UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission file number
(Exact Name of Registrant as Specified in Its Charter)
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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:
Title of Each Class |
Trading Symbol |
Name of Each Exchange on which Registered |
(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 August 1, 2022, there were
1
ALLSCRIPTS HEALTHCARE SOLUTIONS, INC.
FORM 10-Q
For the Fiscal Quarter Ended June 30, 2022
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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29 |
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Item 3. |
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Item 4. |
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38 |
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Item 1. |
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Item 1A. |
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Item 2. |
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Item 6. |
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2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
ALLSCRIPTS HEALTHCARE SOLUTIONS, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands, except per share amounts) |
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June 30, 2022 |
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December 31, 2021 |
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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 $ |
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Contract assets, net of allowance of $ |
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Prepaid expenses and other current assets |
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Current assets attributable to discontinued operations |
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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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Long-term assets attributable to discontinued operations |
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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)
(In thousands, except per share amounts) |
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June 30, 2022 |
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December 31, 2021 |
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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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Long-term liabilities attributable to discontinued operations |
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Total liabilities |
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Stockholders’ equity: |
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Preferred stock: $ |
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Common stock: $ |
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Treasury stock: at cost, |
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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 June 30, |
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Six Months Ended June 30, |
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(In thousands, except per share amounts) |
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2022 |
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2021 |
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2022 |
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2021 |
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Revenue: |
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Provider |
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$ |
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$ |
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$ |
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$ |
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Payer & Life Sciences |
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Total revenue |
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Cost of revenue: |
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Provider |
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Payer & Life Sciences |
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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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Asset impairment charges |
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Amortization of intangible and acquisition-related assets |
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(Loss) income from operations |
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Interest expense |
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Other income, net |
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Equity in net loss of unconsolidated investments |
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(Loss) income from continuing operations before income taxes |
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Income tax benefit (provision) |
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Income from continuing operations, net of tax |
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Loss from discontinued operations |
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( |
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Gain on sale of discontinued operations |
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Income tax effect on discontinued operations |
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( |
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(Loss) income from discontinued operations, net of tax |
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( |
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( |
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( |
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Net (loss) income |
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$ |
( |
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$ |
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$ |
( |
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$ |
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Net (loss) income 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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$ |
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$ |
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Discontinued operations |
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Net (loss) income per share - Basic |
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$ |
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$ |
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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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$ |
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$ |
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Discontinued operations |
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( |
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( |
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( |
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Net (loss) income per share - Diluted |
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$ |
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$ |
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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 June 30, |
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Six Months Ended June 30, |
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(In thousands) |
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2022 |
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2021 |
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2022 |
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2021 |
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Net (loss) income |
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$ |
( |
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$ |
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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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( |
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Change in fair value of derivatives qualifying as cash flow hedges |
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( |
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( |
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( |
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( |
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Other comprehensive (loss) income before income tax benefit |
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( |
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( |
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( |
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( |
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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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( |
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( |
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( |
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( |
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Comprehensive (loss) income |
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$ |
( |
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$ |
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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 June 30, |
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Six Months Ended June 30, |
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(In thousands) |
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2022 |
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2021 |
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2022 |
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2021 |
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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, |
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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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$ |
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$ |
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Common stock issued under stock compensation plans, |
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Balance at end of period |
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$ |
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$ |
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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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Issuance of treasury stock |
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Purchase of treasury stock |
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( |
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( |
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( |
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Accelerated share repurchase program |
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Balance at end of period |
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( |
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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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$ |
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$ |
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Issuance of treasury stock |
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Purchase of treasury stock |
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( |
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( |
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( |
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( |
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Accelerated share repurchase program |
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Balance at end of period |
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$ |
( |
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$ |
( |
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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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$ |
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$ |
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Stock-based compensation |
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Common stock issued under stock compensation plans, |
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( |
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( |
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( |
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( |
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ASU 2020-06 implementation adjustments |
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( |
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Accelerated share repurchase program |
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( |
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Issuance of treasury stock |
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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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$ |
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$ |
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Retained earnings |
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Balance at beginning of period |
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$ |
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$ |
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$ |
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$ |
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Net (loss) income |
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( |
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( |
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ASU 2020-06 implementation adjustments |
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Balance at end of period |
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$ |
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$ |
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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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$ |
( |
) |
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$ |
( |
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Foreign currency translation adjustments, net |
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( |
) |
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( |
) |
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Unrecognized loss on derivatives qualifying as cash flow hedges, net of tax |
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( |
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( |
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( |
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( |
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Balance at end of period |
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$ |
( |
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$ |
( |
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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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$ |
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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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$ |
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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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Six Months Ended June 30, |
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(In thousands) |
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2022 |
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2021 |
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Cash flows from operating activities: |
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Net (loss) income |
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$ |
( |
) |
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$ |
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Less: (Loss) income from discontinued operations |
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( |
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Income from continuing operations |
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Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities: |
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Depreciation and amortization |
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Non-cash lease expense, net |
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( |
) |
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( |
) |
Stock-based compensation expense |
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Deferred taxes |
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( |
) |
|
|
|
|
Impairment of assets and long-term investments |
|
|
|
|
|
|
||
Equity in net loss of unconsolidated investments |
|
|
|
|
|
|
||
Other (income) loss, net |
|
|
( |
) |
|
|
|
|
Changes in operating assets and liabilities (net of businesses acquired): |
|
|
|
|
|
|
||
Accounts receivable and contract assets, net |
|
|
|
|
|
|
||
Prepaid expenses and other assets |
|
|
|
|
|
( |
) |
|
Accounts payable |
|
|
|
|
|
|
||
Accrued expenses |
|
|
|
|
|
|
||
Accrued compensation and benefits |
|
|
( |
) |
|
|
( |
) |
Deferred revenue |
|
|
( |
) |
|
|
( |
) |
Other liabilities |
|
|
( |
) |
|
|
|
|
Net cash provided by operating activities - continuing operations |
|
|
|
|
|
|
||
Net cash used in operating activities - discontinued operations |
|
|
( |
) |
|
|
( |
) |
Net cash provided by (used in) operating activities |
|
|
|
|
|
( |
) |
|
Cash flows from investing activities: |
|
|
|
|
|
|
||
Capital expenditures |
|
|
( |
) |
|
|
( |
) |
Capitalized software |
|
|
( |
) |
|
|
( |
) |
Cash paid for business acquisitions, net of cash acquired |
|
|
( |
) |
|
|
|
|
Sale of businesses and other investments, net of cash divested, and distributions received |
|
|
|
|
|
|
||
Purchases of equity securities, other investments and related intangible assets, net |
|
|
( |
) |
|
|
( |
) |
Net cash provided by (used in) investing activities - continuing operations |
|
|
|
|
|
( |
) |
|
Net cash used in investing activities - discontinued operations |
|
|
( |
) |
|
|
( |
) |
Net cash provided by (used in) investing activities |
|
|
|
|
|
( |
) |
|
Cash flows from financing activities: |
|
|
|
|
|
|
||
Taxes paid related to net share settlement of equity awards |
|
|
( |
) |
|
|
( |
) |
Credit facility payments |
|
|
( |
) |
|
|
|
|
Credit facility borrowings, net of issuance costs |
|
|
|
|
|
|
||
Repurchase of common stock |
|
|
( |
) |
|
|
( |
) |
Intercompany to/from parent/subsidiaries |
|
|
|
|
|
|
||
Payment of acquisition and other financing obligations |
|
|
|
|
|
( |
) |
|
Net cash used in financing activities - continuing operations |
|
|
( |
) |
|
|
( |
) |
Net cash used in financing activities - discontinued operations |
|
|
( |
) |
|
|
( |
) |
Net cash used in financing activities |
|
|
( |
) |
|
|
( |
) |
Effect of exchange rate changes on cash and cash equivalents |
|
|
( |
) |
|
|
|
|
Net increase (decrease) in cash and cash equivalents |
|
|
|
|
|
( |
) |
|
Cash, cash equivalents and restricted cash, beginning of period |
|
|
|
|
|
|
||
Cash, cash equivalents and restricted cash, end of period |
|
|
|
|
|
|
||
Less: Cash and cash equivalents attributable to discontinued operations |
|
|
( |
) |
|
|
( |
) |
Cash, cash equivalents and restricted cash, end of period, excluding discontinued operations |
|
$ |
|
|
$ |
|
||
The accompanying notes are an integral part of these consolidated financial statements.
8
ALLSCRIPTS HEALTHCARE SOLUTIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation and Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of Allscripts Healthcare Solutions, Inc. (“Allscripts”) and its wholly-owned subsidiaries and controlled affiliates. All significant intercompany balances and transactions have been eliminated. Each of the terms “we,” “us,” “our” or the “Company” as used herein refers collectively to Allscripts Healthcare Solutions, Inc. and its wholly-owned subsidiaries and controlled affiliates, unless otherwise stated.
Unaudited Interim Financial Information
The unaudited interim consolidated financial statements as of and for the three and six months ended June 30, 2022 and 2021 have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim financial reporting. These interim consolidated financial statements are unaudited and, in the opinion of our management, include all adjustments, consisting of normal recurring adjustments and accruals, necessary to present fairly the consolidated financial statements for the periods presented in accordance with generally accepted accounting principles in the United States of America (“GAAP”). The consolidated results of operations for the three and six months ended June 30, 2022 are not necessarily indicative of the results to be expected for the full year ending December 31, 2022.
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, 2021, as amended (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 current macroeconomic trends and their 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 August 2020, the Financial Accounting Standards Board (“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 requires the application of the if-converted method for calculating diluted earnings per share, whereas the treasury stock method is no longer permitted for convertible instruments. 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 adopted ASU 2020-06 on
Accounting Pronouncements Not Yet Adopted
In October 2021, the FASB issued Accounting Standards Update No. 2021-08, “Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers” (“ASU 2021-08”), which requires contract assets and contract liabilities (deferred revenue) acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with Accounting Standards Codification (“ASC”) 606, “Revenue from Contracts with Customers”, as if it had originated the contracts. The new guidance creates an exception to the general recognition and measurement principles of ASC 805, “Business Combinations”. The new standard should be applied prospectively and is effective for all public business entities for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The standard is effective for all other entities for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted. We are currently evaluating the effects of the adoption of ASU 2021-08 on our consolidated financial statements.
9
We do not believe that any other recently issued, but not yet effective accounting standards, if adopted, will have a material impact on our consolidated financial statements.
2. Revenue from Contracts with Customers
Our
At June 30, 2022 and December 31, 2021, 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 tables below:
(In thousands) |
|
Three Months |
|
|
Three Months |
|
||
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 |
|
|
Three Months |
|
||
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 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 unsatisfied performance obligations 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 and uncertainty of our revenue and cash flows are affected by economic factors.
|
|
Three Months Ended June 30, 2022 |
|
|||||||||
(In thousands) |
|
Veradigm |
|
|
Unallocated Amounts |
|
|
Total |
|
|||
Provider |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Payer & Life Sciences |
|
|
|
|
|
|
|
|
|
|||
Total revenue |
|
$ |
|
|
$ |
|
|
$ |
|
|||
|
|
Three Months Ended June 30, 2021 |
|
|||||||||
(In thousands) |
|
Veradigm |
|
|
Unallocated Amounts |
|
|
Total |
|
|||
Provider |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Payer & Life Sciences |
|
|
|
|
|
|
|
|
|
|||
Total revenue |
|
$ |
|
|
$ |
|
|
$ |
|
|||
|
|
Six Months Ended June 30, 2022 |
|
|||||||||
(In thousands) |
|
Veradigm |
|
|
Unallocated Amounts |
|
|
Total |
|
|||
Provider |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Payer & Life Sciences |
|
|
|
|
|
|
|
|
|
|||
Total revenue |
|
$ |
|
|
$ |
|
|
$ |
|
|||
|
|
Six Months Ended June 30, 2021 |
|
|||||||||
(In thousands) |
|
Veradigm |
|
|
Unallocated Amounts |
|
|
Total |
|
|||
Provider |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Payer & Life Sciences |
|
|
|
|
|
|
|
|
|
|||
Total revenue |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Contract Assets – Estimate of Credit Losses
We adopted Accounting Standards Update No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”) on January 1, 2020 using the cumulative-effect adjustment transition method. The guidance required the recognition of lifetime estimated credit losses expected to occur for contract assets and trade receivables. The guidance also required that we pool assets with similar risk characteristics and consider current economic conditions when estimating losses.
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. We also used each customer’s primary business unit in our pooling determination. This assessment provides information of the customer including size, segment and industry. The pools are aligned with management’s current review of financial performance. For the three and six months ended June 30, 2022, 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 24-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 macroeconomic and inflationary trends and 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 June 30, 2022 analysis resulted in a reduction to the ending estimate of credit losses.
11
Changes in the estimate of credit losses for contract assets are presented in the table below.
|
|
Six Months Ended June 30, |
|
|||||
(In thousands) |
|
2022 |
|
|
2021 |
|
||
Beginning balance |
|
$ |
|
|
$ |
|
||
Write-offs |
|
|
( |
) |
|
|
|
|
Ending balance |
|
$ |
|
|
$ |
|
||
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. Refer to Note 2, “Revenue from Contracts with Customers” for information regarding the adoption of ASU 2016-13. No adjustments were made to the pools or historical loss rate data for trade accounts receivable during the six months ended June 30, 2022.
Changes in the estimate of credit losses for trade accounts receivable are presented in the table below.
|
|
Six Months Ended June 30, |
|
|||||
(In thousands) |
|
2022 |
|
|
2021 |
|
||
Beginning balance |
|
$ |
|
|
$ |
|
||
Current period provision |
|
|
|
|
|
|
||
Write-offs |
|
|
( |
) |
|
|
( |
) |
Ending balance |
|
$ |
|
|
$ |
|
||
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.
We have elected the group of practical expedients under Accounting Standards Update No. 2016-02, Leases (Topic 842) (“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 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 included office and computer equipment leases. As of December 31, 2021, we no longer have finance leases. Our finance leases in 2021 were not significant. Our operating leases have remaining lease terms up to
(In thousands) |
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
Operating lease cost (1) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Less: Sublease income |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Total operating lease costs |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
12
(1)
Supplemental cash flow information for operating leases is as follows:
(In thousands) |
|
Six Months Ended June 30, |
|
|||||
|
|
2022 |
|
|
2021 |
|
||
Cash paid for amounts included in the measurement of lease liabilities: |
|
|
|
|
|
|
||
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) |
|
June 30, 2022 |
|
|
December 31, 2021 |
|
||
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 June 30, 2022.
|
|
June 30, 2022 |
|
|
(In thousands) |
|
Operating Leases |
|
|
Remainder of 2022 |
|
$ |
|
|
2023 |
|
|
|
|
2024 |
|
|
|
|
2025 |
|
|
|
|
2026 |
|
|
|
|
Thereafter |
|
|
|
|
Total lease liabilities |
|
|
|
|
Less: Amount representing interest |
|
|
( |
) |
Less: Short-term lease liabilities |
|
|
( |
) |
Total Long-term lease liabilities |
|
$ |
|
|
5. Business Combinations and Divestitures
Acquisitions
On
The preliminary purchase price allocation of the fair value of the consideration transferred as of the acquisition date of March 25, 2022 is shown in the table below. The goodwill is expected to be deductible for tax purposes.
|
|
(In thousands) |
|
|
Cash and cash equivalents |
|
$ |
|
|
Accounts receivable, net |
|
|
|
|
Prepaid expenses and other current assets |
|
|
|
|
Fixed assets |
|
|
|
|
Intangible assets |
|
|
|
|
Goodwill |
|
|
|
|
Accounts payable and accrued expenses |
|
|
( |
) |
Deferred revenue |
|
|
( |
) |
Other liabilities |
|
|
( |
) |
Net assets acquired |
|
$ |
|
|
13
The following table summarizes the estimated fair values of the identifiable intangible assets and their estimated useful lives:
|
|
Useful Life |
|
Fair Value |
|
|
Description |
|
(In years) |
|
(In thousands) |
|
|
Customer Relationships |
|
|
$ |
|
||
Technology |
|
|
|
|
||
Tradenames |
|
|
|
|
||
|
|
|
|
$ |
|
|
We incurred $
Divestitures
On May 2, 2022, we completed the sale of our Hospitals and Large Physician Practices business, including the Sunrise and TouchWorks solutions (the “Hospitals and Large Physician Practices Business”) to Altera Digital Health Inc. (formerly known as Harris Dawn Holdings Inc.), a Delaware corporation (“Altera”), a wholly-owned subsidiary of Constellation Software Inc., an Ontario corporation, pursuant to a purchase agreement (the “Altera Purchase Agreement”) by which Altera purchased substantially all of the assets of the Hospitals and Large Physician Practices Business. The total consideration for the Hospitals and Large Physician Practices Business was $
On August 23, 2021, we completed the sale of substantially all of the assets of our 2bPrecise business to a third party for a non-controlling interest in the combined entity. We realized a pre-tax gain upon the sale of $
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.
14
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 reflects 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.
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 |
|
June 30, 2022 |
|
|
December 31, 2021 |
|
||||||||||||||||||||||||||
(In thousands) |
|
Classifications |
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||||||
Foreign exchange |
|
Prepaid expenses |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||||
Total assets |
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Foreign exchange |
|
Accrued |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||||
Contingent consideration |
|
Accrued |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Total liabilities |
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||||
The changes in our Level 3 liability measured at fair value on a recurring basis at June 30, 2022 is summarized as follows:
(In thousands) |
|
Contingent Consideration |
|
|
Balance at December 31, 2021 |
|
$ |
|
|
Payments |
|
|
( |
) |
Balance at June 30, 2022 |
|
$ |
|
|
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 June 30, 2022 |
|
|
Cost |
|
|
June 30, 2022 |
|
|
December 31, 2021 |
|
||||
Equity method investments (1) |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Cost with adjustments |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total long-term equity investments |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
(1)
During the three and six months ended June 30, 2021, one of our third-party cost method investments converted its notes and we received
As of June 30, 2022, it is not practicable 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
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.
15
7. Stockholders' Equity
Stock-based Compensation Expense
Stock-based compensation expense recognized during the three and six months ended June 30, 2022 and 2021 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 June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
(In thousands) |
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
Cost of revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Provider |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Payer & Life Sciences |
|
|
|
|
|
|
|
|
|
|
|
|
||||
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 June 30, 2022 |
|
|
Six Months Ended June 30, 2022 |
|
||||||||||
|
|
|
|
|
Weighted-Average |
|
|
|
|
|
Weighted-Average |
|
||||
|
|
|
|
|
Grant Date |
|
|
|
|
|
Grant Date |
|
||||
(In thousands, except per share amounts) |
|
Shares |
|
|
Fair Value |
|
|
Shares |
|
|
Fair Value |
|
||||
Service-based restricted stock units |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Performance-based restricted stock units with a service condition |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Market-based restricted stock units with a service condition |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
|
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
During the six months ended June 30, 2022 and the year ended December 31, 2021,
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 six months ended June 30, 2022 and 2021 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 six months ended June 30, 2022 and 2021 were
16
Stock Repurchases
On November 18, 2020, we announced that our Board of Directors approved a stock purchase program (the “2020 Program”) under which we may repurchase up to $
On May 26, 2021, we announced that our Board approved a stock purchase program (the “2021 Program”) under which we may repurchase up to $
On January 24, 2022, we announced that our Board of Directors approved a stock purchase program (the “2022 Program”) under which we may repurchase up to $
The approximate dollar value of shares of our common stock that may yet be purchased under the 2022 Program was $
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 numerator includes net income (loss) and any interest expense related to the 0.875% Convertible Senior Notes, net of tax, and 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, as well as convertible notes calculated under the if-converted method.
17
The calculations of earnings (loss) per share are as follows:
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
(In thousands, except per share amounts) |
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
Basic earnings (loss) per Common Share: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Income from continuing operations, net of tax |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
(Loss) income from discontinued operations, net of tax |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
Net (loss) income |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted-average common shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic earnings from continuing operations per Common Share |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Basic (loss) earnings from discontinued operations per Common Share |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
Net (loss) earnings per Common Share |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Diluted earnings (loss) per Common Share: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Income from continuing operations, net of tax |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Effect of assumed conversions: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Plus: Interest expense, net of tax, associated with 0.875% Convertible Senior Notes |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Income from continuing operations, net of tax after the effect of assumed conversions |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
(Loss) income from discontinued operations, net of tax |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted-average common shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Plus: Dilutive effect of restricted stock unit awards, convertible notes and warrants |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted-average common shares outstanding assuming dilution |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Diluted earnings from continuing operations per Common Share |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Diluted (loss) earnings from discontinued operations per Common Share |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
Net (loss) earnings per Common Share |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
The following restricted stock unit awards, convertible notes and warrants are not included in the computation of diluted earnings per share as the effect of including such restricted stock unit awards, convertible notes and warrants in the computation would be anti-dilutive:
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
(In thousands) |
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
Shares subject to anti-dilutive restricted stock unit awards, convertible notes and warrants excluded from calculation |
|
|
|
|
|
|
|
|
|
|
|
|
||||
9. Goodwill and Intangible Assets
Goodwill and intangible assets consist of the following:
|
|
June 30, 2022 |
|
|
December 31, 2021 |
|
||||||||||||||||||
|
|
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 six months ended June 30, 2022 were as follows:
(In thousands) |
|
Veradigm |
|
|
Unallocated |
|
|
Total |
|
|||
Balance as of December 31, 2021 |
|
|
|
|
|
|
|
|
|
|||
Additions |
|
|
|
|
|
|
|
|
|
|||
Balance as of June 30, 2022 |
|
$ |
|
|
$ |
|
|
$ |
|
|||
There were
10. Debt
Debt outstanding, excluding lease obligations, consists of the following:
|
|
June 30, 2022 |
|
|
December 31, 2021 |
|
||||||||||||||||||
(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) As of June 30, 2022, the principal balance is recognized in debt. As of December 31, 2021, the principal balance is $
Interest expense consists of the following:
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
(In thousands) |
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
Interest expense |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Amortization of discounts and debt issuance costs |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total interest expense |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Interest expense related to the
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
(In thousands) |
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
Coupon interest |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Amortization of discounts and debt issuance costs |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total interest expense related to the 0.875% Convertible Senior Notes |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Allscripts Senior Secured Credit Facility
On April 29, 2022, Allscripts and Allscripts Healthcare LLC entered into a Third Amended and Restated Credit Agreement (the “Third Amended Credit Agreement”), with JPMorgan Chase Bank, N.A., as administrative agent and other lenders party thereto, amending and restating the Second Amended Credit Agreement. The Third Amended Credit Agreement provides for a $
As of June 30, 2022, $
As of June 30, 2022, we had $
19
0.875% Convertible Senior Notes
The issuance in December 2019 of the combined $
In June 2020, we paid $
On January 1, 2022, we adopted ASU 2020-06 using the modified retrospective transition method. The guidance simplifies the accounting for convertible instruments by removing major separation models required under GAAP. The guidance also removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exceptions. As a result of the adoption of ASU 2020-06, the liability and equity components of the 0.875% Convertible Senior Notes are to be presented as a single liability as of January 1, 2022. Therefore, as of January 1, 2022, we decreased Additional paid-in capital by $
The
Future Debt Payments
The following table summarizes future debt principal payment obligations as of June 30, 2022:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
(In thousands) |
|
Total |
|
|
Remainder |
|
|
2023 |
|
|
2024 |
|
|
2025 |
|
|
2026 |
|
|
Thereafter |
|
|||||||
0.875% Convertible Senior Notes (1) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||||
Total debt |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||||
(1)
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 June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
(In thousands, except effective tax rate) |
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
(Loss) income from continuing operations before income taxes |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
Income tax benefit (provision) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
||
Effective tax rate |
|
|
% |
|
|
% |
|
NM |
|
|
|
% |
||||
NM - We define “NM” as not meaningful for percentages greater than 200%.
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 including a windfall benefit 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 $
The sale of the Hospitals and Large Physician Practices Business included the majority of our foreign subsidiaries. In the quarter ended March 31, 2022, the assets and liabilities of these foreign subsidiaries were classified as held for sale on our consolidated balance sheet. As such, the company no longer considered the undistributed earnings of these foreign subsidiaries to be indefinitely invested. Therefore, in the three months ended March 31, 2022, we recorded a deferred tax asset of $
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:
|
|
June 30, 2022 |
|
|||||||||
|
|
Asset Derivatives |
|
|
Liability Derivatives |
|
||||||
(In thousands) |
|
Balance Sheet Location |
|
Fair Value |
|
|
Balance Sheet Location |
|
Fair Value |
|
||
Derivatives qualifying as cash flow hedges: |
|
|
|
|
|
|
|
|
|
|
||
Foreign exchange contracts |
|
Prepaid expenses and other current assets |
|
$ |
|
|
Accrued expenses |
|
$ |
|
||
Total derivatives |
|
|
|
$ |
|
|
|
|
$ |
|
||
|
|
December 31, 2021 |
|
|||||||||
|
|
Asset Derivatives |
|
|
Liability Derivatives |
|
||||||
(In thousands) |
|
Balance Sheet Location |
|
Fair Value |
|
|
Balance Sheet Location |
|
Fair Value |
|
||
Derivatives qualifying as cash flow hedges: |
|
|
|
|
|
|
|
|
|
|
||
Foreign exchange contracts |
|
Prepaid expenses and other current assets |
|
$ |
|
|
Accrued expenses |
|
$ |
|
||
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 June 30, 2022, there were
21
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 income (loss):
|
|
Amount of Gain (Loss) Recognized |
|
|
|
|
Amount of Gain (Loss) Reclassified from AOCI into Income |
|
||||||||||
(In thousands) |
|
Three Months |
|
|
Six Months |
|
|
Location of Gain (Loss) Reclassified |
|
Three Months |
|
|
Six Months |
|
||||
Foreign exchange contracts |
|
$ |
( |
) |
|
$ |
( |
) |
|
Cost of Revenue |
|
$ |
( |
) |
|
$ |
|
|
|
|
|
|
|
|
|
|
Selling, general and |
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
Research and development |
|
$ |
( |
) |
|
$ |
|
|||
|
|
Amount of Gain (Loss) Recognized |
|
|
|
|
Amount of Gain (Loss) Reclassified from AOCI into Income |
|
||||||||||
(In thousands) |
|
Three Months |
|
|
Six Months |
|
|
Location of Gain (Loss) Reclassified |
|
Three Months |
|
|
Six Months |
|
||||
Foreign exchange contracts |
|
$ |
( |
) |
|
$ |
|
|
Cost of Revenue |
|
$ |
|
|
$ |
|
|||
|
|
|
|
|
|
|
|
Selling, general and |
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
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, 2021 (1) |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
Other comprehensive (loss) income before |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Net losses (gains) reclassified from accumulated |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Net other comprehensive income (loss) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Balance as of June 30, 2022 (2) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
(1)
(2)
(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 |
|
|
|
|
|
|
|
|
|
|||
Net (gains) losses reclassified from accumulated |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Net other comprehensive income (loss) |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Balance as of June 30, 2021 |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
(1)
22
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 June 30, |
|
|||||||||||||||||||||
|
|
2022 |
|
|
2021 |
|
||||||||||||||||||
(In thousands) |
|
Before-Tax Amount |
|
|
Tax Effect |
|
|
Net Amount |
|
|
Before-Tax Amount |
|
|
Tax Effect |
|
|
Net Amount |
|
||||||
Foreign currency translation adjustments |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
||||
Derivatives qualifying as cash flow hedges: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Foreign exchange contracts: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Net (losses) gains arising during the period |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
( |
) |
||
Net losses (gains) reclassified into income |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|||
Net change in unrealized (losses) gains on foreign exchange contracts |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
( |
) |
||
Other comprehensive (loss) income |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
||
|
|
Six Months Ended June 30, |
|
|||||||||||||||||||||
|
|
2022 |
|
|
2021 |
|
||||||||||||||||||
(In thousands) |
|
Before-Tax Amount |
|
|
Tax Effect |
|
|
Net Amount |
|
|
Before-Tax Amount |
|
|
Tax Effect |
|
|
Net Amount |
|
||||||
Foreign currency translation adjustments |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
||||
Derivatives qualifying as cash flow hedges: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Foreign exchange contracts: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Net (losses) gains arising during the period |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
|||
Net (gains) losses reclassified into income |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
( |
) |
||
Net change in unrealized (losses) gains on foreign exchange contracts |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
( |
) |
||
Other comprehensive (loss) income |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
||
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 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 related to the Horizon Clinicals software. In August 2018, McKesson received an additional CID (together with the May 2017 CID, the “McKesson CIDs”), related to the Paragon software. The McKesson CIDs request documents and information related to the certification McKesson obtained in connection with the U.S. Department of Health and Human Services’ Electronic Health Record Incentive Program. McKesson has agreed, with respect to the McKesson 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. In October 2021, Allscripts received a CID seeking information about its acquisition of the EIS Business from McKesson and the Horizon Clinicals software. McKesson has agreed to assume defense of this CID. In May 2022, Allscripts completed the sale of the assets of its Hospital and Large Physician Practices Business to Altera. This divestiture included the sale of the Paragon software; however, the divestiture did not include the Horizon Clinicals software or liabilities arising from the McKesson CIDs.
23
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 (the “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 things, pay a criminal fine of $
15. Discontinued Operations
Hospitals and Large Physician Practices Discontinued Operation
On May 2, 2022, we sold substantially all of the assets of the Hospitals and Large Physician Practices Business. The Hospitals and Large Physician Practices Business sale represented a strategic shift that had a major effect on our operations and financial results. As of June 30, 2022, we reported the Hospitals and Large Physician Practices Business as discontinued operations. Prior to the sale, the Hospitals and Large Physician Practices Business was part of the former Hospitals and Large Physician Practices reportable segment.
24
The following table summarizes the major classes of assets and liabilities of the Hospitals and Large Physician Practices Business as reported on the consolidated balance sheets as of June 30, 2022 and December 31, 2021:
(In thousands) |
|
June 30, 2022 |
|
|
December 31, 2021 |
|
||
Carrying amounts of major classes of assets associated with Hospitals and Large Physician Practices included as part of discontinued operations: |
|
|
|
|
|
|
||
Cash and cash equivalents |
|
$ |
|
|
$ |
|
||
Restricted cash |
|
|
|
|
|
|
||
Accounts receivable, net of allowance of $ |
|
|
|
|
|
|
||
Contract assets, net of allowance of $ |
|
|
|
|
|
|
||
Prepaid expenses and other current assets |
|
|
|
|
|
|
||
Total current assets attributable to discontinued operations |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Fixed assets, net |
|
|
|
|
|
|
||
Software development costs, net |
|
|
|
|
|
|
||
Intangible assets, net |
|
|
|
|
|
|
||
Goodwill |
|
|
|
|
|
|
||
Deferred taxes, net |
|
|
|
|
|
|
||
Contract assets - long-term, net of allowance of $ |
|
|
|
|
|
|
||
Right-of-use assets - operating leases |
|
|
|
|
|
|
||
Other assets |
|
|
|
|
|
|
||
Total long-term assets attributable to discontinued operations |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
Carrying amounts of major classes of liabilities associated with Hospitals and Large Physician Practices included as part of discontinued operations: |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Accounts payable |
|
$ |
|
|
$ |
|
||
Accrued expenses |
|
|
|
|
|
|
||
Accrued compensation and benefits |
|
|
|
|
|
|
||
Deferred revenue |
|
|
|
|
|
|
||
Current operating lease liabilities |
|
|
|
|
|
|
||
Total current liabilities attributable to discontinued operations |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Deferred revenue long-term |
|
|
|
|
|
|
||
Long-term operating lease liabilities |
|
|
|
|
|
|
||
Other liabilities |
|
|
|
|
|
|
||
Total long-term liabilities attributable to discontinued operations |
|
$ |
|
|
$ |
|
||
25
The following table summarizes the major income and expense line items of the Hospitals and Large Physician Practices Business as reported in the consolidated statements of operations for the three and six months ended June 30, 2022 and 2021.
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
(In thousands) |
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
Major income and expense line items related to Hospitals and Large Physician Practices: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Provider |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Total revenue |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cost of revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Provider |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total cost of revenue |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Gross profit |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Selling, general and administrative expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Research and development |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Asset impairment charges |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Amortization of intangible assets |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Loss from discontinued operations for Hospitals and Large Physician Practices |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Other (loss) income, net |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|||
Gain on sale of discontinued operations |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Equity in net (loss) income of unconsolidated investments |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
||
Loss from discontinued operations for Hospitals and Large Physician Practices before income taxes |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Income tax (provision) benefit |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
||
(Loss) income from discontinued operations, net of tax for Hospitals and Large Physician Practices |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
EPSi and CarePort 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 Amounts” category as it did not meet the requirements to be a reportable segment nor the criteria to be aggregated into our
On December 31, 2020, we completed the sale of our CarePort business. Prior to the sale, CarePort was part of the former 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.
26
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 and six months ended June 30, 2021. The activity during the three and six months ended June 30, 2021 relates to certain adjustments made in connection with the sale of EPSi and CarePort, primarily relating to net working capital adjustments that impacted the gain on the sale of the discontinued operations.
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||
(In thousands) |
|
June 30, 2021 |
|
|
June 30, 2021 |
|
||
Major income and expense line items related to EPSi and CarePort: |
|
|
|
|
|
|
||
Revenue: |
|
|
|
|
|
|
||
Provider |
|
$ |
|
|
$ |
|
||
Total revenue |
|
|
|
|
|
|
||
Cost of revenue: |
|
|
|
|
|
|
||
Provider |
|
|
|
|
|
( |
) |
|
Total cost of revenue |
|
|
|
|
|
( |
) |
|
Gross profit |
|
|
|
|
|
|
||
Selling, general and administrative expenses |
|
|
|
|
|
|
||
Research and development |
|
|
|
|
|
( |
) |
|
Income from discontinued operations for EPSi and CarePort |
|
|
|
|
|
|
||
Other income, net |
|
|
|
|
|
|
||
Gain on sale of discontinued operations |
|
|
|
|
|
|
||
Income from discontinued operations for EPSi and CarePort before income taxes |
|
|
|
|
|
|
||
Income tax provision |
|
|
( |
) |
|
|
( |
) |
Income from discontinued operations, net of tax for EPSi and CarePort |
|
$ |
|
|
$ |
|
||
16. Business Segments
Our
As of January 1, 2022, we had
The Hospitals and Large Physician Practices segment derived its revenue from the sale of integrated clinical and financial management solutions, which primarily included EHR-related software, related installation, support and maintenance, outsourcing and private cloud hosting. The Veradigm segment derived its revenue from payer and life sciences solutions, which are mainly targeted at payers, life sciences companies and other key healthcare stakeholders. Additionally, revenue was derived from software applications for patient engagement and the sale of EHR software to single-specialty and small and mid-sized physician practices, including related clinical, financial, administrative and operational solutions. These solutions enabled clients to transition, analyze and coordinate care and improve the quality, efficiency and value of healthcare delivery across the entire care community. The “Unallocated Amounts” category consisted of the 2bPrecise business, certain products that were shifted from the previous Core Clinical and Financial Solutions reportable segment due to the organizational changes (“Certain Products”), transfer pricing revenues and certain corporate-related expenses. The amounts included in the “Unallocated Amounts” category for 2bPrecise and Certain Products did not meet the requirements to be reportable segments nor the criteria to be aggregated into the
On March 2, 2022, we entered into a purchase agreement to sell substantially all of the assets of our Hospitals and Large Physician Practices Business. As of March 31, 2022, the assets and liabilities related to the purchase agreement were classified as held for sale on our consolidated balance sheet. We also classified the related assets and liabilities in discontinued operations, as the Hospitals and Large Physician Practices Business disposition represented a strategic shift that had a major effect on our operations and financial results. As a result of the transaction, we realigned our reporting structure. As of March 31, 2022, we had two operating segments: (i) Veradigm and (ii) Certain Products. The Veradigm operating segment was the equivalent to our one reportable segment. On May 2, 2022, we completed the sale of the Hospitals and Large Physician Practices Business. As of June 30, 2022, our two operating segments and one reportable segment remain unchanged from the first quarter of 2022. The prior period segment disclosures below have been revised to conform to the current period presentation.
27
Our chief operating decision maker 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 June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
(In thousands) |
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Veradigm |
|
$ |
|
|
$ |
|
|
|
|
|
|
|
||||
Unallocated Amounts |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total revenue |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Gross profit: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Veradigm |
|
$ |
|
|
$ |
|
|
|
|
|
|
|
||||
Unallocated Amounts |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total gross profit |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Income (loss) from operations: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Veradigm |
|
$ |
|
|
$ |
|
|
|
|
|
|
|
||||
Unallocated Amounts |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Total (loss) income from operations |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
|||
17. Supplemental Disclosures
Supplemental Consolidated Statements of Cash Flows Information
The majority of the restricted cash balance as of June 30, 2022 and 2021 represents lease deposits.
|
|
June 30, |
|
|||||
(In thousands) |
|
2022 |
|
|
2021 |
|
||
Reconciliation of cash, cash equivalents and restricted cash: |
|
|
|
|
|
|
||
Cash and cash equivalents |
|
$ |
|
|
$ |
|
||
Restricted cash |
|
|
|
|
|
|
||
Total cash, cash equivalents and restricted cash |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
|
|
Six Months Ended June 30, |
|
|||||
(In thousands) |
|
2022 |
|
|
2021 |
|
||
Supplemental non-cash information: |
|
|
|
|
|
|
||
Issuance of treasury stock to commercial partner |
|
$ |
|
|
$ |
|
||
28
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
This “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section and other sections of this Quarterly Report on Form 10-Q (“Form 10-Q”) contain forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, that involve risks and uncertainties. Forward-looking statements provide current expectations of future events based on certain assumptions and include any statement that does not directly relate to any historical fact or pattern, including statements 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, statements regarding our expected future investment in research and development efforts and statements regarding our operations following the sale of the Hospital and Large Physician Practices Business. Forward-looking statements can also be identified by the use of words such as “future,” “anticipates,” “believes,” “estimates,” “expects,” “intends,” “plans,” “predicts,” “will,” “would,” “could,” “can,” “may,” and similar terms. Forward-looking statements are not guarantees of future performance. Actual results could differ significantly from those set forth in the forward-looking statements, and reported results should not be considered an indication of future performance or events. Certain factors that could cause our actual results to differ materially from those described in the forward-looking statements include, but are not limited to: 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; the failure by Practice Fusion to comply with the terms of the settlement agreements with the U.S. Department of Justice (the “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 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; other risks associated with investments and acquisitions; risks associated with the disposition of the Hospitals and Large Physician Practices Business; our failure to compete successfully; consolidation in our industry; current and future laws, regulations and industry initiatives; increased government involvement in our industry; the failure of markets in which we operate to develop as quickly as expected; 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; the performance of our products; 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 global operations; variability of our quarterly operating results; risks related to our outstanding indebtedness; changes in tax rates or laws; business disruptions; our ability to maintain proper and effective internal controls; asset and long-term investment impairment charges; inflationary pressures and macroeconomic volatility; and the other factors discussed in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2021, as amended (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.
29
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 continue to face the challenges of caring for an aging population with an increasing number of patients with chronic diseases, as well as the ongoing COVID-19 crisis. 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 Office of the National Coordinator for Health Information Technology oversight in April 2021. Additional regulatory clarity will come with the final rule expected shortly from the HHS Office of the Inspector General, as well as a rule from HHS that will outline disincentives for providers who may be engaged in blocking behaviors. Some aspects of the new regulations are having a significant effect on our business processes and how our clients must exchange patient information. In particular, Allscripts must 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.
Following several high-profile ransomware and other cybersecurity attacks both in and outside the healthcare industry, as well as increased conversation about the expanding use of patient health data outside of HIPAA-covered environments, including through consumer applications, policy makers have taken action affecting Allscripts and our clients and are currently considering additional legislative and regulatory vehicles to expand privacy protections. Allscripts remains committed to working to securely protect the patient data within our system and complying with requirements associated with the transmission of patient data to both HIPAA- and non-HIPAA-covered entities.
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) continues to cause volatile 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 and employee work locations, and have implemented certain 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, was asked by the White House, HHS, the Centers for Disease Control and Prevention, 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 and/or discharged; predictive analytics based on local data for surge anticipation and vaccine management; and research based on real-world data informing the world’s evolving understanding of post-acute sequelae of COVID-19 (known colloquially as Long COVID). Allscripts and our clients may also be affected by changed requirements at the federal, state or local levels as efforts to modernize public health systems, including technologies (e.g., telehealth), are implemented following the inclusion of associated appropriations within COVID-19-related bills that passed in 2020, 2021 and 2022.
The COVID-19 pandemic negatively impacted revenue for the three and six months ended June 30, 2022, as projects and buying decisions from the prior year were delayed due in part to the pandemic. However, the negative impacts on our business in the first and second quarters of 2022 were minimal compared to the prior year periods. 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 resurgences or additional “waves” of outbreaks of COVID-19 in various jurisdictions (including new lineages 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.
Changes in Macroeconomic Conditions
A potential economic recession and uncertainty in financial markets may result in changes in market conditions and produce market volatility. The impact of inflation and rising interest rates may affect the financial performance of the customers we serve and influence customer demand.
30
Second Quarter 2022 Summary
During the second quarter of 2022, we continued to make progress on our key strategic, financial and operational imperatives, which are aimed at driving higher client satisfaction, increasing operating margins and improving our competitive position by expanding the depth and breadth of our products. Additionally, we believe there are still opportunities to continue to improve our operating leverage and further streamline our operations, and such efforts are ongoing.
Total revenue for the second quarter of 2022 was $151 million, an increase of $10 million compared to the second quarter of 2021. For the three months ended June 30, 2022, provider revenue and payer & life sciences revenue were $119 million and $32 million, respectively, compared with $116 million and $25 million, respectively, during the three months ended June 30, 2021. Gross profit for the second quarter of 2022 was $79 million, an increase of $11 million compared to the second quarter of 2021. Gross margin increased to 52.7% in the second quarter of 2022 compared to a 48.5% gross margin in the second quarter of 2021.
Overview of Consolidated Results
Three and Six Months Ended June 30, 2022 Compared with the Three and Six Months Ended June 30, 2021
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||||||||||
(In thousands, except percentages) |
|
2022 |
|
|
2021 |
|
|
% Change |
|
|
2022 |
|
|
2021 |
|
|
% Change |
|
||||||
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Provider |
|
$ |
118,939 |
|
|
$ |
115,904 |
|
|
|
2.6 |
% |
|
$ |
237,604 |
|
|
$ |
227,074 |
|
|
|
4.6 |
% |
Payer & Life Sciences |
|
|
31,959 |
|
|
|
25,302 |
|
|
|
26.3 |
% |
|
|
55,966 |
|
|
|
47,784 |
|
|
|
17.1 |
% |
Total revenue |
|
|
150,898 |
|
|
|
141,206 |
|
|
|
6.9 |
% |
|
|
293,570 |
|
|
|
274,858 |
|
|
|
6.8 |
% |
Cost of revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Provider |
|
|
58,326 |
|
|
|
60,094 |
|
|
|
(2.9 |
%) |
|
|
115,343 |
|
|
|
118,960 |
|
|
|
(3.0 |
%) |
Payer & Life Sciences |
|
|
13,090 |
|
|
|
12,693 |
|
|
|
3.1 |
% |
|
|
25,264 |
|
|
|
24,562 |
|
|
|
2.9 |
% |
Total cost of revenue |
|
|
71,416 |
|
|
|
72,787 |
|
|
|
(1.9 |
%) |
|
|
140,607 |
|
|
|
143,522 |
|
|
|
(2.0 |
%) |
Gross profit |
|
|
79,482 |
|
|
|
68,419 |
|
|
|
16.2 |
% |
|
|
152,963 |
|
|
|
131,336 |
|
|
|
16.5 |
% |
Gross margin % |
|
|
52.7 |
% |
|
|
48.5 |
% |
|
|
|
|
|
52.1 |
% |
|
|
47.8 |
% |
|
|
|
||
Selling, general and administrative expenses |
|
|
59,847 |
|
|
|
28,124 |
|
|
|
112.8 |
% |
|
|
101,165 |
|
|
|
60,288 |
|
|
|
67.8 |
% |
Research and development |
|
|
22,750 |
|
|
|
20,942 |
|
|
|
8.6 |
% |
|
|
46,170 |
|
|
|
41,602 |
|
|
|
11.0 |
% |
Asset impairment charges |
|
|
0 |
|
|
|
172 |
|
|
|
(100.0 |
%) |
|
|
0 |
|
|
|
172 |
|
|
|
(100.0 |
%) |
Amortization of intangible and acquisition-related assets |
|
|
2,241 |
|
|
|
2,363 |
|
|
|
(5.2 |
%) |
|
|
4,412 |
|
|
|
4,727 |
|
|
|
(6.7 |
%) |
(Loss) income from operations |
|
|
(5,356 |
) |
|
|
16,818 |
|
|
|
(131.8 |
%) |
|
|
1,216 |
|
|
|
24,547 |
|
|
|
(95.0 |
%) |
Interest expense |
|
|
(1,887 |
) |
|
|
(2,949 |
) |
|
|
(36.0 |
%) |
|
|
(4,023 |
) |
|
|
(6,092 |
) |
|
|
(34.0 |
%) |
Other income, net |
|
|
2,133 |
|
|
|
16,528 |
|
|
|
(87.1 |
%) |
|
|
2,145 |
|
|
|
17,326 |
|
|
|
(87.6 |
%) |
Equity in net loss of unconsolidated investments |
|
|
(207 |
) |
|
|
(86 |
) |
|
|
140.7 |
% |
|
|
(605 |
) |
|
|
(64 |
) |
|
NM |
|
|
(Loss) income from continuing operations before income taxes |
|
|
(5,317 |
) |
|
|
30,311 |
|
|
|
(117.5 |
%) |
|
|
(1,267 |
) |
|
|
35,717 |
|
|
|
(103.5 |
%) |
Income tax benefit (provision) |
|
|
8,579 |
|
|
|
(4,168 |
) |
|
NM |
|
|
|
23,000 |
|
|
|
(5,274 |
) |
|
NM |
|
||
Effective tax rate |
|
|
161.4 |
% |
|
|
13.8 |
% |
|
|
|
|
NM |
|
|
|
14.8 |
% |
|
|
|
|||
Income from continuing operations, net of tax |
|
|
3,262 |
|
|
|
26,143 |
|
|
|
(87.5 |
%) |
|
|
21,733 |
|
|
|
30,443 |
|
|
|
(28.6 |
%) |
Loss from discontinued operations |
|
|
(3,797 |
) |
|
|
(6,178 |
) |
|
|
(38.5 |
%) |
|
|
(8,818 |
) |
|
|
(358 |
) |
|
NM |
|
|
Gain on sale of discontinued operations |
|
|
2,765 |
|
|
|
0 |
|
|
|
100.0 |
% |
|
|
2,765 |
|
|
|
647 |
|
|
NM |
|
|
Income tax effect on discontinued operations |
|
|
(66,256 |
) |
|
|
1,961 |
|
|
NM |
|
|
|
(56,849 |
) |
|
|
251 |
|
|
NM |
|
||
(Loss) income from discontinued operations, net of tax |
|
|
(67,288 |
) |
|
|
(4,217 |
) |
|
NM |
|
|
|
(62,902 |
) |
|
|
540 |
|
|
NM |
|
||
Net (loss) income |
|
$ |
(64,026 |
) |
|
$ |
21,926 |
|
|
NM |
|
|
$ |
(41,169 |
) |
|
$ |
30,983 |
|
|
NM |
|
||
NM – We define “NM” as not meaningful for increases or decreases greater than 200%.
Revenue
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||||||||||
(In thousands) |
|
2022 |
|
|
2021 |
|
|
% Change |
|
|
2022 |
|
|
2021 |
|
|
% Change |
|
||||||
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Provider |
|
$ |
118,939 |
|
|
$ |
115,904 |
|
|
|
2.6 |
% |
|
$ |
237,604 |
|
|
$ |
227,074 |
|
|
|
4.6 |
% |
Payer & Life Sciences |
|
|
31,959 |
|
|
|
25,302 |
|
|
|
26.3 |
% |
|
|
55,966 |
|
|
|
47,784 |
|
|
|
17.1 |
% |
Total revenue |
|
$ |
150,898 |
|
|
$ |
141,206 |
|
|
|
6.9 |
% |
|
$ |
293,570 |
|
|
$ |
274,858 |
|
|
|
6.8 |
% |
31
Three and Six Months Ended June 30, 2022 Compared with the Three and Six Months Ended June 30, 2021
Provider revenue consists of revenue derived from software applications for patient engagement and the sale of EHR software to single-specialty and small and mid-sized physician practices, including related clinical, financial, administrative and operational solutions. Payer and life sciences revenue primarily consists of sales of our integrated data systems solutions and related services to key healthcare stakeholders, including health plans and pharmaceutical companies, to help them improve the quality, efficiency and value of healthcare delivery.
Provider revenue increased for the three and six months ended June 30, 2022 compared to the prior year comparable periods, reflecting increases in transaction-related, subscription and upfront software revenues. Payer and life sciences revenue increased for the three and six months ended June 30, 2022 compared to the prior year comparable periods, primarily due to an increase in subscription revenues and transaction-related revenues.
The percentage of provider and payer and life sciences revenue of our total revenue was 79% and 21%, respectively, during the three months ended June 30, 2022 and 82% and 18%, respectively, during the three months ended June 30, 2021. The percentage of provider and payer and life sciences revenue of our total revenue was 81% and 19%, respectively, during the six months ended June 30, 2022 and 83% and 17%, respectively, during the six months ended June 30, 2021.
Gross Profit
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||||||||||
(In thousands, except percentages) |
|
2022 |
|
|
2021 |
|
|
% Change |
|
|
2022 |
|
|
2021 |
|
|
% Change |
|
||||||
Total cost of revenue |
|
$ |
71,416 |
|
|
$ |
72,787 |
|
|
|
(1.9 |
%) |
|
$ |
140,607 |
|
|
$ |
143,522 |
|
|
|
(2.0 |
%) |
Gross profit |
|
$ |
79,482 |
|
|
$ |
68,419 |
|
|
|
16.2 |
% |
|
$ |
152,963 |
|
|
$ |
131,336 |
|
|
|
16.5 |
% |
Gross margin % |
|
|
52.7 |
% |
|
|
48.5 |
% |
|
|
|
|
|
52.1 |
% |
|
|
47.8 |
% |
|
|
|
||
Three and Six Months Ended June 30, 2022 Compared with the Three and Six Months Ended June 30, 2021
Gross profit and margin increased during the three and six months ended June 30, 2022 compared with the prior year comparable periods, primarily due to increases in revenues, new business and lower contractor usage.
Selling, General and Administrative Expenses
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||||||||||
(In thousands) |
|
2022 |
|
|
2021 |
|
|
% Change |
|
|
2022 |
|
|
2021 |
|
|
% Change |
|
||||||
Selling, general and administrative expenses |
|
$ |
59,847 |
|
|
$ |
28,124 |
|
|
|
112.8 |
% |
|
$ |
101,165 |
|
|
$ |
60,288 |
|
|
|
67.8 |
% |
Three and Six Months Ended June 30, 2022 Compared with the Three and Six Months Ended June 30, 2021
Selling, general and administrative expenses increased during the three and six months ended June 30, 2022, compared with the prior year comparable periods, primarily due to higher legal costs and increases in stock-based compensation expense.
Research and Development
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||||||||||
(In thousands) |
|
2022 |
|
|
2021 |
|
|
% Change |
|
|
2022 |
|
|
2021 |
|
|
% Change |
|
||||||
Research and development |
|
$ |
22,750 |
|
|
$ |
20,942 |
|
|
|
8.6 |
% |
|
$ |
46,170 |
|
|
$ |
41,602 |
|
|
|
11.0 |
% |
Three and Six Months Ended June 30, 2022 Compared with the Three and Six Months Ended June 30, 2021
Research and development expenses increased during the three and six months ended June 30, 2022 compared with the prior year comparable periods, primarily due to the increased investment in Veradigm products for both provider and payer and life sciences.
Asset impairment charges
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||||||||||
(In thousands) |
|
2022 |
|
|
2021 |
|
|
% Change |
|
|
2022 |
|
|
2021 |
|
|
% Change |
|
||||||
Asset impairment charges |
|
$ |
0 |
|
|
$ |
172 |
|
|
|
(100.0 |
%) |
|
$ |
0 |
|
|
$ |
172 |
|
|
|
(100.0 |
%) |
Three and Six Months Ended June 30, 2022 Compared with the Three and Six Months Ended June 30, 2021
Asset impairment charges for the three and six months ended June 30, 2021 were due to the write-off of deferred costs related to our private cloud hosting operations.
Amortization of Intangible and Acquisition-related Assets
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||||||||||
(In thousands) |
|
2022 |
|
|
2021 |
|
|
% Change |
|
|
2022 |
|
|
2021 |
|
|
% Change |
|
||||||
Amortization of intangible and acquisition-related assets |
|
$ |
2,241 |
|
|
$ |
2,363 |
|
|
|
(5.2 |
%) |
|
$ |
4,412 |
|
|
$ |
4,727 |
|
|
|
(6.7 |
%) |
32
Three and Six Months Ended June 30, 2022 Compared with the Three and Six Months Ended June 30, 2021
The decrease in amortization expense for the three and six months ended June 30, 2022, compared with the prior year comparable periods, was due to normal amortization expense and certain intangible assets being fully amortized in 2021.
Interest Expense
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||||||||||
(In thousands) |
|
2022 |
|
|
2021 |
|
|
% Change |
|
|
2022 |
|
|
2021 |
|
|
% Change |
|
||||||
Interest expense |
|
$ |
1,887 |
|
|
$ |
2,949 |
|
|
|
(36.0 |
%) |
|
$ |
4,023 |
|
|
$ |
6,092 |
|
|
|
(34.0 |
%) |
Three and Six Months Ended June 30, 2022 Compared with the Three and Six Months Ended June 30, 2021
Interest expense decreased during the three and six months ended June 30, 2022 compared to the prior year comparable periods due to the absence of accreted interest expense in 2022 on the equity component of the 0.875% Convertible Senior Notes. As of January 1, 2022, we adopted 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”, which required us to remove the equity component from Additional paid-in capital. Refer to Note 10, “Debt” of the Notes to Consolidated Financial Statements in Part I, Item 1 of this Form 10-Q for additional information.
Other Income, Net
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||||||||||
(In thousands) |
|
2022 |
|
|
2021 |
|
|
% Change |
|
|
2022 |
|
|
2021 |
|
|
% Change |
|
||||||
Other income, net |
|
$ |
2,133 |
|
|
$ |
16,528 |
|
|
|
(87.1 |
%) |
|
$ |
2,145 |
|
|
$ |
17,326 |
|
|
|
(87.6 |
%) |
Three and Six Months Ended June 30, 2022 Compared with the Three and Six Months Ended June 30, 2021
Other income, net for the three and six months ended June 30, 2022 and 2021 consisted of a combination of interest income and miscellaneous receipts and expenses. The large increase in income in 2021 was primarily due to a $5.0 million distribution received from the Practice Fusion escrow account related to the settlement agreements with the DOJ, a $9.7 million gain as a result of a note conversion, the revaluation of our existing investment with a third-party cost method investment, and a $1.4 million distribution received from a third-party cost method investment.
Equity in Net Loss of Unconsolidated Investments
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|||||||||||||||||
(In thousands) |
|
2022 |
|
|
2021 |
|
|
% Change |
|
|
2022 |
|
|
2021 |
|
|
% Change |
|||||
Equity in net loss of unconsolidated investments |
|
$ |
(207 |
) |
|
$ |
(86 |
) |
|
|
140.7 |
% |
|
$ |
(605 |
) |
|
$ |
(64 |
) |
|
NM |
Three and Six Months Ended June 30, 2022 Compared with the Three and Six Months Ended June 30, 2021
Equity in net (loss) income of unconsolidated investments represents our share of the equity earnings (or losses) 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 June 30, |
|
Six Months Ended June 30, |
||||||||||||||||
(In thousands, except percentages) |
|
2022 |
|
|
2021 |
|
|
% Change |
|
2022 |
|
|
2021 |
|
|
% Change |
||||
Income tax benefit (provision) |
|
$ |
8,579 |
|
|
$ |
(4,168 |
) |
|
NM |
|
$ |
23,000 |
|
|
$ |
(5,274 |
) |
|
NM |
Effective tax rate |
|
|
161.4 |
% |
|
|
13.8 |
% |
|
|
|
NM |
|
|
|
14.8 |
% |
|
|
|
NM - We define “NM” as not meaningful for percentages greater than 200%
Three and Six Months Ended June 30, 2022 Compared with the Three and Six Months Ended June 30, 2021
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 including a windfall benefit of $11.2 million for the six months ended June 30, 2022 and a windfall benefit of $4.6 million for the six months ended June 30, 2021. Our effective tax rate for the six months ended June 30, 2022, compared with the prior year comparable period, differs primarily due to the release of valuation allowance of $11.2 million in the six months ended June 30, 2022. In addition, the permanent items, credits and the impact of foreign earnings had more impact on the pre-tax loss of $1.3 million in the six months ended June 30, 2022, compared to the impact of these items on a pre-tax income of $35.7 million for the six months ended June 30, 2021.
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 six months ended June 30, 2022, we released valuation allowances of $11.2 million related to U.S. deferred tax assets.
33
Discontinued Operations
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|||||||||||||||||
(In thousands) |
|
2022 |
|
|
2021 |
|
|
% Change |
|
|
2022 |
|
|
2021 |
|
|
% Change |
|||||
Loss from discontinued operations |
|
$ |
(3,797 |
) |
|
$ |
(6,178 |
) |
|
|
(38.5 |
%) |
|
$ |
(8,818 |
) |
|
$ |
(358 |
) |
|
NM |
Gain on sale of discontinued operations |
|
|
2,765 |
|
|
|
0 |
|
|
NM |
|
|
|
2,765 |
|
|
|
647 |
|
|
NM |
|
Income tax effect on discontinued operations |
|
|
(66,256 |
) |
|
|
1,961 |
|
|
NM |
|
|
|
(56,849 |
) |
|
|
251 |
|
|
NM |
|
(Loss) income from discontinued operations, net of tax |
|
$ |
(67,288 |
) |
|
$ |
(4,217 |
) |
|
NM |
|
|
$ |
(62,902 |
) |
|
$ |
540 |
|
|
NM |
|
Three and Six Months Ended June 30, 2022 Compared with the Three and Six Months Ended June 30, 2021
On May 2, 2022, we completed the sale of our Hospitals and Large Physician Practices business, including the Sunrise and TouchWorks solutions (the “Hospitals and Large Physician Practices Business”) to Altera Digital Health Inc. (formerly known as Harris Dawn Holdings Inc.), a Delaware corporation (“Altera”), a wholly-owned subsidiary of Constellation Software Inc., an Ontario corporation, pursuant to a purchase agreement (the “Altera Purchase Agreement”) by which Altera purchased substantially all of the assets of the Hospitals and Large Physician Practices Business. The Hospitals and Large Physician Practices Business sale represented a strategic shift that had a major effect on our operations and financial results. As of June 30, 2022, we reported the Hospitals and Large Physician Practices Business as discontinued operations.
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 Amounts” category as it did not meet the requirements to be a reportable segment nor the criteria to be aggregated into our two reportable segments at the time. Prior to the sale of CarePort, it was part of the former 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 loss from discontinued operations for the three and six months ended June 30, 2022 represents the income statement activity related to the Hospitals and Large Physician Practices Business. The gain on sale of discontinued operations for the three and six months ended June 30, 2022 is a result of the sale of the Hospitals and Large Physician Practices Business. The income tax effect on discontinued operations for the three and six months ended June 30, 2022 represents the income tax expense related to the Hospitals and Large Physician Practices Business.
The loss from discontinued operations, net of tax for the three months ended June 30, 2021 and the income from discontinued operations, net of tax for the six months ended June 30, 2021 primarily represent the income statement activity related to the Hospitals and Large Physician Practices Business. The gain on sale of discontinued operations for the six months ended June 30, 2021 represents the net working capital adjustments to the gain from the sale of CarePort. The income tax effect on discontinued operations for the three and six months ended June 30, 2021 primarily represents the income tax expense related to the Hospitals and Large Physician Practices Business. 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.
34
Segment Operations
On March 2, 2022, we entered into a purchase agreement to sell substantially all of the assets of our Hospitals and Large Physician Practices Business. As of March 31, 2022, the operating segment was classified in discontinued operations as the disposition represented a strategic shift that had a major effect on our operations and financial results. Therefore, we changed our reportable segments, which previously included Hospitals and Large Physician Practices. As of March 31, 2022, we had two operating segments: (i) Veradigm and (ii) Certain Products. The Veradigm operating segment was the equivalent to our one reportable segment. On May 2, 2022, we completed the sale of the Hospitals and Large Physician Practices Business. As of June 30, 2022, our two operating segments and one reportable segment remained unchanged from the first quarter of 2022. The segment disclosures below for the three and six months ended June 30, 2021 have been revised to conform to the current period presentation. Refer to Note 16 “Business Segments” of the Notes to Consolidated Financial Statements in Part I, Item 1 of this Form 10-Q for further discussion on the impact of the change.
Overview of Segment Results
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||||||||||
(In thousands) |
|
2022 |
|
|
2021 |
|
|
% Change |
|
|
2022 |
|
|
2021 |
|
|
% Change |
|
||||||
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Veradigm |
|
$ |
144,637 |
|
|
$ |
133,449 |
|
|
|
8.4 |
% |
|
|
280,915 |
|
|
|
259,819 |
|
|
|
8.1 |
% |
Unallocated Amounts |
|
|
6,261 |
|
|
|
7,757 |
|
|
|
(19.3 |
%) |
|
|
12,655 |
|
|
|
15,039 |
|
|
|
(15.9 |
%) |
Total revenue |
|
$ |
150,898 |
|
|
$ |
141,206 |
|
|
|
6.9 |
% |
|
$ |
293,570 |
|
|
$ |
274,858 |
|
|
|
6.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Gross Profit: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Veradigm |
|
$ |
75,409 |
|
|
$ |
63,641 |
|
|
|
18.5 |
% |
|
|
144,604 |
|
|
|
122,264 |
|
|
|
18.3 |
% |
Unallocated Amounts |
|
|
4,073 |
|
|
|
4,778 |
|
|
|
(14.8 |
%) |
|
|
8,359 |
|
|
|
9,072 |
|
|
|
(7.9 |
%) |
Total gross profit |
|
$ |
79,482 |
|
|
$ |
68,419 |
|
|
|
16.2 |
% |
|
$ |
152,963 |
|
|
$ |
131,336 |
|
|
|
16.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Income (loss) from operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Veradigm |
|
$ |
23,974 |
|
|
$ |
18,014 |
|
|
|
33.1 |
% |
|
|
42,089 |
|
|
|
29,508 |
|
|
|
42.6 |
% |
Unallocated Amounts |
|
|
(29,330 |
) |
|
|
(1,196 |
) |
|
NM |
|
|
|
(40,873 |
) |
|
|
(4,961 |
) |
|
NM |
|
||
Total (loss) income from operations |
|
$ |
(5,356 |
) |
|
$ |
16,818 |
|
|
|
(131.8 |
%) |
|
$ |
1,216 |
|
|
$ |
24,547 |
|
|
|
(95.0 |
%) |
Veradigm
Our Veradigm segment derives its revenue from payer and life sciences solutions, which are mainly targeted at payers, life sciences companies and other key healthcare stakeholders. Additionally, revenue is derived from software applications for patient engagement and the sale of EHR software to single-specialty and small and mid-sized physician practices, including related clinical, financial, administrative and operational solutions. 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 June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||||||||||
(In thousands) |
|
2022 |
|
|
2021 |
|
|
% Change |
|
|
2022 |
|
|
2021 |
|
|
% Change |
|
||||||
Revenue |
|
$ |
144,637 |
|
|
$ |
133,449 |
|
|
|
8.4 |
% |
|
$ |
280,915 |
|
|
$ |
259,819 |
|
|
|
8.1 |
% |
Gross profit |
|
$ |
75,409 |
|
|
$ |
63,641 |
|
|
|
18.5 |
% |
|
$ |
144,604 |
|
|
$ |
122,264 |
|
|
|
18.3 |
% |
Gross margin % |
|
|
52.1 |
% |
|
|
47.7 |
% |
|
|
|
|
|
51.5 |
% |
|
|
47.1 |
% |
|
|
|
||
Income from operations |
|
$ |
23,974 |
|
|
$ |
18,014 |
|
|
|
33.1 |
% |
|
$ |
42,089 |
|
|
$ |
29,508 |
|
|
|
42.6 |
% |
Operating margin % |
|
|
16.6 |
% |
|
|
13.5 |
% |
|
|
|
|
|
15.0 |
% |
|
|
11.4 |
% |
|
|
|
||
Three and Six Months Ended June 30, 2022 Compared with the Three and Six Months Ended June 30, 2021
Veradigm revenue increased for the three and six months ended June 30, 2022 compared with the prior year comparable periods, due to increases in subscription, upfront software and transaction-related revenues. The increase was partially offset by decreases in maintenance and client services revenues.
Gross profit and gross margin increased during the three and six months ended June 30, 2022 compared with the prior year comparable periods, primarily due to increases in revenues, new business and lower contractor usage.
Income from operations and operating margin increased during the three and six months ended June 30, 2022 compared with the prior year comparable periods, primarily due the increase in gross profit. The increases were partially offset due to higher research and development costs related to the increased investment in Veradigm products for both provider and payer and life sciences and the decrease in capitalized software costs.
35
Unallocated Amounts
The “Unallocated Amounts” category consists of the 2bPrecise business, certain products that were shifted from the previous Core Clinical and Financial Solutions reportable segment due to the organizational changes (“Certain Products”) and certain corporate-related expenses. The amounts included in the “Unallocated Amounts” category for 2bPrecise and Certain Products do not meet the requirements to be reportable segments nor the criteria to be aggregated into our Veradigm reportable segment.
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||||||||||
(In thousands) |
|
2022 |
|
|
2021 |
|
|
% Change |
|
|
2022 |
|
|
2021 |
|
|
% Change |
|
||||||
Revenue |
|
$ |
6,261 |
|
|
$ |
7,757 |
|
|
|
(19.3 |
%) |
|
$ |
12,655 |
|
|
$ |
15,039 |
|
|
|
(15.9 |
%) |
Gross profit |
|
$ |
4,073 |
|
|
$ |
4,778 |
|
|
|
(14.8 |
%) |
|
$ |
8,359 |
|
|
$ |
9,072 |
|
|
|
(7.9 |
%) |
Gross margin % |
|
|
65.1 |
% |
|
|
61.6 |
% |
|
|
|
|
|
66.1 |
% |
|
|
60.3 |
% |
|
|
|
||
Loss from operations |
|
$ |
(29,330 |
) |
|
$ |
(1,196 |
) |
|
NM |
|
|
$ |
(40,873 |
) |
|
$ |
(4,961 |
) |
|
NM |
|
||
Operating margin % |
|
NM |
|
|
|
(15.4 |
%) |
|
|
|
|
NM |
|
|
|
(33.0 |
%) |
|
|
|
||||
Three and Six Months Ended June 30, 2022 Compared with the Three and Six Months Ended June 30, 2021
Revenue decreased during the three and six months ended June 30, 2022, compared with the prior year comparable periods, primarily due to a decrease in upfront software revenues.
Gross profit decreased during the three and six months ended June 30, 2022, compared with the prior year comparable periods, primarily due to the decrease in revenues. The decrease to revenues was partially offset by an increase in cost of revenues as certain corporate bonus expense previously recorded to the “Unallocated Amounts” category was recorded to the Veradigm segment in 2022.
Loss from operations increased during the three and six months ended June 30, 2022, compared with the prior year comparable periods, primarily due to higher legal costs, increases in stock-based compensation expense and changes attributed to corporate allocations from 2021 to 2022.
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 June 30, 2022, our principal sources of liquidity consisted of cash and cash equivalents of $501 million and available borrowing capacity of $699 million under our New Revolving Facility. The change in our cash and cash equivalents balance is reflective of the following:
Operating Cash Flow Activities
|
|
Six Months Ended June 30, |
|
|||||||||
(In thousands) |
|
2022 |
|
|
2021 |
|
|
$ Change |
|
|||
Net (loss) income |
|
$ |
(41,169 |
) |
|
$ |
30,983 |
|
|
$ |
(72,152 |
) |
Less: (Loss) income from discontinued operations |
|
|
(62,902 |
) |
|
|
540 |
|
|
|
(63,442 |
) |
Income from continuing operations |
|
$ |
21,733 |
|
|
$ |
30,443 |
|
|
|
(8,710 |
) |
Non-cash adjustments to net (loss) income |
|
|
37,411 |
|
|
|
38,164 |
|
|
|
(753 |
) |
Cash impact of changes in operating assets and liabilities |
|
|
17,516 |
|
|
|
19,646 |
|
|
|
(2,130 |
) |
Net cash provided by operating activities - |
|
|
76,660 |
|
|
|
88,253 |
|
|
|
(11,593 |
) |
Net cash used in operating activities - |
|
|
(9,034 |
) |
|
|
(284,615 |
) |
|
|
275,581 |
|
Net cash provided by (used in) operating activities |
|
$ |
67,626 |
|
|
$ |
(196,362 |
) |
|
$ |
263,988 |
|
Six Months Ended June 30, 2022 Compared with the Six Months Ended June 30, 2021
Net cash provided by operating activities – continuing operations decreased during the six months ended June 30, 2022 compared with the prior year comparable period. Income from continuing operations for the six months ended June 30, 2022 included a deferred tax benefit. However, during the six months ended June 30, 2021 we recorded higher income from operations and higher other income, which included a distribution received from the Practice Fusion escrow account related to the settlement agreements with the DOJ, the investment gain and distribution received from our third-party cost method investments. Non-cash adjustments to net (loss) income decreased primarily due the change in deferred taxes and lower depreciation and amortization expense. The decrease was partially offset due to higher stock-based compensation expense. The increase in cash impact of changes in operating assets and liabilities for the six months ended June 30, 2022 was primarily a result of working capital changes.
Net cash used in operating activities – discontinued operations decreased for the six months ended June 30, 2022 primarily due to the absence of the tax payment relating to the gain from the sale of CarePort on December 31, 2020, which was paid in the second quarter of 2022.
36
Investing Cash Flow Activities
|
|
Six Months Ended June 30, |
|
|||||||||
(In thousands) |
|
2022 |
|
|
2021 |
|
|
$ Change |
|
|||
Capital expenditures |
|
$ |
(1,652 |
) |
|
$ |
(225 |
) |
|
$ |
(1,427 |
) |
Capitalized software |
|
|
(18,258 |
) |
|
|
(16,735 |
) |
|
|
(1,523 |
) |
Cash paid for business acquisitions, net of cash acquired |
|
|
(24,106 |
) |
|
|
0 |
|
|
|
(24,106 |
) |
Sale of businesses and other investments, net of cash divested, and distributions received |
|
|
672,488 |
|
|
|
4,242 |
|
|
|
668,246 |
|
Purchases of equity securities, other investments and related intangible assets, net |
|
|
(251 |
) |
|
|
(221 |
) |
|
|
(30 |
) |
Net cash provided by (used in) investing activities - |
|
|
628,221 |
|
|
|
(12,939 |
) |
|
|
641,160 |
|
Net cash used in investing activities - |
|
|
(15,248 |
) |
|
|
(21,606 |
) |
|
|
6,358 |
|
Net cash provided by (used in) investing activities |
|
$ |
612,973 |
|
|
$ |
(34,545 |
) |
|
$ |
647,518 |
|
Six Months Ended June 30, 2022 Compared with the Six Months Ended June 30, 2021
The change from net cash used in operating activities - continuing operations for the six months ended June 30, 2021 to net cash provided by operating activities - continuing operations for the six months ended June 30, 2022 was primarily due to the cash received as a result of the sale of the Hospitals and Large Physician Practices Business, which was partially offset by cash paid for the Babel Health acquisition.
Net cash used in investing activities – discontinued operations during the six months ended June 30, 2022 and 2021 primarily reflects spending for capitalized software costs related to the Hospitals and Large Physician Practices Business.
Financing Cash Flow Activities
|
|
Six Months Ended June 30, |
|
|||||||||
(In thousands) |
|
2022 |
|
|
2021 |
|
|
$ Change |
|
|||
Taxes paid related to net share settlement of equity awards |
|
$ |
(27,871 |
) |
|
$ |
(12,638 |
) |
|
$ |
(15,233 |
) |
Credit facility payments |
|
|
(200,000 |
) |
|
|
0 |
|
|
|
(200,000 |
) |
Credit facility borrowings, net of issuance costs |
|
|
22,335 |
|
|
|
250,000 |
|
|
|
(227,665 |
) |
Repurchase of common stock |
|
|
(143,372 |
) |
|
|
(308,953 |
) |
|
|
165,581 |
|
Intercompany to/from parent/subsidiaries |
|
|
11,685 |
|
|
|
4,987 |
|
|
|
6,698 |
|
Payment of acquisition and other financing obligations |
|
|
0 |
|
|
|
(2,400 |
) |
|
|
2,400 |
|
Net cash used in financing activities - |
|
|
(337,223 |
) |
|
|
(69,004 |
) |
|
|
(268,219 |
) |
Net cash used in financing activities - |
|
|
(11,697 |
) |
|
|
(6,236 |
) |
|
|
(5,461 |
) |
Net cash used in financing activities |
|
$ |
(348,920 |
) |
|
$ |
(75,240 |
) |
|
$ |
(273,680 |
) |
Six Months Ended June 30, 2022 Compared with the Six Months Ended June 30, 2021
Net cash used in financing activities - continuing operations increased for the six months ended June 30, 2022 primarily due to higher credit facility payments and lower credit facility borrowings in 2022. The increase was partially offset due to lower share repurchases of common stock.
Net cash used in financing activities - discontinuing operations during both the six months ended June 30, 2022 and 2021 primarily reflects the cash for operations for the Hospitals and Large Physician Practices Business.
Future Capital Requirements
We enter into obligations with third parties in the ordinary course of business. These future cash obligations will be funded from future cash flows from the sale of our products and services. The material cash requirements include the following contractual and other obligations.
Debt Obligations
As of June 30, 2022, we had outstanding convertible senior notes in an aggregate principal amount of $207.9 million, which is fully due on the convertible senior notes’ maturity date. As of June 30, 2022, we had no outstanding borrowings under the New Revolving Facility.
Non-cancelable Operating Leases
We have lease arrangements for certain facilities. As of June 30, 2022, we had fixed lease payment obligations of $21.3 million, with $6.7 million payable within the next 12 months.
37
Purchase Obligations
Purchase obligations consist of minimum purchase commitments for Microsoft services, computer equipment, maintenance, consulting and other commitments. As of June 30, 2022, we had purchase obligations of $43.1 million, with approximately $16.1 million payable within the next 12 months.
Letters of Credit
As of June 30, 2022, we had $0.8 million letters of credit outstanding under the Third Amended Credit Agreement.
Income Taxes
Our liability for uncertain tax positions was $30.5 million as of June 30, 2022. It is uncertain the amount that is payable within the next 12 months for liabilities that may result from this exposure, as we cannot predict, with reasonable reliability, the outcome of discussions with the respective taxing jurisdictions, which may or may not result in cash settlements.
Other Matters Affecting Future Capital Requirements
Our total investment in research and development is expected to increase in 2022 as the Company plans to make continued investments in expanding the capabilities and functionality of our Veradigm provider, payer and life sciences solutions. 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 $501 million as of June 30, 2022, our future cash flows, our borrowing capacity under our New 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, any of which might impact our liquidity requirements or cause us to borrow additional amounts under our New Revolving Facility or issue additional equity or debt securities.
Critical Accounting Estimates
There were no material changes to our critical accounting estimates from those 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 six months ended June 30, 2022.
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 June 30, 2022 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.
38
Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting during the quarter ended June 30, 2022, 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 six months ended June 30, 2022 from the risk factors as previously disclosed in our Form 10-K.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
On January 24, 2022, we announced that our Board of Directors approved a stock purchase program (the “2022 Program”) under which we may repurchase up to $250 million of our common stock, with no termination date. The 2022 Program replaced a previous program approved by our Board in 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.
The following table summarizes the stock repurchase activity during the three months ended June 30, 2022 and the approximate dollar value of shares that may yet be purchased under our stock repurchase program:
(In thousands, except per share amounts) |
|
|
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
|
Total Number |
|
|
Approximate |
|
||||
|
|
|
|
|
|
|
|
Of Shares |
|
|
Dollar Value |
|
||||
|
|
|
|
|
|
|
|
Purchased |
|
|
Of Shares |
|
||||
|
|
|
|
|
|
|
|
As Part Of |
|
|
That May Yet |
|
||||
|
|
Total |
|
|
Average |
|
|
Publicly |
|
|
Be Purchased |
|
||||
|
|
Number |
|
|
Price |
|
|
Announced |
|
|
Under The |
|
||||
|
|
Of Shares |
|
|
Paid Per |
|
|
Plans Or |
|
|
Plans Or |
|
||||
Period (Based on Trade Date) |
|
Purchased |
|
|
Share(1) |
|
|
Programs |
|
|
Programs |
|
||||
04/01/22—04/30/22 |
|
|
0 |
|
|
$ |
0.00 |
|
|
|
0 |
|
|
$ |
200,367 |
|
05/01/22—05/31/22 |
|
|
2,559 |
|
|
$ |
17.29 |
|
|
|
2,559 |
|
|
$ |
156,105 |
|
06/01/22—06/30/22 |
|
|
2,920 |
|
|
$ |
16.89 |
|
|
|
2,920 |
|
|
$ |
106,784 |
|
|
|
|
5,479 |
|
|
$ |
17.08 |
|
|
|
5,479 |
|
|
|
|
|
39
Item 6. Exhibits
Exhibit Number |
|
|
Exhibit Description |
|
Filed Herewith |
|
Furnished Herewith |
10.1 |
† |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 June 30, 2022, formatted in Inline XBRL and included in Exhibit 101. |
|
X |
|
|
|
|
|
|
|
|
|
|
† Indicates management contract or compensatory plan.
40
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/ Leah S. Jones |
|
|
Leah S. Jones |
|
|
Chief Financial Officer |
|
|
(Duly Authorized Officer) |
Date: August 8, 2022
41
Exhibit 31.1
Certification
I, Richard J. Poulton, certify that:
Date: August 8, 2022 |
|
/s/ Richard J. Poulton |
|
|
Chief Executive Officer |
Exhibit 31.2
Certification
I, Leah S. Jones, certify that:
Date: August 8, 2022 |
|
/s/ Leah S. Jones |
|
|
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 June 30, 2022, 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 June 30, 2022, fairly presents, in all material respects, the financial condition and results of operations of Allscripts Healthcare Solutions, Inc.
Dated as of this 8th day of August, 2022.
/s/ Richard J. Poulton |
|
|
|
/s/ Leah S. Jones |
Richard J. Poulton Chief Executive Officer |
|
|
|
Leah S. Jones 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.