Q4 2020 Allscripts Healthcare Solutions Inc Earnings Call
Greetings and welcome to Allscripts fourth quarter, and full year, 'twenty and 'twenty earnings call.
Time, all participants are in a listen only mode.
And answer session will follow the formal presentation, if anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad. As a reminder, this conference is being recorded it is now my pleasure to introduce your host Stephen you'll see and Vice President of Investor Relations. Thank you you may begin.
Thank you very much and welcome to the Allscripts fourth quarter, 'twenty and 'twenty earnings Conference call. Our speakers today are Paul Black Allscripts, Chief Executive Officer, and Luke Colton, and how president and Chief Financial Officer.
And we're making a number of forward looking statements during the presentation and the Q&A part of the call. These statements are based on current expectations and involve a number of risks and uncertainties that could cause our actual results to vary materially.
We undertake no obligation to revise these forward looking statements in light of new information or future events. Please.
Please refer to our earnings release and SEC filings for more information regarding the risk factors that may affect our results and he's also reference the GAAP and non-GAAP financial statements as well as and non-GAAP tables, and our earnings release and the supplemental workbook that are both available on our Investor relations website, and with that I'm going to hand, the call over to Paul Black to begin.
Thanks, Stephanie and thanks.
And the call. We appreciate your interest and all scripts.
And this past year has been a year without precedent for allscripts, our clients nor the entire world.
Paul scripts associates were surprised shocked and heartened by the initial challenge and the collective outpour of our client needs.
The pandemic Stephen their resolve to respond to and indeed answered that the crisis.
Both domestically and internationally.
Except that we saw in 'twenty and 'twenty was driven by non infectious enthusiasm and serve our clients and our shareholders.
And I continue to extend my most sincere thanks to the Allscripts family and I'm very proud of and the way we rapidly adapted to help our clients and our frontline and this pandemic.
I'm also very proud of our fourth quarter results, which were above our expectations. These results were enabled by the focus and the velocity of decisions and we have made and implemented over the past year.
To summarize last year, it was a year of resilience and a reset for allscripts. He.
We made significant strategic changes to align with our client priorities impacting our solutions portfolio and our balance sheet and cost base in order to strengthen the long term fundamentals of the company.
I am confident and we will be able to leverage the work we have concluded over the past year to generate significant value for our clients associates and shareholders as we look to 2021.
Interestingly 35 years ago, we were founded as a company and 1986.
Here are some of the details on the progress we've made across the strategic platforms of the company.
On data and cold.
And 19 pandemic made clear the mission critical nature of our solutions and the importance of using data to both manage patients individually on their care journey and to manage populations to ensure optimum health outcomes.
Made enhancements to our solutions to help our clients address the surge and patients from the pandemic and data captured and our electronic health Records off the managed care across the continuum.
Because of our open platform clients had rapid access to their data, enabling them to gain insights on their patients to deliver quicker more effective care.
Simultaneously, they made smart financial decisions for their organizations.
Our bare die and business unit led the design and prototype of a monthly reporting system to track COVID-19, and re testing on a national scale using our EHR data to answer the critical question about whether COVID-19 infection confers immunity.
All major EHR and now contribute to this report and it is one of the earliest and leading U S indicators that reinfection is rare.
On research and using our data researchers at Stanford Johns Hopkins, Harvard University of Texas, and the Urban Institute are working on emerging treatments understanding certain services utilization and telehealth trends evaluating the interplay between COVID-19, and maternal health and developing machine learning.
Approaches to combat COVID-19.
Our EHR data and being used by vaccine manufacturers to surveil, the vaccinated population and.
Near real time to help identify potential safety issues immediately should they arise.
On care venues are consumer engagement strategy has at its core and EMR agnostic patient consumer record Paul.
Hello, My health help physicians reach their patients through telehealth care delivery.
Mark contains all patient and medical information not just data from one EMR company.
This record needs to be easily connected the consumers care team.
That is why we architected a platform approach to our telemedicine solutions.
This strategy contrasts favorably to a bunch of cool apps and further perpetuate isolated silos of inoperable data.
Telehealth, the new venue of care created as a necessity of the pandemic has permanently changed the way patients well access and engage with health providers.
Our other platforms and the fourth quarter and line with our vision of providing a platform of health, we announced the general availability of Sunrise 20 day zero and milestone release at.
It includes the client choice to move to a hosting and the Microsoft Azure cloud.
And more than 150, new enhancements user experience updates and more than 35, new performance improvement.
The enhancement made to this version of Sunrise will streamline workflows introduced and efficiencies and overall reduce the burden on clinicians during a time when they need it most.
And my opinion pandemic provided a perfect display of why a vision of open connected communities of health matters.
Community based individually coordinated care is precisely what will cause the pandemic to subside.
Quote a colleague community wide data and referral networks east patient transitions and facilitate provider resourcing, which contributes to broad unified patient care.
Using the cleanup, the clinical and financial burden and any particular system.
While telehealth has received much applause from the Swift and effective response during the crisis. It is important to note. The contributions core technologies have provided to their success and rapid and response.
Putting EHR platforms analytics post acute networks and patient engagement.
All of these platforms were utilized to orchestrate and necessary actions to successfully treat and contain this deadly pandemic.
On Microsoft and internally, we have aligned allscripts to ensure that our development professional services upgrade center client support teams and associated methodologies are hardened to migrate current on premise clients to azure.
Moving to the cloud will allow our clients to lower total cost of ownership and prove the EHR experienced from providers.
For innovation with new impactful solutions and helped to engage with clients and consumers more effectively.
Our platform of health is designed to deliver on all of these imperatives as we believe this is where the market is headed.
On HCA.
And the fourth quarter, we continued to make progress on this front, we signed a contract with HCA healthcare for a seven year commitment to upgrade and migrate their existing on premise deployment of Sunrise oncology at eight facilities, which is utilized by Hca's, Sarah Cannon Cancer Institute.
Allscripts cloud hosting built on Microsoft Azure. This is just one example of the many benefits we are seeing with our partnership with Microsoft.
Internationally, we are seeing terror parallel trends strong example of the Microsoft partnership and is it.
Recent expansion of Sunrise across from the Victoria, Australia region have Gippsland.
And October last year, we compute and we completed the rollout of Sunrise EHR platform at the Latrobe Regional hospital.
This was one of the first Ehr's and Australia to use Microsoft Azure.
Our speed efficiency and flexibility and resilience.
Theater with a cloud based system and the driving force behind the decision to extend Sunrise EHR platform Cross gets one four additional hospitals.
And our ambulatory enterprise.
We are continuing to see increasing momentum.
As we benefit from our leading outpatient market share across touch works professional and practice fusion electronic health Records.
Last year, we added 35, new logos and the touch works and professional services.
Professional solutions as clients and seeing the benefits from our long term investments.
We are winning in this market as clients are looking for and end to end answer for clinical and financial payment and our CNS solutions and <unk>.
Client pivot to consider and consolidate applications to fewer vendors.
One new client that I'd like to highlight was our agreement with the United States Orthopedic Alliance.
Partnership will bring to market, leading infrastructure designed to help orthopedic practices scaled with agility to improve EHR implementation timelines to provide evidence based guidelines and to support evolving clinical protocols, creating community wide connectivity.
This opportunity will allow us to scale and grow our combined software and U S. L. A service offerings across the country.
On data analytics and care coordination, we saw strong momentum and the fourth quarter as bear dime returned to growth and.
Investments, we've made and our integrated data and analytics platforms have led to significant new bookings and larger deals, particularly around clinical research and our national data exchange platform and risk adjusted analytics.
We have the largest linked EHR claims patient database available for research sourced from and directly connected to clinical platforms.
Our data and platform enabled research services are allowing us to capture a larger share of the value chain and will do.
<unk> growth across the life Sciences business.
On bare die and pair.
Our solutions are designed to simplify and he's provider and payer collaboration through analytics and better point of care workflows that improve practice profitability and clinical outcomes.
The ability to connect data protocols and insights generated by the companies. We work with will allow closed loop precision medicine to a court occur at the bedside Clinic research lab and the home.
This is a distinct competitive advantage and value that paradigm brings.
All of these enhancements are the manifestation of our vision and substantial R&D investments over the last several years.
As we have expanded our robust care and data platforms.
Now I'd like to discuss the work, we did to unlock value from our solutions portfolio and the <unk>.
And excuse me simple.
Fire business at the same time.
We completed the sale of both E Tsi and Purport Hill and the fourth quarter.
It's clear from the sale of multiples that these businesses were not receiving and the appropriate valuation under allscripts ownership.
And thus we made the decision to monetize these assets and deploy the proceeds to reducing leverage returning capital to shareholders and.
And to continue investing and our solutions to drive growth.
Regarding our cost base at the beginning of last year, we were not optimized for the uncertainty and market environments, we were seeing and our core solutions.
This combined with the onset of the pandemic resulted in us taking decisive and rapid action to reduce costs beginning in the second quarter of 'twenty and 'twenty.
Focus on driving improved and sustainable EBITDA margins.
While these actions are never easy, we made systemic and lasting changes.
We are.
Confident and optimistic and we will continue to leverage the changes we made to drive improved margins and free cash flow going forward.
We have made significant profit growth across all of these critical areas.
And while 'twenty and 'twenty was challenging I am confident that all Scripps is even better positioned to win for our client associates and shareholders.
Before I hand, the call to Rick I wanted to highlight some external recognition that we have recently received.
<unk> research is named named US number one.
Under the category of most trusted partner and community hospitals.
Surveying our client, beating all of our competitors.
And the report with the firms surveyed and you know like 100 community hospitals.
Allscripts ranked highest in these four categories being committed to our client success aligning our solution development with the needs of our clients.
Dominating special requests to tailor our solutions collaborating with clients to resolve issues.
Testament and this is a testament to our teams.
We are pleased to be recognized.
By independent third parties.
And finally, we published our first corporate responsibility report this past month, which is available on our website I'm very proud of the positive impact we have on our communities, particularly in a year as difficult as 2020, we.
We are passionate about changing lives for the better.
This is core to who allscripts is.
We expect to annually update this report and share our progress and.
Across all facets of corporate social responsibility.
The pandemic has stirred the company it is.
As a line of our collective spirit to serve our clients and communities around the world.
With that let me turn the call over to Rick Poulton, Allscripts, President and Chief Financial Officer.
Yeah.
Okay. Thanks, Paul and thanks, everybody for joining us today.
And structure my comments today really around two areas first I'm going to give you a more detailed review of our fourth quarter and full year financial and operating performance.
And secondly, I'll talk about our 2021 outlook.
So as a reminder, additional financial details are available in the supplemental financial data workbook, that's posted on our Investor Relations website.
Given our asset divestitures and the supplemental financial data workbook has details on Allscripts financial performance, both including and excluding the results from the EPS Si and care Port health businesses that we divested last year.
This will allow you to compare our results to your original models and our prior guidance and the prior guidance from the company as.
And as well as assist you and building your new models and compare our 2021 outlook with 2020 results on a like for like basis.
So, let's begin with fourth quarter results and <unk>.
My comments will primarily be focused on non-GAAP results for the fourth quarter, which include EPS Si and care Port health for the period that we own these businesses.
In summary, the fourth quarter was by far our best quarterly performance and years and continued a steady drumbeat of improved performance throughout 2020.
And our continued cost management, along with the traditional seasonal strength that we experienced in Q4 for both sales and revenue.
And and significant operating leverage and very strong sequential improvement and margin performance earnings per share and free cash flow.
So with that overview, let me provide some more detail color.
The sales environment, followed traditional seasonal patterns and it was the strongest quarter of the year.
We generated $220 million and new business bookings and had significant success selling additional products and services to our existing base of hospital clients.
We also had continued strength and competitive wins of new ambulatory clients and we also benefited from strong sales quarter and paradigm, particularly around life Science research and clinical data exchange.
While bookings were down in 2020 on an absolute basis compared to 2019.
Our backlog actually increased over this period to $4 $1 billion at year end.
This reflects the considerable level of client renewals, we secured during the year.
Which as Youll recall, we do not included in our reported bookings.
So while the selling environment for new business was softer in 'twenty and 'twenty, we actually ended the year and a stronger position and we entered it with regards to booked future revenue.
Now to the P&L.
Non-GAAP revenue for the quarter was $415 million and was up from $402 million in the third quarter.
As stronger software revenue and seasonal strength from <unk> more than offset the $9 million headwind related to the sale of our EPS side business, which you'll recall closed on October 15th.
Looking at it on a year over year basis. After you normalize for the EPS I disposition the year over year decline and revenue in Q4 narrowed significantly compared to Q2 and Q3.
This is indicative of a steady return of patient volumes as well as having digested the impact of the client attrition that we highlighted earlier and the year.
Turning to our margin performance and the quarter, our consolidated adjusted EBITDA margin was 23, 4% and was above our expectations as we benefited from better than expected seasonally driven software revenue and a continued decline and operating expenses across all areas of the P&L.
The margin results and the quarter reflected and nearly 1000 basis point improvement from the first quarter of 2020 and.
And a 700 basis point improvement on a year over year basis.
This margin improvement came despite an 808 hundred basis point reduction in capitalized software relative to Q3, and a 600 basis point reduction on a year over year basis.
As we had previewed on our last earnings call. We made progress during the fourth quarter on reducing the amount of R&D that is capitalized and we are now actually working down our deferred cost balance on the balance sheet as we amortize more than capitalized.
We expect this trend to continue throughout 2021 and details of capitalized software. It can be found in table one of the supplemental data workbook.
And our GAAP operating expenses, we recorded restructuring charges and the quarter of $17 million.
Which brought our full year total to $66 million. These.
These primarily related to severance costs and other expenses, resulting from our margin improvement plan.
And as we look ahead, we expect this number to be significantly lower in 'twenty and 'twenty, one and thus be less of a drain on free cash flow performance for the year.
Free cash flow is a major focus area for us and 'twenty 'twenty, one and if you look through the fourth quarter's results you can really see the opportunity for strength and free cash flow generation from our continuing operations.
During the quarter, if you exclude the $58 million in our final cash payment to the Doj.
We generated $56 million of operating cash flow from continuing operations and $30 million of free cash flow from continuing operations during the quarter.
So now I'd like to turn to the balance sheet.
We ended the year with a significantly stronger financial position compared to where we started the year.
We ended the year with $208 million and principal of debt outstanding and our cash balance stood at $537 million at the end of the year.
We also have a $300 million tax obligation on the year end balance sheet that we expect to pay next month.
After we make that payment we will we will have removed more than $1 billion and obligations from our balance sheet. Since the end of 2019, while simultaneously repurchasing $335 million of outstanding common stock.
We also significantly reduced our average accounts receivable days outstanding from 93% to 82 days.
And wrote off $75 million and assets, whose values, we felt have diminished.
So we worked all aspects of our balance sheet hard and both are tangible and total net worth has never been stronger and.
I'm very proud of my team, who have tried this outcome and they have allowed us to start 2021, and a very powerful position.
So and I want to shift gears and talk about our outlook for 2021.
As our village as our visibility into future trends has somewhat improved we've returned to our normal practice of providing an annual outlook.
I want to reiterate when making comparisons between our 'twenty 'twenty, one outlook and our performance in 2020, please refer to the supplemental financial work with tables, one and B to B and three B, respectively, which provides non-GAAP financial details for our continuing operations.
Our revenue outlook for 'twenty and 'twenty, one, it's $1 $5 billion and.
Essence, we expect recent trends to continue and this factors in COVID-19 uncertainties as well as continued growth and a very non business.
And in terms of a quarter to quarter results, we expect seasonal fluctuations to continue and we expect quarterly revenue to fall and a range of $365 million to $385 million of revenue per quarter.
With the first quarter closer at the bottom end of the range and the fourth quarter towards the top end of that range.
Our adjusted EBITDA outlook for 'twenty and 'twenty, one is a range of $240 million to $260 million and reflects our confidence and our ability to manage our costs and drive year over year margin improvement.
And finally, our free cash flow expectations for 2021 are a range of $90 million to $100 million consistent with our prior guidance and reflecting an improvement and free cash flow conversion compared with 2020.
This expected free cash flow along with our Derisked balance sheet with zero net debt provides us with significant opportunity to continue to return additional capital to shareholders via share repurchases, while also investing in our business to drive profitable growth.
So to wrap up our progress in 'twenty and 'twenty on multiple strategic and financial initiatives has been gratifying and what was otherwise a very challenging year.
Our breadth of relevant solutions, our strong balance sheet and sustainable cost structure position provides allscripts with a very clear path to long term value creation and.
And so with that I'd like to open up the call for any questions.
Thank you ladies and gentlemen at this time, we will be conducting a question and answer session. If you'd like to ask a question you May press star one on your telephone keypad, a confirmation tone will indicate your line is and any questions. Thank.
You May press Star two if you would like to remove your question from the Q4 participants using speaker equipment and may be necessary to pick up your handset before pressing the star key. Our first question comes from the line of Sean Dodge with RBC capital markets. Please proceed with your question.
Hey, good afternoon, and this is Thomas pillar, one for Sean Thanks for taking the questions.
And so one on the resell launching of this new kind of true better organization.
North well being involved there how should we think about the potential impact on bare die and does this change anything about the competitive landscape or dynamics for paradigm.
No we don't see that as having any direct impact on alert on outlook.
Okay and.
And then maybe another one kind of going back to the migration of Sunrise to the cloud.
How long do you expect this kind of overall process to take and the pandemic disrupted or delayed and any elements of this.
It has not delayed it it's actually given us some room to work on some things that perhaps we would not normally have.
Meaning we've got some additional focus on this that perhaps might not have had as a result of a lot of other client activities that were going on simultaneously.
And we think depending upon what pieces and we're gonna move and how we're going to move it and the timeframe for that and there's a lot of architectural considerations as we put the plan together, but we've been working very closely with Microsoft.
And second technical architects and solution architects to ensure that we have something that's very tight we'll have you know.
Capabilities and the cloud already and some of those as we saw and depending upon what.
Solutions Youre talking about and we've had things had been in the marketplace for a long period of time of Sunrise and specifically as I mentioned, we have clients who are actually using azure on the low end of the marketplace and I talk about 100 beds and below as well as clients and other parts of the world that are using it and similarly sized organizations.
Okay, great. Thank you very much.
Thanks Thomas.
Our next question comes from the line of Charles <unk> with Cowen. Please proceed with your question.
Yeah.
Hi, it's James on for Charles.
Can you talk more about the drivers of performance and our life Sciences business in their dine you noted the strength of the business, which has been consistent with what others. In this space and also noted and more broadly how should we think about the growth profile and a very time and the near to long term.
Okay.
Well, so our our outlook for our revenue and we've already shared that what we expect out of Aratana maritime and the near term is reflected in that.
Of course, we'll be able to monitor that with our quarterly reporting packs and our disclosures that separate there and I'm from the other parts of the business, so you'll be able to watch that going forward.
Why do we see I think the first part of your question is why do we see strength still.
Paul made a lot of comments and and I think what's going to and repetitive I mean, we have a.
Collectively across all of our ambulatory EHR base.
And our largest footprints of market share that are and the industry.
We have extensive data rights across that footprint.
And we have worked hard for years, it's not just a conversation. We've started recently, which is I think in Vogue with some of our competitors right now and we've actually been doing this for years.
Working on a car.
And filing that data and a very usable way linking.
Linking it to claims data and other data registries and.
We've built very extensive relationships with across all of the life science community. So.
People are increasingly recognizing the value of what we have and that's that's what's leading to our growth.
And also the adjusted EBITDA margin for well ahead of guidance this quarter.
With all the upside and and the margin is driven by bad and expected seasonal seasonally driven software revenue or debt Opex reductions also come and better than expected.
Paul Paul I mean, it's a combination of Ah.
A better mix and higher revenue along with continued cost improvement cost have been going and.
And the right direction for us for several quarters now.
Okay. Thank you.
Thanks, James and our next question comes from the line of Michael Cherny with Bank of America. Please proceed with your question.
Good afternoon, thanks for all the color so far.
Paul you gave some nice updates on particularly some of your upsell opportunities.
As you think about the next leg of the rollout with the cloud based platform with everything integrated with Microsoft Azure and when does the next step in terms of those upgrade upsell cross.
Cross sell potential opportunities really start to take hold in terms of when does your sales force feel like they have the tools and their tool kit to go out and continue to penetrate those customers each service for so long.
The.
And the announcement of that parallels the internal work that we're doing obviously on the engineer.
Engineering side, but it also parallels the work, we did and with our sales kickoff.
Spring two weeks ago.
And so those folks I've been you know if you will tooled up with the appropriate presentations and appropriate.
Capability to go out and start having discussions about that my expectation. This year is that we will see a number of our clients who want to jump in and make a full commitment to move from especially on premise to do something and the cloud with us and there's a lot of pressure on on premise.
<unk> to get to something that has these capabilities, but one of the larger drivers around all of it is.
He is around fiber and so we expect debt. This will play nicely into not only our plans to take people to the cloud for AI T C O Cape faster capabilities and delivery around upgrades and you know all the continuous availability options that are are there natively.
<unk> and.
And that combined with a bit of a <unk>.
Increased sense of urgency to do something different and have computers, and Nick and your closet.
Closet is driving a lot of that demand.
Got it and then a question for <unk>.
Rick I had to do a double take when I saw where your debt and filed the balance sheet really nice job on on that front to alongside up still hold the divestitures as you think about heading into 'twenty, one and you mentioned and the use of our cash on that one outstanding liability, but how should we think about the the rest of the use of cash and.
And just from a cleanup perspective, where do you stay and currently on your share buyback authorization.
Yes.
Thanks, Mike.
So let me take those in reverse order on our current authorization.
And we've got a new authorization last November for $300 million shortly after that we announced a.
Accelerated stock repurchase program for.
And for $200 million. So think about you know two thirds of that and it's kind of used up by that.
That program and that program is happening as we speak and we'll probably wrap up sometime in the April timeframe.
So that will leave us some capacity under our current authorization and then of course, we can always.
Go back to the board and seek to up that should.
Should we so choose.
So those are just the facts are on our board.
Amortization and use of it.
I think you know the first part of your question Mike.
We've talked publicly about we're sitting here right now.
And if again, if you think about all the pay off of the tax obligation that I referred to.
And what kind of in essence at a zero net debt you know a little bit slightly cash positive net cash positive position at the end of the year we've.
We've talked about expecting to generate pretty good free cash flow off the business during the year and I think we've made we've made public comments about longer term, we see our target.
You know somewhere around one and half turns of debt on the company.
As a place that we'd be very comfortable settling into so you know that.
That gives you some sense of what we have.
In terms of thinking about deployment of capital and the near term and.
You know, we'll look to continue to invest first and what we have as necessary and and.
Perhaps there'll be some small bolt on type acquisitions that might make sense.
And on the radar right now, but there might be something.
And then we will continue to buyback what we believe is undervalued stock.
So.
Yeah.
Great. Thanks, so much and really nice job.
Thanks, Mike.
Our next question comes from the line of Robert Jones with Goldman Sachs. Please proceed with your question.
Hey, great. Thanks for the questions I guess, maybe just taking a step back looking at the growth the organic growth expectations for 'twenty, one and it looks like and it's kind of flat year over year.
I guess, if you think about the future and you guys touched on some of this but I'd I'd be curious you know Paul or Rick you know, where where do you see you know future growth coming from like if you had to think about you know kind of accelerating the top line again like you mentioned Vera Diamond and Theres. Some other obvious opportunities, but where would you say you're most excited or you see the most opportunity to kind of react.
Celebrate the top line.
Well, Bob and I'll answer that and it's not tremendously different from what you might have heard from us and the past, but I mean, I'll just repeat it.
No look the U S. EHR market is largely a replacement market I think everybody understands that I hope that everybody understands that.
But there will be replacement, it's still a fragmented market the requirements to stay regulatory compliant keep going up and.
And we continue to believe we will see the industry naturally consolidated debt.
As that happens there's opportunities for replacement wins, and we expect to be a winner and the replacement market on a net basis. So that's one place outside the U S is still a lot of Greenfield and.
And the amount of digital tool the penetration of digital tools and to most of the health care outside the U S is way behind the U S. So.
And that's an opportunity that we're excited about the tend to be public sector deals. So they are a little more difficult to predict timing, but they're nevertheless out there and we expect to be successful there.
And we think they'll continue to be new use cases in the U S that will drive some incremental opportunities to so whether it's around a value based care or whether it's around reimbursement opportunities or whether it's around standards of care changing such as you know.
Incorporation of personalized medicine and to care.
And these are areas that will create new use cases that we think we can also benefit from so you know that's collectively I think the outlook around the clinical and maybe financial areas and the business.
It's continuing to one other financial area that we've seen nice growth and and we'll continue to expand is a revenue cycle services for and particularly our ambulatory clients.
<unk> got a nice steady drumbeat of growth there and we would expect that to continue.
And then of course, there's paradigm, which we've talked about and that's in essence, bringing our assets that we have to the.
Payer and life science and markets and that's something we've been working out for a couple of years. So we have some very real infrastructure and very real commercial relationships and we expect those to grow nicely as we look ahead.
So.
And that's our outlook for EBITDA growth can come from.
No no that's super helpful and I guess, maybe just a follow up to build off of of the comments around you know getting the balance sheet and and much better shape.
No the debt leverage and and much better shape. Yeah, you, obviously have access to a lot of.
Primary care docs out there there's a huge focus these days on on focusing on them and giving them tools and partnering with them to do more and the value based world whether that be with that may or even in the commercial side.
Any thoughts just around deploying capital to maybe acquire an asset or maybe even I guess invest internally to to approach that market a little bit differently, you know as far as trying to get them and a better place to you know to take advantage of some of these cat potatoes, and models that are out there and that are coming out there.
And yes short answer is yes, we spend a lot of time thinking about that whether it makes sense to build out capabilities organically or acquire some and.
You should certainly expect to see us more active and that area.
Okay, Great I appreciate it.
Thank you.
Our next question comes from the line of Donald Hooker with Keybanc capital markets. Please proceed with your question.
Oh, great good afternoon her growth.
And I hope I didn't Miss this but I mean, obviously, the if I look at the segments.
I mean, it looks like your your core clinical and financial solutions segment and sort of.
Kind of that and the fourth quarter after a long and I think it was that is that your targeted level kind of.
Long term you mentioned there there are a number of different puts and takes there.
But is that for that particular segment is that.
Kind of a starting point.
And a seasonally strong starting point as we think about ahead and are you, mostly now done with a lot of the efficiency initiatives and we've got tremendous.
EBITDA margin expansion and that particular segment over the course of the year.
And do you feel like you're kind of moving on to something else now or is that going to keep going higher.
Yeah I think.
It's a good question, Dan and I think look and we what you see in the fourth quarter are very real but it is definitely assisted by some of the seasonality that I talked about so.
And I wouldn't think that as you shouldnt expect to see.
Higher number than that every quarter going forward okay.
I think when you look at it holistically across the year.
And what we're signaling is that the core clinical should go up and we will continue to see.
Improvement as you look at it across the full year and that is absolutely a function of continuing on some of the margin improvement initiatives that we've been talking about for several quarters now.
Super and you you did come in and just remind me here. The long term goal for that segment I think its 18 or 20% from EBITDA margin right.
That's correct.
That's correct.
And then maybe if I could.
And I'm trying to understand the different segments here that the data analytics and care coordination segment, obviously, you sold two very profitable businesses.
For a substantial gain and.
Which is great, but obviously the margin of that segment routines and substantially what is the and you know and the.
Past, you kind of were targeting kind of a 30% plus margin for that segment just to help us understand and kind of the visibility to expansion over time, though what was there a new target there.
There will be a new target, we haven't published one yet.
And what.
And your observation is right. We had you know so if you look at our supplemental data workbook.
And I'm not sure if you've had a chance to do that yet, but you'll see a lot of details on kind of where you're going with what is what does that segment look like with the businesses that we do.
And in it and what does it look like what does that business out of it and so yes. There is a pretty new there's a pretty clear need to reset expectations of what will happen. There. We do think we'll see some nice margin expansion in 'twenty and 'twenty, one there, but we haven't specifically and that's part of my overall margin guidance, but I'm not giving specific segment guidance.
Okay, Yeah, okay.
Super Thank you. Thank you.
Youre welcome.
Our next question comes from the line of Eric Percher with Nephron Research. Please proceed with your question.
Thank you Chris.
And on internal investment I think you helped us last year.
Time understand where internal investment was focused and obviously telehealth became a virtual became a larger piece of that and I. Appreciate the detail on the platform approach can you give us a bit of a feel of how those investments have trended over the course of 2020 and whether there's significant changes as we look and.
Into 'twenty one.
Yes.
Oh, it's not significant changes Eric in terms of where our internal focused investments are I mean, you know to recount. The replay I mean, we were investing and very time and the.
Infrastructure required to help grow that business.
We are investing around our core EHR solutions.
In terms of modernizing some of the talk around it and bringing some new feature functionality to it as well.
Paul talked about that needs to be sunrise earlier, but we're doing that with some of our other platforms as well.
And we continue you know we continue to invest in some areas that a couple of questions before you kind of touched on and so some of the new use cases that we believe will be coming and helping ambulatory practices.
Participate and captivated care and as you know people are taking non more risk tools to manage that risk tools to help them.
Put position themselves from maximum reimbursement and things like that there's there's there's areas like that that we're continuing to invest and as well.
Got it and <unk>.
Given the investment ongoing and very dime and comment on the last question Youre not quite ready to provide guidance, but when we see we're very dime has landed without the other assets and.
And the additional data you gave us here is it fair to assume growth over the course of the.
Year.
Margin growth expansion over the course of the year from this new base. It is it is it is fair to assume that for two reasons. One is I expect.
And I expect them to absolutely grow their top line and they'll get very nice operating leverage off of that but.
But secondly, the numbers Youre seeing is a full burdened allocation with corporate overhead going against the segments as well and that is of course as part of the target area from margin improvement. So as we improve there and that'll that will find its way into the segments as well sure. Thanks for that.
Youre welcome.
Yeah.
Our next question comes from the line of Jeff Garro with Piper Sandler. Please proceed with your question.
Yeah, good afternoon, and thanks for taking the questions first one from me I wanted to see if there was any early feedback from beta users other clients or prospects on Sunrise 20 pointed out.
Yeah.
Response, thus far has been universally positive they are very excited about the you know the.
And look and feel the experience because we have debt.
Debt is a manifestation of our user centered design construct and we go into the buildup with the other thing is that you and this is one of the first releases that we have had that will really take full advantage of whats going on and the cloud things around.
This text.
And capabilities that you can utilize to Microsoft.
And as I've mentioned earlier.
Abstention amount of work and effort around.
And how people back systems up and how they have duplicate data centers all of that can be substantially streamlined by having different.
Experiences as well and some different contracts and what they currently have which is quite important to them and theyre going through their check mark on security as well as uptime as Ross just.
The capability for them to have a system and it runs like a utility basically always on and so those are all important and.
And you know well received if you will but they are eager to participate in that and we get a number of clients and have raised their hand and.
Enthusiastically interestingly, it's also been.
That'll be important for us as we're out selling new business and the marketplace not a lot of people have a robust.
Set of capabilities around in patient EMR outpatient and inpatient.
And patient.
<unk> outpatient billing all in one platform and the cloud and that's also been pretty well.
Like and received and my expectation there is that we're gonna.
Most more scoreboard and as they say and that part of our overall business on the on net new logo side, if you will for Sunrise.
Yeah.
Great. Thanks for that very helpful.
Second one from me more of the financial side.
You have discussed general revenue trends, but I was hoping you could comment further on retention performance and of course segment over the past year, and 2020, and and how you think that might trend in 'twenty and 'twenty one.
Well you.
You know if you recall, we started the year and 2020 talking about a bolus of attrition that we expected to absorb and 2020.
And remember that was a bolus that really came from decisions made several years previous.
So we talked about that and that clearly impacted our numbers and in absolute dollar terms.
And accounts for a lot of the year over year decline in revenue.
And so.
So with that backdrop, our experienced and 2020 in terms of you know.
How many people notified us perhaps if you will of their intent to leave and you know sometime in the future that number was very low in 'twenty and 'twenty and we feel good about that so to me that's the best leading indicator about where attrition is wrong.
And.
Sure.
We're doing our best to continue to drive our value proposition across and make our make retention is high and we can make it. So that you know that's that's why I guess I can tell you about it and then otherwise you know the number you know our expectation for attrition is reflected and the impact of attrition is reflected and the revenue outlook that was given.
Okay.
So when I think about the <unk>.
Fourth quarter performance and that core segment or the full year, you know kind of a similar rate of decline and again. So is that the right trend to think about in 2021 or or is there a.
And from the pandemic and you know and you kind of rebounded and utilization that we should think about there or maybe continued conservatism around that.
Well again, what I said was.
And we expected about 1 billion and a half and what that representatives in essence, we're expecting current kind of trends of revenue to continue so that's.
And that's a different message than we devote delivered last year. So last year at this time, we talked about a net.
Net decline in revenue because of attrition.
You're not hearing us say that this year, but we're saying you know there is and outlook that's kind of consistent with current trends.
Understood. Thanks for taking the questions.
Youre welcome.
Our next question comes from the line of Steve Halper with Cantor Fitzgerald. Please proceed with your question.
Sure one question and one follow up so sunrise.
Version 20.
Considered a normal upgrade for existing customers or is there a revenue opportunity there.
There are inc.
And our charges are for the month and license support fees based on historical relationship stays in many cases. That's included typically though the client asked US are we have sold.
Our upgrade center to help them move from where they are too.
Two.
This new upgrade and.
And we also at this time.
Really encourage clients to not only take the upgrade but make sure that they are taking full advantage of the features that they're looking at as well as to look at the rest of their portfolio to see if there's other things that there really shouldn't be looking at.
It's time to put in surgery time to put in E. D. It's time to put in Sunrise financial manager, but it's time to round out the portfolio. If you will and place all the chips and the center of the table. We have a lot of clients have gone all in as a result of and upgrade discussion and.
And that's helping us as we have spent the dollars and we spent over the course of the last eight plus years to really bolster that sunrise family of solutions and have a single patient record for all of the venues that most clients are operating in.
And that makes sense and one housekeeping question.
Given the strength.
Balance sheet.
What should we assume for interest expense for the for the year.
Yeah.
Ah well so Steve the only debt, we have outstanding our convertible bonds and the the cash interest rate on that is under 1%. So I think it's seven eighths of a point I think.
So that's your cash interest what also goes into the interest expense line item is some amortization from.
And.
Some of the renewal cost when we put the facility in place and some of the costs incurred to put the Sony and place get amortized. So there's some noncash there and.
And then if you look at our GAAP financials, there's also a noncash charge the way.
The accounting rules work for those convertible bonds and <unk>.
Correct.
Impute, an interest cost that's closer to your your straight debt rate for like a high yield offering.
And that's in GAAP, but we adjust that piece out for non-GAAP. So if you use the non-GAAP financials. It's just a combination of the cash number and then some amortization of deferred costs.
Got it.
Thanks, Steve.
As a reminder, it is star one to ask a question. Our next question comes from the line of Benjamin talks with Jefferies. Please proceed with your question.
Hi, there good.
Good afternoon, and thanks for the question.
First one I'm, just kind of around the client environment and the.
Selling environment.
How are you thinking about the.
The stimulus package talks and we're hearing about and and the potential impact on clients' financial positions.
What's kind of the discussions are here and the marketplace.
The clients benefited from that last year, and a relatively material way, they're interested this year and knowing what the payback for that is when that will be but.
But I also believe that this administration is going to be pretty keen to ensure that our people have access to healthcare and it'll be difficult to for individual citizens to have access to healthcare the healthcare organizations are not.
Healthy financially so my expectation will be that whether it is and stimulus package or not with these organizations will continue to do.
A bit better than they did last year, mostly because the environment and more predictable. This time last year. The pandemic was just starting to hit by March. It was fall on by April and May those are two of the worst.
U S healthcare month, and then it had ever been experienced because of all the fundamental shutdowns, including elective surgeries that moved and moved into June and July which were from two of the best months that some of our organizations that we are very close to had ever experienced so.
With the extent to the extent that we now have much more predictability around that and we don't have at least you know and knock on wood currently.
Body shutting down elective surgeries that that makes all day.
And at the core clinical component of what we do very important from a overall client health perspective.
They're all doing everything they can to consolidate costs, they're moving people around and they're doing the appropriate furloughs etcetera, and so they've all become.
Ordinarily attuned to be and being able to manage our costs, probably perhaps better than what they had historically and every single line item that they have is receiving a substantial amount of.
Scrutiny.
Got it got it that's helpful. Thank you.
Okay.
Sorry can you hear me.
Yes sure.
Oh, sorry, okay.
Jumping back to the airtime.
And just wanted to better understand.
What differentiates the day to assets I mean is it more.
I believe it's like Holy ambulatory focus does that the distinction kind of relative to larger datasets and the market I mean, there's some fears out there and claimed to have like a 1 billion covered lives are you targeting life science sub segments therapeutic specific therapeutic areas can you just help understand and help me understand kind of the.
And the Mark of the dataset.
Yeah.
Well listen it's a longitudinal clinical dataset.
She is very beneficial for us.
And it's life science companies and research companies are looking at why a condition and can manifest itself.
And that's number one number two it is largely not exclusively a coming from our ambulatory client base, but it's largely coming from there.
Most prescribing behavior happens and that setting as opposed to the inpatient setting so.
And that is also valuable certainly tour and life science companies.
Life Science companies.
Thirdly, it's about you know how and what what level of ubiquity do you have with the information and what can you do with it.
And how can you link it to claims information and data and isolation is has limited value and when it's linked to other information is where it starts to pick up its values significantly.
And so it's kind of a combination of all of that plus the infrastructure. We've built around it are the commercial relationships, we have collectively add to what it is and so I'm not sure how much more to tell you than that right now but.
From.
One of the one of the exclamation points I guess I always put on that is when you know you have something when your competitors turned to you and ask them to help them.
Get value out of their information.
Yeah.
And if I could just sneak one and real quick.
On the move on Microsoft Azure and the cloud you talked about the potential for clients to save some money on that are there internal cost synergies from that at all.
Yeah, well, it's as we get a critical mass of folks moving into and Azure environment and the answer is yes, there will be cost synergies.
In the in.
And the transition stage.
Not a lot, but but no there's no there's no duplicate a burden either so the real synergies will come and we get more of a critical mass there.
Yes.
But appreciate it.
Welcome.
Our next question comes from the line of Jin Manheimer with Paul and Securities. Please proceed with your question.
Hey, Thanks, gentlemen, and congrats on a strong finish to 2020 I appreciate the color around.
The margin profile earlier can you can you give us a long term top line growth outlook post the divestitures of the two businesses and the fourth quarter and then my follow up would be if you could share.
How many sunrise clients do you count as customers today and Thats both.
Mystic and globally. Thank you.
Yeah.
Ah well thanks for the thanks for the Oh.
Warm thoughts Jean and I appreciate that.
And I guess.
We are just reestablishing and outlook for revenue now I don't think we want to be and the business of long term growth rate projections and theres a lot of variables.
And that obviously you have to take into account there and.
We've talked about you know directionally the areas that should allow us to grow we've talked about the top of our nutrition, which is shrinking and that.
Gives you a better based on obviously to try and grow off of.
And so I think I'd just leave my comments on at that point or there for now and on that question gene.
Yes.
The I'm sorry, the second part of your question was.
<unk>.
And that related to sandy.
Your line is client base.
Yeah. So, let's let's just say this I mean, it's in the hundreds, okay and and I don't I don't really think we want to be any more specific than that.
Yeah.
Is that balanced across the U S and and overseas.
Clearly candidate and it includes it includes all yes.
But the split on international versus.
You are certainly skews heavily towards the U S. Though.
Great. Thank you.
You're welcome.
Thanks Gene.
That's all the time, we have for questions I'd like to hand, it back to Mr. Paul Black for closing remarks.
Thank you very much and thanks, everybody for joining us today to wrap up our progress from 2020 on multiple strategic and financial initiatives.
It's been quite gratifying and it was an otherwise very challenging year.
The breadth of relevant solutions strong balance sheet and sustainable cost structure position us.
<unk> and I'll provide allscripts with a significant competitive advantage and a path to.
And to long term value creation.
So very much for your time and interest today.
Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation you may disconnect. Your lines at this time and have a wonderful day.