UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
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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)
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(State or Other Jurisdiction of Incorporation or Organization) |
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(I.R.S. Employer Identification No.) |
(Address of Principal Executive Offices, Zip Code)
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(Registrant's Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
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(Nasdaq Global Select Market) |
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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.
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Non-accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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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 April 26, 2021, there were
ALLSCRIPTS HEALTHCARE SOLUTIONS, INC.
FORM 10-Q
For the Fiscal Quarter Ended March 31, 2021
TABLE OF CONTENTS
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PAGE |
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3 |
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Item 1. |
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3 |
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Item 2. |
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Management's Discussion and Analysis of Financial Condition and Results of Operations |
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26 |
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Item 3. |
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34 |
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Item 4. |
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35 |
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35 |
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Item 1. |
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35 |
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Item 1A. |
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Item 2. |
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35 |
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Item 6. |
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2
PART I. FINANCIAL INFORMATION
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Item 1. |
Financial Statements |
ALLSCRIPTS HEALTHCARE SOLUTIONS, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
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(In thousands, except per share amounts) |
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March 31, 2021 |
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December 31, 2020 |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Restricted cash |
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Accounts receivable, net of allowance of $ March 31, 2021 and December 31, 2020, respectively |
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Contract assets, net of allowance of $ |
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Income tax receivable |
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Prepaid expenses and other current assets |
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Total current assets |
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Fixed assets, net |
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Software development costs, net |
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Intangible assets, net |
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Goodwill |
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Deferred taxes, net |
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Contract assets - long-term, net of allowance of $ |
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Right-of-use assets - operating leases |
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Other assets |
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Total assets |
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$ |
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$ |
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3
ALLSCRIPTS HEALTHCARE SOLUTIONS, INC.
CONSOLIDATED BALANCE SHEETS (CONTINUED)
(Unaudited)
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(In thousands, except per share amounts) |
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March 31, 2021 |
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December 31, 2020 |
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LIABILITIES AND STOCKHOLDERS' EQUITY |
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Current liabilities: |
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Accounts payable |
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$ |
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$ |
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Accrued expenses |
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Accrued compensation and benefits |
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Deferred revenue |
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Current operating lease liabilities |
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Current liabilities attributable to discontinued operations |
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Total current liabilities |
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Long-term debt |
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Deferred revenue |
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Deferred taxes, net |
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Long-term operating lease liabilities |
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Other liabilities |
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Total liabilities |
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Commitments and contingencies |
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Stockholders’ equity: |
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Preferred stock: $ |
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Common stock: $ and December 31, 2020; as of March 31, 2021, respectively; and outstanding as of December 31, 2020, respectively |
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Treasury stock: at cost, December 31, 2020 |
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Additional paid-in capital |
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Retained earnings |
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Accumulated other comprehensive loss |
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Total stockholders’ equity |
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Total liabilities and stockholders’ equity |
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$ |
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$ |
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The accompanying notes are an integral part of these consolidated financial statements.
4
ALLSCRIPTS HEALTHCARE SOLUTIONS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
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Three Months Ended March 31, |
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(In thousands, except per share amounts) |
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2021 |
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2020 |
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Revenue: |
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Software delivery, support and maintenance |
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$ |
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$ |
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Client services |
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Total revenue |
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Cost of revenue: |
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Software delivery, support and maintenance |
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Client services |
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Amortization of software development and acquisition-related assets |
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Total cost of revenue |
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Gross profit |
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Selling, general and administrative expenses |
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Research and development |
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Amortization of intangible and acquisition-related assets |
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Income (loss) from operations |
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Interest expense |
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Other income, net |
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Equity in net income of unconsolidated investments |
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Income (loss) from continuing operations before income taxes |
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Income tax (provision) benefit |
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Income (loss) from continuing operations, net of tax |
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(Loss) income from discontinued operations |
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Gain on sale of discontinued operations |
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Income tax effect on discontinued operations |
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Income from discontinued operations, net of tax |
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Net income (loss) |
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$ |
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$ |
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Net income (loss) per share: |
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Basic |
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Continuing operations |
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$ |
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$ |
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Discontinued operations |
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Net income (loss) per share - Basic |
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$ |
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$ |
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Diluted |
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Continuing operations |
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$ |
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$ |
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Discontinued operations |
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Net income (loss) per share - Diluted |
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$ |
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$ |
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The accompanying notes are an integral part of these consolidated financial statements.
5
ALLSCRIPTS HEALTHCARE SOLUTIONS, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
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Three Months Ended March 31, |
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(In thousands) |
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2021 |
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2020 |
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Net income (loss) |
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$ |
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$ |
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Other comprehensive income (loss): |
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Foreign currency translation adjustments |
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Change in fair value of derivatives qualifying as cash flow hedges |
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Other comprehensive income (loss) before income tax benefit |
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Income tax benefit related to items in other comprehensive income (loss) |
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Total other comprehensive income (loss) |
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Comprehensive income (loss) |
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$ |
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$ |
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The accompanying notes are an integral part of these consolidated financial statements.
6
ALLSCRIPTS HEALTHCARE SOLUTIONS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited)
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Three Months Ended March 31, |
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(In thousands) |
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2021 |
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2020 |
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Number of common shares |
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Balance at beginning of period |
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Common stock issued under stock compensation plans, net of shares withheld for employee taxes |
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Balance at end of period |
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Common stock |
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Balance at beginning of period |
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$ |
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$ |
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Common stock issued under stock compensation plans, net of shares withheld for employee taxes |
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Balance at end of period |
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$ |
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$ |
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Number of treasury stock shares |
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Balance at beginning of period |
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Purchase of treasury stock |
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Balance at end of period |
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Treasury stock |
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Balance at beginning of period |
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$ |
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$ |
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Purchase of treasury stock |
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Balance at end of period |
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$ |
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$ |
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Additional paid-in capital |
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Balance at beginning of period |
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$ |
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$ |
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Stock-based compensation |
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Common stock issued under stock compensation plans, net of shares withheld for employee taxes |
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Warrants issued |
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Balance at end of period |
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$ |
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$ |
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Retained earnings (accumulated deficit) |
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Balance at beginning of period |
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$ |
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$ |
( |
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Net income (loss) |
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ASU 2016-13 implementation adjustments |
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Balance at end of period |
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$ |
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$ |
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Accumulated other comprehensive loss |
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Balance at beginning of period |
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$ |
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$ |
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Foreign currency translation adjustments, net |
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Unrecognized loss on derivatives qualifying as cash flow hedges, net of tax |
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Balance at end of period |
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$ |
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$ |
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Total Stockholders’ Equity at beginning of period |
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$ |
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$ |
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Total Stockholders’ Equity at end of period |
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$ |
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$ |
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The accompanying notes are an integral part of these consolidated financial statements.
7
ALLSCRIPTS HEALTHCARE SOLUTIONS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
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Three Months Ended March 31, |
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(In thousands) |
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2021 |
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2020 |
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Cash flows from operating activities: |
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Net income (loss) |
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$ |
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$ |
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Less: Income from discontinued operations |
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Income (loss) from continuing operations |
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Adjustments to reconcile net income (loss) to net cash provided by operating activities: |
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Depreciation and amortization |
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Operating right-of-use asset amortization |
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Stock-based compensation expense |
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Deferred taxes |
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Equity in net income of unconsolidated investments |
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Other loss (income), net |
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Changes in operating assets and liabilities (net of businesses acquired): |
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Accounts receivable and contract assets, net |
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Prepaid expenses and other assets |
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Accounts payable |
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( |
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( |
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Accrued expenses |
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( |
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Accrued compensation and benefits |
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( |
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Deferred revenue |
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Other liabilities |
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Operating leases |
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( |
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Accrued DOJ settlement |
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Net cash provided by (used in) operating activities - continuing operations |
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Net cash (used in) provided by operating activities - discontinued operations |
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( |
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Net cash provided by (used in) operating activities |
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Cash flows from investing activities: |
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Capital expenditures |
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( |
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Capitalized software |
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( |
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Purchases of equity securities, other investments and related intangible assets, net |
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( |
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Sale of other investments |
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Net cash used in investing activities - continuing operations |
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( |
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( |
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Net cash used in investing activities - discontinued operations |
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( |
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Net cash used in investing activities |
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Cash flows from financing activities: |
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Taxes paid related to net share settlement of equity awards |
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Payments for issuance costs on |
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Credit facility payments |
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Credit facility borrowings, net of issuance costs |
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Repurchase of common stock |
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Payment of acquisition and other financing obligations |
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( |
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( |
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Net cash (used in) provided by financing activities |
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( |
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Effect of exchange rate changes on cash and cash equivalents |
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( |
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( |
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Net (decrease) increase in cash and cash equivalents |
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( |
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Cash, cash equivalents and restricted cash, beginning of period |
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Cash, cash equivalents and restricted cash, end of period |
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$ |
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$ |
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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 and for the three months ended March 31, 2021 and 2020 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 months ended March 31, 2021 are not necessarily indicative of the results to be expected for the full year ending December 31, 2021.
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, 2020 (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. Our estimates and assumptions consider the economic implications of COVID-19 on our critical and significant accounting estimates. Actual results could differ materially from these estimates.
Significant Accounting Policies
There have been no changes to our significant accounting policies from those disclosed in our Form 10-K.
Recently Adopted Accounting Pronouncements
In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2019-12, “Income Taxes (Topic 740)” (“ASU 2019-12”), which is part of the FASB’s overall simplification initiative to reduce the costs and complexity of applying accounting standards while maintaining or improving the usefulness of the information provided to users of financial statements. ASU 2019-12 simplifies accounting guidance for intraperiod allocations, deferred tax liabilities, year-to-date losses in interim periods, franchise taxes, step-up in tax basis of goodwill, separate entity financial statements and interim recognition of tax laws or rate changes. ASU 2019-12 is effective for public business entities for annual reporting periods beginning after December 15, 2020. We adopted ASU 2019-12 on
Accounting Pronouncements Not Yet Adopted
In August 2020, the FASB issued Accounting Standards Update No. 2020-06, “Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity” (“ASU 2020-06”). The amendments in ASU 2020-06 simplify the accounting for convertible instruments by removing major separation models required under current GAAP. ASU 2020-06 removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exceptions and also simplifies the diluted earnings per share calculation in certain areas. The standard is effective for public business entities, excluding entities eligible to be smaller reporting companies as defined by the SEC, for fiscal years and interim periods within those fiscal years, beginning after December 15, 2021. We are currently evaluating the impact of this accounting guidance.
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.
9
2. Revenue from Contracts with Customers
Our
At March 31, 2021 and December 31, 2020, 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 based on the origination of performance obligations and elected accounting expedients is presented in the table below:
|
(In thousands) |
|
Three Months Ended March 31, 2021 |
|
|
|
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 |
|
$ |
|
|
|
(In thousands) |
|
Three Months Ended March 31, 2020 |
|
|
|
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 $
10
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 March 31, |
|
|||||
|
(In thousands) |
|
2021 |
|
|
2020 |
|
||
|
Revenue: |
|
|
|
|
|
|
|
|
|
Recurring revenue |
|
$ |
|
|
|
$ |
|
|
|
Non-recurring revenue |
|
|
|
|
|
|
|
|
|
Total revenue |
|
$ |
|
|
|
$ |
|
|
|
|
|
Three Months Ended March 31, 2021 |
|
|||||||||||||
|
(In thousands) |
|
Core Clinical and Financial Solutions |
|
|
Data, Analytics and Care Coordination |
|
|
Unallocated Amounts |
|
|
Total |
|
||||
|
Software delivery, support and maintenance |
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
Client services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue |
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
|
|
Three Months Ended March 31, 2020 |
|
|||||||||||||
|
(In thousands) |
|
Core Clinical and Financial Solutions |
|
|
Data, Analytics and Care Coordination |
|
|
Unallocated Amounts |
|
|
Total |
|
||||
|
Software delivery, support and maintenance |
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
Client services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue |
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
Contract Assets – Estimate of Credit Losses
We adopted ASU 2016-13 on January 1, 2020 using the cumulative-effect adjustment transition method. The new guidance required the recognition of lifetime estimated credit losses expected to occur for contract assets. The guidance also required that we pool assets with similar risk characteristics and consider current economic conditions when estimating losses. The adoption of ASU 2016-13 for contract assets was recorded as a debit to retained earnings of $
At adoption, we segmented the contract asset population into pools based on their risk assessment. Risks related to contract assets are a customer’s inability to pay or bankruptcy. Each pool was defined by their internal credit assessment, and business size. The pools were aligned with management’s review of financial performance at the time. In the fourth quarter of 2020, we used each customer’s primary business unit in our pooling determination. This assessment provides additional information of the customer including size, segment and industry. Using this perspective, we added one new pool. We reallocated pools and loss rates accordingly and noted slight shifts in each pool. The new pools are aligned with management’s current review of financial performance. For the three months ended March 31, 2021, no adjustment to the pools was necessary.
We utilized a loss-rate method to measure expected credit loss for each pool. The loss rate is calculated using a twenty-four-month lookback period of credit memos and adjustments divided by the average contract asset balance for each pool during that period. We considered current economic conditions, including how the COVID-19 pandemic is impacting the global economy, internal forecasts, cash collection and credit memos written during the current period when assessing loss rates. We reviewed these factors and concluded that no adjustments should be made to the historical loss rate data. The March 31, 2021 analysis resulted in no change in the ending estimate of credit losses.
11
Changes in the estimate of credit losses for contract assets are presented in the table below.
|
(In thousands) |
|
Total |
|
|
|
Balance at December 31, 2020 |
|
$ |
|
|
|
Current period provision |
|
|
|
|
|
Balance at March 31, 2021 |
|
$ |
|
|
|
Less: Contract assets, short-term |
|
|
|
|
|
Total contract assets, long-term |
|
$ |
|
|
3. Accounts Receivable
Trade Accounts Receivable – Estimate of Credit Losses
We adopted ASU 2016-13 on January 1, 2020 using the cumulative-effect adjustment transition method. The new guidance required the recognition of lifetime estimated credit losses expected to occur for trade accounts receivable. The guidance also required that we pool assets with similar risk characteristics and consider current economic conditions when estimating losses. The adoption of ASU 2016-13 for trade accounts receivable was recorded as a debit to retained earnings of $
At adoption, we segmented the accounts receivable population into pools based on their risk assessment. Risks related to trade accounts receivable are a customer’s inability to pay or bankruptcy. Each pool was defined by their internal credit assessment, and business size. The pools were aligned with management’s review of financial performance at the time. In the fourth quarter of 2020, we used each customer’s primary business unit in our pooling determination. This assessment provides additional information of the customer including size, segment and industry. Using this perspective, we added one new pool. We reallocated pools and loss rates accordingly and noted slight shifts in each pool. The new pools are aligned with management’s current review of financial performance. For the three months ended March 31, 2021, no adjustment to the pools was necessary.
We utilized a loss-rate method to measure expected credit loss for each pool. The loss rate is calculated using a twelve-month lookback period of credit memos and adjustments divided by the average accounts receivable balance for each pool during that period. We considered current economic conditions, including how the COVID-19 pandemic is impacting the global economy, internal forecasts, cash collection and credit memos written during the current period when assessing loss rates. We reviewed these factors and concluded that no adjustments should be made to the historical loss rate data.
Changes in the estimate of credit losses for trade accounts receivable are presented in the tables below.
|
(In thousands) |
|
Total |
|
|
|
Balance at December 31, 2020 |
|
$ |
|
|
|
Current period provision |
|
|
|
|
|
Write-offs |
|
|
( |
) |
|
Recoveries |
|
|
|
|
|
Balance at March 31, 2021 |
|
$ |
|
|
4. Leases
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 the 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 term at the commencement date for new 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.
12
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 consist of executory costs, and the practical expedient allows for 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 finance leases are not significant. Our leases have remaining lease terms up to
|
(In thousands) |
|
Three Months Ended March 31, |
|
|||||
|
|
|
2021 |
|
|
2020 |
|
||
|
Operating lease cost (1) |
|
$ |
|
|
|
$ |
|
|
|
Less: Sublease income |
|
|
( |
) |
|
|
( |
) |
|
Total operating lease costs |
|
$ |
|
|
|
$ |
|
|
|
(1) |
|
Supplemental cash flow information for operating leases is as follows:
|
(In thousands) |
|
Three Months Ended March 31, |
|
|||||
|
|
|
2021 |
|
|
2020 |
|
||
|
Operating cash flows from operating leases |
|
$ |
|
|
|
$ |
|
|
|
Right-of-use assets obtained in exchange for operating lease obligations |
|
$ |
|
|
|
$ |
|
|
The balance sheet location and balances for operating leases are as follows:
|
(In thousands, except lease term and discount rate) |
|
March 31, 2021 |
|
|
December 31, 2020 |
|
||
|
Right-of-use assets - operating leases |
|
$ |
|
|
|
$ |
|
|
|
Current operating lease liabilities |
|
$ |
|
|
|
$ |
|
|
|
Long-term operating lease liabilities |
|
$ |
|
|
|
$ |
|
|
|
Weighted average remaining lease term (in years) |
|
|
|
|
|
|
|
|
|
Weighted average discount rate |
|
|
|
% |
|
|
|
% |
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 March 31, 2021.
|
|
|
March 31, 2021 |
|
|
|
(In thousands) |
|
Operating Leases |
|
|
|
Remainder of 2021 |
|
$ |
|
|
|
2022 |
|
|
|
|
|
2023 |
|
|
|
|
|
2024 |
|
|
|
|
|
2025 |
|
|
|
|
|
Thereafter |
|
|
|
|
|
Total lease liabilities |
|
|
|
|
|
Less: Amount representing interest |
|
|
( |
) |
|
Less: Short-term lease liabilities |
|
|
( |
) |
|
Total long-term lease liabilities |
|
$ |
|
|
13
5. Business Combinations and Divestitures
Acquisitions
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 $
Divestitures
On December 31, 2020, we completed the sale of substantially all of the assets of our CarePort business to a subsidiary of WellSky Corp., a Delaware corporation (“WellSky”), pursuant to a purchase agreement (the “CarePort Purchase Agreement”). The total consideration for CarePort was $
On October 15, 2020, we completed the sale of substantially all of the assets of our EPSiTM business (“EPSi”) to Strata Decision Technology LLC, an Illinois limited liability company (“Strata”), and Roper Technologies, Inc., a Delaware corporation, pursuant to a purchase agreement (the “EPSi Purchase Agreement”). The total consideration for EPSi was $
6. 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: Quoted prices for similar instruments in active markets with inputs that are observable, either directly or indirectly. Our Level 2 derivative financial instruments include foreign currency forward contracts valued based upon observable values of spot and forward foreign currency exchange rates.
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. Our Level 3 instrument includes the fair value of contingent consideration related to a completed acquisition. The fair value is based on a discounted cash flow analysis reflecting the likelihood of achieving specified performance measures or events and captures the contractual nature of the contingencies, commercial risk, or time value of money.
14
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 |
|
March 31, 2021 |
|
|
December 31, 2020 |
|
||||||||||||||||||||||||||
|
(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 |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Total assets |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contingent consideration - current |
|
Accrued expenses |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Total liabilities |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
The changes in our Level 3 liability measured at fair value on a recurring basis at March 31, 2021 is summarized as follows:
|
(In thousands) |
|
Contingent Consideration |
|
|
|
Balance at December 31, 2020 |
|
$ |
|
|
|
Additions |
|
|
|
|
|
Balance at March 31, 2021 |
|
$ |
|
|
The following table summarizes the quantitative information about our Level 3 fair value measurements at March 31, 2021:
|
|
|
March 31, 2021 |
|
|||||||||||
|
(In thousands, except the discount rate) |
|
Fair Value |
|
|
Valuation Technique |
|
Significant Unobservable Inputs |
|
Ranges of Inputs |
|
Weighted Average (1) |
|
||
|
Financial instruments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contingent consideration |
|
$ |
|
|
|
Probability Weighted Discounted cash flow |
|
Discount rate |
|
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
Registry members |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Patient data volume |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Projected year of payment |
|
2021 |
|
|
|
|
|
Total financial instruments |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
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 March 31, 2021 |
|
|
Cost |
|
|
March 31, 2021 |
|
|
December 31, 2020 |
|
||||
|
Equity method investments (1) |
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Cost less impairment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total long-term equity investments |
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
(1) |
|
As of March 31, 2021, 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.
Impairment of Long-term Investments
Each quarter, management performs an assessment of each of our investments on an individual basis to determine if there have been any declines in fair value. Based on our assessment, we determined
15
Long-term Financial Liabilities
Our long-term financial liabilities include amounts outstanding under our senior secured credit facility (as described in Note 10, “Debt”), with carrying values that approximate fair value since the interest rates approximate current market rates. Refer to Note 10, “Debt,” for further information regarding our long-term financial liabilities.
7. Stockholders' Equity
Stock-based Compensation Expense
Stock-based compensation expense recognized during the three months ended March 31, 2021 and 2020 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 March 31, |
|
|||||
|
(In thousands) |
|
2021 |
|
|
2020 |
|
||
|
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.
We granted stock-based awards as follows:
|
|
|
Three Months Ended March 31, 2021 |
|
|||||
|
|
|
|
|
|
|
Weighted-Average |
|
|
|
|
|
|
|
|
|
Grant Date |
|
|
|
(In thousands, except per share amounts) |
|
Shares |
|
|
Fair Value |
|
||
|
Service-based restricted stock units |
|
|
|
|
|
$ |
|
|
|
Performance-based restricted stock units with a service condition |
|
|
|
|
|
$ |
|
|
|
Market-based restricted stock units with a service condition |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
|
$ |
|
|
During the three months ended March 31, 2021 and the year ended December 31, 2020,
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 three months ended March 31, 2021 and 2020 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 three months ended March 31, 2021 and 2020 were
16
Stock Repurchases
On November 18, 2020, we announced that our Board approved a new stock purchase program (the “2020 Program”) under which we may repurchase up to $
There were
On November 30, 2020, we entered into separate Master Confirmations (each, a “Master Confirmation”) and Supplemental Confirmations (each, together with the related Master Confirmation, an “ASR Agreement”), with JPMorgan Chase Bank, National Association and Wells Fargo Bank, National Association (each, an “ASR Counterparty”, or collectively, “ASR Counterparties”), to purchase shares of our common stock for a total payment of $
At final settlement, depending on the final purchase price per share, the ASR Counterparties may be required to deliver additional shares of our common stock to the Company, or, under certain circumstances, we may be required to make a cash payment to each ASR Counterparty or may elect to deliver the equivalent value in shares of our common stock. The final purchase price per share under each ASR Agreement will generally be based on the average of daily volume-weighted average prices of shares of our common stock during a term set forth in the ASR Agreements. The ASR Agreements contain provisions customary for agreements of this type, including provisions for adjustments to the transaction terms, the circumstances generally under which the ASR Agreements may be accelerated, extended or terminated early by the ASR Counterparties and various acknowledgments, representations and warranties made by the parties to one another. Final settlement of the ASR Agreements is expected to be completed during the second quarter of 2021.
Any future stock repurchase transactions may be made through open market transactions, block trades, privately negotiated transactions (including accelerated share repurchase transactions) or other means, subject to market conditions. 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 repurchase program may be accelerated, suspended, delayed or discontinued at any time.
8. 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 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 March 31, |
|
|||||
|
(In thousands, except per share amounts) |
|
2021 |
|
|
2020 |
|
||
|
Basic earnings (loss) per Common Share: |
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations, net of tax |
|
$ |
|
|
|
$ |
( |
) |
|
Income from discontinued operations, net of tax |
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
|
|
|
$ |
( |
) |
|
|
|
|
|
|
|
|
|
|
|
Weighted-average common shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss) from continuing operations per Common Share |
|
$ |
|
|
|
$ |
( |
) |
|
Basic earnings from discontinued operations per Common Share |
|
|
|
|
|
|
|
|
|
Net earnings (loss) per Common Share |
|
$ |
|
|
|
$ |
( |
) |
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings (loss) per Common Share: |
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations, net of tax |
|
$ |
|
|
|
$ |
( |
) |
|
Income from discontinued operations, net of tax |
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
|
|
|
$ |
( |
) |
|
|
|
|
|
|
|
|
|
|
|
Weighted-average common shares outstanding |
|
|
|
|
|
|
|
|
|
Plus: Dilutive effect of restricted stock unit awards and warrants |
|
|
|
|
|
|
|
|
|
Weighted-average common shares outstanding assuming dilution |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings (loss) from continuing operations per Common Share |
|
$ |
|
|
|
$ |
( |
) |
|
Diluted earnings from discontinued operations per Common Share |
|
|
|
|
|
|
|
|
|
Net earnings (loss) per Common Share |
|
$ |
|
|
|
$ |
( |
) |
Due to the net loss for the three months ended March 31, 2020, we used basic weighted-average common shares outstanding in the calculation of diluted loss per share, since the inclusion of any stock equivalents would be anti-dilutive.
The following restricted stock unit awards and warrants are not included in the computation of diluted earnings (loss) per share as the effect of including such restricted stock unit awards and warrants in the computation would be anti-dilutive:
|
|
|
Three Months Ended March 31, |
|
|||||
|
(In thousands) |
|
2021 |
|
|
2020 |
|
||
|
Shares subject to anti-dilutive restricted stock unit awards and warrants excluded from calculation |
|
|
|
|
|
|
|
|
9. Goodwill and Intangible Assets
Goodwill and intangible assets consist of the following:
|
|
|
March 31, 2021 |
|
|
December 31, 2020 |
|
||||||||||||||||||
|
|
|
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 |
|
|
|
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
18
Changes in the carrying amounts of goodwill by reportable segment for the three months ended March 31, 2021 were as follows:
|
(In thousands) |
|
Core Clinical and Financial Solutions |
|
|
Data, Analytics and Care Coordination |
|
|
Total |
|
|||
|
Balance as of December 31, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange translation |
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of March 31, 2021 |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
There were
10. Debt
Debt outstanding, excluding lease obligations, consists of the following:
|
|
|
March 31, 2021 |
|
|
December 31, 2020 |
|
||||||||||||||||||
|
(In thousands) |
|
Principal Balance |
|
|
Unamortized Discount and Debt Issuance Costs |
|
|
Net Carrying Amount |
|
|
Principal Balance |
|
|
Unamortized Discount and Debt Issuance Costs |
|
|
Net Carrying Amount |
|
||||||
|
0.875% Convertible Senior Notes (1) |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
Senior Secured Credit Facility |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
Total debt |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
(1) |
Principal balance is $ |
Interest expense consists of the following:
|
|
|
Three Months Ended March 31, |
|
|||||
|
(In thousands) |
|
2021 |
|
|
2020 |
|
||
|
Interest expense |
|
$ |
|
|
|
$ |
|
|
|
Amortization of discounts and debt issuance costs |
|
|
|
|
|
|
|
|
|
Total interest expense |
|
$ |
|
|
|
$ |
|
|
Interest expense related to the 0.875% Convertible Senior Notes and the 1.25% Cash Convertible Senior Notes (which matured and were repaid in full on July 1, 2020), included in the table above, consisted of the following:
|
|
|
Three Months Ended March 31, |
|
|||||
|
(In thousands) |
|
2021 |
|
|
2020 |
|
||
|
Coupon interest |
|
$ |
|
|
|
$ |
|
|
|
Amortization of discounts and debt issuance costs |
|
|
|
|
|
|
|
|
|
Total interest expense related to the convertible notes |
|
$ |
|
|
|
$ |
|
|
Allscripts Senior Secured Credit Facility
On February 15, 2018, Allscripts and Allscripts 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 March 31, 2021, $
In connection with the sale of our EPSi business on October 15, 2020, which is further discussed in Note 5, “Business Combinations and Divestitures”, the terms of our Second Amended Credit Agreement required us to make a mandatory prepayment of our Term Loan in the amount of $
In connection with the sale of our CarePort business on December 31, 2020, which is further discussed in Note 5, “Business Combinations and Divestitures”, the terms of our Second Amended Credit Agreement required us to make a mandatory prepayment of our Term Loan in the amount of $
19
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 provided the financial flexibility to settle the U.S. Department of Justice’s investigations as discussed in Note 14, “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.
On July 20, 2020, we entered into a Second Amendment to the 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 $
As of March 31, 2021, we had $
0.875% Convertible Senior Notes
The issuance in December 2019 of the combined $
Future Debt Payments
The following table summarizes future debt payment obligations as of March 31, 2021:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands) |
|
Total |
|
|
Remainder of 2021 |
|
|
2022 |
|
|
2023 |
|
|
2024 |
|
|
2025 |
|
|
Thereafter |
|
|||||||
|
0.875% Convertible Senior Notes (1) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Total debt |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
(1) |
Amount represents face value of the 0.875% Convertible Senior Notes, which includes both the liability and equity portion. |
11. 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, 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.
|
|
|
Three Months Ended March 31, |
|
|||||
|
(In thousands, except effective tax rate) |
|
2021 |
|
|
2020 |
|
||
|
Income (loss) from continuing operations before income taxes |
|
$ |
|
|
|
$ |
( |
) |
|
Income tax (provision) benefit |
|
$ |
( |
) |
|
$ |
|
|
|
Effective tax rate |
|
|
|
% |
|
|
|
% |
20
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 months ended March 31, 2021, compared with the prior year comparable period, differs primarily due to the fact that the permanent items, credits and the impact of foreign earnings had less impact on the pre-tax income 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 $
12. Derivative Financial Instruments
The following tables provide information about the fair values of our derivative financial instruments as of the respective balance sheet dates:
|
|
|
March 31, 2021 |
|
|||
|
|
|
Asset Derivatives |
|
|||
|
(In thousands) |
|
Balance Sheet Location |
|
Fair Value |
|
|
|
Derivatives qualifying as cash flow hedges: |
|
|
|
|
|
|
|
Foreign exchange contracts |
|
Prepaid expenses and other current assets |
|
$ |
|
|
|
Total derivatives |
|
|
|
$ |
|
|
|
|
|
December 31, 2020 |
|
|||
|
|
|
Asset Derivatives |
|
|||
|
(In thousands) |
|
Balance Sheet Location |
|
Fair Value |
|
|
|
Derivatives qualifying as cash flow hedges: |
|
|
|
|
|
|
|
Foreign exchange contracts |
|
Prepaid expenses and other current assets |
|
$ |
|
|
|
Total derivatives |
|
|
|
$ |
|
|
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 March 31, 2021, 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 March 31, 2021 |
|
|
Location of Gain (Loss) Reclassified from AOCI into Income |
|
Three Months Ended March 31, 2021 |
|
||
|
Foreign exchange contracts |
|
$ |
|
|
|
Cost of Revenue |
|
$ |
|
|
|
|
|
|
|
|
|
Selling, general and administrative expenses |
|
|
|
|
|
|
|
|
|
|
|
Research and development |
|
$ |
|
|
21
|
|
|
Amount of Gain (Loss) Recognized in OCI |
|
|
|
|
Amount of Gain (Loss) Reclassified from AOCI into Income |
|
||
|
(In thousands) |
|
Three Months Ended March 31, 2020 |
|
|
Location of Gain (Loss) Reclassified from AOCI into Income |
|
Three Months Ended March 31, 2020 |
|
||
|
Foreign exchange contracts |
|
$ |
( |
) |
|
Cost of Revenue |
|
$ |
|
|
|
|
|
|
|
|
|
Selling, general and administrative expenses |
|
|
|
|
|
|
|
|
|
|
|
Research and development |
|
$ |
|
|
13. Accumulated Other Comprehensive Loss
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.
|
(In thousands) |
|
Foreign Currency Translation Adjustments |
|
|
Unrealized Net Gains (Losses) on Foreign Exchange Contracts |
|
|
Total |
|
|||
|
Balance as of December 31, 2020 (1) |
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
|
Other comprehensive income (loss) before reclassifications |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (gains) losses reclassified from accumulated other comprehensive loss |
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Net other comprehensive income (loss) |
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Balance as of March 31, 2021 (2) |
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
|
(1) |
Net of taxes of $ |
|
(2) |
Net of taxes of $ |
|
(In thousands) |
|
Foreign Currency Translation Adjustments |
|
|
Unrealized Net Gains (Losses) on Foreign Exchange Contracts |
|
|
Total |
|
|||
|
Balance as of December 31, 2019 (1) |
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
|
Other comprehensive income (loss) before reclassifications |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Net other comprehensive income (loss) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Balance as of March 31, 2020 (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 March 31, |
|
|||||||||||||||||||||
|
|
|
2021 |
|
|
2020 |
|
||||||||||||||||||
|
(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 gains (losses) arising during the period |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
Net (gains) losses reclassified into income |
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in unrealized (losses) gains on foreign exchange contracts |
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
Other comprehensive income (loss) |
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
22
14. 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.
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, 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 additional 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.
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, and we announced that on January 27, 2020, Practice Fusion entered into a deferred prosecution agreement and various civil settlement agreements, including with the Medicaid programs for each U.S. state, the District of Columbia and Puerto Rico (collectively, the “Settlement Agreements”) resolving the investigations conducted by the DOJ and the U.S. Attorney’s Office. The Settlement Agreements required Practice Fusion to, among other matters, pay a criminal fine of $
15. Discontinued Operations
During 2020, we implemented a strategic initiative to sell
On October 15, 2020, we completed the sale of our EPSi business. Prior to the sale, EPSi was part of the Unallocated category as it did not meet the requirements to be a reportable segment nor the criteria to be aggregated into our two reportable segments. On its own, the divestiture of the EPSi business did not represent a strategic shift that had a major effect on our operations and financial results. However, the combined sale of EPSi and CarePort represented a strategic shift that had a major effect on our operations and financial results. Therefore, EPSi was treated as a discontinued operation.
On December 31, 2020, we completed the sale of our CarePort business. Prior to the sale, CarePort was part of the Data, Analytics and Care Coordination reportable segment. On its own, the divestiture of the CarePort business represented a strategic shift that had a major effect on our operations and financial results.
23
The following table summarizes the major classes of assets and liabilities of EPSi and CarePort, as reported on the consolidated balance sheets as of March 31, 2021 and December 31, 2020:
|
(In thousands) |
|
March 31, 2021 |
|
|
December 31, 2020 |
|
||
|
Carrying amounts of major classes of liabilities associated with EPSi and CarePort included as part of discontinued operations: |
|
|
|
|
|
|
|
|
|
Accrued expenses |
|
$ |
|
|
|
$ |
|
|
|
Income tax payable |
|
|
|
|
|
|
|
|
|
Total current liabilities attributable to discontinued operations |
|
$ |
|
|
|
$ |
|
|
The following table summarizes the major income and expense line items of EPSi and CarePort as reported in the consolidated statements of operations for the three months ended March 31, 2021 and 2020. The activity during the three months ended March 31, 2021 primarily relates to net working capital adjustments that impacted the gain on the sale of the discontinued operations.
|
|
|
Three Months Ended |
|
|
Three Months Ended |
|
||
|
(In thousands) |
|
March 31, 2021 |
|
|
March 31, 2020 |
|
||
|
Major income and expense line items related to EPSi and CarePort: |
|
|
|
|
|
|
|
|
|
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 assets |
|
|
|
|
|
|
|
|
|
(Loss) income from discontinued operations for EPSi and CarePort |
|
|
( |
) |
|
|
|
|
|
Interest expense |
|
|
|
|
|
|
( |
) |
|
Gain on sale of discontinued operations |
|
|
|
|
|
|
|
|
|
Income from discontinued operations for EPSi and CarePort before income taxes(1) |
|
|
|
|
|
|
|
|
|
Income tax provision |
|
|
( |
) |
|
|
( |
) |
|
Income from discontinued operations, net of tax for EPSi and CarePort(2) |
|
$ |
|
|
|
$ |
|
|
(1)
(2)
16. 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.
As of March 31, 2021, we had
24
Our Chief Operating Decision Maker (“CODM”) uses segment revenues, gross profit and income (loss) from operations as measures of performance and to make decisions about the allocation of resources. We do not track our assets by segment.
|
|
|
Three Months Ended March 31, |
|
|||||
|
(In thousands) |
|
2021 |
|
|
2020 |
|
||
|
Revenue: |
|
|
|
|
|
|
|
|
|
Core Clinical and Financial Solutions |
|
$ |
|
|
|
$ |
|
|
|
Data, Analytics and Care Coordination |
|
|
|
|
|
|
|
|
|
Unallocated Amounts |
|
|
( |
) |
|
|
( |
) |
|
Total revenue |
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit: |
|
|
|
|
|
|
|
|
|
Core Clinical and Financial Solutions |
|
$ |
|
|
|
$ |
|
|
|
Data, Analytics and Care Coordination |
|
|
|
|
|
|
|
|
|
Unallocated Amounts |
|
|
|
|
|
|
|
|
|
Total gross profit |
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations: |
|
|
|
|
|
|
|
|
|
Core Clinical and Financial Solutions |
|
$ |
|
|
|
$ |
( |
) |
|
Data, Analytics and Care Coordination |
|
|
|
|
|
|
( |
) |
|
Unallocated Amounts |
|
|
( |
) |
|
|
|
|
|
Total income (loss) from operations |
|
$ |
|
|
|
$ |
( |
) |
17. Supplemental Disclosures
Supplemental Consolidated Statements of Cash Flows Information
The majority of the restricted cash balance as of March 31, 2021 and 2020 represents the remaining balance of the escrow account established as part of the acquisition of Netsmart LLC (“Netsmart”) in 2016, to be used by Netsmart to facilitate the integration of Allscripts’ former HomecareTM business.
|
|
|
March 31, |
|
|||||
|
(In thousands) |
|
2021 |
|
|
2020 |
|
||
|
Reconciliation of cash, cash equivalents and restricted cash: |
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
|
|
|
$ |
|
|
|
Restricted cash |
|
|
|
|
|
|
|
|
|
Total cash, cash equivalents and restricted cash |
|
$ |
|
|
|
$ |
|
|
25
|
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 regarding the potential impacts of the COVID-19 pandemic and steps we have taken or plan to take in response thereto, statements related to the effect of macroeconomic trends, statements regarding evolving patient care models, statements regarding legislative, administrative and regulatory actions on our business and opportunities related to accumulated patient data, and statements regarding 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 Allscripts actual results to differ materially from those described in the forward-looking statements include, but are not limited to: our ability to achieve the margin targets associated with our margin improvement initiatives within the contemplated time periods, if at all; the magnitude, severity and duration of the COVID-19 pandemic, including the impacts of the pandemic, along with the impacts of our responses and the responses by governments and other businesses to the pandemic, on our business, our employees, our clients and our suppliers; 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; our use of the proceeds from the sale of our EPSi and CarePort businesses; the failure by Practice Fusion to comply with the terms of the settlement agreements with the Department of Justice (“DOJ”); the costs and burdens of compliance by Practice Fusion with the terms of its settlement agreements with the DOJ; 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; our ability to recover from third parties (including insurers) any amounts paid in connection with Practice Fusion’s settlement agreements with the DOJ and related inquiries; the expected financial results of businesses acquired by us; the successful integration of businesses recently acquired by us; the anticipated and unanticipated expenses and liabilities related to businesses acquired by us, including the civil investigation by the U.S. Attorney’s Office involving our Enterprise Information Solutions business; our failure to compete successfully; consolidation in our industry; current and future laws, regulations and industry initiatives; increased government involvement in our industry; our or our customers’ failure to see the benefits of government programs; changes in interoperability or other regulatory standards; our ability to maintain and expand our business with existing clients or effectively transition clients to newer products; the effects of the realignment of our sales, services and support organizations; market acceptance of our products and services; the unpredictability of the sales and implementation cycles for our products and services; our ability to manage future growth; our ability to introduce new products and services; our ability to establish and maintain strategic relationships; our ability to protect our intellectual property rights; the outcome of legal proceedings involving us; our ability to hire, retain and motivate key personnel; performance by our content and service providers; liability for use of content; price reductions; our ability to license and integrate third-party technologies; risks related to international operations; changes in tax rates or laws; business disruptions; our ability to maintain proper and effective internal controls; asset and long-term investment impairment charges; and the other factors discussed in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2020 (our “Form 10-K”) under the heading “Risk Factors” and elsewhere. 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” 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. 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.
26
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.
Globally, healthcare providers face the urgency of the COVID-19 crisis, as well as 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 and to fully embrace expectations of efficient, patient-centered information exchange. Congressional oversight of EHRs and health information technology has increased in recent years. This increased oversight has impacted and could continue to impact our clients and our business. The passage of the 21st Century Cures Act in December 2016 assuaged some concerns about interoperability and possible U.S. Food and Drug Administration oversight of EHRs, and the ensuing regulations on data blocking and interoperability were released by the Department of Health and Human Services (“HHS”) in March 2020 and became applicable under the Office of the National Coordinator for Health Information Technology oversight in April 2021. Additional regulatory clarity will come with the final rule expected from the HHS Office of the Inspector General. Some aspects of the new regulations will have a significant effect on our business processes and how our clients must exchange patient information. In particular, Allscripts will need to complete development work to satisfy the revised and new certification criterion, and we and our clients will continue making adjustments to business practices associated with information exchange and provision of Electronic Health Information.
Please refer to the section entitled “Our Business Overview and Regulatory Environment” in Part II, Item 7 of our Form 10-K for additional information.
Impacts of COVID-19
The global outbreak of the novel coronavirus (COVID-19) has severely restricted the level of economic activity around the world, and the degrees of any economic recovery in various jurisdictions have not been linear. We have been carefully monitoring the COVID-19 pandemic and its impact on our global operations. We are conducting business with certain modifications to employee travel, employee work locations, and cost reduction initiatives, among other modifications. We will continue to actively monitor the situation and may take further actions that alter our business operations as may be required by federal, state or local authorities or that we determine are in the best interests of our employees, customers, partners and stockholders.
Allscripts, along with other health IT vendors, has been asked by the White House, HHS, the CDC, and state and local governments to support public health efforts to contain the pandemic by expanding COVID-19 reporting options available to our clients. Our technology has been instrumental to the provision of high-quality care, aiding not only public health surveillance but also in clinical decision support interventions to aid in triage, diagnosis and treatment; information exchange as patients are moved from site to site; predictive analytics based on local data for surge anticipation; and patient transitions as they leave the acute care environment for post-acute rehabilitative care.
However, the COVID-19 pandemic negatively impacted revenue for the three months ended March 31, 2021, as we saw delays in deals with upfront software revenue and professional services implementations across our inpatient and outpatient base. During 2020, we implemented cost reduction actions across all functional disciplines of the Company, including headcount reductions and temporary salary measures. We believe the cost reduction actions that were implemented in 2020 and our current liquidity provide us with operating and financial flexibility to assist us in navigating through this uncertain environment.
The extent to which the COVID-19 pandemic will continue to impact the Company’s results of operations and financial condition will depend on future developments that are highly uncertain and cannot be predicted. Future developments include new information that may emerge concerning the duration and severity of the COVID-19 pandemic, resurgences or additional “waves” of outbreaks of COVID-19 in various jurisdictions (including new strains or mutations of the virus), the impact of COVID-19 on economic activity, the actions taken by health authorities and policy makers to contain its impacts on public health and the global economy and the availability, effectiveness and public acceptance of vaccines.
Critical Accounting Policies and Estimates
There were no material changes to our critical accounting policies and estimates from those previously disclosed in our Form 10-K.
First Quarter 2021 Summary
During the first quarter of 2021, we continued to make progress on our key strategic, financial and operational imperatives, which are aimed at driving higher client satisfaction, increasing operating margins, 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.
27
Total revenue for the first quarter of 2021 was $368 million, a decrease of $13 million compared to the first quarter of 2020. For the three months ended March 31, 2021, software delivery, support and maintenance revenue and client services revenue were $223 million and $146 million, respectively, compared with $232 million and $149 million, respectively, during the three months ended March 31, 2020. Gross profit for the first quarter of 2021 was $150 million, an increase of $18 million compared to the first quarter of 2020. Gross margin increased to 40.7% in the first quarter of 2021 compared to a 34.6% gross margin in the first quarter of 2020.
Our contract backlog as of March 31, 2021 was $4.0 billion, which decreased compared with our contract backlog of $4.1 billion and $4.2 billion as of December 31, 2020 and March 31, 2020, respectively.
Our bookings, which reflect the value of executed contracts for software, hardware, other client services, private cloud hosting, outsourcing and subscription-based services, totaled $194 million for the three months ended March 31, 2021, which represents an increase of 6% over the comparable prior period amount of $183 million and an increase of 7% from the fourth quarter 2020 amount of $181 million.
Overview of Consolidated Results
Three Months Ended March 31, 2021 Compared with the Three Months Ended March 31, 2020
|
|
|
Three Months Ended March 31, |
|
|||||||||
|
(In thousands, except percentages) |
|
2021 |
|
|
2020 |
|
|
% Change |
|
|||
|
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Software delivery, support and maintenance |
|
$ |
222,691 |
|
|
$ |
232,140 |
|
|
|
(4.1 |
%) |
|
Client services |
|
|
145,661 |
|
|
|
149,224 |
|
|
|
(2.4 |
%) |
|
Total revenue |
|
|
368,352 |
|
|
|
381,364 |
|
|
|
(3.4 |
%) |
|
Cost of revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Software delivery, support and maintenance |
|
|
70,731 |
|
|
|
73,084 |
|
|
|
(3.2 |
%) |
|
Client services |
|
|
118,087 |
|
|
|
148,220 |
|
|
|
(20.3 |
%) |
|
Amortization of software development and acquisition-related assets |
|
|
29,489 |
|
|
|
28,124 |
|
|
|
4.9 |
% |
|
Total cost of revenue |
|
|
218,307 |
|
|
|
249,428 |
|
|
|
(12.5 |
%) |
|
Gross profit |
|
|
150,045 |
|
|
|
131,936 |
|
|
|
13.7 |
% |
|
Gross margin % |
|
|
40.7 |
% |
|
|
34.6 |
% |
|
|
|
|
|
Selling, general and administrative expenses |
|
|
81,708 |
|
|
|
92,825 |
|
|
|
(12.0 |
%) |
|
Research and development |
|
|
49,173 |
|
|
|
59,377 |
|
|
|
(17.2 |
%) |
|
Amortization of intangible and acquisition-related assets |
|
|
5,824 |
|
|
|
6,710 |
|
|
|
(13.2 |
%) |
|
Income (loss) from operations |
|
|
13,340 |
|
|
|
(26,976 |
) |
|
|
(149.5 |
%) |
|
Interest expense |
|
|
(3,143 |
) |
|
|
(10,665 |
) |
|
|
(70.5 |
%) |
|
Other income, net |
|
|
1,037 |
|
|
|
522 |
|
|
|
98.7 |
% |
|
Equity in net income of unconsolidated investments |
|
|
22 |
|
|
|
200 |
|
|
|
(89.0 |
%) |
|
Income (loss) from continuing operations before income taxes |
|
|
11,256 |
|
|
|
(36,919 |
) |
|
|
(130.5 |
%) |
|
Income tax (provision) benefit |
|
|
(2,663 |
) |
|
|
4,534 |
|
|
|
(158.7 |
%) |
|
Effective tax rate |
|
|
23.7 |
% |
|
|
12.3 |
% |
|
|
|
|
|
Income (loss) from continuing operations, net of tax |
|
|
8,593 |
|
|
|
(32,385 |
) |
|
|
(126.5 |
%) |
|
(Loss) income from discontinued operations |
|
|
(29 |
) |
|
|
16,218 |
|
|
|
(100.2 |
%) |
|
Gain on sale of discontinued operations |
|
|
647 |
|
|
|
0 |
|
|
NM |
|
|
|
Income tax effect on discontinued operations |
|
|
(154 |
) |
|
|
(4,187 |
) |
|
|
(96.3 |
%) |
|
Income from discontinued operations, net of tax |
|
|
464 |
|
|
|
12,031 |
|
|
|
(96.1 |
%) |
|
Net income (loss) |
|
$ |
9,057 |
|
|
$ |
(20,354 |
) |
|
|
(144.5 |
%) |
NM – We define “NM” as not meaningful for increases or decreases greater than 200%.
Revenue
|
|
|
Three Months Ended March 31, |
|
|||||||||
|
(In thousands) |
|
2021 |
|
|
2020 |
|
|
% Change |
|
|||
|
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Recurring revenue |
|
$ |
295,648 |
|
|
$ |
309,981 |
|
|
|
(4.6 |
%) |
|
Non-recurring revenue |
|
|
72,704 |
|
|
|
71,383 |
|
|
|
1.9 |
% |
|
Total revenue |
|
$ |
368,352 |
|
|
$ |
381,364 |
|
|
|
(3.4 |
%) |
28
Three Months Ended March 31, 2021 Compared with the Three Months Ended March 31, 2020
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 decreased for the three months ended March 31, 2021 compared to the prior year comparable period, primarily due to attrition. The decrease was partially offset by an increase in subscription revenue. Non-recurring revenue increased for the three months ended March 31, 2021 compared to the prior year comparable period, primarily due to higher upfront software revenues and hardware revenues. The increase was partially offset by a decrease in client services revenue.
The percentage of recurring and non-recurring revenue of our total revenue was 80% and 20%, respectively, during the three months ended March 31, 2021 and 81% and 19%, respectively, during the three months ended March 31, 2020.
Gross Profit
|
|
|
Three Months Ended March 31, |
|
|||||||||
|
(In thousands, except percentages) |
|
2021 |
|
|
2020 |
|
|
% Change |
|
|||
|
Total cost of revenue |
|
$ |
218,307 |
|
|
$ |
249,428 |
|
|
|
(12.5 |
%) |
|
Gross profit |
|
$ |
150,045 |
|
|
$ |
131,936 |
|
|
|
13.7 |
% |
|
Gross margin % |
|
|
40.7 |
% |
|
|
34.6 |
% |
|
|
|
|
Three Months Ended March 31, 2021 Compared with the Three Months Ended March 31, 2020
Gross profit and margin increased during the three months ended March 31, 2021 compared with the prior year comparable period, primarily due to the cost reduction initiatives implemented throughout 2020. The increase was partially offset by attrition.
Selling, General and Administrative Expenses
|
|
|
Three Months Ended March 31, |
|
|||||||||
|
(In thousands) |
|
2021 |
|
|
2020 |
|
|
% Change |
|
|||
|
Selling, general and administrative expenses |
|
$ |
81,708 |
|
|
$ |
92,825 |
|
|
|
(12.0 |
%) |
Three Months Ended March 31, 2021 Compared with the Three Months Ended March 31, 2020
Selling, general and administrative expenses decreased during the three months ended March 31, 2021, compared with the prior year comparable period, primarily due to the impact of the cost reduction initiatives implemented throughout 2020.
Research and Development
|
|
|
Three Months Ended March 31, |
|
|||||||||
|
(In thousands) |
|
2021 |
|
|
2020 |
|
|
% Change |
|
|||
|
Research and development |
|
$ |
49,173 |
|
|
$ |
59,377 |
|
|
|
(17.2 |
%) |
Three Months Ended March 31, 2021 Compared with the Three Months Ended March 31, 2020
Research and development expenses decreased during the three months ended March 31, 2021 compared with the prior year comparable period, primarily due to the impact of the cost reduction initiatives implemented throughout 2020.
Amortization of Intangible and Acquisition-related Assets
|
|
|
Three Months Ended March 31, |
|
|||||||||
|
(In thousands) |
|
2021 |
|
|
2020 |
|
|
% Change |
|
|||
|
Amortization of intangible and acquisition-related assets |
|
$ |
5,824 |
|
|
$ |
6,710 |
|
|
|
(13.2 |
%) |
Three Months Ended March 31, 2021 Compared with the Three Months Ended March 31, 2020
The decrease in amortization expense for the three months ended March 31, 2021, compared with the prior year comparable period, was due to normal amortization expense and certain intangible assets being fully amortized in 2020.
Interest Expense
|
|
|
Three Months Ended March 31, |
|
|||||||||
|
(In thousands) |
|
2021 |
|
|
2020 |
|
|
% Change |
|
|||
|
Interest expense |
|
$ |
3,143 |
|
|
$ |
10,665 |
|
|
|
(70.5 |
%) |
29
Three Months Ended March 31, 2021 Compared with the Three Months Ended March 31, 2020
Interest expense decreased during the three months ended March 31, 2021 compared to the prior year comparable period due to lower outstanding debt levels during the current year period. The 1.25% Cash Convertible Senior Notes matured and were repaid in full in the third quarter of 2020. The senior secured credit facility was repaid in full in the fourth quarter of 2020 and there were no borrowings from the senior secured revolving facility (“Revolving Facility”) during the three months ended March 31, 2021.
Other Income, Net
|
|
|
Three Months Ended March 31, |
|
|||||||||
|
(In thousands) |
|
2021 |
|
|
2020 |
|
|
% Change |
|
|||
|
Other income, net |
|
$ |
1,037 |
|
|
$ |
522 |
|
|
|
98.7 |
% |
Three Months Ended March 31, 2021 Compared with the Three Months Ended March 31, 2020
Other income, net for the three months ended March 31, 2021 and 2020 consisted of a combination of interest income and miscellaneous receipts and expenses.
Equity in Net Income of Unconsolidated Investments
|
|
|
Three Months Ended March 31, |
|
|||||||||
|
(In thousands) |
|
2021 |
|
|
2020 |
|
|
% Change |
|
|||
|
Equity in net income of unconsolidated investments |
|
$ |
22 |
|
|
$ |
200 |
|
|
|
(89.0 |
%) |
Three Months Ended March 31, 2021 Compared with the Three Months Ended March 31, 2020
Equity in net income of unconsolidated investments represents our share of the equity earnings of our investments in third parties accounted for under the equity method of accounting based on a one quarter lag.
Income Taxes
|
|
|
Three Months Ended March 31, |
|
|||||||||
|
(In thousands, except percentages) |
|
2021 |
|
|
2020 |
|
|
% Change |
|
|||
|
Income tax (provision) benefit |
|
$ |
(2,663 |
) |
|
$ |
4,534 |
|
|
|
(158.7 |
%) |
|
Effective tax rate |
|
|
23.7 |
% |
|
|
12.3 |
% |
|
|
|
|
Three Months Ended March 31, 2021 Compared with the Three Months Ended March 31, 2020
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 months ended March 31, 2021, compared with the prior year comparable period, differs primarily due to the fact that the permanent items, credits and the impact of foreign earnings had less impact on the pre-tax income of $11.3 million in the three months ended March 31, 2021, compared to the impacts of these items on a pre-tax loss of $36.9 million for the three months ended March 31, 2020.
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 months ended March 31, 2021, we recorded valuation allowances of $0.2 million related to U.S. and foreign net operating loss carryforwards.
Discontinued Operations
|
|
|
Three Months Ended March 31, |
|
|||||||||
|
(In thousands) |
|
2021 |
|
|
2020 |
|
|
% Change |
|
|||
|
(Loss) income from discontinued operations |
|
$ |
(29 |
) |
|
$ |
16,218 |
|
|
|
(100.2 |
%) |
|
Gain on sale of discontinued operations |
|
|
647 |
|
|
|
0 |
|
|
NM |
|
|
|
Income tax effect on discontinued operations |
|
|
(154 |
) |
|
|
(4,187 |
) |
|
|
(96.3 |
%) |
|
Income from discontinued operations, net of tax |
|
$ |
464 |
|
|
$ |
12,031 |
|
|
|
(96.1 |
%) |
30
Three Months Ended March 31, 2021 Compared with the Three Months Ended March 31, 2020
On October 15, 2020 and December 31, 2020, we completed the sale of the EPSi and CarePort businesses, respectively. Prior to the sale of EPSi, it was part of the Unallocated category as it did not meet the requirements to be a reportable segment nor the criteria to be aggregated into our two reportable segments. Prior to the sale of CarePort, it was part of the Data, Analytics and Care Coordination reportable segment. Both businesses were part of the same strategic initiative and were sold within the same period, and given that the combined sale of EPSi and CarePort represented a strategic shift that had a major effect on our operations and financial results, we reported them together as discontinued operations for all periods presented. The income from discontinued operations during the three months ended March 31, 2020 represents income generated from both EPSi and CarePort. The gain on sale of discontinued operations during the three months ended March 31, 2021 primarily represents net working capital adjustments to the gain from the sale of CarePort. Refer to Note 15, “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.
Segment Operations
Overview of Segment Results
|
|
|
Three Months Ended March 31, |
|
|||||||||
|
(In thousands) |
|
2021 |
|
|
2020 |
|
|
% Change |
|
|||
|
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Core Clinical and Financial Solutions |
|
$ |
309,165 |
|
|
$ |
320,332 |
|
|
|
(3.5 |
%) |
|
Data, Analytics and Care Coordination |
|
|
63,565 |
|
|
|
63,431 |
|
|
|
0.2 |
% |
|
Unallocated Amounts |
|
|
(4,378 |
) |
|
|
(2,399 |
) |
|
|
82.5 |
% |
|
Total revenue |
|
$ |
368,352 |
|
|
$ |
381,364 |
|
|
|
(3.4 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Profit: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Core Clinical and Financial Solutions |
|
$ |
119,962 |
|
|
$ |
100,434 |
|
|
|
19.4 |
% |
|
Data, Analytics and Care Coordination |
|
|
30,083 |
|
|
|
31,502 |
|
|
|
(4.5 |
%) |
|
Unallocated Amounts |
|
|
0 |
|
|
|
0 |
|
|
NM |
|
|
|
Total gross profit |
|
$ |
150,045 |
|
|
$ |
131,936 |
|
|
|
13.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Core Clinical and Financial Solutions |
|
$ |
17,605 |
|
|
$ |
(20,712 |
) |
|
|
185.0 |
% |
|
Data, Analytics and Care Coordination |
|
|
382 |
|
|
|
(6,264 |
) |
|
|
(106.1 |
%) |
|
Unallocated Amounts |
|
|
(4,647 |
) |
|
|
0 |
|
|
NM |
|
|
|
Total income (loss) from operations |
|
$ |
13,340 |
|
|
$ |
(26,976 |
) |
|
|
(149.5 |
%) |
Core Clinical and Financial Solutions
Our Core Clinical and Financial Solutions segment derives its revenue from the sale of software applications for patient engagement, integrated clinical and financial management solutions, which primarily include EHR-related software, financial and practice management software, related installation, support and maintenance, outsourcing, private cloud hosting and revenue cycle management.
|
|
|
Three Months Ended March 31, |
|
|||||||||
|
(In thousands, except percentages) |
|
2021 |
|
|
2020 |
|
|
% Change |
|
|||
|
Revenue |
|
$ |
309,165 |
|
|
$ |
320,332 |
|
|
|
(3.5 |
%) |
|
Gross profit |
|
$ |
119,962 |
|
|
$ |
100,434 |
|
|
|
19.4 |
% |
|
Gross margin % |
|
|
38.8 |
% |
|
|
31.4 |
% |
|
|
|
|
|
Income (loss) from operations |
|
$ |
17,605 |
|
|
$ |
(20,712 |
) |
|
|
(185.0 |
%) |
|
Operating margin % |
|
|
5.7 |
% |
|
|
(6.5 |
%) |
|
|
|
|
Three Months Ended March 31, 2021 Compared with the Three Months Ended March 31, 2020
Core Clinical and Financial Solutions revenue decreased during the three months ended March 31, 2021, compared with the prior year comparable period, primarily due to attrition.
Gross profit and margin increased during the three months ended March 31, 2021, compared with the prior year comparable period, primarily due to the cost reduction initiatives implemented throughout 2020. The increase was partially offset by the previously mentioned attrition.
31
Income from operations and operating margin increased for the three months ended March 31, 2021, compared with the prior year comparable period, primarily due to lower operating expenses driven by the cost reduction initiatives implemented throughout 2020.
Data, Analytics and Care Coordination
Our Data, Analytics and Care Coordination segment derives its revenue from the sale of practice reimbursement and payer and life sciences solutions, which are mainly targeted at physician practices, payers, life sciences companies and other key healthcare stakeholders. These solutions enable clients to transition, analyze, coordinate care and improve the quality, efficiency and value of healthcare delivery across the entire care community.
|
|
|
Three Months Ended March 31, |
|
|||||||||
|
(In thousands, except percentages) |
|
2021 |
|
|
2020 |
|
|
% Change |
|
|||
|
Revenue |
|
$ |
63,565 |
|
|
$ |
63,431 |
|
|
|
0.2 |
% |
|
Gross profit |
|
$ |
30,083 |
|
|
$ |
31,502 |
|
|
|
(4.5 |
%) |
|
Gross margin % |
|
|
47.3 |
% |
|
|
49.7 |
% |
|
|
|
|
|
Income (loss) from operations |
|
$ |
382 |
|
|
$ |
(6,264 |
) |
|
|
(106.1 |
%) |
|
Operating margin % |
|
|
0.6 |
% |
|
|
(9.9 |
%) |
|
|
|
|
Three Months Ended March 31, 2021 Compared with the Three Months Ended March 31, 2020
Data, Analytics and Care Coordination revenue increased slightly for the three months ended March 31, 2021 compared with the prior year comparable period, due to an increase in subscription revenues. The increase was mostly offset by a decrease in transaction-related revenues.
Gross profit and margin decreased slightly during the three months ended March 31, 2021 compared with the prior year comparable period, primarily due to higher capitalized software-related costs.
Income from operations and operating margin increased during the three months ended March 31, 2021 compared with the prior year comparable period, primarily due to lower operating expenses driven by the cost reduction initiatives implemented throughout 2020. The increase was partially offset by a decline in gross profit.
Unallocated Amounts
The “Unallocated Amounts” category consists of transfer pricing revenues and as of January 1, 2021 includes certain corporate related expenses.
|
|
|
Three Months Ended March 31, |
|
|||||||||
|
(In thousands, except percentages) |
|
2021 |
|
|
2020 |
|
|
% Change |
|
|||
|
Revenue |
|
$ |
(4,378 |
) |
|
$ |
(2,399 |
) |
|
|
82.5 |
% |
|
Gross profit |
|
$ |
0 |
|
|
$ |
0 |
|
|
NM |
|
|
|
Gross margin % |
|
|
0.0 |
% |
|
|
0.0 |
% |
|
|
|
|
|
Loss from operations |
|
$ |
(4,647 |
) |
|
$ |
0 |
|
|
NM |
|
|
|
Operating margin % |
|
|
106.1 |
% |
|
|
0.0 |
% |
|
|
|
|
Three Months Ended March 31, 2021 Compared with the Three Months Ended March 31, 2020
Revenue decreased during the three months ended March 31, 2021, compared with the prior year comparable period, primarily due to an increase in transfer pricing revenues.
Loss from operations during the three months ended March 31, 2021 includes certain general and administrative corporate expenses.
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. March 31, 2021 |
|
|||||
|
(In millions) |
|
As of March 31, 2021 |
|
|
As of December 31, 2020 |
|
|
As of March 31, 2020 |
|
|
December 31, 2020 |
|
|
March 31, 2020 |
|
|||||
|
Software delivery, support and maintenance |
|
$ |
2,115 |
|
|
$ |
2,153 |
|
|
$ |
2,272 |
|
|
|
(1.8 |
%) |
|
|
(6.9 |
%) |
|
Client services |
|
|
1,923 |
|
|
|
1,918 |
|
|
|
1,905 |
|
|
|
0.3 |
% |
|
|
0.9 |
% |
|
Total contract backlog |
|
$ |
4,038 |
|
|
$ |
4,071 |
|
|
$ |
4,177 |
|
|
|
(0.8 |
%) |
|
|
(3.3 |
%) |
32
Total contract backlog as of March 31, 2021 decreased compared with December 31, 2020 and March 31, 2020. 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.
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, and divestitures. As of March 31, 2021, our principal sources of liquidity consisted of cash and cash equivalents of $515 million and available borrowing capacity of $899 million under our Revolving Facility. The change in our cash and cash equivalents balance is reflective of the following:
Operating Cash Flow Activities
|
|
|
Three Months Ended March 31, |
|
|||||||||
|
(In thousands) |
|
2021 |
|
|
2020 |
|
|
$ Change |
|
|||
|
Net income (loss) |
|
$ |
9,057 |
|
|
$ |
(20,354 |
) |
|
$ |
29,411 |
|
|
Less: Income from discontinued operations |
|
|
464 |
|
|
|
12,031 |
|
|
|
(11,567 |
) |
|
Income (loss) from continuing operations |
|
$ |
8,593 |
|
|
$ |
(32,385 |
) |
|
|
40,978 |
|
|
Non-cash adjustments to net income (loss) |
|
|
58,354 |
|
|
|
61,490 |
|
|
|
(3,136 |
) |
|
Cash impact of changes in operating assets and liabilities |
|
|
(11,036 |
) |
|
|
(48,461 |
) |
|
|
37,425 |
|
|
Net cash provided by (used in) operating activities - continuing operations |
|
|
55,911 |
|
|
|
(19,356 |
) |
|
|
75,267 |
|
|
Net cash (used in) provided by operating activities - discontinued operations |
|
|
(51,336 |
) |
|
|
15,648 |
|
|
|
(66,984 |
) |
|
Net cash provided by (used in) operating activities |
|
$ |
4,575 |
|
|
$ |
(3,708 |
) |
|
$ |
8,283 |
|
Three Months Ended March 31, 2021 Compared with the Three Months Ended March 31, 2020
Net cash provided by operating activities – continuing operations increased during the three months ended March 31, 2021 compared with the prior year comparable period. The increase in net income (loss) for the three months ended March 31, 2021 reflects cost savings related to the cost reduction initiatives implemented throughout 2020 as well as lower interest expense due to the repayment of the 1.25% Cash Convertible Senior Notes and the senior secured credit facility in the third and fourth quarters of 2020, respectively, with no borrowings from the Revolving Facility in 2021. Net income (loss) and cash impact of changes in operating assets and liabilities for the three months ended March 31, 2020 reflects $57 million of payments related to the DOJ Settlement Agreements. The increase in cash impact of changes in operating assets and liabilities for the three months ended March 31, 2021 was partially offset by working capital changes. Non-cash adjustments to net income (loss) decreased primarily due to a lower depreciation and amortization expenses and a decrease in stock-based compensation expense.
Net cash provided by operating activities – discontinued operations decreased during the three months ended March 31, 2021 compared with the prior year comparable period primarily due to the tax payment relating to the gain from the sale of CarePort on December 31, 2020. Additionally, both EPSi and CarePort generated cash from operations during the three months ended March 31, 2020.
Investing Cash Flow Activities
|
|
|
Three Months Ended March 31, |
|
|||||||||
|
(In thousands) |
|
2021 |
|
|
2020 |
|
|
$ Change |
|
|||
|
Capital expenditures |
|
$ |
(2,377 |
) |
|
$ |
(2,777 |
) |
|
$ |
400 |
|
|
Capitalized software |
|
|
(18,144 |
) |
|
|
(26,490 |
) |
|
|
8,346 |
|
|
Purchases of equity securities, other investments and related intangible assets, net |
|
|
(221 |
) |
|
|
(3,028 |
) |
|
|
2,807 |
|
|
Sale of other investments |
|
|
1,753 |
|
|
|
0 |
|
|
|
1,753 |
|
|
Net cash used in investing activities - continuing operations |
|
|
(18,989 |
) |
|
|
(32,295 |
) |
|
|
13,306 |
|
|
Net cash used in investing activities - discontinued operations |
|
|
0 |
|
|
|
(2,134 |
) |
|
|
2,134 |
|
|
Net cash used in investing activities |
|
$ |
(18,989 |
) |
|
$ |
(34,429 |
) |
|
$ |
15,440 |
|
Three Months Ended March 31, 2021 Compared with the Three Months Ended March 31, 2020
Net cash used in investing activities – continuing operations decreased during the three months ended March 31, 2021, compared with the prior year comparable period. The decrease in the use of cash during 2021 was primarily due to a decrease in capitalized software costs and a decrease in additional investments.
33
Net cash used in investing activities – discontinued operations during the three months ended March 31, 2020 reflects spending for capital expenditures and capitalized software costs related to the EPSi and CarePort businesses that were sold during the fourth quarter of 2020.
Financing Cash Flow Activities
|
|
|
Three Months Ended March 31, |
|
|||||||||
|
(In thousands) |
|
2021 |
|
|
2020 |
|
|
$ Change |
|
|||
|
Taxes paid related to net share settlement of equity awards |
|
$ |
(5,972 |
) |
|
$ |
(3,174 |
) |
|
$ |
(2,798 |
) |
|
Payments for issuance costs on 0.875% Convertible Senior Notes |
|
|
0 |
|
|
|
(758 |
) |
|
|
758 |
|
|
Credit facility payments |
|
|
0 |
|
|
|
(80,000 |
) |
|
|
80,000 |
|
|
Credit facility borrowings, net of issuance costs |
|
|
0 |
|
|
|
210,000 |
|
|
|
(210,000 |
) |
|
Repurchase of common stock |
|
|
0 |
|
|
|
(9,714 |
) |
|
|
9,714 |
|
|
Payment of acquisition and other financing obligations |
|
|
(1,542 |
) |
|
|
(2,911 |
) |
|
|
1,369 |
|
|
Net cash (used in) provided by financing activities |
|
$ |
(7,514 |
) |
|
$ |
113,443 |
|
|
$ |
(120,957 |
) |
Three Months Ended March 31, 2021 Compared with the Three Months Ended March 31, 2020
Net cash provided by financing activities decreased during the three months ended March 31, 2021, compared with the prior year comparable period. The decrease was primarily a result of no borrowings or payments under our Revolving Facility during the three months ended March 31, 2021.
Future Capital Requirements
The following table summarizes future payments under the 0.875% Convertible Senior Notes and Revolving Facility as of March 31, 2021:
|
(In thousands) |
|
Total |
|
|
Remainder of 2021 |
|
|
2022 |
|
|
2023 |
|
|
2024 |
|
|
2025 |
|
|
Thereafter |
|
|||||||
|
Principal payments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.875% Convertible Senior Notes (1) |
|
$ |
207,911 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
207,911 |
|
|
Total principal payments |
|
|
207,911 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
207,911 |
|
|
Interest payments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.875% Convertible Senior Notes |
|
|
10,915 |
|
|
|
910 |
|
|
|
1,819 |
|
|
|
1,819 |
|
|
|
1,819 |
|
|
|
1,819 |
|
|
|
2,729 |
|
|
Senior Secured Credit Facility (2) |
|
|
4,607 |
|
|
|
1,798 |
|
|
|
2,247 |
|
|
|
562 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
Total interest payments |
|
|
15,522 |
|
|
|
2,708 |
|
|
|
4,066 |
|
|
|
2,381 |
|
|
|
1,819 |
|
|
|
1,819 |
|
|
|
2,729 |
|
|
Total future debt payments |
|
$ |
223,433 |
|
|
$ |
2,708 |
|
|
$ |
4,066 |
|
|
$ |
2,381 |
|
|
$ |
1,819 |
|
|
$ |
1,819 |
|
|
$ |
210,640 |
|
|
(1) |
Amount represents the face value of the 0.875% Convertible Senior Notes, which includes both the liability and equity portions. |
|
(2) |
Amounts represent unused fees related to the unused available borrowing capacity on the Revolving Facility. |
Other Matters Affecting Future Capital Requirements
Our total investment in research and development is expected to decline in 2021 as the Company continues to benefit from margin improvement initiatives that commenced in 2020. Our total spending consists of research and development costs directly recorded to expense, which are offset by the capitalization of eligible development costs.
We believe that our cash and cash equivalents of $515 million as of March 31, 2021, 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 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 March 31, 2021, 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 three months ended March 31, 2021.
34
|
Item 4. |
Controls and Procedures |
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Exchange Act, as of the end of the period covered by this Form 10-Q.
Based on management’s evaluation, our chief executive officer and our chief financial officer concluded that our disclosure controls and procedures are designed to, and were effective as of March 31, 2021 to, provide assurance at a reasonable level that the information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow for timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting during the three months ended March 31, 2021, 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.
PART II. OTHER INFORMATION
|
Item 1. |
Legal Proceedings |
We hereby incorporate by reference Note 14, “Contingencies,” of the Notes to Consolidated Financial Statements in Part I, Item 1 of this Form 10-Q.
|
Item 1A. |
Risk Factors |
There have been no material changes during the quarter ended March 31, 2021 from the risk factors as previously disclosed in our Form 10-K.
|
Item 2. |
Unregistered Sales of Equity Securities and Use of Proceeds |
On November 18, 2020, we announced that our Board of Directors approved a new stock repurchase program under which we may repurchase up to $300 million of our common stock through December 31, 2021. We did not repurchase any shares during the three months ended March 31, 2021.
On November 30, 2020, we entered into separate Master Confirmations (each, a “Master Confirmation”) and Supplemental Confirmations (each, together with the related Master Confirmation, an “ASR Agreement”), with JPMorgan Chase Bank, National Association and Wells Fargo Bank, National Association (each, an “ASR Counterparty”, or collectively, “ASR Counterparties”), to purchase shares of our common stock for a total payment of $200.0 million (the “Prepayment Amount”). Under the terms of the ASR Agreements, on November 30, 2020, we paid the Prepayment Amount to the ASR Counterparties and received on December 2, 2020 an initial delivery of 11.7 million shares of our common stock, which is approximately 80% of the total number of shares that could be repurchased under the ASR Agreements if the final purchase price per share equaled the closing price of our common stock on November 30, 2020. The approximate dollar value of shares of our common stock that may yet be purchased under the new stock repurchase program following the ASR Agreements is $67.2 million as of March 31, 2021.
At final settlement, depending on the final purchase price per share, the ASR Counterparties may be required to deliver additional shares of our common stock to the Company, or, under certain circumstances, we may be required to make a cash payment to each ASR Counterparty or may elect to deliver the equivalent value in shares of our common stock. The final purchase price per share under each ASR Agreement will generally be based on the average of daily volume-weighted average prices of shares of our common stock during a term set forth in the ASR Agreements. The ASR Agreements contain provisions customary for agreements of this type, including provisions for adjustments to the transaction terms, the circumstances generally under which the ASR Agreements may be accelerated, extended or terminated early by the ASR Counterparties and various acknowledgments, representations and warranties made by the parties to one another. Final settlement of the ASR Agreements is expected to be completed during the second quarter of 2021.
Any future stock repurchase transactions may be made through open market transactions, block trades, privately negotiated transactions (including accelerated share repurchase transactions) or other means, subject to market conditions. 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 repurchase program may be accelerated, suspended, delayed or discontinued at any time.
35
|
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 March 31, 2021, formatted in Inline XBRL and included in Exhibit 101. |
|
X |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36
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/ Richard J. Poulton |
|
|
|
Richard J. Poulton |
|
|
|
President and Chief Financial Officer |
|
|
|
(Principal Financial and Accounting Officer and Duly Authorized Officer) |
Date: April 30, 2021
37
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: April 30, 2021 |
|
/s/ Paul M. Black |
|
|
|
Chief Executive Officer |
Exhibit 31.2
Certification
I, Richard J. Poulton, 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: April 30, 2021 |
|
/s/ Richard J. Poulton |
|
|
|
President and 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 March 31, 2021, 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 March 31, 2021, fairly presents, in all material respects, the financial condition and results of operations of Allscripts Healthcare Solutions, Inc.
Dated as of this 30th day of April, 2021.
|
/s/ Paul M. Black |
|
|
|
/s/ Richard J. Poulton |
|
Paul M. Black Chief Executive Officer |
|
|
|
Richard J. Poulton President and 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.