Allscripts Healthcare (MDRX) Posts In-Line Earnings In Q2

Allscripts Healthcare Solutions, Inc. (NASDAQ:MDRX) reported second-quarter 2016 earnings of 10 cents per share, which was in line with the Zacks Consensus Estimate. The figure improved 25% on a year-over-year basis.

The upside was driven by 12.8% growth in revenues (including deferred revenues and other adjustments), which totaled $396.6 million, slightly ahead of the Zacks Consensus Estimate of $396 million.

Quarter Details

According to management, software delivery revenues in the quarter increased 11%, totaling $258 million. Notably, recurring software revenues increased 10% and nonrecurring software revenues increased 15%.

At the Client services segment, revenues surged 16% to $139 million, with 31% growth in recurring revenues. However, exclusive of Netsmart, recurring revenues at this section improved 13%.

Bookings increased 39% year over year to $362 million on the back of the acquisition of Netsmart. However, excluding the contribution by Netsmart, bookings totaled $318 million, up 22% from the prior-year quarter. Notably, software delivery bookings grew 49%, while service bookings increased 26% on a year-over-year basis.

Current backlog at Allscripts stands at $4 billion, an increase of $443 million from the year-ago quarter. The upside was mainly driven by a significant number of bookings in the reported quarter. We note that Netsmart contributed a major $267 million toward the backlog.

Meanwhile, contract revenue backlog as of Jun 30, 2016, totaled $4.0 billion, an increase of $443 million from the figure as of Mar 31, 2016.

Business Highlights

Allscripts signed a 10-year agreement with OptumCare, part of Optum and UnitedHealth Group (NYSE:UNH). As per the deal, the latter can utilize the Allscipts TouchWorks suite as its electronic health record and practice management solution.

Allscripts also completed the previously announced transaction that combines Allscripts Homecare business with Netsmart in the reported quarter.

Margin Details

Adjusted gross margin expanded 400 basis points (bps) on a year-over-year basis to 48.1%, mainly driven by strong one-time software revenues. However, Netsmart did not particularly affect gross margins.

Operating expenses rose 15% year over year to $133 million owing to additional expenses associated with the consolidation of Netsmart.

Notably, adjusted EBITDA increased to $78 million in the reported quarter, a 26% rise from the second-quarter 2015 figure.

Guidance

For full-year 2016 revenues, Allscripts affirmed its guidance at the range of $1.580 billion to $1.610 billion.

Allscripts reiterated its adjusted earnings guidance at 55 cents to 62 cents per share.

Adjusted EBITDA is anticipated in the band of $280–$300 million.

Zacks Rank & Key Picks

Currently, Allscripts has a Zacks Rank #3 (Hold).

Better-ranked stocks in the broader medical sector are Natus Medical Inc (NASDAQ:BABY) , Mesa Laboratories Inc. (NASDAQ:MLAB) and Masimo Corporation (NASDAQ:MASI) . All the three stocks carry a Zacks Rank #1 (Strong Buy).