Despite declining sales and lower hospital utilization of its software, EHR vendor Allscripts beat Wall Street expectations in its second quarter results released aftermarket Thursday, reporting revenue of $406 million, down almost 9% year over year.
The Chicago-based IT company had a mixed quarter, with a wide miss on bookings of $188 million, down 32% year over year. However, total contract backlog of $4.4 billion was up 13% year over year in a bright spot for the company, representing a near-term cushion amid ongoing uncertainty.
Allscripts continues to withhold full-year guidance, which it withdrew last quarter over COVID-19 volatility. Allscripts’ stock, which has plummeted by almost a fourth since the beginning of this year, was up 33% in early morning trading Friday.
Patient volumes that flatlined starting in March have slammed hospitals and health systems financially.
But dwindling volumes also affect software companies, as fewer patients mean less utilization of ambulatory revenue cycle management, payment clearinghouse tools and some transactional service lines around lab connectivity, ePrescribing and pre-authorization, Allscripts president and CFO Rick Poulton told investors on a call Thursday. Those services make up about 10% of the company’s recurring revenue each quarter.
“We were encouraged to see patient volumes recover in June,” Poulton said.
Though Allscripts reported an operating loss of $4.7 million — compared to operating income of $4.7 million in the same quarter last year — SVB Leerink analyst Stephanie Davis said she was “cautiously optimistic” on Allscripts given better-than-expected revenue and margin improvement in the quarter.
Allscripts’ adjusted EBITDA margin grew from 13.7% in the first quarter this year to 19% in the second due to its ongoing margin improvement plan, executives said. The $4.7 million operating loss was due in part to about $28 million in restructuring charges (mostly severance costs), though Poulton said he expects no more than $10 million in additional restructuring charges in the back half of the year.
The 34-year-old vendor hired advisory firm Alix Partners in March to help make selling, general and administrative expenses more efficient following a $182 million loss in 2019.
Allscripts also announced Thursday it’s selling hospital financial decision support business EPSi to cloud-based tech company Strata Decision Technology for $365 million, in a deal expected to close in the third quarter this year. Allscripts plans to use the proceeds from divesting EPSi, which it’s owned since 2010, to pare down debt.
After the deal closes, EPSi’s customer base and employees will migrate to Strata.
Allscripts also rejiggered its financial reporting into two segments: Core Clinical and Financial Solutions segment and the Data, Analytics & Care Coordination segment.
Core Clinical and Financial Solutions is comprised of Allscripts’ EHR and clinical systems software, including practice management, hosting, billing, revenue cycle management and patient engagement. The segment makes up about 77% of its revenue, and saw quarterly revenues decline about 9% year over year.
Data, Analytics & Care Coordination is made up of higher margin software businesses, like payer and life sciences arm Veradigm, care coordination business CarePort and its personalized medicine and ambulatory clearinghouse segments. The segment, which makes up about 21% of Allscript’s total revenue, saw revenue dip 7% year over year.