Q1 2022 Allscripts Healthcare Solutions Inc Earnings Call
Right.
Greetings and welcome to the Allscripts first quarter 2022 earnings conference call.
At this time all participants are in a listen only mode.
A question 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.
I would now like to turn the call over to Johnny Johns Vice President of Investor Relations. Thank you you may begin.
Thank you very much good afternoon, and welcome to the Allscripts first quarter 2022 earnings conference call. Our speakers today are Paul Black and Red Colton, we will be 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 refer to our earnings release and SEC filings for more information regarding the risk factors that may affect our results.
Please reference the GAAP and non-GAAP financial statements as well as our non-GAAP tables in our earnings release that are available on our Investor relations website, and with that I'm going to hand, the call over to Paul Black.
Good afternoon, and thank you all for joining us today.
Roughly 10 years ago I stepped off the board as an independent director to take over the role CEO because I believed in the company our clients and most importantly, our people.
Over the past 10 years, we've seen unparalleled change.
Our industry as providers payers and pharma adopted the technology and solutions Allscripts helped pioneer.
This week's closing of the sale of our hospital large physician practices segment marks yet another dramatic change in our company's history and positions all of our stakeholders employees clients and investors for continued success.
As a company transforms and launches into its next evolution focusing on our paradigm business. It is a natural time for the next generation of leaders to step forward.
As such I have decided to step down as CEO .
Effective Friday may six.
Obviously, a difficult decision.
Leave knowing the company is stronger than ever.
And in the hands of an accomplished and proven leadership team I'm incredibly proud to announce Rick Poulton, whom all of you know will be assuming the CEO role effective tomorrow.
Rick has been an amazing partner to me and a staunch supporter of our clients employees and shareholders over the past 10 years.
We'll be working with Rick through the end of the second quarter to ensure a smooth transition and will remain an avid supporter of all scripts.
So in wrapping up my last earnings call I want to thank our investors for placing their confidence in allscripts. Thank our clients repeatedly choosing our technology and solutions and thank our employees for their undying dedication to serving our clients and making things all possible.
Let me now I'll turn the call over to Rick Poulton Allscripts President.
Wow Okay.
Paul for the very kind words.
It's truly been a pleasure to partner with see through all the highs and lows that.
We face together over the last 10 years.
Your leadership and confidence allowed us to accomplish a tremendous amount, particularly over the last two years and I will always appreciate both of your Mentorship and your friendship.
I don't know if it will be efficient Paul a golf club or a nice called Corona that youll have in one hand.
But I know your phone will always be in the other and so I look forward to many more phone calls together sharing thoughts on the challenges and opportunities that lie ahead.
I could share many funny stories from the last 10 years, but if I keep rambling does is going to start sounded like a eulogy.
And I know neither one of us want that so let me get back to the task at hand by just saying a big thank you.
Welcome.
Okay. So thanks to everybody in the audience for joining us today for our first quarter earnings call.
We are of course very pleased to have successfully closed the transaction with constellation software.
This transaction completes our multiyear journey to streamline and recapitalize the operations of the company.
It leaves us as a more focused differentiated company with significant growth opportunity strong margins and strong cash flow.
All underpinned by a very powerful balance sheet.
Yeah.
So while it is a little bitter sweet to say goodbye to more than 5000 of our colleagues. We know these associates and the clients are in good health are in a good home with herself and we wish them nothing but the best for the future.
I want to start by orienting you on how we have reported our first quarter numbers.
The results of the hospital and large physician practices business segment are reported in the financials as discontinued operations and you should expect to see this again in Q2 on both the P&L and cash flow statement for the stub period that we owned the business.
For the remaining continuing operations <unk> is our core operating entity, representing approximately 95% of our consolidated revenue.
But we continue to own a small unrelated product line that represents the remaining 5% of revenue.
Additionally, we have some stranded corporate costs from the transaction that we expect to whittle down a fair bit over the next several quarters.
And I also anticipate some other modest onetime costs that we will incur in the months ahead to complete the physical separation of the companies.
And so because of all that for at least the remainder of 2022, we will report both verity and performance as well as full consolidated results for the company.
Additionally, we've tried to streamline your review by putting all tables into the press release and scrapping the supplemental data package that we previously prepared each quarter well.
While at the same time, we provided we're providing more enhanced disclosures of both revenue and gross profit of our provider versus payer and life science business lines.
Our goal is simple and streamlined transparency and of course welcome any feedback once you have digested this information.
So with all of that framing let me get to the numbers. We were pleased with our start to 2022, we saw strong year over year growth in revenue gross profit and adjusted EBITDA as well as an overall improvement in margins earnings per share and free cash flow.
The <unk> business segment saw year over year revenue growth of 8% during the quarter, which was consistent with our expectations.
The <unk> provide our platform continues its growth trajectory, adding over 500, new practices and 6100 prescribing physicians during the quarter.
Additionally in April the U S Department of state selected our practice management patient registration and scheduling platform for deployment to over 200 designated health units housed within embassies and missions around the globe.
This project will expand on the cloud based EHR deployment that is already underway.
On the payer and life science side of Aerodyne, we continue to leverage our scaled provider network effectively using our proprietary datasets are clinical data exchange platform and point of care connectivity to create significant value for our payer and life science clients.
During the quarter, we went live with two more marketplace data partnerships, allowing us to continue to expand our reach and ease of use for our customers.
Yeah.
<unk> non-GAAP gross margin was 52, 2%, which was up 420 basis points year over year, reflecting good operating leverage and good balance of improvement between our end market revenue areas.
Further down the P&L, we continue to manage our operating expenses, while also investing for the future.
Youll see in our results on a GAAP basis, we incurred approximately $7 million in transaction related and legal costs, which we have excluded from our non-GAAP earnings calculation.
We will likely have a little more of this in Q2, but then I would expect to get back to clean reporting by Q3.
With only adjustments for purchase accounting amortization stock based compensation and a normalized tax rate representing a differences between our GAAP and non-GAAP reporting.
We held the nice operating leverage with Barrett I'm reporting 24% year over year adjusted EBITDA growth in the quarter and this resulted in adjusted EBITDA margin of 25, 8% an increase of 330 basis points year over year.
On a per share basis, we reported consolidated non-GAAP EPS of <unk> 13 per share, which was up 63% year over year, reflecting our growing earnings as well as our aggressive share repurchases over the last year.
We continued this in the first quarter repurchasing $50 million of common stock through open market through open market repurchases.
Now I want to turn to cash.
An excellent quarter of free cash flow generation as we generated $35 million of cash flow from continuing operations and $25 million of free cash flow.
I also want to point out that accounting rules governing what is classified as continuing operations versus discontinued operations creates a little bit of confusion with what our true cash cash position was at the end of the quarter.
As you can see at the bottom of table three of the press release.
There was more than $68 million of cash sitting on the books of the discontinued operation at the end of the quarter.
We received all of that cash on top of the acquisition price. So our balance sheet net debt position at the end of the quarter appears much higher than it really was.
Finally last week, we announced that we amended our credit agreement to extend maturity of the facility for an additional five years as well as secured improved pricing.
The amendment consists of a $700 million senior secured revolving facility with significant flexibility to expand as necessary and supportive paradigms growth trajectory.
So now turning to our outlook for 2022, we are maintaining our outlook and expect that <unk> revenue to grow in a range of 6% to 7% year over year.
<unk> adjusted EBITDA, we expect to grow in a range of 10% to 15% year over year.
And we expect that our consolidated free cash flow from continuing operations to be in a range of $110 million to $120 million.
So to wrap up we feel 2022 got off to a strong start and we look forward to maintaining that momentum in our new streamline company now.
Now I'd like to open up the call for any questions.
Thank you we will now be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad.
Confirmation tone will indicate your line is in the question queue.
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Okay.
Our first question comes from the line of Sean Dodge with RBC capital markets. Please proceed with your questions.
Yeah. Thanks, good afternoon.
I'll start by saying congratulations to you call for 10.
10 years in and congratulations to Rick.
You as well.
Thanks, Johnny cash flow guidance.
Youre welcome the free cash flow guidance for <unk> $110 million to $120 million of the year.
Can we think about that as being a good.
A representation of the run rate going forward.
I'm interpreting this correctly it was $24 $5 million of free cash flow attributable to bare die continuing up in the quarter isn't it.
Is that a good kind of run rate going forward or is there something you'd point out there has been kind of noisy.
Contributing.
Yes.
Well first off Sean Thanks for the kind words.
With respect to free cash flow I want to just be clear that guidance is for the consolidated entity. Okay. So that actually reflects.
What we expect in terms of some of the costs and whatnot that I referred to.
The consolidated level.
And so as to is that an unusual number two I think thats part of our <unk>.
Steady state, yes, there was nothing unusual in the quarter.
And we're not really counting on anything unusual for the year. So.
We think thats reflective of the business and obviously as we look to grow the business I would hope that would continue to grow as well.
Okay and then.
On the margins, you've said payer and life Sciences.
<unk> oriented offerings are going to grow faster than the provider business.
Gross margins on on each of those businesses.
I guess, what if anything is that revenue mix shift you're going to do to margins gross margins overtime.
Yes actually we.
I know, we just sent a press release out not long for the call. So I'm sure you haven't had a full time to digest, but youll see.
With some of the tables, we've augmented to the press release.
The answer to a lot of that question, Sean with respect outbreaks down.
In particular, I would point you towards tables, nine and 10.
We give detail at the revenue line item and gross profit and gross margin line item.
Short answer though to your question is you'll see when you get a chance to digest that that the difference in margins between the provider side and the pair life science side are not are not very large they are actually pretty comparable to each other so as revenue mix changes.
I don't think we will get we won't see a lot from the revenue mix I think we will instead see improvement come from continued operating leverage.
Okay.
Very helpful. Thanks again.
Great. Thanks, Ron Thanks, Sean.
Thank you. Our next question is coming from the line of Jeff Garrow with Piper Sandler. Please proceed with your questions.
Yes, good afternoon, and thanks for taking the questions and I'll Echo the congrats to Paul and whatever.
Whatever next steps are ahead and to Ric for stepping into the CEO overall.
So wanted to ask about revenue on the <unk>.
Here in life Science cohort curious what headwinds and tailwind that piece of the business saw in the first quarter and what can drive an inflection up towards the 20% to 25% growth expectation for the year.
Yeah.
Thanks for the wishes Jeff.
The payer and life Science area first of all there's definitely some seasonality youll see that youll see that if you look backwards and we will continue to experience that comp going forward.
I would say this quarter was.
A little slow we had we had added some new folks to our sales team effort there and so we're looking forward to a little more momentum later in the year.
But.
Yeah.
That there is not a really a seasonal story beyond that.
So I mean, we're still confident in those numbers I think we will see those numbers rise in Q2 that year over year growth, but.
The real power of the growth that we had forecast it will come as we continue to build momentum through the year.
Great.
Maybe dive a little more on the details there now that we have more disclosure on the revenue I'm just curious in terms of product mix for the payer and life science revenue contribution.
Don't want to overlook the common technology elements, then that you have a portfolio of products.
I think a growing set of use cases, but are there any particular products that you would call out is just.
Key drivers that investors should focus on.
Yes.
You can see the total of it all.
Jeff as you know about 20% of revenue and we expect that mix to shift and I think you've got you've picked that up from us by now, but the numbers are not large and so percentages can change a lot with even.
Singular transactions that happen. So I think we're not going to get into really product line level details at least not yet as we look ahead to.
I think later in the year, we're going to think about doing an investor day and when we do that will we will take a little deeper dive.
Oh, great refer to more to come there one last one from me more on the reporting side of things.
Lots of Digest, then not surprising.
And not see a bookings number because of potential lack of comparability there, but I'm just curious what we can expect going forward there and also on backlog, whether that'll show up in the 10-Q and what the right way might be to interpret that number if it will be in there.
The business changed a lot I don't backlog, where we will probably not go get into because it's not a business that has long term contracts the way the hospital side did and so backlog doesn't really.
Backlog changes don't to me arent as good a predictor of of stable revenue ahead.
But that's our current thinking on that bookings.
We will bring back into the fold.
Been a busy week and.
Didn't I didn't actually really intend to leave that out to be candid with you. So we will we'll work on that and we'll get we'll get that back in here next quarter.
Great to hear thanks again.
Thanks.
Thank you. Our next question comes from the line of Stephanie Davis with <unk> Securities. Please proceed with your questions.
Hi, guys. Thank you for taking my question Paul Congrats on retirement, Rick Congrats on the new title others there.
Thank you Stefan.
How should we think about the CFO is that something you guys are going to actively look to fail or are we just declaring bankruptcy premium at all for that.
Yeah.
We're going after the embedded well did he sets you up for that question.
Yeah.
Right exactly blessing, if he doesn't do that very often in the flesh that sounds like Paul.
We we have.
We will be making some announcements about the rest of the leadership team soon.
Stephanie.
That will that will come out probably later today actually.
K already so.
Legal counsel is telling me it's already in the 8-K, that's coming out. So we have we're promoting from within to fill the CFO role.
And I look forward to introducing you.
Passing that at the time, but we.
We'll be here the goal of all of this is to have very smooth transitions.
So just as Paul will.
Worked with me over the next couple of months to make sure we try not to Miss anything at the top I will continue to.
Help as much as necessary to keep make sure we have the financial reporting consistent and everybody understands what we're doing.
Hey, Praful like in prior to the announcement on the strategy side I'd be curious like you guys are interested in focusing in on for the bare die in business now that you can hone in on entirely is there any.
Any efforts or any strategies you wanted to really target that you have.
Has your full attention.
Yes, I mean, I think Stephanie.
The Big question, obviously will be and this will be something we'll discuss with our board as well, but it will be.
We have a nice organic growth that we've shared our expectations with already but the question is should.
Should we augment that should we.
Accelerate that through.
Potentially some acquisitions.
But we haven't we have a lot to do organically right now and we have a good runway. So that's the immediate focus but as we as we look out ahead, we will have to entertain that certainly we have the balance sheet capacity.
To do whatever we want.
Yeah.
I think in terms of specific strategy Stefan had kind of probably differ a little bit. The same answer I gave Jeff earlier, we're going to look to do at Investor Day later in the year.
And when we do that I think will get into a little more depth.
How we're making money today, and where we expect to take that going forward.
Alright, it sounds like a plan looking forward to it and congrats again.
Thanks, Good afternoon.
Thank you. Our next question comes from the line of George Hill with Deutsche Bank. Please proceed with your questions.
Hi, This is <unk> on behalf of George Hill.
So my question is are you seeing the slowdown in fundraising and the early stage biotech market have any impact on demand advert IDIOM or are you seeing any changes in demand from Seattle with your partner.
Yes.
Can I ask you repeat the first part of the question.
You cut out a little bit.
Reduced funding.
I lost you after that yes.
I'm, saying are you see any slowdown.
Are you seeing the slowdown in the early stage biotech market have any impact on the demand that vetted him or her.
Are you seeing any change in demand from Seattle, if you're partnering.
Okay.
We're not seeing any any real impact from early stage biotech companies and any funding issues. They have their that's not really ever been our target audience, we definitely work with <unk>.
More mature much.
Much larger pharma companies and as for Crows. They also tend to be quite large as well. So there's these are not companies dependent on new infusions of capital.
Have we seen a slowdown now no I mean, I think the market continues to operate where we expect it to.
And.
Well I think to me again, the best evidence of that is in the results we had for the quarter.
Okay.
And then another one from me.
Sure Moshe.
Enterprise EMR assets does this team visiting nurses other EMR vendors to partner with you could beat that to be unique.
Within the life science space.
Yeah.
I think Thats, a fair question and we will see what the answer that becomes I mean, we have partnerships today with.
Some that are might be viewed as competitive in some aspects of our business.
I would point out to you that I think health care is full of.
Co-opetition, if you will if thats a word there is a lot of.
Folks that are.
On one in some aspects of their business compete in other aspects of their business. They partner and so I don't think thats, an unusual dynamic and.
So far our partnership agreements I think are quite successful and my hope is that we will continue to expand those.
Alright, okay. Thank you so much.
Thank you.
Okay.
Thank you. Our next question is coming from the line of Michael Cherny with Bank of America. Please proceed with your questions.
Hey, This is Allen Lutz in for Mike I wanted to talk about the <unk> touch point media business really the I guess the advertising for you guys.
I'm not sure how big it is but can you talk about the uptake with big pharma and then how fast can it grow and is this business material to your top line at the moment.
Well.
The answer to all of them I guess are yes, you see a lot of that media type business or at least I think that's what you're referring to in reflecting the seasonality so that tends to happen it.
Tends to be a bolus in later in the year.
We our outlook right now is that we'll have another strong year there.
But we do business with.
Very large pharma pharma companies and so the $1.
They can they can be significant.
You can see again, I guess significance always beauties in the eyes of the holder and again I'll start by saying I'll remind you that 80% of our revenue today is coming from health care providers the balance coming from <unk>.
And life science companies, but we do expect the parent life science segment of our business to grow faster and that growth is certainly a part of that growth is coming off of that media platform absolutely.
Thanks, and then Rick you mentioned a comment on the net debt that I missed what's the right net debt number that we should think about.
If you look at the balance sheet I would just.
I think the right way to look at it is add another $68 million of cash effectively to what's on the balance sheet.
<unk> cash and then you can do the math off of that.
Great. Thank you very much extra then that gets you to a net debt of around $230 million.
Thank you there are no further questions at this time I would now like to turn the call back over to Paul Black for any closing comments.
Thanks, everybody for your time today and great to be at the helm of this great company is even greater to see the leadership step up and the ability to have a no brainer choice. If you will a no brainer choice for the successor to run this company.
And.
I'm thrilled to work with everybody on this call for the last past 10 years to encourage us to ask tough questions and importantly, as we've always tried to do we try to reward your trust and confidence in us with performance.
And certainly over the certainly over the last 24 months your forbearance and your patience with US has paid off. So we're also quite proud of that so thank you very much. Thank you for the nice comments and I hope that you all a final do goodbye.
This does conclude today's teleconference. We appreciate your participation you may disconnect your lines at this time.
Thank you worry of the rest of your day.
[music].
[music].
Greetings and welcome to the Allscripts first quarter 2022 earnings conference call.
At this time all participants are in a listen only mode.
<unk> and answer session will follow the formal presentation.
What you require operator assistance during the conference. Please press star zero on your telephone keypad.
As a reminder, this conference is being recorded.
I would now like to turn the call over to Johnny Johns Vice President of Investor Relations. Thank you you may begin.
Thank you very much good afternoon, and welcome to the Allscripts first quarter 2022 earnings conference call. Our speakers today are Paul Black and Red color, we will be 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 refer to our earnings release and SEC filings for more information regarding the risk factors that may affect our result.
Please reference the GAAP and non-GAAP financial statements as well as our non-GAAP tables in our earnings release that are available on our Investor relations website, and with that I'm going to hand, the call over to Paul Black.
Gentlemen, good afternoon, and thank you all for joining us today.
Roughly 10 years ago I stepped off the board as an independent director to take over the role CEO because I believe in our company our clients and most importantly, our people.
Over the past 10 years, we've seen unparalleled change.
Our industry as providers payers and pharma adopted the technology and solutions all scripts helped pioneer.
Technology and solutions and thank our employees for their undying dedication to serving our clients and making things all possible.
Let me know I'll turn the call over to Rick Bolton Allscripts President.
Wow Okay.
Paul for the very kind words.
It's truly been a pleasure to partner with you through all the highs and lows.
That we face together over the last 10 years.
Your leadership and confidence allowed us to accomplish a tremendous amount, particularly over the last two years and I will always appreciate both your mentorship and your friendship.
I don't know if it will be a fishing pole, a golf club or an ice cold Corona that you'll have in one hand.
But I know your phone will always be in the other and so I look forward to many more phone calls together sharing thoughts on the challenges and opportunities that lie ahead.
I could share many funny stories from the last 10 years, but if I keep rambling and this is going to start sounded like a eulogy.
And I know neither one of us want that so let me get back to the task at hand by just saying a big thank you.
Okay. So thanks to everybody in the audience for joining us today for our first quarter earnings call.
We are of course very pleased to have successfully close the transaction with constellations software.
This transaction completes a multiyear journey to streamline and recapitalize the operations of the company.
It leaves us as a more focused differentiated company with significant growth opportunity strong margins and strong cash flow.
All underpinned by a very powerful balance sheet.
So while it is a little bitter sweet to say goodbye to more than 5000 of our colleagues. We know these associates and the clients darn. Good are in a good home with herself and we wish them nothing but the best for the future.
I wanted to start by orienting you on how we have reported our first quarter numbers.
The results of the hospital and large physician practices business segment are reported in the financials as discontinued operations and you should expect to see this again in Q2 on both the P&L in a cash flow statement for the stub period that we own the business.
For the remaining continuing operations Veradigm is our core operating entity, representing approximately 95% of our consolidated revenue.
But we continue to own a small unrelated product line that represents the remaining five per cent of revenue.
Additionally, we have some stranded corporate costs from the transaction that we expect to whittle down a fair bit over the next several quarters.
And I also anticipate some other modest one time costs that we will incur in the months ahead to complete the physical separation of the companies.
And so because of all that for at least the remainder of 2022, we will report both veradigm performance as well as full consolidated results for the company.
Additionally, we have tried to streamline your review by putting all tables into the press release and scrapping the supplemental data package that we previously prepared each quarter while.
While at the same time, we provided we are providing more enhanced disclosures of both revenue and gross profit of our provider versus pay or in life science business lines.
Our goal is simple and streamlined transparency and of course welcome any feedback once you have digested this information.
So with all that framing let me get to the numbers. We were pleased with our start to 2022, we saw strong year over year growth in revenue gross profit and adjusted EBITDA as well as an overall improvement in margins earnings per share and free cash flow.
The Veradigm business segments saw year over year revenue growth of 8% during the quarter, which was consistent with our expectations.
The Veradigm provide our platform continues its growth trajectory, adding over 500, new practices and 6100 prescribing physicians during the quarter.
Additionally in April the U S Department of state selected our practice management patient registration and scheduling platform for deployment to over 200 designated health units housed within embassies and missions around the globe.
This project will expand on the cloud based EHR deployments that is already underway.
On the pair in life science side of Veradigm, we continue to leverage our scaled provider network effectively using our proprietary datasets are clinical data exchange platform and point of care connectivity to create significant value for our payer in life science clients.
During the quarter, we went live with two more marketplace data partnerships, allowing us to continue to expand our reach and ease of use for our customers.
Veradigm non-GAAP gross margin was $52, 2%, which was up 420 basis points year over year, reflecting good operating leverage and good balance of improvement between our end market revenue areas.
Further down the P&L, we continue to manage our operating expenses, while also investing for the future.
You'll see in our results that on a gap basis, we incurred approximately $7 million in transaction related and legal costs, which we have excluded from our non-GAAP earnings calculation.
We will likely have a little more of this in queue too, but then I would expect to get back to clean reporting by Q3 with only adjustments for purchase accounting amortization stock based compensation and a normalised tax rate representing the differences between our gap and non-GAAP recording.
We held the nice operating leverage with Veradigm reporting 24% year over year, adjusted EBITDA growth quarter and this resulted in adjusted EBITDA margin of 25.8% an increase of 330 basis points year over year.
On a per share basis, we reported consolidated non-GAAP EPS of 13 per share, which was up 63% year over year, reflecting our growing earnings as well as our aggressive share repurchases over the last year.
We continued this in the first quarter repurchasing $50 million of common stock through open market trend through open market repurchases.
Now I want to turn to cash we.
We had an excellent quarter of free cash flow generation as we generated $35 million a cash flow from continuing operations and $25 million a free cash flow.
I also want to point out that accounting rules governing what is classified as continuing operations versus discontinued operations creates a little bit of confusion with what our true cash cash position was at the end of the quarter.
As you can see at the bottom of table three of the press release.
There was more than $68 million of cash sitting on the books of the discontinued operation at the end of the quarter.
We received all of that cash on top of the acquisition price. So our balance sheet net debt position at the end of the quarter appears much higher than it really was.
Finally last week, we announced that we amended our credit agreement to extend maturity of the facility for additional five years as well as security improved pricing.
The amendment consists of a $700 million senior secured revolving facility with significant flexibility to expand as necessary and supportive aerodyne's growth trajectory.
So now turning to our outlook for 2022, we are maintaining our outlook and expect that veradigm revenue to grow in a range of 6% to 7% year over year.
Veradigm adjusted EBITDA, we expect to grow in a range of 10% to 15% year over year.
And we expect that our consolidated free cash flow from continuing operations to be in a range of $110 million to $120 million.
So to wrap up we feel 2022 got off to a strong start and we look forward to maintaining that momentum and our new streamlined company now.
I would like to open up the call for any questions.
Thank you we will not be conducting a question and answer session. You would like to ask a question. Please press star one on your telephone keypad.
Confirmation total indicate your line isn't the question queue.
Press start to if you would like to remove your question from the queue for participants using speaker equipment and may be necessary to pick up your handset before pressing the <unk> one moment. Please while we call for your questions.
Our first question comes from the line of Sean Dodge with RBC capital markets. Please proceed with your questions.
Yeah good afternoon.
I'll start by saying.
Congratulations you call for.
10 years and and congratulations to.
You as well.
Thanks, Johnny cash flow guidance.
You're welcome the free cash flow guidance for Veradigm 110, $120 million a year.
Can we think about that as being a good.
Representation of the run rate going forward, if I'm interpreting this correct.
24, and a half a million dollars of free cash flow attributable bear darn.
Continuing up.
In the quarters isn't it.
That a good kind of run rate going forward or is there something you'd point out there has been kind of noisy.
Contributing.
Yeah.
Well first off shot thanks for the kind words.
With respect to free cash flow I wanted to just be clear that guidance is for the consolidated entity. Okay. So that actually reflects.
What we expect in terms of some of the costs and whatnot that I referred to.
The consolidated level.
And so as to is that an unusual number two I think that's part of our steady state. Yes, there was nothing unusual in the quarter.
And we're not really counting on anything unusual for the year. So.
We think that's reflective of the business and obviously as we look to grow the business I would hope that would continue to grow as well.
Okay and then.
On on the margins, you've said payer and life Sciences.
Those oriented offerings are gonna grow faster than the provider business.
Gross margins on on each of those businesses compare I guess, what if anything is is that revenue mix shift you're going to do to margins gross margins over time.
Yeah actually we I know, we just sent the press release out not long before the call. So I'm sure you're having a full time to digest, but you'll see.
With some of the tables, we've augmented to the press release.
The answer to a lot of that question, Sean with respect outbreaks down.
In particular, I would point you towards tables, nine and 10.
Where we give detail at the revenue line item in gross profit and gross margin line item.
The short answer though to your question is you'll see when you get a chance to digest that that the difference in margins between the provider side and the pair life science side are not are not very large they're actually pretty comparable to each other so as revenue mix changes.
I don't think we'll get we won't see a lot from the revenue mix I think will instead see improvement come from continued operating leverage.
Okay. That's very helpful. Thanks, Yeah.
Alright, Thanks, John Thanks, John .
Thank you. Our next question is coming from the line of Jeff Gara with Piper Sandwich. Please proceed with your questions.
Yeah, good afternoon, and thanks for taking the questions and a lack of the congrats to Paul and whatever next steps are ahead and to Rick for stepping into the senior overall.
<unk> wanted to ask about revenue on the the pier and life science cohort curious, what what headwinds and tailwind that piece of the business on the first quarter and what can drive uninfected up towards the 20% to 25 per cent growth expectation for the year.
Yeah.
Thanks for the wishes Jeff.
The parent life Science area first of all there's definitely some seasonality you'll see that you see that if you look backwards and we will continue to experience that cup going forward.
I would say the quarter was.
A little slow we had we had added some new folks to our sales team effort there and so we're looking forward to a little more momentum later in the year.
But.
That there's not a really a seasonal story beyond that Jeff. So I mean, we're still confident in those numbers I think we'll see those numbers rise and Q2 that year over year growth, but.
The the real power of the growth that we it forecast it'll come.
As we continue to build momentum through the year.
Great Great and maybe a diver little more of the details that we have more disclosure on the revenue I'm I'm just curious in terms of product mix for the payer in life science revenue contribution.
Don't want to overlook the the common technology elements. Then that you know you you have a portfolio of products and I think a growing set of use cases, but are there any particular products that that you would call out is key.
T drivers that investors should focus on.
Yeah, I mean, you can see that the total of it all.
Jeff is about 10% of revenue and we expect that mixed to shift and I think you've you've got you've picked that up from us by now, but the numbers are not large and so percentages can change a lot with even.
Singular transactions that happen.
So I think we're not going to get into really product line level details at.
At least not yet as we look ahead to.
I think later in the year, we're gonna think about doing an investor day, and when we do that we'll we'll take a little deeper dive.
Oh, great <unk> refer to more to come there one last one from me more of the reporting side of things.
Lots of digest and not surprising too.
Not C. A book is number because of potential lack of compare ability. There. So I'm just curious what what we can expect going forward there and also backlog whether that will show up in the 10-Q and what the right way might be to interpret that number if it'll be in there.
The business changed a lot I don't backlog were will probably not.
Go get into because it's not a business that has long term contracts the way the hospital side did and so backlog doesn't really.
Backlog changes don't add to me aren't as good a predictor of or of stable revenue ahead, but that's that's our current thinking of that bookings, we will bring back into the <unk>. It's been a busy week and we didn't I didn't actually really intend to leave that out to be candid with you so well.
We'll work on that and we'll get we'll get that back in here next quarter.
Great to hear thanks again.
Thanks.
Thank you are next questions come from the line, that's Stephanie Davis with SBB Securities. Please proceed with your questions.
Okay. Thank you for taking my questions pile Congrats on my time, Rick Congrats on the new title other there.
Thank you Stephanie how how.
How should we think about the C. F. O is that something you guys are going to activate doctor fail or are we just declaring bankruptcy premier I'm all set.
[laughter], we're going to have to put that in quotes did he set you up for that.
[laughter].
Right exactly blessing and he doesn't do that very often.
That sounds like Paul.
We we have we will be making some announcements about the rest of the leadership team soon Stephanie and.
That will that will come out probably later today actually Oh, it's in da K already so my legal counsel is telling me it's already in the 8-K, that's coming out. So we have that we're promoting from within the filter CFO role.
And I'll look forward to introducing you and passing it at the time, but.
We'll be here the goal of all of this is to have very smooth transitions.
So just as Paul will.
Work with me over the next couple of months to make sure we try not to Miss anything at the top I will continue to you know help.
Help as much as necessary to make sure we have the financial reporting consistent and everybody understands what we're doing.
Okay, very awful that can practically announcement on the strategy side I'd be curious about you guys are interested in focusing in on for the Veradigm business now that you can <unk> entirely is there any.
Any efforts or any strategy. If you want I really tried to add that you have has your full attention.
Yeah, I mean, I think Stephanie.
The Big question, obviously will be and this will be something we will discuss with our board as well but.
We have a nice organic growth that we've shared our expectations with already but the question is.
Should we augment that should we.
Accelerate that through potentially some acquisitions.
But we have we have a lot to do organically right now and we have a good runway. So that's the immediate focus but as.
As we look out ahead, we will have to entertain that certainly we have the balance sheet capacity.
To do whatever we want.
I think we.
Terms of specific strategy stuffing I'd kinda, probably differ a little bit the same answer I gave Jeff Earlier's, we're going to look to do an investor day later in the year and when we do that I think will get into a little more depth of.
How were making money today, and where we expect to take that going forward.
Alright sounds like a plan that can <unk> and congrats again <unk>.
Thanks afternoon.
Thank you. Our next question is coming from the line of Georgia with Deutsche Bank. Please proceed with your questions.
Hi, This is patty on behalf of <unk>.
So my question is are you seeing this slowdown in fundraising and the early stage biotech market have any impact on <unk> or Ah you see any changes in demand from Seattle with your partner.
Could I ask you repeat the first part of the question.
You cut out a little bit.
Reduced funding.
And I lost you after that yeah, I'm, saying I you see any slowed down.
Sorry are you seeing this lower down in the early speed biotech market have any impact on the day minded that again.
Are you seeing any team can demand from Seattle with your partner.
We're not seeing any any real impact from early stage biotech companies and any funding issues. They have their that's not really ever been our target audience would definitely work with more mature much larger pharma companies and as for Cro's. They also tend to.
Quite large as well so there's these are not companies dependent on new infusions of capital.
Have we seen a slowdown no no I mean, I think the market continues to operate where we expect it to.
And well I think to me again, the best evidence of that is in the results we have for the corner.
Okay and another one for me.
Now that you <unk> be your enterprise M I acids, <unk> repeat that to be.
Within the lifetime space.
Yeah, I think that's a fair question and and we'll see what the answer that becomes I mean, we have partnerships today with some that are you know might be viewed as competitive in some aspects of our business.
I would point out too that I think health care is full of.
Coopetition, if you're well if that's a word there's a lot of.
Folks that are.
On one and some aspects of their business compete in other aspects of their business day partner and so I don't think that's an unusual dynamic and so far our partnership agreements I think are quite successful and my hope is that we will continue to expand those.
Alright gotcha. Thank you so much.
Thank you [laughter].
Thank you are next questions come from the line of Michael Cherney with Bank of America. Please proceed with your questions.
Hey, this is Alan Watts from Mike I wanted to talk about the Veradigm Touchpoint media business really the I guess the advertising pre guys I'm.
I'm not sure how big it is but can you talk about the uptake with big pharma and then how fast can it grow and is this business material to your top line at the moment.
Well.
The answer to all of them I guess, our yes, you see a lot of that media type business or at least I think that's how you refer to.
In reflecting the seasonality so that tends to happen.
Tends to be abolished and later in the year.
Where our outlook right now is that we'll have another strong year there.
But we do business with.
Very large farmer farmer companies and so the dollars.
They they they can be significant.
Again, I guess significance always beauty's in the either the holder and again I'll start by saying remind you that 80% of our revenue today is coming from health care providers balanced coming from <unk>.
<unk> and life science companies, but we do expect the parent life science segment of our business to grow faster and that growth is certainly a part of that growth is coming off of that media platform absolutely.
Thanks, and then Rick you mentioned comment on the net debt that I missed what's the right net number that we should think about.
If you look at the balance sheet I would just you know I I think the right way to look at it is add another $68 million of cash effectively to what's on the balance sheet.
That is cash and then you can do the math off of that.
Great. Thank you very much actually doing that to get you to net debt of around $230 million.
Thank you there are no further questions at this time I would now I'd like to turn the call back over Paul Black for any closing comments.
Thanks, everybody for your time today, it's been great to be at the helm with this great company is even greater to see the leadership step up and the ability to have a no brainer choice. If you will a no brainer choice for the successor to run this company [laughter] and I I'm thrilled to work with everybody on this call.
Call for the last past 10 years, you fell to encourage us to ask tough questions and importantly, as we've always tried to do we tried to reward your trust and confidence in us with performance and certainly certainly over the last 24 months your forbearance and your patience with US is paid off so we're also.
Quite proud of that thank you very much. Thank you for the nice comments and I will bid you all a final Ado Goodbye.
This does conclude today's teleconference. We appreciate your participation you may disconnect your lines at this time.
Enjoy the rest of your day.