar conduct underlying the DOJ’s investigations into Practice Fusion’s business practices; the expected financial results of businesses acquired by us, including the EIS business, the NantHealth provider/patient solutions business, Practice Fusion and Health Grid; the successful integration of businesses recently acquired by us; the anticipated and unanticipated expenses and liabilities related to the EIS business, the NantHealth provider/patient solutions business, Practice Fusion and Health Grid, including the civil investigation by the U.S. Attorney’s Office involving our EIS business; security breaches resulting in unauthorized access to our or our clients’ computer systems or data, including denial-of-services, ransomware or other Internet-based attacks; 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 businesses 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; 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 and long-term investment impairment charges. The following discussion should be read in conjunction with the unaudited consolidated financial statements and notes thereto included in Part I, Item 1, “Financial Statements (unaudited)” in this Form 10-Q, as well as our Form 10-K filed with the Securities and Exchange Commission (the “SEC”). We assume no obligation to revise or update any forward-looking statements for any reason, except as required by law.
Each of the terms “we,” “us,” “our,” “Company,” or “Allscripts” as used herein refers collectively to Allscripts Healthcare Solutions, Inc. and/or its wholly-owned subsidiaries and controlled affiliates, unless otherwise stated.
Overview
Our Business Overview and Regulatory Environment
We deliver information technology (“IT”) solutions and services to help healthcare organizations achieve optimal clinical, financial and operational results. We sell our solutions to physicians, hospitals, governments, health systems, health plans, life-sciences companies, retail clinics, retail pharmacies, pharmacy benefit managers, insurance companies, employer wellness clinics, and post-acute organizations, such as home health and hospice agencies. We help our clients improve the quality and efficiency of health care with solutions that include electronic health records (“EHRs”), information connectivity, private cloud hosting, outsourcing, analytics, patient access and population health management.
Our solutions empower healthcare professionals with the data, insights and connectivity to other caregivers they need to succeed in an industry that is rapidly changing from fee-for-service models to fee-for-value advanced payment models. We believe we offer some of the most comprehensive solutions in our industry today. Healthcare organizations can effectively manage patients and patient populations across all care settings using a combination of our physician, hospital, health system, post-acute care and population health management products and services. We believe these solutions will help transform health care as the industry seeks new ways to manage risk, improve quality and reduce costs.
29
Globally, healthcare providers face an aging population and the challenge of caring for an increasing number of patients with chronic diseases. At the same time, practitioners worldwide are also under growing pressure to demonstrate the delivery of high-quality care at lower costs. Population health management, analytics, connectivity based on open Application Programming Interfaces (“APIs”), and patient engagement are strategic imperatives that can help address these challenges. In the United States, for example, such initiatives will be critical tools for success under the framework of the Quality Payment Program (“QPP”), launched by the Centers for Medicare & Medicaid Services (“CMS”) in response to the passage of the Medicare Access and CHIP Reauthorization Act (“MACRA”). As healthcare providers and payers migrate from volume-based to value-based care delivery, interoperable solutions that are connected to the consumer marketplace are the key to market leadership in the new healthcare reality. Additionally, there is a small but growing portion of the market interested in payment models not reliant on insurance, such as the direct primary care model, with doctors and other healthcare professionals interested in the clinical value of the interoperable EHR separate and apart from payment mechanisms established by public or commercial payers or associated reporting requirements.
We believe our solutions are delivering value to our clients by providing them with powerful connectivity, as well as increasingly robust patient engagement and care coordination tools, enabling users to successfully participate in alternative payment models that reward high value care delivery. Population health management is commonly viewed as one of the critical next frontiers in healthcare delivery, and we expect this rapidly emerging and evolving area to be a key driver of our future growth, both domestically and globally.
Recent advances in molecular science and computer technology are creating opportunities for the delivery of personalized medicine solutions. We believe these solutions will transform the coordination and delivery of health care, ultimately improving patient outcomes.
Specific to the United States, the healthcare IT industry in which we operate is in the midst of a period of rapid change, primarily due to new laws and regulations, as well as modifications to industry standards. Various incentives that exist today (including alternative payment models that reward high value care delivery) have been rapidly moving health care toward a time where EHRs are as common as practice management or other financial systems in all provider offices. As a result, we believe that legislation, such as the aforementioned MACRA, as well as other government-driven initiatives (including at the state level), will continue to affect healthcare IT adoption and expansion, including products and solutions like ours. We also believe that we are well-positioned in the market to take advantage of the ongoing opportunity presented by these changes.
Given that CMS has proposed further regulations, including payment rules for upcoming years, which require use of EHRs and other health information technology even as we comply with previously published rules, our industry is preparing for additional areas in which we must execute compliance. Similarly, our ability to achieve expanded applicable product certification requirements resulting from changing strategies at the Office of the National Coordinator for Health Information Technology (“ONC”) and the scope of related development and other efforts required to meet regulatory standards could both materially impact our capacity to maximize the market opportunity. All our market-facing EHR solutions and several other relevant products have successfully completed the testing process and are certified as 2015 Edition-compliant by an ONC-Authorized Certification Body (the most recent edition). Allscripts remains committed to satisfying evolving certification requirements and meeting conditions of certification, including those that are expected to be finalized at the end of the review process by ONC later this year or early next.
The MACRA encouraged the adoption of health IT necessary to satisfy new requirements more closely associating the report of quality measurements to Medicare payments. Following the finalization of the Physician Fee Schedule rule each year, providers accepting payment from Medicare must select one of two payment models: the Merit-based Incentive Payment System (“MIPS”) or an Advanced Alternative Payment Model (“APM”). Both of these approaches require substantive reporting on quality measures; additionally, the MIPS consolidated several preexisting incentive programs, including Medicare Meaningful Use and Physician Quality Reporting System, under one umbrella, as required by statute. We believe the implementation of this law is likely driving additional interest in our products among providers who were not eligible for or chose not to participate in the Health Information Technology for Economic and Clinical Health Act (“HITECH”) incentive program but now need an EHR and other health IT solutions and among those looking to purchase more robust systems to comply with increasingly complex MACRA requirements. Additional regulations continue to be released annually, clarifying requirements related to reporting and quality measures, which will enable physician populations and healthcare organizations to make strategic decisions about the purchase of analytic software or other solutions important to comply with the new law and associated regulations.
HITECH resulted in additional related new orders for our EHR products, and we believe that the MACRA could drive purchases of not only EHRs but also additional technologies necessary in advanced payment models. Large physician groups will continue to purchase and enhance their use of EHR technology; while the number of very large practices with over 100 physicians that have not yet acquired such technology is insignificant, those considering replacement purchases are increasing. Such practices may choose to replace older EHR technology in the future as regulatory requirements (such as those related to Advanced APMs) and business realities dictate the need for updates and upgrades, as well as additional features and functionality. As incentive payment strategies shift in policies under the current Presidential Administration in the United States, the role of commercial payers and their continued expansion of alternative payment models and interest in attaining larger volumes of clinical data, as well as the anticipated growth in Medicaid payment models, are expected to provide additional incentives for purchase and expansion.
30
We also continue to see activity in local community-based buying, whereby individual hospitals, health systems and integrated delivery networks subsidize the purchase of EHR licenses or related services for local, affiliated physicians and physicians across their employed physician base in order to leverage buying power and to help those practices take advantage of payment reform opportunities. This activity has also resulted in a pull-through effect where smaller practices affiliated with a community hospital are motivated to participate in a variety of incentive programs, while the subsidizing health system expands connectivity within the local provider community. We believe that the new rules related to exceptions to the Stark Law and Anti-Kickback Statute, which were recently released in proposed form and would continue to allow hospitals and other organizations to subsidize the purchase of EHRs, contributed to the growth of this market dynamic. We expect that these regulatory revisions from HHS will further support value-based payment models and their associated purchasing arrangements between hospitals and physician practices, including allowing subsidization of replacement EHRs and not just initial purchases. The associated challenge we face is to successfully position, sell, implement and support our products sold to hospitals, health systems or integrated delivery networks that subsidize their affiliated physicians. We believe the community programs we have in place will help us penetrate these markets.
We believe we have taken and continue to take the proper steps to maximize the opportunity presented by the QPP and other new payment programs, including several announced recently, such as Primary Care First and the Pathways to Success overhaul of Medicare’s National ACO program. However, given the effects the laws are having on our clients, there can be no assurance that they will result in significant new orders for us in the near term, and if they do, that we will have the capacity to meet the additional market demand in a timely fashion.
Additionally, other public laws to reform the United States healthcare system contain various provisions, which may impact us and our clients. Continued efforts by the current Presidential Administration to alter aspects of the Patient Protection and Affordable Care Act (as amended, the “PPACA”) or to make other policy changes through Executive Orders create uncertainty for us and for our clients. Certain lawsuits related to the PPACA also create uncertainty for us and our clients. Some laws currently in place may have a positive impact by requiring the expanded use of EHRs, quality measurement, prescription drug monitoring and analytics tools to participate in certain federal, state or private sector programs. Others, such as adjustments made to the PPACA by the current Presidential Administration, laws or regulations mandating reductions in reimbursement for certain types of providers, decreasing insurance coverage of patients, state level requests for waivers from CMS related to Medicaid modeling, or increasing regulatory oversight of our products or our business practices, may have a negative impact by reducing the resources available to purchase our products. Increases in fraud and abuse enforcement and payment adjustments for non-participation in certain programs or overpayment of certain incentive payments may also adversely affect participants in the healthcare sector, including us.
Generally, Congressional oversight of EHRs and health information technology has increased in recent years, including a specific focus on perceived interoperability failures and physician frustration with user burden, as well as contributing factors to such dissatisfaction. This increased oversight could impact our clients and our business. The passage of the 21st Century Cures Act in December 2016 assuaged some concerns about interoperability and possible FDA oversight of EHRs, and we await the final regulations on data blocking and interoperability that were released in proposed form by HHS in February 2019. Certain of these proposals may have a significant effect on our business processes and how our clients must exchange patient information. We will respond as necessary to the finalized regulations on those topics, which are expected early next year.
Allscripts continues to see increased opportunities stemming from the large stores of patient data accumulated from our industry-leading client base and partnerships with other EHR companies, including NextGen Healthcare Inc., a leading provider of ambulatory-focused healthcare technology solutions. Through collaboration with researchers and life sciences companies, we believe Allscripts may play a role in the study of real-world evidence as it relates to post-market surveillance of new medicines, as an example. We will closely monitor any new laws that take shape in Congress that may touch third-party uses of patient data and/or any related privacy implications for patient consent.
Congressional focus on addressing the opioid epidemic in part through technological applications and reducing clinician burden is likely to continue. The Administration is also taking action in some areas that may directly or indirectly affect Allscripts and our clients, including efforts to increase health-related price transparency in order to support patients in applying market-based pressures to the nation’s challenge of cost containment. Further, CMS has proposed changes to the Evaluation & Management coding structure that ties closely to our clients’ requirements to document the care they are delivering prior to payment. We expect these changes may have a positive effect on clinician satisfaction with our EHRs, if implemented as proposed, though the fundamentals of payment will remain in transition to value-based payment models.
New payment and delivery system reform programs, including those related to the Medicare program, are increasingly being rolled out at the state level through Medicaid administrators, as well as through the private sector, presenting additional opportunities for us to provide software and services to our clients who participate. We also must take steps to comply with state-specific laws and regulations governing companies in the health information technology space.
We derive our revenues primarily from sales of our proprietary software (either as a perpetual license sale or under a subscription delivery model), support and maintenance services, and managed services, such as outsourcing, private cloud hosting and revenue cycle management.
31
Critical Accounting Policies and Estimates
We adopted the new leasing standard ASU 2016-02 effective January 1, 2019. The standard requires that leased assets and corresponding lease liabilities be recognized in the consolidated balance sheets as right-to-use assets and operating or financing lease liabilities. Refer to Note 3 “Leases” to our consolidated financial statements included Part I, Item 1, “Financial Statements (unaudited)” of this Form 10-Q for further information regarding the impact of adopting ASU 2016-02.
There were no other material changes to our critical accounting policies and estimates from those previously disclosed in our Form 10-K.
Third Quarter 2019 Summary
During the third quarter of 2019, we continued to make progress on our key strategic, financial and operational imperatives, which are aimed at driving higher client satisfaction, improving our competitive position by expanding the depth and breadth of our products and integrating recent acquisitions. Additionally, we believe there are still opportunities to continue to improve our operating leverage and further streamline our operations and such efforts are ongoing.
Total revenue for the third quarter of 2019 was $444 million, an increase of $12 million compared to the third quarter of 2018. For the three months ended September 30, 2019, software delivery, support and maintenance revenue and client services revenue was $284 million and $160 million, respectively, compared with $274 million and $158 million, respectively, during the three months ended September 30, 2018. Gross profit for the third quarter was $175 million, a decrease of $3 million compared to the third quarter of 2018. Gross margin decreased to 39.5% in the third quarter of 2019 compared to a 41.2% gross margin in third quarter of 2018.
Our contract backlog as of September 30, 2019 was $3.9 billion, which remained consistent compared with our contract backlog of $3.9 billion as of December 31, 2018, while decreasing compared with contract backlog as of September 30, 2018 of $4.1 billion.
Our bookings, which reflect the value of executed contracts for software, hardware, other client services, private-cloud hosting, outsourcing and subscription-based services, totaled $236 million for the three months ended September 30, 2019, which represents an increase of 19% over the comparable prior period amount of $198 million and a decrease of 14% from the second quarter of 2019 amount of $276 million.
32
Overview of Consolidated Results
Three and Nine Months Ended September 30, 2019 Compared with the Three and Nine Months Ended September 30, 2018
|
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||||||||||
|
(In thousands) |
|
2019 |
|
|
2018 |
|
|
% Change |
|
|
2019 |
|
|
2018 |
|
|
% Change |
|
||||||
|
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Software delivery, support and maintenance |
|
$ |
284,373 |
|
|
$ |
274,138 |
|
|
|
3.7 |
% |
|
$ |
844,908 |
|
|
$ |
839,176 |
|
|
|
0.7 |
% |
|
Client services |
|
|
159,811 |
|
|
|
158,292 |
|
|
|
1.0 |
% |
|
|
475,785 |
|
|
|
468,440 |
|
|
|
1.6 |
% |
|
Total revenue |
|
|
444,184 |
|
|
|
432,430 |
|
|
|
2.7 |
% |
|
|
1,320,693 |
|
|
|
1,307,616 |
|
|
|
1.0 |
% |
|
Cost of revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Software delivery, support and maintenance |
|
|
90,329 |
|
|
|
86,847 |
|
|
|
4.0 |
% |
|
|
269,813 |
|
|
|
265,795 |
|
|
|
1.5 |
% |
|
Client services |
|
|
149,258 |
|
|
|
142,158 |
|
|
|
5.0 |
% |
|
|
430,814 |
|
|
|
429,420 |
|
|
|
0.3 |
% |
|
Amortization of software development and acquisition-related assets |
|
|
29,295 |
|
|
|
25,473 |
|
|
|
15.0 |
% |
|
|
86,547 |
|
|
|
76,017 |
|
|
|
13.9 |
% |
|
Total cost of revenue |
|
|
268,882 |
|
|
|
254,478 |
|
|
|
5.7 |
% |
|
|
787,174 |
|
|
|
771,232 |
|
|
|
2.1 |
% |
|
Gross profit |
|
|
175,302 |
|
|
|
177,952 |
|
|
|
(1.5 |
%) |
|
|
533,519 |
|
|
|
536,384 |
|
|
|
(0.5 |
%) |
|
Gross margin % |
|
|
39.5 |
% |
|
|
41.2 |
% |
|
|
|
|
|
|
40.4 |
% |
|
|
41.0 |
% |
|
|
|
|
|
Selling, general and administrative expenses |
|
|
101,152 |
|
|
|
108,125 |
|
|
|
(6.4 |
%) |
|
|
306,939 |
|
|
|
350,975 |
|
|
|
(12.5 |
%) |
|
Research and development |
|
|
63,873 |
|
|
|
63,032 |
|
|
|
1.3 |
% |
|
|
191,597 |
|
|
|
202,313 |
|
|
|
(5.3 |
%) |
|
Asset impairment charges |
|
|
248 |
|
|
|
0 |
|
|
NM |
|
|
|
4,037 |
|
|
|
30,075 |
|
|
|
(86.6 |
%) |
|
|
Amortization of intangible and acquisition-related assets |
|
|
6,847 |
|
|
|
6,609 |
|
|
|
3.6 |
% |
|
|
20,376 |
|
|
|
19,630 |
|
|
|
3.8 |
% |
|
Income (loss) from operations |
|
|
3,182 |
|
|
|
186 |
|
|
NM |
|
|
|
10,570 |
|
|
|
(66,609 |
) |
|
|
(115.9 |
%) |
|
|
Interest expense |
|
|
(10,839 |
) |
|
|
(13,251 |
) |
|
|
(18.2 |
%) |
|
|
(31,447 |
) |
|
|
(36,925 |
) |
|
|
(14.8 |
%) |
|
Other income (loss), net |
|
|
781 |
|
|
|
(536 |
) |
|
NM |
|
|
|
(143,700 |
) |
|
|
(584 |
) |
|
NM |
|
||
|
Gain on sale of businesses, net |
|
|
0 |
|
|
|
0 |
|
|
NM |
|
|
|
0 |
|
|
|
172,258 |
|
|
|
(100.0 |
%) |
|
|
Recovery (impairment) of long-term investments |
|
|
0 |
|
|
|
0 |
|
|
NM |
|
|
|
1,045 |
|
|
|
(15,487 |
) |
|
|
(106.7 |
%) |
|
|
Equity in net income (loss) of unconsolidated investments |
|
|
386 |
|
|
|
(177 |
) |
|
NM |
|
|
|
540 |
|
|
|
529 |
|
|
|
2.1 |
% |
|
|
(Loss) income from continuing operations before income taxes |
|
|
(6,490 |
) |
|
|
(13,778 |
) |
|
|
(52.9 |
%) |
|
|
(162,992 |
) |
|
|
53,182 |
|
|
NM |
|
|
|
Income tax benefit (provision) |
|
|
765 |
|
|
|
1,637 |
|
|
|
(53.3 |
%) |
|
|
(640 |
) |
|
|
(5,918 |
) |
|
|
(89.2 |
%) |
|
Effective tax rate |
|
|
11.8 |
% |
|
|
11.9 |
% |
|
|
|
|
|
|
(0.4 |
%) |
|
|
11.1 |
% |
|
|
|
|
|
(Loss) income from continuing operations, net of tax |
|
|
(5,725 |
) |
|
|
(12,141 |
) |
|
|
(52.8 |
%) |
|
|
(163,632 |
) |
|
|
47,264 |
|
|
NM |
|
|
|
Loss from discontinued operations |
|
|
0 |
|
|
|
(13,857 |
) |
|
|
(100.0 |
%) |
|
|
0 |
|
|
|
(32,980 |
) |
|
|
(100.0 |
%) |
|
Income tax effect on discontinued operations |
|
|
0 |
|
|
|
2,152 |
|
|
|
(100.0 |
%) |
|
|
0 |
|
|
|
7,627 |
|
|
|
(100.0 |
%) |
|
Loss from discontinued operations, net of tax |
|
|
0 |
|
|
|
(11,705 |
) |
|
|
(100.0 |
%) |
|
|
0 |
|
|
|
(25,353 |
) |
|
|
(100.0 |
%) |
|
Net (loss) income |
|
|
(5,725 |
) |
|
|
(23,846 |
) |
|
|
(76.0 |
%) |
|
|
(163,632 |
) |
|
|
21,911 |
|
|
NM |
|
|
|
Net loss attributable to non-controlling interest |
|
|
0 |
|
|
|
4 |
|
|
|
(100.0 |
%) |
|
|
424 |
|
|
|
3,494 |
|
|
|
(87.9 |
%) |
|
Accretion of redemption preference on redeemable convertible non-controlling interest - discontinued operations |
|
|
0 |
|
|
|
(12,149 |
) |
|
|
(100.0 |
%) |
|
|
0 |
|
|
|
(36,446 |
) |
|
|
(100.0 |
%) |
|
Net loss attributable to Allscripts Healthcare Solutions, Inc. stockholders |
|
$ |
(5,725 |
) |
|
$ |
(35,991 |
) |
|
|
(84.1 |
%) |
|
$ |
(163,208 |
) |
|
$ |
(11,041 |
) |
|
NM |
|
|
NM – We define “NM” as not meaningful for increases or decreases greater than 200%.
33
Revenue
|
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||||||||||
|
(In thousands) |
|
2019 |
|
|
2018 |
|
|
% Change |
|
|
2019 |
|
|
2018 |
|
|
% Change |
|
||||||
|
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recurring revenue |
|
$ |
349,455 |
|
|
$ |
349,404 |
|
|
|
0.0 |
% |
|
$ |
1,048,204 |
|
|
$ |
1,063,440 |
|
|
|
(1.4 |
%) |
|
Non-recurring revenue |
|
|
94,729 |
|
|
|
83,026 |
|
|
|
14.1 |
% |
|
|
272,489 |
|
|
|
244,176 |
|
|
|
11.6 |
% |
|
Total revenue |
|
$ |
444,184 |
|
|
$ |
432,430 |
|
|
|
2.7 |
% |
|
$ |
1,320,693 |
|
|
$ |
1,307,616 |
|
|
|
1.0 |
% |
Three and Nine Months Ended September 30, 2019 Compared with the Three and Nine Months Ended September 30, 2018
Recurring revenue consists of subscription-based software sales, support and maintenance revenue, recurring transactions revenue and recurring revenue from managed services solutions, such as outsourcing, private cloud hosting and revenue cycle management. Non-recurring revenue consists of perpetual software licenses sales, hardware resale and non-recurring transactions revenue, and project-based client services revenue.
Recurring revenue remained consistent for the three months ended September 30, 2019 compared to the prior year comparable period with known attrition within the EIS and other businesses offset with an increase in subscription revenue. The sale of the OneContent business on April 2, 2018 also contributed to the decline in recurring revenue for the nine months ended September 30, 2019. The OneContent business was acquired as part of the EIS business acquisition on October 2, 2017 and it contributed $13 million of recurring revenue during the first quarter of 2018, including $1 million of amortization of acquisition-related deferred revenue adjustments. Non-recurring revenue increased due to higher sales of perpetual software licenses for our acute solutions and hardware in 2019 compared to 2018, partially offset by lower client services revenue related to the timing of software activations.
The percentage of recurring and non-recurring revenue of our total revenue was 79% and 21%, respectively, during the three and nine months ended September 30, 2019 and 81% and 19%, respectively, during the three and nine months ended September 30, 2018.
Gross Profit
|
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||||||||||
|
(In thousands) |
|
2019 |
|
|
2018 |
|
|
% Change |
|
|
2019 |
|
|
2018 |
|
|
% Change |
|
||||||
|
Total cost of revenue |
|
$ |
268,882 |
|
|
$ |
254,478 |
|
|
|
5.7 |
% |
|
$ |
787,174 |
|
|
$ |
771,232 |
|
|
|
2.1 |
% |
|
Gross profit |
|
$ |
175,302 |
|
|
$ |
177,952 |
|
|
|
(1.5 |
%) |
|
$ |
533,519 |
|
|
$ |
536,384 |
|
|
|
(0.5 |
%) |
|
Gross margin % |
|
|
39.5 |
% |
|
|
41.2 |
% |
|
|
|
|
|
|
40.4 |
% |
|
|
41.0 |
% |
|
|
|
|
Three and Nine Months Ended September 30, 2019 Compared with the Three and Nine Months Ended September 30, 2018
Gross profit and gross margin decreased during the three months ended September 30, 2019 compared with the prior year comparable period, primarily due to an increase in hosting migration costs, higher amortization of software development and recognition of previously deferred expenses.
Gross profit was consistent for the nine months ended September 30, 2019 due the previously mentioned items, partially offset with increase in organic sales for Veradigm and our acute solutions in 2019 compared to 2018 and the sale of the OneContent business on April 2, 2019, which carried a higher gross margin compared with our other businesses.
Selling, General and Administrative Expenses
|
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||||||||||
|
(In thousands) |
|
2019 |
|
|
2018 |
|
|
% Change |
|
|
2019 |
|
|
2018 |
|
|
% Change |
|
||||||
|
Selling, general and administrative expenses |
|
$ |
101,152 |
|
|
$ |
108,125 |
|
|
|
(6.4 |
%) |
|
$ |
306,939 |
|
|
$ |
350,975 |
|
|
|
(12.5 |
%) |
Three and Nine Months Ended September 30, 2019 Compared with the Three and Nine Months Ended September 30, 2018
Selling, general and administrative expenses decreased during the three and nine months ended September 30, 2019, compared with the prior year comparable periods. The decline for the three months ended September 30, 2019 was primarily due to the impact of headcount reduction actions taken during 2018 as part of the integration of the EIS, Practice Fusion and Health Grid acquisitions. The decrease for the nine months ended September 30, 2019 was primarily due to the headcount reduction previously mentioned and the sale of OneContent, which resulted in one-time incentive compensation expenses and lower transaction-related and legal expenses.
Research and Development
|
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||||||||||
|
(In thousands) |
|
2019 |
|
|
2018 |
|
|
% Change |
|
|
2019 |
|
|
2018 |
|
|
% Change |
|
||||||
|
Research and development |
|
$ |
63,873 |
|
|
$ |
63,032 |
|
|
|
1.3 |
% |
|
$ |
191,597 |
|
|
$ |
202,313 |
|
|
|
(5.3 |
%) |
34
Three and Nine Months Ended September 30, 2019 Compared with the Three and Nine Months Ended September 30, 2018
Research and development expenses remained consistent during the three months ended September 30, 2019 compared with the prior year comparable period. Research and development expenses decreased during the nine months ended September 30, 2019, compared with the prior year comparable period and was primarily due to the sale of OneContent at the beginning of second quarter 2018 as there were $10 million of one-time incentive compensation expenses recorded in research and development as a result of the sale.
Asset Impairment Charges
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
|||||||||||||||||
|
(In thousands) |
|
2019 |
|
|
2018 |
|
|
% Change |
|
2019 |
|
|
2018 |
|
|
% Change |
|
|||||
|
Asset impairment charges |
|
$ |
248 |
|
|
$ |
0 |
|
|
NM |
|
$ |
4,037 |
|
|
$ |
30,075 |
|
|
|
(86.6 |
%) |
Three and Nine months Ended September 30, 2019 Compared with the Three and Nine Months Ended September 30, 2019
Asset impairment charges for the three and nine months ended September 30, 2019 were primarily the result of retiring certain hosting assets due to data center migrations. During the nine months ended September 30, 2018, we recognized non-cash asset impairment charges related to the write-off of purchased third-party software as a result of our decision to discontinue several software development projects.
Amortization of Intangible Assets
|
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||||||||||
|
(In thousands) |
|
2019 |
|
|
2018 |
|
|
% Change |
|
|
2019 |
|
|
2018 |
|
|
% Change |
|
||||||
|
Amortization of intangible and acquisition-related assets |
|
$ |
6,847 |
|
|
$ |
6,609 |
|
|
|
3.6 |
% |
|
$ |
20,376 |
|
|
$ |
19,630 |
|
|
|
3.8 |
% |
Three and Nine Months Ended September 30, 2019 Compared with the Three and Nine Months Ended September 30, 2018
The increase in amortization expense for the three and nine months ended September 30, 2019, compared with the prior year comparable periods, was due to incremental amortization expense associated with intangible assets acquired as part of business combinations completed during 2018.
Interest Expense
|
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||||||||||
|
(In thousands) |
|
2019 |
|
|
2018 |
|
|
% Change |
|
|
2019 |
|
|
2018 |
|
|
% Change |
|
||||||
|
Interest expense |
|
$ |
10,839 |
|
|
$ |
13,251 |
|
|
|
(18.2 |
%) |
|
$ |
31,447 |
|
|
$ |
36,925 |
|
|
|
(14.8 |
%) |
Three and Nine Months Ended September 30, 2019 Compared with the Three and Nine Months Ended September 30, 2018
Interest expense during the three and nine months ended September 30, 2019 decreased compared to the prior year comparable periods, due to the impact of lower average outstanding borrowings partially offset by higher interest rates.
Other Income (Loss), Net
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
||||||||||||||||
|
(In thousands) |
|
2019 |
|
|
2018 |
|
|
% Change |
|
2019 |
|
|
2018 |
|
|
% Change |
||||
|
Other income (loss), net |
|
$ |
781 |
|
|
$ |
(536 |
) |
|
NM |
|
$ |
(143,700 |
) |
|
$ |
(584 |
) |
|
NM |
Three and Nine Months Ended September 30, 2019 Compared with the Three and Nine Months Ended September 30, 2019
Other income (loss), net for the three and nine months ended September 30, 2019 and 2018 consisted of a combination of interest income, and miscellaneous receipts and expenses. The large increase in loss during 2019 was due to the expected $145 million settlement with the DOJ related to its civil and criminal investigations of Practice Fusion. Refer to Note 13, “Contingencies” of the Notes to the Consolidated Financial Statements in Part I, Item 1 of this Form 10-Q for further information regarding the investigations.
Gain on Sale of Businesses, Net
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
|||||||||||||||||
|
(In thousands) |
|
2019 |
|
|
2018 |
|
|
% Change |
|
2019 |
|
|
2018 |
|
|
% Change |
|
|||||
|
Gain on sale of businesses, net |
|
$ |
0 |
|
|
$ |
0 |
|
|
NM |
|
$ |
0 |
|
|
$ |
172,258 |
|
|
|
(100.0 |
%) |
Three and Nine Months Ended September 30, 2019 Compared with the Three and Nine Months Ended September 30, 2018
Gain on sale of businesses, net during the nine months ended September 30, 2018 consists of a gain of $177.9 million and a loss of $5.6 million from the divestiture of our OneContent and Strategic Sourcing businesses, respectively.
35
Recovery (impairment) of Long-term investments
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
|||||||||||||||||
|
(In thousands) |
|
2019 |
|
|
2018 |
|
|
% Change |
|
2019 |
|
|
2018 |
|
|
% Change |
|
|||||
|
Recovery (impairment) of long-term investments |
|
$ |
0 |
|
|
$ |
0 |
|
|
NM |
|
$ |
1,045 |
|
|
$ |
(15,487 |
) |
|
|
(106.7 |
%) |
Three and Nine Months Ended September 30, 2019 Compared with the Three and Nine Months Ended September 30, 2018
During the nine months ended September 30, 2019, we recovered $1.0 million from a third-party cost-method investment that we had previously impaired. The impairment charges for the nine months ended September 30, 2018 were the result of non-cash charges related to two of our cost-method equity investments and a related note receivable. These charges equaled the cost bases of the investments and the related note receivable prior to the impairment.
Equity in Net (Loss) Income of Unconsolidated Investments
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
|||||||||||||||||
|
(In thousands) |
|
2019 |
|
|
2018 |
|
|
% Change |
|
2019 |
|
|
2018 |
|
|
% Change |
|
|||||
|
Equity in net income (loss) of unconsolidated investments |
|
$ |
386 |
|
|
$ |
(177 |
) |
|
NM |
|
$ |
540 |
|
|
$ |
529 |
|
|
|
2.1 |
% |
Three and Nine Months Ended September 30, 2019 Compared with the Three and Nine Months Ended September 30, 2018
Equity in net loss of unconsolidated investments represents our share of the equity earnings of our investments in third parties accounted for under the equity method of accounting.
Income Taxes
|
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||||||||||
|
(In thousands) |
|
2019 |
|
|
2018 |
|
|
% Change |
|
|
2019 |
|
|
2018 |
|
|
% Change |
|
||||||
|
Income tax benefit (provision) |
|
$ |
765 |
|
|
$ |
1,637 |
|
|
|
(53.3 |
%) |
|
$ |
(640 |
) |
|
$ |
(5,918 |
) |
|
|
(89.2 |
%) |
|
Effective tax rate |
|
|
11.8 |
% |
|
|
11.9 |
% |
|
|
|
|
|
|
(0.4 |
%) |
|
|
11.1 |
% |
|
|
|
|
Three and Nine Months Ended September 30, 2019 Compared with the Three and Nine Months Ended September 30, 2018
The United States Tax Cuts and Jobs Act (the “Tax Act”) was enacted on December 22, 2017 and introduced significant changes to the income tax law in the United States. Our provision for income taxes differs from the tax computed at the U.S. federal statutory income tax rate primarily due to permanent differences, income attributable to foreign jurisdictions taxed at different rates, state taxes, tax credits and certain discrete items. Our effective tax rate for the three and nine months ended September 30, 2019, compared with the prior year comparable periods, differs primarily due to higher tax shortfalls associated with stock-based compensation reflected in the provision for the nine months ended September 30, 2019 and release of valuation allowance of $14.5 million recorded during the nine months ended September 30, 2018.
In evaluating our ability to recover our deferred tax assets within the jurisdictions from which they arise, we consider all available evidence, including scheduled reversals of deferred tax liabilities, tax-planning strategies, and results of recent operations. In evaluating the objective evidence that historical results provide, we consider three years of cumulative operating income (loss). During the three and nine months ended September 30, 2019, we recorded immaterial impacts for valuation allowances.
Discontinued Operations
|
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||||||||||
|
(In thousands) |
|
2019 |
|
|
2018 |
|
|
% Change |
|
|
2019 |
|
|
2018 |
|
|
% Change |
|
||||||
|
Loss from discontinued operations |
|
$ |
0 |
|
|
$ |
(13,857 |
) |
|
|
(100.0 |
%) |
|
$ |
0 |
|
|
$ |
(32,980 |
) |
|
|
(100.0 |
%) |
|
Income tax effect on discontinued operations |
|
$ |
0 |
|
|
$ |
2,152 |
|
|
|
(100.0 |
%) |
|
$ |
0 |
|
|
$ |
7,627 |
|
|
|
(100.0 |
%) |
36
Three and Nine Months Ended September 30, 2019 Compared with the Three and Nine Months Ended September 30, 2018
On December 31, 2018, we sold all of the Class A Common Units of Netsmart owned by the Company. Prior to the sale, Netsmart comprised a separate reportable segment due to its significance to our historical consolidated financial statements and results of operations, and is now reported as a discontinued operation as a result of the sale for all periods presented. The loss from discontinued operations primarily represents the net losses incurred by Netsmart for the three and nine months ended September 30, 2018. Also included in discontinued operations are earnings associated with the Horizon Clinicals and Series2000 Revenue Cycle product offerings, which we stopped supporting effective as of March 31, 2018. Refer to Note 14, “Discontinued Operations” of the Notes to Consolidated Financial Statements in Part I, Item 1 of this Form 10-Q for further information regarding discontinued operations.
Non-Controlling Interests
|
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||||||||||
|
(In thousands) |
|
2019 |
|
|
2018 |
|
|
% Change |
|
|
2019 |
|
|
2018 |
|
|
% Change |
|
||||||
|
Net loss attributable to non-controlling interest |
|
$ |
0 |
|
|
$ |
4 |
|
|
|
(100.0 |
%) |
|
$ |
424 |
|
|
$ |
3,494 |
|
|
|
(87.9 |
%) |
|
Accretion of redemption preference on redeemable convertible non-controlling interest - discontinued operations |
|
$ |
0 |
|
|
$ |
(12,149 |
) |
|
|
(100.0 |
%) |
|
$ |
0 |
|
|
$ |
(36,446 |
) |
|
|
(100.0 |
%) |
Three and Nine Months Ended September 30, 2019 Compared with the Three and Nine Months Ended September 30, 2018
The net loss attributable to non-controlling interest represents the share of earnings of consolidated affiliates that is attributable to the affiliates’ common stock that is not owned by us for each of the periods presented. The accretion of redemption preference on redeemable convertible non-controlling interest represents the accretion of liquidation preference at 11% per annum to the value of the preferred units of Netsmart, prior to the sale of our investment in Netsmart on December 31, 2018.
Segment Operations
During the first quarter of 2019, we changed our reportable segments from Clinical and Financial Solutions, Population Health and Unallocated to Provider, Veradigm and Unallocated. The segment disclosures below for the three and nine months ended September 30, 2018, have been revised to conform to the current year presentation. Refer to Note 15 “Business Segments” of the Notes to Consolidated Financial Statements in Part I, Item 1 of this Form 10-Q for further discussion on the impact of the change.
Overview of Segment Results
|
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||||||||||
|
(In thousands) |
|
2019 |
|
|
2018 |
|
|
% Change |
|
|
2019 |
|
|
2018 |
|
|
% Change |
|
||||||
|
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provider |
|
$ |
396,679 |
|
|
$ |
402,213 |
|
|
|
(1.4 |
%) |
|
$ |
1,194,976 |
|
|
$ |
1,226,104 |
|
|
|
(2.5 |
%) |
|
Veradigm |
|
|
41,680 |
|
|
|
38,775 |
|
|
|
7.5 |
% |
|
|
115,317 |
|
|
|
95,079 |
|
|
|
21.3 |
% |
|
Unallocated Amounts |
|
|
5,825 |
|
|
|
(8,558 |
) |
|
|
168.1 |
% |
|
|
10,400 |
|
|
|
(13,567 |
) |
|
|
176.7 |
% |
|
Total revenue |
|
$ |
444,184 |
|
|
$ |
432,430 |
|
|
|
2.7 |
% |
|
$ |
1,320,693 |
|
|
$ |
1,307,616 |
|
|
|
1.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Profit: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provider |
|
$ |
168,047 |
|
|
$ |
175,393 |
|
|
|
(4.2 |
%) |
|
$ |
508,180 |
|
|
$ |
545,223 |
|
|
|
(6.8 |
%) |
|
Veradigm |
|
|
25,655 |
|
|
|
27,669 |
|
|
|
(7.3 |
%) |
|
|
75,203 |
|
|
|
66,112 |
|
|
|
13.8 |
% |
|
Unallocated Amounts |
|
|
(18,400 |
) |
|
|
(25,110 |
) |
|
|
26.7 |
% |
|
|
(49,864 |
) |
|
|
(74,951 |
) |
|
|
33.5 |
% |
|
Total gross profit |
|
$ |
175,302 |
|
|
$ |
177,952 |
|
|
|
(1.5 |
%) |
|
$ |
533,519 |
|
|
$ |
536,384 |
|
|
|
(0.5 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provider |
|
$ |
96,895 |
|
|
$ |
101,130 |
|
|
|
(4.2 |
%) |
|
$ |
301,294 |
|
|
$ |
308,071 |
|
|
|
(2.2 |
%) |
|
Veradigm |
|
|
8,975 |
|
|
|
12,850 |
|
|
|
(30.2 |
%) |
|
|
29,525 |
|
|
|
26,163 |
|
|
|
12.9 |
% |
|
Unallocated Amounts |
|
|
(102,688 |
) |
|
|
(113,794 |
) |
|
|
9.8 |
% |
|
|
(320,249 |
) |
|
|
(400,843 |
) |
|
|
20.1 |
% |
|
Total income (loss) from operations |
|
$ |
3,182 |
|
|
$ |
186 |
|
|
NM |
|
|
$ |
10,570 |
|
|
$ |
(66,609 |
) |
|
|
115.9 |
% |
|
37
Provider
Our Provider segment derives its revenue from the sale of integrated clinical software applications, financial management and patient engagement solutions, which primarily include EHR-related software, connectivity and coordinated care solutions, financial and practice management software, related installation, support and maintenance, outsourcing, private cloud hosting, revenue cycle management, training and electronic claims administration services.
|
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||||||||||
|
(In thousands) |
|
2019 |
|
|
2018 |
|
|
% Change |
|
|
2019 |
|
|
2018 |
|
|
% Change |
|
||||||
|
Revenue |
|
$ |
396,679 |
|
|
$ |
402,213 |
|
|
|
(1.4 |
%) |
|
$ |
1,194,976 |
|
|
$ |
1,226,104 |
|
|
|
(2.5 |
%) |
|
Gross profit |
|
$ |
168,047 |
|
|
$ |
175,393 |
|
|
|
(4.2 |
%) |
|
$ |
508,180 |
|
|
$ |
545,223 |
|
|
|
(6.8 |
%) |
|
Gross margin % |
|
|
42.4 |
% |
|
|
43.6 |
% |
|
|
|
|
|
|
42.5 |
% |
|
|
44.5 |
% |
|
|
|
|
|
Income from operations |
|
$ |
96,895 |
|
|
$ |
101,130 |
|
|
|
(4.2 |
%) |
|
$ |
301,294 |
|
|
$ |
308,071 |
|
|
|
(2.2 |
%) |
|
Operating margin % |
|
|
24.4 |
% |
|
|
25.1 |
% |
|
|
|
|
|
|
25.2 |
% |
|
|
25.1 |
% |
|
|
|
|
Three and Nine Months Ended September 30, 2019 Compared with the Three and Nine Months Ended September 30, 2018
Provider revenue decreased during the three months ended September 30, 2019, compared with the prior year comparable period due to known attrition within the EIS and other businesses. The sale of the OneContent and Strategic Sourcing businesses on March 15, 2018 and on April 2, 2018, respectively, contributed to the decline in revenue for the nine months ended September 30, 2019. These businesses were acquired as part of the EIS business acquisition on October 2, 2017 and contributed $16 million of revenue during the first quarter of 2018, including $1 million of amortization of acquisition-related deferred revenue adjustments. These decreases were partly offset by higher sales of perpetual software licenses for our acute solutions in 2019 compared to 2018 and additional revenue from the acquisition of Health Grid during 2018.
Gross profit and margin decreased during the three months ended September 30, 2019 compared with the prior year comparable period primarily due the previously mentioned attrition and increased hosting migration costs. These were partially offset with lower costs due to the decline in sales. The sale of OneContent, which had higher overall profitability, compared with our other Provider businesses, contributed to the decline of gross profit and margin for the nine months ended September 30, 2019. The operating margin for the three and nine months ended September 30, 2019, compared with the prior year comparable periods decreased. This decrease was the result of a decline in gross profit partially offset by lower selling, general and administrative, and research and development expenses driven by headcount reduction actions taken during 2018 as part of the integration of the EIS and Health Grid acquisitions.
Veradigm
Our Veradigm segment derives its revenue from the provision of data-driven clinical insights with actionable tools for clinical workflow, research, analytics and media. Its solutions, targeted at key healthcare stakeholders, help improve the quality, efficiency and value of healthcare delivery – from biopharma to health plans, healthcare providers and patients, and health technology partners, among others.
|
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||||||||||
|
(In thousands) |
|
2019 |
|
|
2018 |
|
|
% Change |
|
|
2019 |
|
|
2018 |
|
|
% Change |
|
||||||
|
Revenue |
|
$ |
41,680 |
|
|
$ |
38,775 |
|
|
|
7.5 |
% |
|
$ |
115,317 |
|
|
$ |
95,079 |
|
|
|
21.3 |
% |
|
Gross profit |
|
$ |
25,655 |
|
|
$ |
27,669 |
|
|
|
(7.3 |
%) |
|
$ |
75,203 |
|
|
$ |
66,112 |
|
|
|
13.8 |
% |
|
Gross margin % |
|
|
61.6 |
% |
|
|
71.4 |
% |
|
|
|
|
|
|
65.2 |
% |
|
|
69.5 |
% |
|
|
|
|
|
Income from operations |
|
$ |
8,975 |
|
|
$ |
12,850 |
|
|
|
(30.2 |
%) |
|
$ |
29,525 |
|
|
$ |
26,163 |
|
|
|
12.9 |
% |
|
Operating margin % |
|
|
21.5 |
% |
|
|
33.1 |
% |
|
|
|
|
|
|
25.6 |
% |
|
|
27.5 |
% |
|
|
|
|
Three and Nine Months Ended September 30, 2019 Compared with the Three and Nine Months Ended September 30, 2018
Veradigm revenue increased for the three and nine months ended September 30, 2019 compared with the prior year comparable periods due to an increase in organic sales. Gross profit and income from operations decreased during the three months ended September 30, 2019 compared with the prior year comparable period due to increased hosting migration costs. Gross profit and income from operations increased for the nine months ended September 30, 2019 due to an increase in organic sales and cost reductions partially offset with headcount growth and hosting migration costs. The acquisition of Practice Fusion during the first quarter of 2018 also contributed to the nine months ended September 30, 2019 increase.
Gross margin and operating margin decreased during the three and nine months ended September 30, 2019, compared with the prior year comparable periods, primarily due to (i) an increase in hosting migration costs, (ii) costs associated with recent acquisitions, (iii) headcount growth and (iv) partially offset with other cost reductions.
38
Unallocated Amounts
In determining revenue, gross profit and income from operations for our segments, we do not include in revenue the amortization of acquisition-related deferred revenue adjustments, which reflect the fair value adjustments to deferred revenues acquired in a business acquisition. We also exclude the amortization of intangible assets, stock-based compensation expense, expenses not reflective of our core business and transaction-related costs and non-cash asset impairment charges from the operating segment data provided to our CODM. Expenses not reflective of our core business relate to certain severance, product consolidation, legal, consulting and other charges. Accordingly, these amounts are not included in our reportable segment results and are included in the “Unallocated Amounts” category. The “Unallocated Amounts” category also includes (i) corporate general and administrative expenses (including marketing expenses) and certain research and development expenses related to common solutions and resources that benefit all of our business units, all of which are centrally managed, and (ii) revenue and the associated cost from the resale of certain ancillary products, primarily hardware.
|
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||||||||||
|
(In thousands) |
|
2019 |
|
|
2018 |
|
|
% Change |
|
|
2019 |
|
|
2018 |
|
|
% Change |
|
||||||
|
Revenue |
|
$ |
5,825 |
|
|
$ |
(8,558 |
) |
|
|
168.1 |
% |
|
$ |
10,400 |
|
|
$ |
(13,567 |
) |
|
|
176.7 |
% |
|
Gross profit |
|
$ |
(18,400 |
) |
|
$ |
(25,110 |
) |
|
|
26.7 |
% |
|
$ |
(49,864 |
) |
|
$ |
(74,951 |
) |
|
|
33.5 |
% |
|
Gross margin % |
|
NM |
|
|
NM |
|
|
|
|
|
|
NM |
|
|
NM |
|
|
|
|
|
||||
|
Loss from operations |
|
$ |
(102,688 |
) |
|
$ |
(113,794 |
) |
|
|
9.8 |
% |
|
$ |
(320,249 |
) |
|
$ |
(400,843 |
) |
|
|
20.1 |
% |
|
Operating margin % |
|
NM |
|
|
NM |
|
|
|
|
|
|
NM |
|
|
NM |
|
|
|
|
|
||||
Three and Nine Months Ended September 30, 2019 Compared with the Three and Nine Months Ended September 30, 2018
Revenue from the resale of ancillary products, primarily consisting of hardware, is customer and project driven and, as a result, can fluctuate from period to period. Revenue for the three months ended September 30, 2019 increased compared with the prior year comparable period due to an increase in hardware revenue in other products as well as only $0.4 million in amortization of acquisition-related deferred revenue adjustments that was recorded during the three months ended September 30, 2019 compared to $7.3 million during the three months ended September 30, 2018. The acquisition-related adjustments in 2018 primarily resulted from the acquisitions of the EIS, Practice Fusion and Nant Health. Revenue for the nine months ended September 30, 2019 increased compared with the prior year comparable period due to an increase in hardware revenue in other products as well as only $1.5 million in amortization of acquisition-related deferred revenue adjustments that was recorded during the nine months ended September 30, 2019 compared to $23.4 million during the nine months ended September 30, 2018.
Gross unallocated expenses, which represent the unallocated loss from operations excluding the impact of revenue, totaled $109 million for the three months ended September 30, 2019 compared with $105 million for the prior year comparable period. The decrease for the three months ended September 30, 2019 compared with the comparable prior year period was primarily driven by costs related to the increase in hardware sales and higher transaction-related, severance and legal expenses of $2 million offset with a decrease in stock-based compensation by $2 million. Gross unallocated expenses totaled $331 million for the nine months ended September 30, 2019 compared with $387 million for the nine months ended September 30, 2018. The decrease was primarily due to (i) lower asset impairment charges of $26 million, (ii) $32 million lower net transaction-related severance and legal expenses and (iii) partially offset with an increase in stock-based compensation of $3 million.
Contract Backlog
Contract backlog represents the value of bookings and support and maintenance contracts that have not yet been recognized as revenue. A summary of contract backlog by revenue category is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% Change vs. September 30, 2019 |
|
|||||
|
(In millions) |
|
As of September 30, 2019 |
|
|
As of December 31, 2018 |
|
|
As of September 30, 2018 |
|
|
December 31, 2018 |
|
|
September 30, 2018 |
|
|||||
|
Software delivery, support and maintenance |
|
$ |
2,550 |
|
|
$ |
2,507 |
|
|
$ |
2,641 |
|
|
|
1.7 |
% |
|
|
(3.4 |
%) |
|
Client services |
|
|
1,359 |
|
|
|
1,350 |
|
|
|
1,486 |
|
|
|
0.7 |
% |
|
|
(8.5 |
%) |
|
Total contract backlog |
|
$ |
3,909 |
|
|
$ |
3,857 |
|
|
$ |
4,127 |
|
|
|
1.3 |
% |
|
|
(5.3 |
%) |
Total contract backlog as of September 30, 2019 slightly increased compared with December 31, 2018 and decreased compared with September 30, 2018. Total contract backlog can fluctuate between periods based on the level of revenue and bookings, as well as the timing and mix of renewal activity and periodic revalidations.
39
Liquidity and Capital Resources
The primary factors that influence our liquidity include, but are not limited to, the amount and timing of our revenues, cash collections from our clients, capital expenditures and investments in research and development efforts, including investments in or acquisitions of third-parties. As of September 30, 2019, our principal sources of liquidity consisted of cash and cash equivalents of $139 million and available borrowing capacity of $649 million under our revolving credit facility. The change in our cash and cash equivalents balance is reflective of the following:
Operating Cash Flow Activities
|
|
|
Nine Months Ended September 30, |
|
|||||||||
|
(In thousands) |
|
2019 |
|
|
2018 |
|
|
$ Change |
|
|||
|
Net (loss) income |
|
$ |
(163,632 |
) |
|
$ |
21,911 |
|
|
$ |
(185,543 |
) |
|
Less: Loss from discontinued operations |
|
|
0 |
|
|
|
(25,353 |
) |
|
|
25,353 |
|
|
(Loss) income from continuing operations |
|
|
(163,632 |
) |
|
|
47,264 |
|
|
|
(210,896 |
) |
|
Non-cash adjustments to net income (loss) |
|
|
200,717 |
|
|
|
46,930 |
|
|
|
153,787 |
|
|
Cash impact of changes in operating assets and liabilities |
|
|
26,859 |
|
|
|
(28,865 |
) |
|
|
55,724 |
|
|
Net cash provided by operating activities - continuing operations |
|
|
63,944 |
|
|
|
65,329 |
|
|
|
(1,385 |
) |
|
Net cash (used in) provided by operating activities - discontinued operations |
|
|
(30,000 |
) |
|
|
16,225 |
|
|
|
(46,225 |
) |
|
Net cash provided by operating activities |
|
$ |
33,944 |
|
|
$ |
81,554 |
|
|
$ |
(47,610 |
) |
Nine Months Ended September 30, 2019 Compared with the Nine Months Ended September 30, 2018
Net cash provided by operating activities from continuing operations slightly decreased during the nine months ended September 30, 2019 compared with the prior year comparable period primarily due to working capital changes and higher incentive compensation payments. Non-cash adjustments to net (loss) income increased during the nine months ended September 30, 2019 compared with prior year comparable period. This increase was primarily due to the gain on sale of OneContent occurring in 2018 combined with higher depreciation and amortization expenses, which were primarily due to amortization of right-of-use assets. These increases were partially offset by a recovery of a previously impaired investment and lower impairment charges during the nine months ended September 30, 2019 as compared to the prior year comparable period. Net (loss) income and Cash impact of changes in operating assets and liabilities reflects the $145 million settlement with the DOJ’s investigations.
Net cash used in operating activities – discontinued operations during the nine months ended September 30, 2019 reflects an advance income tax payment related to the gain realized upon the sale of our investment in Netsmart on December 31, 2018.
Investing Cash Flow Activities
|
|
|
Nine Months Ended September 30, |
|
|||||||||
|
(In thousands) |
|
2019 |
|
|
2018 |
|
|
$ Change |
|
|||
|
Capital expenditures |
|
$ |
(13,475 |
) |
|
$ |
(21,924 |
) |
|
$ |
8,449 |
|
|
Capitalized software |
|
|
(86,190 |
) |
|
|
(83,093 |
) |
|
|
(3,097 |
) |
|
Cash paid for business acquisitions, net of cash acquired |
|
|
(23,443 |
) |
|
|
(177,233 |
) |
|
|
153,790 |
|
|
Cash received from sale of businesses, net |
|
|
0 |
|
|
|
241,153 |
|
|
|
(241,153 |
) |
|
Purchases of equity securities, other investments and related intangible assets, net |
|
|
(7,191 |
) |
|
|
(2,723 |
) |
|
|
(4,468 |
) |
|
Other proceeds from investing activities |
|
|
14 |
|
|
|
54 |
|
|
|
(40 |
) |
|
Net cash used in investing activities - continuing operations |
|
|
(130,285 |
) |
|
|
(43,766 |
) |
|
|
(86,519 |
) |
|
Net cash used in investing activities - discontinued operations |
|
|
0 |
|
|
|
(189,555 |
) |
|
|
189,555 |
|
|
Net cash used in investing activities |
|
$ |
(130,285 |
) |
|
$ |
(233,321 |
) |
|
$ |
103,036 |
|
Nine Months Ended September 30, 2019 Compared with the Nine Months Ended September 30, 2018
Net cash used in investing activities from continuing operations increased during the nine months ended September 30, 2019, compared with the prior year comparable period. The increase in the use of cash during 2019 was primarily due to the absence of sales of businesses. The sale of OneContent produced significant investing cash inflows during the nine months ended September 30, 2018, which was partially offset with cash paid for the acquisitions of Practice Fusion and Health Grid. Businesses purchased during 2019 include the Pinnacle and Diabetes Collaborative Registries and the assets of a business engaged in the development, implementation, customization, marketing, licensing and sale of a specialty prescription drug platform including software that collects, saves and transmits information required to fill a prescription.
40
Financing Cash Flow Activities
|
|
|
Nine Months Ended September 30, |
|
|||||||||
|
(In thousands) |
|
2019 |
|
|
2018 |
|
|
$ Change |
|
|||
|
Proceeds from sale or issuance of common stock |
|
$ |
0 |
|
|
$ |
1,283 |
|
|
$ |
(1,283 |
) |
|
Taxes paid related to net share settlement of equity awards |
|
|
(6,762 |
) |
|
|
(8,763 |
) |
|
|
2,001 |
|
|
Payments on debt instruments and lease obligations |
|
|
(15,108 |
) |
|
|
(250,390 |
) |
|
|
235,282 |
|
|
Credit facility borrowings, net of issuance costs |
|
|
249,241 |
|
|
|
325,843 |
|
|
|
(76,602 |
) |
|
Repurchase of common stock |
|
|
(102,160 |
) |
|
|
(101,905 |
) |
|
|
(255 |
) |
|
Repurchase of unsettled common stock |
|
|
(9,301 |
) |
|
|
0 |
|
|
|
(9,301 |
) |
|
Payment of acquisition and other financing obligations |
|
|
(11,473 |
) |
|
|
(3,226 |
) |
|
|
(8,247 |
) |
|
Purchases of subsidiary shares owned by non-controlling interest |
|
|
(54,064 |
) |
|
|
(6,945 |
) |
|
|
(47,119 |
) |
|
Net cash provided by (used in) financing activities - continuing operations |
|
|
50,373 |
|
|
|
(44,103 |
) |
|
|
94,476 |
|
|
Net cash provided by financing activities - discontinued operations |
|
|
0 |
|
|
|
153,491 |
|
|
|
(153,491 |
) |
|
Net cash provided by financing activities |
|
$ |
50,373 |
|
|
$ |
109,388 |
|
|
$ |
(59,015 |
) |
Nine Months Ended September 30, 2019 Compared with the Nine Months Ended September 30, 2018
Net cash provided by financing activities from continuing operations increased during the nine months ended September 30, 2019, compared with the prior year comparable period. The increase in the source of cash was primarily driven by a decrease in payments on debt instruments. This increase was partially offset with a decrease in credit facility borrowings, an increase in the repurchase of common stock and the purchase all of the outstanding minority interest in Pulse8, Inc. compared with the nine months ended September 30, 2018. The higher net credit facility borrowings during the nine months ended September 30, 2018 was the result of additional borrowings used to fund the acquisitions of Practice Fusion and Health Grid.
Future Capital Requirements
The following table summarizes our required minimum future payments under the 1.25% Notes and the Senior Secured Credit Facility as of September 30, 2019.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands) |
|
Total |
|
|
Remainder of 2019 |
|
|
2020 |
|
|
2021 |
|
|
2022 |
|
|
2023 |
|
|
Thereafter |
|
|||||||
|
Principal payments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.25% Cash Convertible Senior Notes (1) |
|
$ |
345,000 |
|
|
$ |
0 |
|
|
$ |
345,000 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
Senior Secured Credit Facility (2) |
|
|
585,000 |
|
|
|
5,000 |
|
|
|
27,500 |
|
|
|
30,000 |
|
|
|
37,500 |
|
|
|
485,000 |
|
|
|
0 |
|
|
Total principal payments |
|
|
930,000 |
|
|
|
5,000 |
|
|
|
372,500 |
|
|
|
30,000 |
|
|
|
37,500 |
|
|
|
485,000 |
|
|
|
0 |
|
|
Interest payments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.25% Cash Convertible Senior Notes (1) |
|
|
4,313 |
|
|
|
0 |
|
|
|
4,313 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
Senior Secured Credit Facility (2) (3) |
|
|
70,886 |
|
|
|
5,465 |
|
|
|
21,351 |
|
|
|
20,310 |
|
|
|
19,181 |
|
|
|
4,579 |
|
|
|
0 |
|
|
Total interest payments |
|
|
75,199 |
|
|
|
5,465 |
|
|
|
25,664 |
|
|
|
20,310 |
|
|
|
19,181 |
|
|
|
4,579 |
|
|
|
0 |
|
|
Total future debt payments |
|
$ |
1,005,199 |
|
|
$ |
10,465 |
|
|
$ |
398,164 |
|
|
$ |
50,310 |
|
|
$ |
56,681 |
|
|
$ |
489,579 |
|
|
$ |
0 |
|
(1) Assumes no cash conversions of the 1.25% Notes prior to their maturity on July 1, 2020.
(2) Assumes no additional borrowings after September 30, 2019, payment of any required periodic installments of principal and that all drawn amounts are repaid upon maturity.
(3) Assumes LIBOR plus the applicable margin remain constant at the rate in effect on September 30, 2019, which was 3.54%.
Other Matters Affecting Future Capital Requirements
We plan to fund the expected $145 million settlement with the DOJ related to its investigations through future cash flows and draws on our Revolving Facility. On August 7, 2019, we entered into a First Amendment to the Second Amended Credit Agreement with JPMorgan Chase Bank, N.A., as administrative agent, and certain other lenders. Refer to Note 9, “Debt” of the Notes to the Consolidated Financial Statements in Part I, Item 1 of this Form 10-Q for further information regarding this amendment.
Our total investment in research and development efforts during 2019 is expected to increase overall for the remainder of the year compared with 2018, as we continue to build and expand capabilities and functionality in Veradigm and our Consumer Health offerings while reducing investment in traditional ambulatory, acute and post-acute platforms. Our total spending consists of research and development costs directly recorded to expense, which are offset by the capitalization of eligible development costs.
41
During 2019, we completed renegotiations with Atos to improve the operating cost structure of our private cloud hosting operations. The new agreement also provides for the payment of initial annual base fees of $35 million per year (increase from $30 million) plus charges for volume-based services currently projected using volumes estimated based on historical actuals and forecasted projections. During the three and nine months ended September 30, 2019, we incurred $28 million and $72 million, respectively, of expenses under our agreement with Atos. These costs are included in cost of revenue in our consolidated statements of operations.
To supplement our statement of operations, the table below presents a non-GAAP measure of research and development-related expenses, that we believe is a useful metric for evaluating how we are investing in research and development.
|
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
(In thousands) |
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
||||
|
Research and development costs directly recorded to expense |
|
$ |
63,873 |
|
|
$ |
63,032 |
|
|
$ |
191,597 |
|
|
$ |
202,313 |
|
|
Capitalized software development costs per consolidated statement of cash flows |
|
|
30,968 |
|
|
|
25,754 |
|
|
|
86,190 |
|
|
|
83,093 |
|
|
Total non-GAAP R&D-related spending |
|
$ |
94,841 |
|
|
$ |
88,786 |
|
|
$ |
277,787 |
|
|
$ |
285,406 |
|
|
Total revenue |
|
$ |
444,184 |
|
|
$ |
432,430 |
|
|
$ |
1,320,693 |
|
|
$ |
1,307,616 |
|
|
Total non-GAAP R&D-related spending as a % of total revenue |
|
|
21.4 |
% |
|
|
20.5 |
% |
|
|
21.0 |
% |
|
|
21.8 |
% |
We believe that our cash and cash equivalents of $139 million as of September 30, 2019, our future cash flows, our borrowing capacity under our Revolving Facility and access to capital markets, taken together, provide adequate resources to meet future operating needs as well as scheduled payments of short and long-term debt. We cannot provide assurance that our actual cash requirements will not be greater than we expect as of the date of this Form 10-Q. We will, from time to time, consider the acquisition of, or investment in, complementary businesses, products, services and technologies and the repurchase of our common stock under our 2018 stock repurchase program, each of which might impact our liquidity requirements or cause us to borrow under our Revolving Facility or issue additional equity or debt securities.
Contractual Obligations, Commitments and Off-Balance Sheet Arrangements
We have various contractual obligations, which are recorded as liabilities in our consolidated financial statements. During the three months ended September 30, 2019, there were no material changes, outside of the ordinary course of business, to our contractual obligations and purchase commitments previously disclosed in our Form 10-K.
|
Item 3. |
Quantitative and Qualitative Disclosures About Market Risk |
Our market risk disclosures set forth in Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk” of our Form 10-K have not changed materially during the nine months ended September 30, 2019.
|
Item 4. |
Controls and Procedures |
Evaluation of Disclosure Controls and Procedures
Under the direction of our chief executive officer and chief financial officer, we evaluated our disclosure controls and procedures pursuant to Rule 13a-15(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and concluded that our disclosure controls and procedures were effective as of September 30, 2019.
Changes in Internal Control over Financial Reporting
We have implemented, and continue to refine, internal controls related to the new leasing accounting standard which we adopted on January 1, 2019. There have been no other changes in our internal control over financial reporting during the quarter ended September 30, 2019, which were identified in connection with management’s evaluation required by paragraph (d) of Rules 13a-15 and 15d-15 under the Exchange Act, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
42
PART II. OTHER INFORMATION
|
Item 1. |
Legal Proceedings |
We hereby incorporate by reference Note 13, “Contingencies,” of the Notes to Consolidated Financial Statements in Part I, Item 1 of this Form 10-Q.
|
Item 1A. |
Risk Factors |
Except as follows, there have been no material changes during the nine months ended September 30, 2019 from the risk factors as previously disclosed in our Form 10-K.
If we fail to finalize our agreement in principle with the DOJ or fail to comply with the terms of any such final settlement documents, including a deferred prosecution agreement and a civil settlement agreement, that we expect to negotiate and sign in connection with the resolution of the DOJ’s investigations into certain of Practice Fusion’s business practices, our business, results of operations and financial condition will be materially and adversely affected. In addition, even if we finalize and comply with those agreements, the costs and burdens of compliance could be significant, and we may face additional investigations and proceedings from other governmental entities or third parties related to the same or similar conduct underlying the agreements with the DOJ.
On August 8, 2019, we announced that we reached an agreement in principle with the DOJ to resolve the DOJ’s civil and criminal investigations into Practice Fusion. We also announced that we accrued an estimated loss of $145 million related to this matter. See Note 13, “Contingencies” of the Notes to Consolidated Financial Statements in Part I, Item 1 of this Form 10-Q for additional information. We expect that a final settlement with the DOJ, if it were to be completed, would include other material non-financial terms and conditions, including a deferred prosecution agreement and a civil settlement agreement. A variety of material issues remain subject to further negotiation and approval by us and the government before the agreement in principle can be finalized, and the terms described above may change following further negotiation. We cannot provide assurances that our efforts to reach a final settlement with the DOJ will be successful or, if they are, the timing or final terms of any such settlement.
If completed and executed, the final settlement documents with the DOJ could contain material non-financial terms and conditions. In addition, compliance with the terms of any such final settlement documents could impose significant costs and burdens on us. If we fail to comply with any such final settlement documents, the DOJ may impose substantial monetary penalties, exclude Practice Fusion from Medicare, Medicaid and other federal healthcare programs, and/or criminally prosecute Practice Fusion, which could have a material adverse effect on our business, financial condition and results of operations.
If a final agreement cannot be reached, it is likely that the DOJ will bring one or more enforcement actions against Practice Fusion. If the federal government were to file enforcement actions against Practice Fusion as a result of the investigations and could establish the elements of a violation of relevant laws, we could be subject to damages, which could be substantial, fines and penalties, or other criminal, civil or administrative sanctions, and we would expect to incur significant costs in connection with such enforcement action, regardless of the outcome. If any or all of these events occur, our business, financial condition and results of operations could be materially and adversely affected.
Other government investigations or legal or regulatory proceedings, including investigations or proceedings brought by private litigants or shareholders, federal agencies, private insurers and states’ attorneys general, may follow as a consequence of our agreement in principle with the DOJ or any final settlement documents, any of which could result in substantial expenses, divert management’s attention from other business concerns and have a material adverse effect on our business, results of operations and financial condition. We may also be subject to negative publicity related to these matters that could harm our reputation, reduce demand for our solutions and services, result in employee attrition and negatively impact our stock price.
|
Item 2. |
Unregistered Sales of Equity Securities and Use of Proceeds |
On August 2, 2018, we announced that our Board of Directors approved a stock repurchase program under which we may repurchase up to $250 million of our common stock through December 31, 2020. Any repurchase activity will depend on many factors such as our working capital needs, cash requirements for investments, debt repayment obligations, economic and market conditions at the time, including the price of our common stock, and other factors that we consider relevant. Our stock purchase program may be accelerated, suspended, delayed or discontinued at any time.
43
The following table summarizes the stock repurchase activity during the three months ended September 30, 2019 and the approximate dollar value of shares that may yet be purchased under our stock repurchase program:
|
(In thousands, except per share amounts) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
Total Number |
|
|
Approximate |
|
||
|
|
|
|
|
|
|
|
|
|
|
Of Shares |
|
|
Dollar Value |
|
||
|
|
|
|
|
|
|
|
|
|
|
Purchased |
|
|
Of Shares |
|
||
|
|
|
|
|
|
|
|
|
|
|
As Part Of |
|
|
That May Yet |
|
||
|
|
|
Total |
|
|
Average |
|
|
Publicly |
|
|
Be Purchased |
|
||||
|
|
|
Number |
|
|
Price |
|
|
Announced |
|
|
Under The |
|
||||
|
|
|
Of Shares |
|
|
Paid Per |
|
|
Plans Or |
|
|
Plans Or |
|
||||
|
Period (Based on Trade Date) |
|
Purchased |
|
|
Share |
|
|
Programs |
|
|
Programs |
|
||||
|
07/01/19—07/31/19 |
|
|
0 |
|
|
$ |
0.00 |
|
|
|
0 |
|
|
$ |
148,104 |
|
|
08/01/19—08/31/19 |
|
|
0 |
|
|
$ |
0.00 |
|
|
|
0 |
|
|
$ |
148,104 |
|
|
09/01/19—09/30/19 |
|
|
3,459 |
|
|
$ |
10.70 |
|
|
|
3,459 |
|
|
$ |
111,084 |
|
|
|
|
|
3,459 |
|
|
$ |
10.70 |
|
|
|
3,459 |
|
|
|
|
|
Item 6.Exhibits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exhibit Number |
|
|
Exhibit Description |
|
Filed Herewith |
|
Furnished Herewith |
|
31.1 |
|
|
|
X |
|
|
|
|
|
|
|
|
|
|
|
|
|
31.2 |
|
|
|
X |
|
|
|
|
|
|
|
|
|
|
|
|
|
32.1 |
|
|
Section 1350 Certifications of Chief Executive Officer and Chief Financial Officer |
|
|
|
X |
|
|
|
|
|
|
|
|
|
|
101.INS |
|
|
Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline document |
|
X |
|
|
|
|
|
|
|
|
|
|
|
|
101.SCH |
|
|
Inline XBRL Taxonomy Extension Schema |
|
X |
|
|
|
|
|
|
|
|
|
|
|
|
101.CAL |
|
|
Inline XBRL Taxonomy Extension Calculation Linkbase |
|
X |
|
|
|
|
|
|
|
|
|
|
|
|
101.LAB |
|
|
Inline XBRL Taxonomy Extension Label Linkbase |
|
X |
|
|
|
|
|
|
|
|
|
|
|
|
101.PRE |
|
|
Inline XBRL Taxonomy Extension Presentation Linkbase |
|
X |
|
|
|
|
|
|
|
|
|
|
|
|
101.DEF |
|
|
Inline XBRL Taxonomy Definition Linkbase |
|
X |
|
|
|
|
|
|
|
|
|
|
|
|
104 |
|
|
The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2019, formatted in Inline XBRL and included in Exhibit 101. |
|
X |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
44
SIGNATURES
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 thereunto duly authorized.
|
ALLSCRIPTS HEALTHCARE SOLUTIONS, INC. |
||
|
|
|
|
|
By: |
|
/s/ Dennis M. Olis |
|
|
|
Dennis M. Olis |
|
|
|
Chief Financial Officer |
|
|
|
(Principal Financial and Accounting Officer) |
Date: November 5, 2019
45
Exhibit 31.1
Certification
I, Paul M. Black, certify that:
|
1. |
I have reviewed this Quarterly Report on Form 10-Q of Allscripts Healthcare Solutions, Inc.; |
|
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
|
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
|
4. |
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
|
|
a. |
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
|
|
b. |
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
|
|
c. |
evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
|
|
d. |
disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
|
5. |
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's Board of Directors (or persons performing the equivalent functions): |
|
|
a. |
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting, which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
|
|
b. |
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
|
Date: November 5, 2019 |
|
/s/ Paul M. Black |
|
|
|
Chief Executive Officer |
Exhibit 31.2
Certification
I, Dennis M. Olis, certify that:
|
1. |
I have reviewed this Quarterly Report on Form 10-Q of Allscripts Healthcare Solutions, Inc.; |
|
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
|
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
|
4. |
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
|
|
a. |
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
|
|
b. |
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
|
|
c. |
evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
|
|
d. |
disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
|
5. |
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's Board of Directors (or persons performing the equivalent functions): |
|
|
a. |
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting, which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
|
|
b. |
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
|
Date: November 5, 2019 |
|
/s/ Dennis M. Olis |
|
|
|
Chief Financial Officer |
Exhibit 32.1
The following statement is being made to the Securities and Exchange Commission solely for purposes of Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350), which carries with it certain criminal penalties in the event of a knowing or willful misrepresentation.
Securities and Exchange Commission
100 F Street, NE
Washington, D.C. 20549
Re: Allscripts Healthcare Solutions, Inc.
Ladies and Gentlemen:
In accordance with the requirements of Section 906 of the Sarbanes-Oxley Act of 2002 (18 USC 1350), each of the undersigned hereby certifies that:
(i) this Quarterly Report on Form 10-Q for the quarter ended September 30, 2019, which this statement accompanies, fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and
(ii) the information contained in this Quarterly Report on Form 10-Q for the quarter ended September 30, 2019, fairly presents, in all material respects, the financial condition and results of operations of Allscripts Healthcare Solutions, Inc.
Dated as of this 5th day of November, 2019.
|
/s/ Paul M. Black |
|
|
|
/s/ Dennis M. Olis |
|
Paul M. Black Chief Executive Officer |
|
|
|
Dennis M. Olis Chief Financial Officer |
A signed original of this written statement required by Section 906 has been provided to Allscripts Healthcare Solutions, Inc. and will be retained by Allscripts Healthcare Solutions, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.