Q4 2019 Earnings Call
Greetings and welcome to the all scripts fourth quarter and full year 2019 earnings conference call.
At this time all participants are in listen only mode. A question and answer session will follow the formal presentation.
Anyone should require operator assistance during the conference. Please press star zero on or telephone keypad.
Please note that this call is being recorded.
Now I'll turn the conference over to our hosts stuff and shelf Vice President of Investor Relations. Thank you you may begin.
Thank you very much and welcome to the Oscars fourth quarter 2019 earnings Conference call.
Our speakers today our pulp.
Chief Executive Officer.
[laughter] well be making a number of forward looking statements during the presentation and the Q and a part of the call. These statements are based on current expectations and involve a number of risks and uncertainties that cause our actual results may vary materially.
Undertake no obligation to revise these forward looking statements in light of new information or future.
Please refer to our earnings release that 55 more detailed descriptions of these risk factors that may affect our results.
Please reference the GAAP and non-GAAP financial statements as opposed to non-GAAP tables in our earnings release.
Well not to work off that are both available on our Investor Relations website and with that we're going to hand, the call over to recalled.
Okay. Thanks, Stephanie good afternoon, everybody and thanks for joining our call today.
I always we appreciate your time and you're interested allscripts.
Oh I want to begin by thanking Donna or it's more than seven years, a dedicated service the allscripts during which was both a transformative time for the industry as well as our company.
We really appreciate his efforts and wish him well in the future.
I'm going to structure my comments today around three areas first a review of our fourth quarter performance next a review of the financial guidance were issuing for 2020.
Finally conclude by discussing our thoughts on Concessionaires position ourselves for long term success.
So let me start with our performance for the fourth quarter. We saw continued strength in our sales efforts and delivered 312 million of bookings, which was up 6% year over year.
This resulted in 1.11 billion of bookings for the full year, which was up 15% year over year and at the high end of our guidance range.
The strength in bookings was broad based and very balanced across our company, that's giving us confidence that our solutions are resonating with our clients.
In addition, we had several significant client extensions that signed during the quarter.
As a reminder, extensions of existing business do not counting I reported bookings, but they do add to our backlog and of course, there strategically important as they reflect the healthy relationship with the client.
Some notable examples in our U.S. based inpatient business include first our largest client Northwell health extended their managed services agreement through 2026.
This follows earlier extensions of their sunrise and Touchworks contracts.
Another client P.A.P.I. HLC extended its solutions and services agreements with Allscripts until 2025.
And agreed to expand Sunrise to a recent newly acquired hospital.
And we were also pleased to recently announced that Memorial Sloan Kettering cancer in cancer Center extended its Sunrise agreement through 2026.
Now turning to international markets, our pipeline remains strong and we were pleased to enter into the Indian market with a partnership to deliver TV motion.
India was the third new market, we answered in 2019, following cutter and the Philippines and looking ahead, we expect our international growth to continue to outpace our domestic growth.
Moving to the ambulatory market, we had another strong sales quarter as we continue to build momentum with new clients as well as existing clients.
We are benefiting from competitive dislocations in the marketplace and our pipeline remains very strong.
Our revenue cycle services business in particular is experiencing robust demand as well as very positive industry recognition.
And finally as Paul will highlight later in his comments are adjacent growth businesses continue to show strength as well.
These include paradigm.
Our care coordination platform called Careport, and our patient engagement platform known as Followmyhealth.
These are true competitive differentiators for Allscripts, and we will work throughout this year to continue to bring greater transparency to their performance.
All in across the company yearend backlog at yearend backlog stands at 4.4 billion or almost two and a half years of revenue at our current run rates.
Now, let me pick up to the piano as they do so please reference the schedules in the earnings releases as well as the supplemental data workbook available on our Allscripts Investor Relations website.
Also my comments on the income statement will largely focused on non-GAAP metrics unless otherwise stated.
Reconciliations of GAAP and non-GAAP figures are available in the earnings release.
Fourth quarter non-GAAP revenue totaled 452 million. This is within our revised guidance range and up more than 2% on a year over year basis.
Non-GAAP gross margins were 42.5% in the fourth quarter of 2019 that compared to 45.3% in the fourth quarter 2018, and 43.2% in the third quarter of 29 team.
So gross margins were disappointing and they suffered from continued higher than expected transition and cyber security cost in our hosting business.
Delays in service implementations, which drive unproductive labor costs.
And the revenue mix, we hadn't I've heard I'm business during the quarter.
Looking at operating expenses, our non-GAAP SGN, a totaled 87 million, which was a $5 million decline from a year ago.
And our non-GAAP R&D costs were 62 million, which was down slightly on a year over year basis.
This drove an adjusted EBITDA total of $74 million for the quarter, which equates to a 16% adjusted EBITDA margin.
And finally cash interest decreased to $7 million.
And this resulted in non-GAAP net income of 28 million and non-GAAP bps of 17 cents a share for the quarter [noise].
Pivoting to the balance sheet and our capital structure in the fourth quarter, we issued $218 million face value of new convertible notes that mature in 2027.
These carry a cash interest rate of 0.875%.
Inclusive of the bond hedge that we purchased at the time of the issuance.
An effective conversion price of $17.59 per share.
We issued these during the fourth quarter to be in a position to pay off the $345 million of existing convertible notes.
Come due this July.
Because of this note offering we were restricted from repurchasing any common shares in the fourth quarter.
We currently have $102 million remaining under our existing stock repurchase authorization and consistent with our past practice expect to be opportunistic with additional share repurchases going forward.
Lastly, we finalized our settlement with the department of Justice in January we expect to pay the $145 million settlement installments throughout 2020.
We also expect to recover approximately half of that I'm out from a variety of Escrows and insurance policies.
Well I will begin the process recoveries right away full realization will likely extend beyond 20 twond.
So now I want to turn to our outlook for 25.
We are initiating guidance for full year, 2020 bookings revenue and non-GAAP earnings per share.
In addition, we are providing bookings and revenue guidance for the first quarter of 2020.
As background context for this guidance, we expect our revenues to be negatively impacted in 2020 by approximately $50 million and year over year client attrition from acute care clients.
I want to be crystal clear on two points here, though.
First these are not new client decisions. These our client decisions that were made years ago and span across both the sunrise and Paragon client base.
Second client attrition is not a new issue.
We have experienced in the past and will undoubtedly experience client churn in the future as well just as every competitor in the industry experience at some level attrition.
We called it out we call it out now, though only because the timing of wind downs from departing clients aligned in such a ways to create a real bolus that is unusually high and we'll have a significant impact on year over year comparisons so.
So with that backdrop for the full year, we expect bookings of between 900 million and $1 billion.
We expect full year 2020 revenue to be between 1.75 billion and 1.85 billion.
Which represents a year over year growth of 1.5% at the midpoint and it incorporates the attrition impact I just discussed.
And we expect to earn non-GAAP earnings per share between 70 cents per share and 75 cents per share for 2020.
Which reflects an 8% increase at the midpoint from 2019.
For the first quarter of 2020, we expect bookings between 175 and $200 million.
And we expect revenue between 420 and $430 million [noise].
So as I mentioned at the beginning my remarks, I want to conclude my comments my talking about the future and positioning ourselves for long term success.
We've talked a lot in recent quarters about adjacent market opportunities and we're excited about our asset portfolio in these areas and believe that we're way out ahead of our all of our competitors in realizing these opportunities.
We also see the continued evolution of the much more mature each our business here in the U.S. and.
And we see the pace the client decisions, which are almost always public sector deals in our international markets.
This necessitates the continuous realignment of our operations and management resources with a different dynamics in each of these markets.
Today, we don't think we are operating at our full potential and that and that with a focused effort on efficiencies resource alignment and streamline decision, making we can improve upon our performance.
We have begun a comprehensive review of our operations as well as the support infrastructure around them.
Hi assist us in this effort we have for several weeks now been interviewing top advisors in Corp, corporate transformations, and we expect to formally higher one of these firms within the next week.
The role of the advisor will be threefold first to bring an independent perspective to our operational review and challenge some of our historical planning assumptions.
Second to jointly develop with our manager management leadership significant EBITDA margin improvement plan for the company.
And third to assist us in executing the margin improvement initiatives on the expected plan timeline.
Working with our advisor we expect to complete the operational review in the next 10 to 12 weeks.
And as soon as it is complete we will schedule in Investor day to share the results of the review and the detailed in the margin improvement plan with investors and analysts.
The guidance that we have already shared today does not contain any assumptions about this operational review or margin improvement initiatives that will come from it.
So we will update guidance as necessary at the Investor Day meeting.
And with that let me turn over to Paul for some of his comments. Thanks, Rick I'm pleased with that bookings results for the fourth both for the fourth quarter 2019, and the full year bookings are the lead indicator of our operating success in the marketplace. These results can be great confidence we've made the right long term investments in strategic platforms server.
Both in the core DHR business and our solutions beyond the HR.
Operationally, we are focused on driving more revenue conversion from our backlog by using our resources to faster support the implementation of the solutions we've already sold.
For the past few years, our strategy has been a position allscripts capture adjacent growth market opportunities as we transitioned from a growth DHR market to replacement market.
Through both organic and inorganic investment.
These additional platforms are paying off.
Our three non DHR platform businesses now represent approximately 20% of total company revenue.
We've talked in depth about our strategy the for the paradigm business. So let me highlight the other two growth platform.
These include our patient engagement in care coordination businesses.
These solutions are aligned with the faster growing markets.
For the clinical DHR system.
Every crying revenue high margins are E HR agnostic and have a cloud based tech stack.
Our patient engagement business Followmyhealth consists of all our patient engagement asset, including health grid.
We have integrated the health great capabilities into the Followmyhealth platform, which now enables provider organizations to contact 100% other patient populations.
<unk> pre does it during and post it does it without requiring these consumers to sign into a portal, we see very high utilization data with this strategic platform when clients use this platform to reach out to patients we are averaging 60% response rate.
The continued adoption of value based care combined with the historically modest levels of usage of patient portals across the healthcare industry has made a critical for us to take this unique approach to consumer engagement solution design.
At a patient actively participate in their own health and wellness, we see better outcomes in the potential for lower cost.
This is obviously not only good for the patient that shows measurable returns to provider organizations.
Our care foreign business provides care coordination software solutions to manage patient transition across the continuum. This end to end platform bridges acute and post acute care DHR and thousands of organizations.
It makes the care patients receive across all settings in all episodes visible to providers Harris and they see a.
This visibility is especially crucial providers that are at risk.
Airport has an extraordinarily important data and resource coordinator not only for hospitals, but for everyone at risk, especially pairs.
I'd like to this also discuss renovations that weve delivered.
Sunrise community care, our modification at Sunrise electronic health record into a fully integrated HR as a service built specifically to meet the unique needs a community hospitals.
And it's Q1 2020 user survey Blackhawk Act asked more than 700 community rural and critical access hospitals about their HR and cloud based systems, Allscripts frustrated highest or the HR suppliers for community critical access and specialty hospitals that were evaluating are currently implementing a cloud based E.
Chart.
I look forward to Sunrise community care as a solution for these unique market needs.
We've also recently released smart pumps integration. This optimization the clinical workflows has helped our clients improved clinician efficiency, achieving significant ROI and patient safety results.
With all we've also made major stride in our human centered approach to solution development, which builds on the success, we've had employing user centered design principles to advance our solutions.
This furthers our effort to improve effectiveness and efficiency and care directly impacting clinician satisfaction.
Before I wrap up I also wanted to comment briefly on the information blocking roll currently being finalized by health and human services.
We have is we have supported the effort to address data blocking since the 21st century cures lot was in Congress and beginning to take shape and Allscripts has had multiple conversations with H S. The white house congressional opposite.
To react to reiterate our support even when we provided feedback.
Typically on elements of the provoke proposed rule that we bought needed altering.
It will mean changes for our company and our client.
And but we have taken a position since 2013 every patient had the right to control whether health data goes when it moves and who sees it.
We understand the final rule from all I'm, saying, maybe expected next week and we look forward to saying what HHS releases.
Looking ahead to the rest of 2020 this management team will focus on driving incremental revenue growth organically.
Manage our cost structure to drive margin expansion optimize R&D for the best returns and improved free cash flow performance.
That's will allow us to execute on a long term capital deployment priorities opportunistic buybacks.
And our debt reduction and or accretive M&A.
This focus will allow us to better serve our client benefiting associates and shareholders.
That's summary, let's open the line for questions.
Thank you.
Ladies and gentlemen at this time will be conducting a question answer session.
If you like to ask a question. Please press star one on your telephone keypad.
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Our first question comes from Jamie Stockton with Wells Fargo. Please state your question.
Hi, Good evening. Thanks for taking my question I guess, maybe the first one Vera dime can can you talk about you know how that how that went in the fourth quarter. It seems like maybe.
It was a decent part of the shortfall.
And I just did a quick scan of the numbers from the K and the implied profitability in Q4 is a pretty low I know that the gap number but you know any thoughts about what's going on there would be great.
Yeah. Thanks for the question, Jamie I guess couple, yes about revenue and profitability on that so.
The D or year over year growth was was pretty modest that's a reflection really a tale of two things one one the.
Media buys which drives a decent chunk of some of the revenue, particularly around the crux fusion platform can be spotty and they vary from quarter to quarter and it tends to be something you see you get a lot of when there seems to be excess cash around and not so much on arisen there was a small there was.
Softer by Q4 than we'd expected and so that's part of it I don't see that as a long term trend I just see it as a reflection of what the conditions where in Q4.
Vis-a-vis media buyer.
And then secondly, I'd say from an expectation standpoint for us.
The next Gen relationship that we've talked about in the past we thought we would have a bigger contribution in Q4.
I believe they spoken about it on their call as well, but that's ramping wrapping up a little slower and every to expected. So I think the opportunity is still sound. We remain very excited about it but it didn't get quite attraction, we expect them to Q4, and therefore didnt didnt convey the growth that we expected.
On the profitability side, yeah, those I mean, there's a little bit of noise, you have <unk> GAAP numbers HM.
Unallocated amount that we have have changed a little bit year over year. So you don't have quite apples and apples, but the biggest thing I'd say on on paradigm that.
And ability is you know we've really consciously made a decision to invest in the infrastructure, particularly to support the data and analytics side of that business.
And that's an investment that or you know we carried all year, but just thought I think more pronounced even in the fourth quarter and.
That's that's a onetime investment while the little bit spill over into early 2020, but it positions us we think for scalability and growth gone for the long term.
Okay, that's great and maybe just one other question you know you guys mentioned that you've been talking with.
Advisors to come in and kind of reviewed the business and look at you know profitability maybe specifically.
No free cash flow, it's been very poor I know that you guys you know want it to improve.
You know any thoughts on how we should think about 2020 I know you got the D.O.J. you know payments that you're gonna have to make so maybe excluding those you know how should we think about 2020.
And you know with any you know action to try to improve margin. It makes me wonder if that's going to translate into even more kind of cash severance cost. We just came off the heels of.
Period, where there was a lot of cost integrating the mckesson business I'm, just any thoughts on that would be great.
Yeah, So I mean I'll start by.
Acknowledging or Europe, and promise I, the free cash flow numbers are.
Our pathetic yeah, I don't know what another word we have two years in a row now were it's been well below our expectations. The number of things that contributed to it and Ah, but it is what is I think he keeps the heart of your question as we look ahead.
We should see if you exclude the DLJ payments.
And if you just put on the shelf for a second any further kind of restructuring type cost that might come from this initiative I described to you I think we'll see in a meaningful improvement year over year I would we have a target for the year would probably be around 60% 65% of.
Conversion of non-GAAP net income to free cash flow.
And you know sitting here today I think that's a good goal for us on its a realistic goal for us.
I don't I can't get ahead of myself on our program, but I would suffice to say, if we're going to invest any money to.
Streamline and maybe how many more efficient that will be a you know that will give good ROI on that so we'll talk more about that when we get closer to the Investor day.
Okay. Thank you.
Thanks.
Our next question comes from Kevin Silly I know with yes. Please state your question.
Hi, guys. Thanks for taking my call. So when I think about the fact that you said the threed the acute care clients that you lost you knew that they're leaving.
Everybody before you gave the three year revenue guidance last year I'm, just trying to figure out sort of what's the delta what's changed relative to the outlook you provided last year Nexgen is it a combination of a bunch of things can you just give us a little bit of visibility other.
Oh, well I think the I guess that makes your timing. So were we set out some numbers in January of 2019 with an eye towards you know this is what we were aspiring to I think.
Sitting here today, I think multiyear guidance is a little bit challenging for us a we keep changing the corporate structure a bit but also I think.
The dynamics of the market are such that it's hard to predict some of this stuff, we're finding its hard to do multi year.
I will say this if you pro forma for the ER. The attrition that's winding up in a Christian you know you know it's going to leave but you don't always know exactly when instantly certainly don't know by quarter. Its clients have a tendency to drag a drag that out a little bit so I'm actually accelerate but more likely they drag and so.
Yeah, it's a little bit difficult the model that with precision point, you're far out if you pro forma the guidance would just giving you for that 50 million.
Note that the revenue range. We're talking about is you know anywhere from up one and a half the up seven.
For SAP, so that that's a growth rate putting you know.
Exclusive excluding this bolus of attrition that I described that's quite consistent with what we predicted a year ago.
So you know I don't know if that's pulling up to your question, but I'm what I'm telling you. Today is this is just as you know our what we see today. This is a meaningful bullets that is you know it's real but at same time, it's not decisions that were made our recently and.
Enriched with the benefit of hind side, maybe we could have done a better job predicting that a year ago.
Okay.
Oh.
Just one I guess, one quick follow up Oh, I'm, just saying intention for Rick to be the interim CFO well you execute a search or could Rick could you be worrying that have for quite a bit quite a bit of time now going forward and is there any decisions on that.
Yes, that's been a decision Rick will be the president and CFO starting tomorrow.
Okay great.
The.
Alright, thank you.
Got it wrong.
Our next question comes from Eric Percher with the friend Research. Please state your question.
Sure. Thank you, but with respect to the revealing planning that you're planning.
How does this fundamentally differ from some of they approaches you've gone through the last couple of years. I know you has led to some segmentation and changes to business. What is it at this point in time that you feel you need or that you have the opportunity to do versus last several years.
Eric I guess, the best way I could describe it is I think what we've done you know what we've done in the last couple of years.
You know from my perspective is first we had a lot of.
Organizational integration of do particularly with the Mckesson acquisition I'm. So we had a number of initiatives that we catalog. Then we went and you know ticked down that list and do it and since then I'd say, we've been in kind of a reaction or remote to the market.
And to the conditions, we were facing a certain time and so yeah. We've incurred yeah. I mean, it seems like a serial conversation with incurred non trivial amount of severance along the way. This is designed to be targeted at where opportunities are and therefore it sustainable.
Improvement its not simply about cost either there are some I think revenue opportunities that we're under optimizing today as well.
But it's nice to be targeted estimates to be durable and I'm. Just we do our jobs right I think we'll be able to give you a perspective on what the investment will be required to make that happen. You know you have the ability to hold us accountable for that.
So.
I think of it differently in that regard.
Okay and relative to the ongoing market when we look at the attrition that you're now experiencing a bolus of is that attrition that I assume its multi year.
Movement away some of that started in prior years and you're seeing that the biggest piece of that business move away or should we assume that there are several years, where this could stairstep.
Yeah, plus any additional attrition.
Oh, Yeah, I mean again I, that's I wanted to point I want to really try to drive across it.
I don't want we're not going to sit here and try to.
This claim that attrition is just hit us for the first time ever right now that's not true sure.
Back to life, that's a factor life, not only with us, but again with every competitor in the industry.
The bolus again was such that we just had an alignment of the stars. If you will that it's you know so significantly a larger number now as we stare at 2020 than it has ever been in the past I don't see that trend for more defections I think again a lot of it on it.
Aragon side was embedded a lot of it on the Sunrise side, our client losses that you guys are certainly familiar with that happens sometime ago is it likely to stair step up from here no I don't believe so not certainly not with anything that I see today.
Okay. Thank you.
Our next question comes from Jeff Garro, with William Blair and company. Please state your question.
Yeah, good afternoon, and thanks for taking the question when I ask about the bookings guidance for for 2020, maybe you could help walk us through saw the drivers of that expected performance. First 2019, then and you know I know in 2019, you had some really important in sizable large client wins. So if there's any way to kind of quantify how 20 twond.
<unk> works on a more apples to apples basis without some of those larger clients deals that we saw in 2019 might be helpful.
Yeah, I mean, I'll just start but I just you know maybe at the risk of overstating. The obvious I'll tell you the guidance we put for 24 to use the same guidance, we started 29 humor.
So 2019 wound up being a stronger sales here than we expected a that's obviously good thing but to your point that was helped by a couple of large deals.
That were on the inpatient side of our business.
And you know those those at least there great when they come but there you know we're not predicting the same level to stand. So were you know we're kinda rebuilding for the same level guidance as we started last year.
When we provide that here, where we really think it will be broad based across our U.S. inpatient our international our ambulatory and our adjacent market businesses that Paul described.
And so they're all going to be good contributors and our view right now and obviously to the extent, we see trends that are that warrant kicking that off will pick it up.
Hopefully, we won't have to pick it down, but that's our best best plans right now.
Okay.
Got it that's that's helpful.
I'll add one more follow up on the attrition topic.
Maybe you could give us what average attrition has has looked like over the last three to five years and maybe another way to look at is what what percentage of occurring recurring revenue base has has already given notice of attrition from you know some prior periods.
[noise] Oh, the dollar impact the dollar impact this year in 2020 is a more than two x., what we would have experienced last year.
Which again is why we pointed out for this year.
I'm not sure I fully appreciate the second part of question I think you're asking is there more that would be coming in the future is that were terrific.
Right you acknowledge that you know this isn't a new issue maybe some clients had made a decision to to move to a different platforms several years ago and I'm trying to get a sense of up that tail that might have already given notice but isn't.
You know factor down to 2020.
So if you think about people we know about today that are going to tread leased based on the notice that given you and it's worth saying it is worth pointing out there are we've had more than a few instances where a client thought they were going to leave and then at the last minute decided that they really the grass.
Not greener on the other side and they came back so.
That's also why it makes a little difficult to talk about it too far out, but I would say other clients who have indicated there their intent to leave and the impact would be felt beyond 2020, that's probably about another $30 million to $40 million or so.
But that bleeds out over several years beyond 2020, that's not a one year huh.
Okay understood. That's helpful color. Thanks again guys.
Well thanks, Joe.
Just a reminder to queue up for a question press star one on your telephone keypad to remove your question from the Q Press Star too.
Our next question comes from George Hill with Deutsche Bank. Please state your question.
Hey, good afternoon, guys and thanks for taking my question I guess reckon pull my first question would be around the cost savings program are there any parameters that are already kind of set up around the program running goalposts I'm wondering like if you guys are open tear radical transformation ideas. If that's what the consultants come back with whether it's kind of breaking up the company or or.
You know whatever whatever they think it'd be the right answer to take on drive quoting returns for shareholders.
Yeah, I mean, Georgia, where or what do you know we're way beyond pride of authorship here. We're open to any great. So you know good ideas I would say the scope of what we're looking to do though is right. Now is with this team is to get really focused on improving <unk>.
Women and free cash flow generation.
That's give me intent I think strategic decisions that could go beyond that were less likely to look to them for that kind of guidance, but we're very open the ideas and we will share all a significant ideas, we get with our board to make sure that they have the opportunity to deliver it.
It was ideas as well.
Okay, and then maybe a quick follow up would be as opposed to D.R.J. settlement as it relates to practice fusion a lot of the news that came out about that had to do with kind of the marketing of opioid products and are you guys worried about having in downstream opioid a liability risk that might be separate from the D.J. settlement.
Yeah, you know look we know that got a lot headlines George I mean were more than a month beyond announcing that final terms of the settlement.
There's been zero follow onto it which is what we thought would happen you know there was it the settlement with your JV comprehensive. It included a lot of different issues oney, only a little bit of which was around the opioid topic, but.
Yeah look we can't we're not perfectly clairvoyant on the future, we don't know, but I guess, so far so good.
And I'd add stores from a client perspective, we didnt, we did not get a lot of feedback from from U.S. based clients nor international clients.
On on that specific topic not to say it was isolated but is there was there was surprisingly few questions about it.
Number one and then I would say also number two I was.
No I I think they are ability here to go now in play offense, what that will help us a lot with regard to the settlement and what you know what we're going to go do it done to protect our shareholders.
To get some of that back through the appropriate mechanisms that exist because of the way that we had.
Drops and an insurance policy set up for unlikely events like this.
Okay, and then I guess, maybe just a quick follow up I kinda as it relates to the expense component I assume that them a lot of the legal expenses related to this topic at the margin gone down.
<unk>.
Well you I'm sorry, you were a little cut out a little wind down is that we said yeah, well like I know that the DJ settlement them. We're just like from a cost perspective like a lot of legal costs should now be beyond just right.
Yeah, Yeah, I mean are.
We see a run rate or that should go down, but certainly yes, okay. All right. Thank you guys.
Thanks George.
Our next question comes from Matthew Gilmore with Robert W. Baird. Please state your question.
Hey, Thanks for the question wanted to come back to the revenue performance I'd I. Appreciate the comments you made on on varied I'm in the past calls. It also talked about some delays with ramping some health credit RCM services deals that were coming online I was I was hoping you can update us on.
Those contracts and are you still expecting that to ramp over the next couple of quarters.
Yeah, Matt I mean, that's definitely those are both Soc contributors to you know again I described earlier as it began if you pro forma for the attrition that we've called out you know our revenue guidance ranges, you know, one and a half a little over 7%.
That's largely being driven by not just the two things you talked about but they are certainly meaningful contributor.
Alright, and then could you spend a second just talking about the capacity for buybacks and I know you were sounds like you're kind of blocked out for the first part of the year here you elaborate I think under three times now I know a lot of the free cash flow will be eaten up by the by the DJ settlement, but just give us some sense for the you know the appetite in the capacity.
You have to buy back stock if you want it to.
Yeah, I mean, we're we're about or about 2.7 under our coverage ratios right. Now. So we have a full turn that we could theoretically apply you know you you'd run through the authorization long before you got that so we'd have to go back.
Increase our authorization first with our board, but I think suffice to say amount on the weekend, we can certainly be as the ambitious as we've done where last year without any issues regarding debt covenants.
Got it thank you.
Our next question comes from David Windley with Jefferies. Please state your question.
Hi, Thanks for taking my question. Good afternoon, I'm wondering if you could quantify the impact or the headwind to EBITDA from the attrition the 50 million attrition that you've called out.
Yes.
Yeah, I mean, it's I mean, it's not it's gonna be you know roughly it's a mix of you know software related and services later revenue. So I'd say, it's you know it's kinda composite margin is the right way to think about the value of the revenue we're losing.
Obviously, we're going to offset that with revenue growth. So.
I don't I think you know you should just you should just think about you know it by itself, it's not going to change the margin profile companies.
Okay. Okay separately I think there was some comment in the prepared remarks about implementation delays or we might have been one of the answers your question, but but implementation delays impacting revenue in the fourth quarter is that.
Then flowing into 2020.
Just one of them.
I understand yeah, hi impact here.
Oh, Yeah, David I had a I had made that comment or around the gross margin performance and I was you know rattling off a few things that contributed to why gross margins were down you know when service projects get delayed you wind up with unproductive labor so that kind of hurt. Your you know you have the costs.
So if the revenue.
I'm sure we should get.
A lot of that back in 2020, most most the client base DHR client base for the most part all need to upgrade Fisher I because of regulatory reasons. So we should get should get that back but you know I would also say that's reflected in our our revenue guidance.
Okay and then last question on varied I'm, you mentioned enrolling regarding next gen relationship slower ramp there is that.
I I paid data receipt from them is it an infrastructure.
Connectivity with your clients I'm wondering what the the stage or the point at which that delay is happening.
In in the ramping up that business.
Yes, it's predominantly just the interfaces between us and though and okay others.
So it's not so much I I guess, what I'm wondering is is your critical mass of data.
Significant enough to be gaining sales traction in that business or do you need to still aggregate more data more deals like the next gen deal in order for that to be.
Material enough to.
Capture attention.
Oh, we don't think so we think we think again you know there dataset combined with our dataset. Yeah. You know in terms of primary care represents half the U.S. population in terms of okay. Let's cover it's it's all right.
We don't think we need more we just need to have be able to.
Aggregate the information link it with other relative relevant data such as claims and things like that.
And then we need package that and sales activity. So.
Our our sales you know it's kinda two things have happened one is a you know the interface between us to them and then secondly, our sales team needs to.
Continue to close business there.
Appreciate your answers thank you.
Welcome.
Our next question comes from Gene Mannheimer with Dougherty and company. Please state your question.
Thanks, Good afternoon.
Two things.
Regarding the just back to the attrition topic. If these are the bulk of this or maintenance contracts say that former clients hospitals.
Contractually committed to for it to define period of time, even even after they made the decision to leave.
After which they wind down wouldn't you have more predictability and into when that revenue is going to go away.
It seems to be sort of blindsided, you little bit a and then my follow up to that is it reasonable to say that the entirety or the overwhelming majority of your of your growth is is now coming from the non each our segments that you characterized [laughter].
Yeah, I can't I don't think the Prime Minister is quite is quite right at all its not just a software maintenance that's flowing for middle class and made a lot of this is various forms of managed services posting some cases, we had outsourcing relationships to.
And that's why I made the comment earlier as I mean I. The composite revenue pool is is you know kind of the same type of blend you see across the company today, it's not simply.
Software maintenance.
As to the you know the comment on you know we seemed blindsided or you know I'm not trying to suggest that I think we probably could have done a better job I'm projecting and maybe more importantly communicating.
But Ah you know what what's happened is happened that I'm just didn't you're calling in today that the number is higher than the past I said, you know as a shared earlier more than double I think that now qualifies as they you know a fairly significant amount it will impact comparisons and I just want to make every vendor Stan.
What's happening there so its a you know any and it's not it's not a science to know exactly when the stuff going to happen because client.
Are you know clients and they think they're doing something and then turns out that they need a six months' nine months or even more than that longer so actually bought off the system. So it's not as perfectly predictable is as you might there.
Okay.
Thank you.
Ladies and gentlemen, there no further questions at this time I'll turn it back to CEO, Paul blank public for closing remarks. Thank you.
Thank you very much work I'm glad that the 2019 is now behind US we had a lot of moving parts going on and in 2020, we'll get a lot of clarity not only with existing clients, but also with the new perspective, one of the we're working on the growth businesses are positioned to grow very nicely. This year and we'd expect to get some very nice return on investment.
Are going to make by bringing in an independent third party review of everything that we've talked about today.
Thank you very much for your time in your interest and Allscripts have a good day.
Thank you. This concludes todays conference all parties may disconnect have a great evening.