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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30, 2019

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

Commission file number 001-35547

 

ALLSCRIPTS HEALTHCARE SOLUTIONS, INC.

(Exact Name of Registrant as Specified in Its Charter)

 

 

Delaware

 

36-4392754

(State or Other Jurisdiction of

Incorporation or Organization)

 

(I.R.S. Employer

Identification No.)

222 Merchandise Mart, Suite 2024

Chicago, IL 60654

(Address of Principal Executive Offices, Zip Code)

(800) 334-8534

(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

Common Stock, par value $0.01 per share

MDRX

The Nasdaq Stock Market LLC

(Nasdaq Global Select Market)

 

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes        No   

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).      Yes        No   

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

 

  

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

  

 

Smaller reporting company

 

 

 

 

 

 

 

 

 

 

 

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.      

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).      Yes        No   

As of October 31, 2019, there were 162,366,195 shares of the registrant's $0.01 par value common stock outstanding.

 


ALLSCRIPTS HEALTHCARE SOLUTIONS, INC.

FORM 10-Q

For the Fiscal Quarter Ended September 30, 2019

TABLE OF CONTENTS

 

 

  

 

 

PAGE

PART I. FINANCIAL INFORMATION

 

3

Item 1.

 

Financial Statements (unaudited)

 

3

Item 2.

 

Management's Discussion and Analysis of Financial Condition and Results of Operations

 

29

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

42

Item 4.

 

Controls and Procedures

 

42

PART II. OTHER INFORMATION

 

43

Item 1.

 

Legal Proceedings

 

43

Item 1A.

 

Risk Factors

 

43

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

43

Item 6.

 

Exhibits

 

44

SIGNATURES

 

45

 

2


PART I. FINANCIAL INFORMATION

Item 1.

Financial Statements 

ALLSCRIPTS HEALTHCARE SOLUTIONS, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands, except per share amounts)

 

September 30, 2019

 

 

December 31, 2018

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

129,349

 

 

$

174,243

 

Restricted cash

 

 

9,375

 

 

 

10,552

 

Accounts receivable, net of allowance of $41,387 and $50,406 as of

   September 30, 2019 and December 31, 2018, respectively

 

 

426,579

 

 

 

465,264

 

Contract assets

 

 

65,515

 

 

 

66,451

 

Prepaid expenses and other current assets

 

 

142,843

 

 

 

142,455

 

Total current assets

 

 

773,661

 

 

 

858,965

 

Fixed assets, net

 

 

96,813

 

 

 

121,913

 

Software development costs, net

 

 

236,551

 

 

 

209,660

 

Intangible assets, net

 

 

397,950

 

 

 

431,081

 

Goodwill

 

 

1,387,088

 

 

 

1,373,744

 

Deferred taxes, net

 

 

5,049

 

 

 

5,036

 

Contract assets - long-term

 

 

101,920

 

 

 

71,879

 

Right-of-use assets - operating leases

 

 

103,537

 

 

 

0

 

Other assets

 

 

127,372

 

 

 

109,206

 

Total assets

 

$

3,229,941

 

 

$

3,181,484

 


3


ALLSCRIPTS HEALTHCARE SOLUTIONS, INC.

CONSOLIDATED BALANCE SHEETS (CONTINUED)

(Unaudited)

(In thousands, except per share amounts)

 

September 30, 2019

 

 

December 31, 2018

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

101,725

 

 

$

73,166

 

Accrued expenses

 

 

261,905

 

 

 

107,068

 

Accrued compensation and benefits

 

 

57,553

 

 

 

100,076

 

Income tax payable

 

 

0

 

 

 

29,644

 

Deferred revenue

 

 

373,105

 

 

 

466,797

 

Current maturities of long-term debt

 

 

358,574

 

 

 

20,059

 

Current operating lease liabilities

 

 

24,451

 

 

 

0

 

Current liabilities attributable to discontinued operations

 

 

0

 

 

 

920

 

Total current liabilities

 

 

1,177,313

 

 

 

797,730

 

Long-term debt

 

 

554,864

 

 

 

647,539

 

Deferred revenue

 

 

12,117

 

 

 

15,984

 

Deferred taxes, net

 

 

55,290

 

 

 

58,470

 

Long-term operating lease liabilities

 

 

100,230

 

 

 

0

 

Other liabilities

 

 

49,069

 

 

 

81,334

 

Total liabilities

 

 

1,948,883

 

 

 

1,601,057

 

Commitments and contingencies

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Preferred stock: $0.01 par value, 1,000 shares authorized,

   no shares issued and outstanding as of September 30, 2019 and December 31, 2018

 

 

0

 

 

 

0

 

Common stock: $0.01 par value, 349,000 shares authorized as of September 30, 2019

   and December 31, 2018; 272,496 and 163,219 shares issued and outstanding as of

   September 30, 2019, respectively; 270,955 and 171,224 shares issued and outstanding

   as of December 31, 2018, respectively

 

 

2,724

 

 

 

2,709

 

Treasury stock: at cost, 109,277 and 99,731 shares as of September 30, 2019 and

   December 31, 2018, respectively

 

 

(561,857

)

 

 

(460,543

)

Additional paid-in capital

 

 

1,876,078

 

 

 

1,881,494

 

(Accumulated deficit) retained earnings

 

 

(30,366

)

 

 

132,842

 

Accumulated other comprehensive loss

 

 

(5,521

)

 

 

(5,389

)

Total Allscripts Healthcare Solutions, Inc.'s stockholders' equity

 

 

1,281,058

 

 

 

1,551,113

 

Non-controlling interest

 

 

0

 

 

 

29,314

 

Total stockholders’ equity

 

 

1,281,058

 

 

 

1,580,427

 

Total liabilities and stockholders’ equity

 

$

3,229,941

 

 

$

3,181,484

 

 

The accompanying notes are an integral part of these consolidated financial statements.

4


ALLSCRIPTS HEALTHCARE SOLUTIONS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

 

Three Months Ended

September 30,

 

 

Nine Months Ended

September 30,

 

(In thousands, except per share amounts)

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Software delivery, support and maintenance

 

$

284,373

 

 

$

274,138

 

 

$

844,908

 

 

$

839,176

 

Client services

 

 

159,811

 

 

 

158,292

 

 

 

475,785

 

 

 

468,440

 

Total revenue

 

 

444,184

 

 

 

432,430

 

 

 

1,320,693

 

 

 

1,307,616

 

Cost of revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Software delivery, support and maintenance

 

 

90,329

 

 

 

86,847

 

 

 

269,813

 

 

 

265,795

 

Client services

 

 

149,258

 

 

 

142,158

 

 

 

430,814

 

 

 

429,420

 

Amortization of software development and

    acquisition-related assets

 

 

29,295

 

 

 

25,473

 

 

 

86,547

 

 

 

76,017

 

Total cost of revenue

 

 

268,882

 

 

 

254,478

 

 

 

787,174

 

 

 

771,232

 

    Gross profit

 

 

175,302

 

 

 

177,952

 

 

 

533,519

 

 

 

536,384

 

Selling, general and administrative expenses

 

 

101,152

 

 

 

108,125

 

 

 

306,939

 

 

 

350,975

 

Research and development

 

 

63,873

 

 

 

63,032

 

 

 

191,597

 

 

 

202,313

 

Asset impairment charges

 

 

248

 

 

 

0

 

 

 

4,037

 

 

 

30,075

 

Amortization of intangible and acquisition-related assets

 

 

6,847

 

 

 

6,609

 

 

 

20,376

 

 

 

19,630

 

Income (loss) from operations

 

 

3,182

 

 

 

186

 

 

 

10,570

 

 

 

(66,609

)

Interest expense

 

 

(10,839

)

 

 

(13,251

)

 

 

(31,447

)

 

 

(36,925

)

Other income (loss), net

 

 

781

 

 

 

(536

)

 

 

(143,700

)

 

 

(584

)

Gain on sale of businesses, net

 

 

0

 

 

 

0

 

 

 

0

 

 

 

172,258

 

Recovery (impairment) of long-term investments

 

 

0

 

 

 

0

 

 

 

1,045

 

 

 

(15,487

)

Equity in net income (loss) of unconsolidated investments

 

 

386

 

 

 

(177

)

 

 

540

 

 

 

529

 

(Loss) income from continuing operations before income taxes

 

 

(6,490

)

 

 

(13,778

)

 

 

(162,992

)

 

 

53,182

 

Income tax benefit (provision)

 

 

765

 

 

 

1,637

 

 

 

(640

)

 

 

(5,918

)

(Loss) income from continuing operations, net of tax

 

 

(5,725

)

 

 

(12,141

)

 

 

(163,632

)

 

 

47,264

 

Loss from discontinued operations

 

 

0

 

 

 

(13,857

)

 

 

0

 

 

 

(32,980

)

Income tax effect on discontinued operations

 

 

0

 

 

 

2,152

 

 

 

0

 

 

 

7,627

 

Loss from discontinued operations, net of tax

 

 

0

 

 

 

(11,705

)

 

 

0

 

 

 

(25,353

)

Net (loss) income

 

 

(5,725

)

 

 

(23,846

)

 

 

(163,632

)

 

 

21,911

 

Net loss attributable to non-controlling interests

 

 

0

 

 

 

4

 

 

 

424

 

 

 

3,494

 

Accretion of redemption preference on redeemable

   convertible non-controlling interest - discontinued operations

 

 

0

 

 

 

(12,149

)

 

 

0

 

 

 

(36,446

)

Net loss attributable to Allscripts Healthcare

   Solutions, Inc. stockholders

 

$

(5,725

)

 

$

(35,991

)

 

$

(163,208

)

 

$

(11,041

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) income attributable to Allscripts Healthcare

   Solutions, Inc. stockholders per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Continuing operations

 

$

(0.03

)

 

$

(0.07

)

 

$

(0.97

)

 

$

0.28

 

Discontinued operations

 

 

0.00

 

 

 

(0.13

)

 

 

0.00

 

 

 

(0.34

)

Net loss attributable to Allscripts Healthcare

   Solutions, Inc. stockholders per share

 

$

(0.03

)

 

$

(0.20

)

 

$

(0.97

)

 

$

(0.06

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Continuing operations

 

$

(0.03

)

 

$

(0.07

)

 

$

(0.97

)

 

$

0.28

 

Discontinued operations

 

 

0.00

 

 

 

(0.13

)

 

 

0.00

 

 

 

(0.34

)

Net loss attributable to Allscripts Healthcare

   Solutions, Inc. stockholders per share

 

$

(0.03

)

 

$

(0.20

)

 

$

(0.97

)

 

$

(0.06

)

The accompanying notes are an integral part of these consolidated financial statements.

5


ALLSCRIPTS HEALTHCARE SOLUTIONS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

 

 

Three Months Ended

September 30,

 

 

Nine Months Ended

September 30,

 

(In thousands)

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Net (loss) income

 

$

(5,725

)

 

$

(23,846

)

 

$

(163,632

)

 

$

21,911

 

Other comprehensive (loss) income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

(574

)

 

 

(60

)

 

 

(35

)

 

 

(1,622

)

Change in fair value of derivatives qualifying as cash flow hedges

 

 

(305

)

 

 

(1,602

)

 

 

(131

)

 

 

(2,695

)

Other comprehensive (loss) income before income

    tax (expense) benefit

 

 

(879

)

 

 

(1,662

)

 

 

(166

)

 

 

(4,317

)

Income tax (expense) benefit related to items in

    other comprehensive (loss) income

 

 

80

 

 

 

416

 

 

 

34

 

 

 

850

 

Total other comprehensive income (loss)

 

 

(799

)

 

 

(1,246

)

 

 

(132

)

 

 

(3,467

)

Comprehensive (loss) income

 

 

(6,524

)

 

 

(25,092

)

 

 

(163,764

)

 

 

18,444

 

Comprehensive loss attributable to non-controlling interests

 

 

0

 

 

 

4

 

 

 

424

 

 

 

3,494

 

Comprehensive (loss) income, net

 

$

(6,524

)

 

$

(25,088

)

 

$

(163,340

)

 

$

21,938

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 


6


ALLSCRIPTS HEALTHCARE SOLUTIONS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

 

 

Three Months Ended

September 30,

 

 

Nine Months Ended

September 30,

 

(In thousands)

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Number of common shares

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at beginning of period

 

 

272,472

 

 

 

270,709

 

 

 

270,955

 

 

 

269,335

 

Common stock issued under stock compensation plans,

    net of shares withheld for employee taxes

 

 

24

 

 

 

97

 

 

 

1,541

 

 

 

1,471

 

Balance at end of period

 

 

272,496

 

 

 

270,806

 

 

 

272,496

 

 

 

270,806

 

Common stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at beginning of period

 

$

2,724

 

 

$

2,707

 

 

$

2,709

 

 

$

2,693

 

Common stock issued under stock compensation plans,

    net of shares withheld for employee taxes

 

 

0

 

 

 

1

 

 

 

15

 

 

 

15

 

Balance at end of period

 

$

2,724

 

 

$

2,708

 

 

$

2,724

 

 

$

2,708

 

Number of treasury stock shares

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at beginning of period

 

 

(105,818

)

 

 

(96,175

)

 

 

(99,731

)

 

 

(88,504

)

Issuance of treasury stock

 

 

0

 

 

 

76

 

 

 

61

 

 

 

76

 

Purchase of treasury stock

 

 

(3,459

)

 

 

0

 

 

 

(9,607

)

 

 

(7,671

)

Balance at end of period

 

 

(109,277

)

 

 

(96,099

)

 

 

(109,277

)

 

 

(96,099

)

Treasury stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at beginning of period

 

$

(524,767

)

 

$

(424,640

)

 

$

(460,543

)

 

$

(322,735

)

Issuance of treasury stock

 

 

0

 

 

 

1,119

 

 

 

846

 

 

 

1,119

 

Purchase of treasury stock

 

 

(37,090

)

 

 

0

 

 

 

(102,160

)

 

 

(101,905

)

Balance at end of period

 

$

(561,857

)

 

$

(423,521

)

 

$

(561,857

)

 

$

(423,521

)

Additional paid-in capital