Q2 2019 Earnings Call
Greetings and welcome to all scripts second quarter 2019 earnings Conference call.
At this time all participants are in 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.
Please note this conference is being recorded.
I would now like to turn the conference over to your host Stephanie She'll Sting. Thank you you may begin.
Thank you very much good afternoon, and welcome to the Allscripts second quarter 2019 earnings Conference call.
Our speakers today are all Black Allscripts, Chief Executive Officer, Rick Poulton, our President and Dennis <unk>, Our Chief Financial Officer.
We'll be making a number of forward looking statements during the presentation and the Q and a part of the call. These statements are based on current expectations and involve a number of risks and uncertainties that can cause or outdoor 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 on FCC filings for more detailed descriptions.
The risk factors that may affect our results.
Please also reference the GAAP and non-GAAP financial statements as well as the non-GAAP tables in our earnings release and the supplemental workbook that are both available on our Investor relations website and with that forget to hand, the call over to Rick Poulton.
Okay. Thanks, Stephanie good afternoon, everybody. Thanks for joining our call today.
As always we appreciate your time and your interest in Allscripts.
We reported a strong second quarter with bookings of 276 million, which was up 31% year over year.
Our pipeline of new deals remain strong as well and so in conjunction with our strong first half performance, we are raising our outlook for 2019 bookings by $125 million.
At the midpoint of the new guidance range compared to the midpoint of the old branch.
Although conversion of backlog to revenue it was a little slower than we had hoped for during the quarter. We Nevertheless had nice sequential revenue growth from Q1.
And we expect this quarterly sequential growth to continue throughout the balance of the year.
Dennis will provide more details on financial performance and our outlook later in the call.
Now, let me highlight some specific trends in client activity during the quarter.
In the hospital and health systems market, we had a very strong quarter from a bookings perspective as as we saw strength across both the sunrise and paragon customer basis.
Specifically, we had two separate paragon accounts expand their footprint to include the integrated ambulatory module.
And with that decision also signed a seven year extensions.
We are proud of the progress we've made with Paragon base at nearly 20 clients have now signed onto long term agreements since we acquired the business for Mckesson in late 2017.
While we have experienced some anticipated attrition in the Paragon base from clients, who had already made a decision before we bought the business.
Our investments have allowed us to retain the vast majority of clients and we look forward to continue serving this client base.
With our Sunrise solution, we acquired two new to brand new clients during the quarter. Both the result of winning competitive proposal processes.
The first San Gore go New York is a California based community hospital, who is migrating to full clinical and revenue cycle with us.
And the second is an international win at St. Luke's Medical center in the Philippines.
Saint Louis is a large academic medical facility with more than 1100 beds and is the leading most respected healthcare institution in the country.
We are thrilled to have them as our anchor client in the Philippines and as they join the Allscripts family. It further cements our industry leadership position in the Pacific rim.
In addition to these new clients, we had several significant sunrise account expansion expansions during the quarter.
Main general went all in with us to add the integrated ambulatory module.
As well as the entire suite of carry operative solutions and patient engagement solutions.
We also had a major expansion with an academic medical center in New York.
To conclude our suite of carry operative solutions and mobility solutions.
Finally, and perhaps most importantly, we made significant progress during the quarter with our largest customer.
We are in advanced stages of negotiations with Northwell on both extending and expanding our relationship with them.
And we expect these negotiations to conclude before the end of the year.
So now moving over to the ambulatory market. We continued the momentum we saw in the first quarter with strong demand for revenue cycle management services.
We added 10, new revenue cycle clients in in the second quarter and to date Allscripts revenue cycle management services covers approximately 6000 providers representing over $2 billion in annual billings.
We also continue to see success selling health credit to our ambulatory base to clients and we closed 24, new health grid deals during the second quarter.
So looking ahead in this market our pipeline for new revenue cycle services opportunities health grid, Upsells and new clinical deals all remain strong.
Moving to Maritime let me start by making a few comments about our announced agreement in principle with the department of Justice related to practice fees.
As you know from our previous SEC filings. The D.R.J. began investigations into certain practices of practice fusion before we acquired the business early last year.
These investigations had many similarities to investigations that have either been settled or remain active with many of our industry competitors.
After acquiring practice fusion the D.R.J. investigations continue to expand and required expanding levels of resources from us to support.
The main focus has been on actions that occurred prior to our ownership and thus we are highly motivated to reach an accord with the D.O.J. as soon as possible.
So that we can put this chapter behind us and focus our focus our team entirely on serving our clients and realizing the significant opportunity that paradigm has to bring value to the payer and life science end markets.
So while the amount we have agreed to pay of $145 million is not insignificant. It is in line with other settlements in the industry and we are happy to have reached the agreement in principle.
We will work with the D.R.J. to finalize the details of the settlement over the next coming on.
And we expect to have recoveries from a variety of third parties that will help offset a portion of the amounts we have agreed to pay the government.
So with that covered let me remind you that our strategy of paradigm remains pursuing additional opportunities to add data to our industry, leading dataset and building new workflows and analytic solutions for life science companies and risk bearing entities.
We are creating one of the industry leader in solving key problems for payer and life science clients.
And our success to date positions us well to deliver on the long term growth outlook, we shared for paradigm earlier this year.
We continue to pursue additional opportunities to make our dataset even more robust.
As an example of this we recently acquired the American College of Cardiology is cardiology and diabetes Red registry assets.
This will extend paradigms. He HR enabled ambulatory research network to create a large scale chronic disease network with more than 250000, clinicians and 150 million patients in the United States.
Our robust dataset, which includes the Nextgen ambulatory data allows us to provide insights and analytics to these clients and affect change at the point of care, which is really the key competitive advantage for paradigm.
The integration of next Gen data is processing. According to plan and we expect to start recognizing revenue from the partnership during the fourth quarter of 2019.
So with that I'll now turn the call back over to Dennis to go through more financial details for the second quarter and our outlook for the balance of the year.
Great. Thanks, Rick.
As we review this quarters results. Please reference the schedules in the earnings release as well as the supplemental data workbook available on the Allscripts Investor Relations website.
For clarity purposes, my comments on the income statement will largely focused on non-GAAP metrics unless otherwise stated.
Full reconciliations of GAAP and non-GAAP figures are available in the earnings release.
Now, let's turn to the results for the second quarter.
Bookings were strong in the quarter totaling $276 million up 31% year over year as old momentum from the first quarter continued.
Our reported backlog now stands at $3.9 billion.
This reflects both the impact of booking as well as renewals in the quarter that are not included in the bookings metric.
Turning to the income statement second quarter, GAAP, and non-GAAP revenue totaled $445 million within our guidance range of 445 to 455 million.
As demonstrated with our Q3 and Q4 revenue guidance, we expect our year over year organic revenue growth to improve in the back half of 2019.
As we benefit from the strong bookings that we've experienced in the first half of the year.
While there may be slight variations recurring revenue from quarter to quarter. We continue to expect recurring revenue to trend in the high 70% to low 80% range for 2019.
Moving to non-GAAP gross margin.
Total Allscripts gross margin was 44.1% in the second quarter of 2019, compared with 46% in the second quarter of 2018 and up from 43% in the first quarter of 2019.
The 100 basis point sequential improvement is attributed to our data center consolidation efforts and continued cost efficiency initiative.
As we said last quarter, we expect gross margin to run at approximately 44% for the balance of the year.
Looking at operating expenses.
non-GAAP SGN, a totaled $91 million or approximately $7 million decline from a year ago as we benefited from actions taken to drive transaction related synergies as well as overall expense management.
The non-GAAP asking a figure excludes transaction related and other expenses.
non-GAAP R&D was $61 million approximately flat year over year.
Our growth software capitalization rate was 29% in the quarter in line with our expectations.
Adjusted EBITDA totaled $75 million, which equates to a 17% adjusted EBITDA margin.
Flat with a year ago quarter.
We continue to expect margins to improve for the balance of 2019, as we benefit from cost savings related to our Dehnert datacenter migration additional service billability due to planned upgrade faster growth in the high margin varied on business and overall leverage on F G and H and R&D expenses.
Looking below the line total cash interest decreased to $6 million, which compares to $8 million from a year ago.
GAAP loss per share in the quarter was 90 cents and includes transaction legal and other cost of $154 million.
As Rick noted, we recognized a 145 million dollar expense and transaction legal and other costs related to the agreement in principle with the D.O.J.
Our non-GAAP effective tax rate was 24% in the quarter consistent with Q1.
Finally, excluding non cash adjustments and transaction related and other expenses non-GAAP net income attributed to all scripts totaled $29 million and non-GAAP EPS was 17 cents for the quarter.
We ended the quarter with a principal balance of $520 million unsecured debt and 345 million of convertible senior notes.
Our leverage ratio defined as net debt divided by trailing 12 month EBITDA was 2.4 at the end of the quarter.
Up slightly from 2.2 at the end of Q1 of 19.
The strength of our balance sheet gives us significant flexibility for additional investment in high growth areas and the continued return of capital to shareholders.
We did not repurchase any shares in the quarter as a result of blackout restrictions related to material negotiations in the second quarter, which resulted in an agreement in principle with the DLJ.
We expect to be opportunistic with additional share repurchases going forward, which is consistent with our prior practice.
At the end of Q2, we had $148 million remaining under our existing stock repurchase authorization.
Turning to cash Q2, operating cash totaled negative $8 million compared with favorable $8 million a year ago.
He asked all totaled 88 days in the quarter down from 97 in the first quarter as we benefited from higher revenue and improved collections.
As we've noted in the past cash flow will vary from quarter to quarter.
We expect 2019 cash flow to improve in the second half of the year as the first half of the year included cash outlays for employee performance bonuses.
Taxes associated with the divestiture of Netsmart and severance and retention fees.
We expect minimal cash transaction related expenses in the back half of 2019.
Turning to our outlook as a result of our strong first half bookings results and our expectations for the second half of the year, we are increasing our 2019 outlooks for bookings.
We expect bookings in 2018 up between 1.05 billion and $1.1 billion, which is up $125 million at the midpoint from our prior outlook of between 900 million and $1 billion.
This reflects strength in both our provider and Verdonk businesses.
For the back half of the year, we expect revenue growth to accelerate as we benefit from strong bookings that we've seen so far in 2019.
We expect quarterly sequential revenue growth to increase every quarter in 2019.
For the third quarter of 2019, we expect non-GAAP revenue of between $445 million and 455 million.
Which reflects a 2.3% year over year organic growth at the midpoint of the third quarter outlook.
We are also providing non-GAAP revenue guidance for the fourth quarter as we have improved visibility as a result of our bookings performance.
For the fourth quarter of 2019, we expect non-GAAP revenue between 460 and $470 million.
Which reflects approximately 5.5% year over year organic increase at the midpoint of our fourth quarter outlook.
Finally, we are reaffirming our outlook for full year non-GAAP earnings per share, we expect non-GAAP earnings per share of between 65 cents and 70 cents for 2019.
This outlook reflects a non-GAAP effective tax rate of 24% for the full year of 2019.
And with that I'll turn it over to Paul Thanks, Dennis.
First let me say that I'm pleased with our second quarter and first half financial results.
Particularly with the strong bookings performance our solutions continue to resonate with our clients and prospects. We are benefiting from strategic decisions, we made to build in a big robust DHR surrounding solutions portfolio.
And expanding that portfolio with an industry, leading presence in the high growth payer and life Sciences markets.
This distinguishes us from our EA to our peers.
We believe that we are at the leading edge of the HIV industry.
We are delivering on our commitment to both clients and shareholders.
On the client side and continue to invest in our platforms. Our scale allows us to innovate being responsive to client and regulatory needs.
As Rick noted this has resulted in the strong bookings we have report reported so far this year.
But the highlights including a major all in Sunrise expansion Paragon extension growth in our revenue cycle business continued penetration of consumer platforms and robust growth in paradigm.
We also continued to build a very competitive business internationally.
Year to date, we've had the best first half internationally, we've had in the past five years.
We see the strong growth in bookings driving revenue growth acceleration in the back half of 2019 as Dennis noted.
We take our commitments to our shareholders very seriously for the past four years, we have met our EPS commitment without revising our outlook mid year.
We have provided a path to our three year revenue outlook and while we are only two quarters in to 2019, our strong sales in our current pipeline give us confidence in our three your revenue outlook that we laid out in January of 2019.
Overall, our financial position is strong and our vision and execution are delivering results. We've demonstrated we can attract new clients across our portfolio and cross sell new capabilities to our existing client clients.
This should result in market share expansion.
Our strong and de risked balance sheet allows us to be disciplined with our capital deployment, we have demonstrated that successfully in the past.
As an executive team, we continue to focus strategically on on strategically priced M&A to drive growth and operating synergies. We are focused on driving margin expansion and earnings growth.
And given that we trade at such a discount to our peers, we will be focused on returning capital to shareholders via optimal and opportunistic share repurchases.
All of this will benefit our clients our associates and our shareholders.
With that summary, let's open up the line for questions.
Thank you.
At this time, we'll be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad a confirmation tomo indicate your line is in the question queue. You May Press Star two if you like to remove your question from the Q.
For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys, one moment, please while we poll for questions.
Our first question comes from Jamie Stockton with Wells Fargo.
Please proceed with your question.
Hi, Yeah. Good evening, Thanks, I guess, maybe I'll start with practice fusion, although I'm sure there's not a ton or you want to say about it.
You know back if I, if I look at the number of doctors, who attested would that software versus let's say he clinical works, who also obviously had big penalty.
Practice fusion that the stations were way less.
Ah, but the penalty is pretty similar he can you just talk about kind of how how you got to that number and and again I. Appreciate that you guys just want to put this behind you but.
You know any color would be great.
Well you know the only color I provide Jamie this is so first off.
As you know because you follow is closed.
The extent of the investigations going on by the deal Jay with products fusion or are they more wider and broader than you know you use. The example of the Colin but.
So it started they certainly started out with a lot of similarities to again, what I said is those that have settled and there's many others that are actively going on and I think your wears off as well.
But those investigations widen so the scope probably changed a little bit and.
You know I guess the only other thing I'd say is you know that the risk of being repetitive we were anxious to put this behind us and so you know were.
You know, we can't exactly we can't speak to how the government thinks about what's fair for various entities, but.
What I can tell you it was a long protracted negotiation with the government and we got to a place that.
We think both parties can stomach it so.
Okay. That's all.
Great I guess my other question, obviously, a the business seems like its growing again or you guys have a good outlook for the second half. So it seems like most things are moving in the direction that.
You want them to with the exception of free cash flow you know.
Negative last year and negative the first couple of quarters this year.
You know.
I I heard Dennis is comment obviously that that you expect things to improve in the second half maybe you could talk about what is a reasonable level of free cash flow for you guys to produce on an annual basis, you kind of on a go forward basis or is there a reasonable conversion rate of EBITDA adjusted EBITDA and free cash flow that we should keep in mind, just anything on that great would be great.
Yeah, Jamie this is Dennis so as we've talked about in the past that we had a couple of large events that hit us in the first quarter I referenced a couple of that in the first half of the year I referenced a few of them in my prepared remarks, I'm, a pretty significant performance pay out for our employees, we had a $30 million netsmart payout and we've been we've incurred some fairly significant severance cost and transaction related costs. Most of those transaction related costs are behind us we see I expect very little of that carrying forward into the second half of the year. So again, we had some some very large onetime items that hit us in the first half of the year that will not be repeated in the second half of the year.
In terms of modeling, we've given guidance before of talking about over the longer period of an 80 to a 100% conversion on net income we think that.
It's something that we would look to happen a latter part of this year and going into next year and that would be the what you should use to model your <unk> free cash flow for us going forward.
Okay. Thank you.
[noise]. Our next question comes from Michael Cherny with Bank of America. Please proceed with your question.
Afternoon, and thanks for taking the question.
Maybe if we dive into the international performance you highlighted how you've had the strong start so far year to date, you talked maybe about some of the geographies, where you've been successful and how much is a market driven in terms of specific government related incentives in those areas versus competitive wins, where they're just looking to optimize their business.
Sure. This is Paul I think we've had some pretty good.
Results end up in Asia Pacific marketplace, as Rick talked about and that's been a good market for US historically you have a lot of very satisfied clients over there that are great references for us in that region between Singapore Guam.
Now this one that we talked about today as well as.
The work that we do in Australia.
So that's one area that continues to do well the other one that would be within the United Kingdom and specifically inside of the National Health service over there where we're also last week. They just they have a new procurement process and we are one of them want to be.
People that were have to be able to.
[noise] do business in that country. That's important based on references in the past based on you actually have to show them the software and production in the country, which is you know there is a pretty high watermark for what you had to do in order to be compliant with those with that process.
And then the other thing that I would say about what we're doing in the United Kingdom is that the clients over there are all and I think that's always a hard thing to say, but they are all highly referenceable and I'm very proud of that and that team and what we've been able to accomplish in that country. So those are probably two of the you know pretty good size opportunities that we've continued to do well and.
Yes, Hi, Mike I would just jump on to that I mean, I think that's where a lot of the recent action has been but and we have a pretty good footprint up in Canada as well and there's some good opportunities ahead, we think in Canada. So that's.
Focal area for us and.
Lastly, while while the country operates a home grown each are you know we are we are now connecting the entire country of Israel, a with the Dbmotion suite. So we think that's a pretty interesting model that has a lot of applicability in a lot of other European and even outside of Europe countries. So.
I would just add the staple those to where Paul so the focal points are.
I appreciate those comments and then just maybe Dennis a technical question for you relative to the department of Justice settlement. It seems like the cash will be due within next couple of months is the expectation that it will be due this year and will be funded through debt or is there. Some other component that you intend to fund the two obviously net or whatever recoveries that you're able to capture.
Yeah, we're still in the negotiations with the deal Jay So in terms of the timing of when payments would be do we have that has not concluded yet. So we'll we'll talk more about that once we have a final agreement in place.
Okay figured I'd try thanks.
Our next question is from Robert Jones with Goldman Sachs. Please proceed with your question.
Hi, Thanks, I guess, maybe just a follow up on that Dennis.
You know the dollar amount that you highlighted the 145, you know any sense of how much of that is actually on.
All scripts versus I think you guys mentioned third party and then am I my thinking about how that would work, though correctly I think the cash balance right now is slightly below that so would it.
<unk> for the timing aside would it have to be some portion debt and cash.
You know again, we can't get into the specifics of all the timing of of when those payments would be do so I really can't address how we funded at that time Weve got a certainly a lot of availability on our current credit facility that would allow us the ability to to finance that if needed, but again, we'll provide more clarity once we have final agreement with the IPO Jay.
Got it no that's fair that's fair, that's and that that's helpful. I guess, maybe taking a step back.
Clearly strong bookings you guys sound really confidence in accelerating the revenue growth.
Into the back half you know, but if I if I take a step back and you look at kind of where revenue and gross profit and EBITDA were in the quarter versus where they were a year ago. This quarter. If you adjust out for for Netsmart. You know seems like were kind of in the same the same ballpark. So what gives you guys. The confidence I mean, obviously your visibility into the into the bookings we don't what gives you the confidence as you look forward to that.
This could potentially be a point in time, where you know the piano could start to pick up from these levels.
I'm going to comment then let Dennis to finish up into that thought so first you'll you'll know right second quarter was by far the high watermark last year as well. So you know you can see Q2 had.
It had some you know nonrecurring opportunities that came in that were part of what drove that so she's a very very different outlook for the back half of this year than what it did last year I would chalk some of that up to you know a lot of moving pieces with a lot of M&A M&A activity. We did over you know 18 months span and this goes back to the Mckesson deal and.
Working through both some of the accounting impact of of bringing on board some of those deals but also oh.
If you think about just a comment I made earlier I mean Mckesson for instance, we had a bunch of Paragon clients that we knew were.
Yeah Dead men walking if you will right. They were they were still contributing to revenue, but when you never going away. So we'd have to work through some of that and some of that has caught out created noise around what were otherwise some movement forward with our core business, but you know I think you know what gives us the confidence I'll turn it over done US as you know we've worked through a lot of that and then secondly.
We have built a nice bike backlog across all facets of the business, including varied I'm, we've talked to you about how the nexgen deal turns on in Q4 as well for an example.
So there's a lot of things like that that are new.
Opportunities that are going on.
Start showing up in the numbers.
Yeah, just to add on to that we did have a exceptionally strong first half of the year for booking both in the acute space in international markets as those projects get worked on and we were able to recognize some of the service revenues and start to turn those systems lives will generate revenue from that we also had a very strong bookings half for revenue cycle management and health grid. Those businesses are being turned on as we speak so sooner we turned those on they generate revenue and a recurring model. So we expect that to continue to grow and then finally I think as Rick alluded to I will start to see some revenue come in from the Nexgen deal in the latter part of the year. So those items along with a lot of our service upgrades happening in the second half of the year on cost in the first half about a lot of those projects being delayed because they are coming to fruition. We received the bookings now just executing on the implementation of those upgrades in the second half of the year, that's what gives us confidence in the guidance that we.
Provided for other third and fourth quarters.
Got it thanks, Robert I appreciate it.
Our next question comes from Charles Rhyee with Cowen and company. Please proceed with your question.
Yes, thanks for taking the question maybe just a follow up on Bob's question. So you talked a little bit about the second quarter.
Revenue was a little bit.
A little bit less than you might have expected.
Anything in terms of the timing on these implementations.
Though there has kind of picked up here you got to get to the third quarter I understand on terms of like check was the high watermark. So I would assume we are in terms of a year over year growth, we'll see that sequential growth any anything that we should be watching out for.
Well you know that's happening here, let's say in the third quarter of specifically in terms of implementation timelines that.
Anything so far is on track.
So again, the Charles the revenue that we had in the second quarter of the year the $445 million was within the guidance range that we provided albeit at the low end.
I think some of the things that drove it again, we had the strong bookings, but just getting the onboarding. Although some of these helped rid of deals that we have and some of the revenue cycle management. The Onboarding was a little took a little longer than we had expected because of the size of the backlog and we've we've built up the teams. We've moved some of those positions to India to get some synergies from a cost standing perspective, but we expect sales to wrap up and recognize that revenue in the second half of the year.
That's great and then just a question on the bookings here, obviously strong performance here on the first two quarters now just thinking about it and obviously raise the guidance in the back half you. It sounds like here in the second quarter alone was from international can you give us a sense on when youre thinking about the back half where you would expect you know sort of how that mix to shake out are you looking at.
Mostly international plus paradigm or you know more paragon here in the U.S., maybe a little bit of a view and then lastly, you talked about the youve been able to retain the vast majority of the parallel client base and it's good to hear you have some expansion extensions here.
At this point in terms of the customer base.
Is there any percentage of customer base. That's left it has to make a decision that's either just chosen to stay or or has already made decisions to leave.
[noise] well, let's start with the first or first part of the question Charles.
Yeah, if you think about our business in four broad quadrants. You know you know we have our U.S. hospital business, we have our.
Independent ambulatory business, we have our international business and we have a bird on business.
You know what you should be taking away from today's call is we had a good quarter in all those areas in Q2, and we also feel like we have pretty good pipeline in all those areas. So that's part of what you are hearing behind our comments and so we'll.
We'll drive the back half a year with we think performance across the whole portfolio.
Paul focused particularly in international because you know its been an area. We feel like we've talked about for a long time and it's been slow coming but you know the significance of having the best best quarter in five years.
I think is good milestone and that's why we mentioned it but in the end.
It would be a mistake to walk away thinking that international drove most of the quarters performance. It was a pretty equal participation across all four of those areas. Okay.
As for the second part of your question, which I think was really around the Paragon client base or maybe more broadly around client base in general.
You know look it's a competitive market out there and I don't think anybody can take for granted their clients. You know, we've been making effort to try to create opportunities for clients to lock up with us for a longer period of time and show them the value of making that commit our commitment for a longer period of time.
They can plan for their upgrades et cetera, and we can think about a much longer term relationship between the two of us and so for those that see that value. That's what we've been doing we've gotten longer longer deals not everybody sees it that way. Some some sexism market still like to kind of go to year to year decisions and you know that's okay. We'll continue to work with those clients.
But I think you know if you have a long term contract you have less risk. If you don't you have a little more Russ on the margin, but you know at the end of the day I think everybody certainly we feel like we need to fight every day for each of our clients.
Great. Thank you appreciate it.
Our next question comes from Jeff Garro with William Blair and company. Please proceed with your question.
Yeah, good afternoon, and thanks for taking the questions maybe maybe a couple more on revenue in the quarter more bookkeeping type questions first if we could get a specific organic revenue growth number from the quarter I know that there might have still been some contributions from health grid and and Zap Rx and then the second one on revenue in the quarter would be the apologies if I missed this the split between the Vera dime and provider segment.
[laughter].
I'll, let Dennis cover all of it Jeff except I was let me just say, there's there's no real M&A of any significance impact year over year. Okay. SAP Rx is like next to zero and even health grid.
What weve picked up in Q2 of last year, Yeah. We obviously had some weve got some nice sales activity since done, but there's a delay really in the revenue contribution from most of that so I think you should think of it what you see is organic.
So Dennis do not pick up the second part of the question, Yes in terms of the the split between veered I'm in the provider that'll obviously be a published in the Q. We don't typically you get into the details here, but yeah, we'd given general guidance that it's roughly a 90 10 split I think it was probably a little richer in the provider non paradigm space and in this quarter than ER than that.
Ratio, but it's one of those more.
Got it and then another couple of questions on the video Chase settlement. That's looming. So first any potential terms or conditions beyond a a cash payment then and then second does this oh potential payment impact your thoughts on share repurchases or capital allocation.
Yeah look the terms of the deal we have an agreement in principle and yes, there's obviously parameters to it that go beyond just writing a check but we feel you know some of those are still needs to be finalized. So we have conceptual agreement on what we would think to be well all the material points, but you know as you got to work through some of the specifics of getting that done before we can fully provide transparency on what that is but I think we are uh huh.
The biggest impact will be writing a check in our view and then we'll have some amount of other things to comply with but we don't see them as impediments to the business are not likely to be an impediment for the business.
Ah I think with respect to then what does that cash.
Your next question comes from Stephanie Ampco with Citi. Please proceed with your question.
Hi, guys. Thanks for taking my question is that given the renewed interest in patient portal solution could you update us on the Followmyhealth product I'd love to hear about any demand and future functionality buildouts that are in the works.
Oh sure I mean, Followmyhealth you know had a had an explosive growth occur when you know when everybody who is adopting portals for meaningful use two requirements or it continues to be used by virtually all of our HR clients.
The Big step we took last year was you know.
Yeah, we see clients thinking about patient engagement much broader than just the portal.
And so that was really what was behind the acquisition of health grid and integrating that full.
Technically with Followmyhealth and also in terms of the go to market strategy Weve blended those sales teams together to do that so they are having a fair amount of success I'm, bringing you know think of it as patient engagement chapter to a is what helped good represents and they're having a lot of success, bringing up the market as you heard some of my comments earlier.
But I think you know because I'm not really sure what what else you might have in mind, maybe you should say if there's something more specific you were trying to think about it I mean followmyhealth continues to be a great. We think its you know.
The most flexible solution in the industry right now for patients to use.
I was just thinking about the traction you're having a follow my house on your revenue cycle times I mentioned in prepared comments.
And you're starting to see more institutions like yourselves, the patient portal partner with financial institutions or Fintech players to try to build out more than a patient payment solution versus 58 data got division.
Now any thoughts on innovation there yeah I mean.
Yeah, I mean, you know we have you know it but then there's [noise].
There's a payment technology already embedded in Followmyhealth so fit.
A patient who is a user of the portal can easily go to their fall my account and settle co pays deductibles et cetera. So.
A lot of that exists with some you know some financial partners.
We add to some of that capability with health grid.
And you know, we'll continue to I think what you should expect us to continue evolve there I mean, we we see patient engagement and making a health care easier and more transparent for for patients as a big part of one of our pillars focus going forward and you should expect us to continue to be active in those areas.
I hear that's a big area demand now one quick follow up just on the balance sheet.
Given the size of the painting for practice you can be some free cash flow trends well you have to do anything on the debt or equity side to get kinda funded.
Yes that is the data so as I talked about.
Previously we get we're still working on in terms of the agreement the payment structure and timing with the D.O.J., but we have quite a bit of available credit.
Available to us through our credit facility. So we're.
Yeah, we'll deal with that when the time comes in we get final terms, there's absolutely no disruption to our capital structure on this deal right now we have north of a half a billion dollars of availability with our current credit facilities not to mention cash on the balance sheet not to mentioned free cash flow that will generate over the next you know whatever kind of where do you want to pick at 12 months.
So there is zero implications on capital structure.
Okay.
Okay, well. Thank you guys appreciate it.
Our next question is from Donald Hooker with Keybanc. Please proceed with your question.
Great. Good afternoon, I'm, just maybe help us understand.
Some of the sort of the seasonality in the business that business has changed a lot obviously with businesses being acquired coming in and out and I suppose you're probably learning as well so when I think about sort of this year.
Particularly paradigm.
If I had a dollar revenue through the year, how would you sort of think about that typically being distributed between the four quarters.
Oh.
They probably skew or you know maybe 30 cents of that took.
Maybe as high as 30 530 would be Q4.
But otherwise pretty equal through the balance of the year.
Okay, Yeah, I would have.
That's true for most of the rest of the company as well does that.
From a from a revenue perspective, it's closer to 25 cents each quarter and there's not a lot of seasonal impact.
On revenue outside of you know, it's a varied I'm park.
What what does have some seasonality is sales and so and sometimes when you're not selling of subscription when you're selling licenses than that sales seasonality can translate to revenue seasonality with some license revenue recognition, but.
We think some of that seasonal pattern is less pronounced than it used to be in the industry.
You see that really frankly by bookings answers you know you don't have as wide a swing as it used to be used to be Q4 was by far the biggest Q second Q2 was second and then Q1 and Q3 were you know laggards considerably in.
Yeah, you just don't have that level of variability than we used to it.
At least going to China.
Super and then maybe just one follow up for me.
I guess, we're also lapping I believe the practice fusion.
Oh subscription price did you put into practice fusion last June I believe would love to hear kind of an update there in terms of the stickiness of that we're a year after now.
In terms of subscriber growth in that in that broad product area and then the other thing sort of related to that I had always been optimistic that you could you know maybe cross sell into there we show some other unit revenue cycle tools and things like that.
Into that base can you maybe elaborate on those two things and that's all for me. Thank you.
Yeah. So on the first point, yes, we have lapped that and you know we told you a year ago, we were very positively surprised by how good we did with the conversion to beat it beat our internal planning estimates.
And we continue to pick up some providers after the initial introduction of it.
And that's still the story you know, we'll we'll have a little bit of churn. There's no no. He HR in the market that doesn't have some churn but were the short answer your questions were happy with the retention rates, we've had and ER and the new providers, we continue to pick up.
ER on the second part of your question, Yes, we actually.
Just last quarter began to cross sell our practice management solution that we own.
Historically practice fusion did not have a own and P.M. system and so they relied on third parties for that.
I wouldn't say, we're selling a combine DHR P. M to the clients, we have a PM system weve been able to scale it down to be able to address a good chunk of the larger practices on the practice fusion solutions.
So there are still small probably one to two doc practices, where RPM systems too too complicated for them and so we'll probably continue to use a third party relationships there, but we have begun some of the cross selling.
Yes.
And then just to build on the first point, we actually have more providers on the system today than we did before we started charging a subscription fee.
That's helpful. Thank you.
Our next question is from gene Mannheimer with Dougherty and company. Please proceed with your question.
Thanks, Good afternoon, congrats on the good progress.
I wanted to ask again very dime here, what what percent of your bookings growth that you're guiding to is there a dime related.
When you say bookings growth are you talking about.
The increase in our outlook for the next right [laughter].
Okay.
Well the increase in outlook remember is is as much to do with you know we had a good first half and I would you know I think it made it easy for us to think bigger given how good the first half was.
In the first half veered I'm had a pretty good first half.
And I don't I don't have a number for Eugene I'm, sorry, I thought my head, but they definitely contributed to the growth rate, but they were not certainly weren't all of it.
But they were contributed to you know you should you know you we gave earlier this year and expectation of.
Where growth was going to come from across the company and right.
You know you should you should think about.
Relative performance of sales is in line with that type of relative.
Contribution of growth.
Okay very good thank you.
And then with respect to just again drilling down on the organic growth here in the in the in the business.
In the fourth quarter, you said, you're expecting some nexgen revenue from that agreement can you quantify the amount of that and maybe for health grids also so we can.
Whittle down those sort of the organic growth piece. Thank you.
Lifting I mean, we're not you know that's a commercial contract that we're not we're not going to get contract level detail, but let's just let's just say that says.
The collective impact from those two areas is you know a single digit million dollars and so you know the increase that we're going to we're seeing relative to where we are.
Standing too.
It's coming from across multiple disciplines and the company not to okay.
Got you so they're very small contribution then from that standpoint.
Thank you I mean, you know it isn't the eye of the holder.
And that's just you know you start it's a start with respect to next Gen units you know early with Alfred So those both of them will become meaningful contributors over time, there's no doubt about it.
Got you you know what we're talking about Q.
Myles.
Very good thank you I appreciate it.
Our next question is from Mike <unk> with Oppenheimer. Please proceed with your question.
Good afternoon. Thanks for taking my question, it's great to hear that you're in talks with north well curious if you can say, which areas you might expand with them.
[noise], Oh, you know north well.
Is a very big institution as you know and there.
You know thinking about doing some big things and.
You know I would just tell you that we're we're joining forces with them you know around thinking about their ambulatory solutions were trying to force something about their data.
What to do with that and you know with that I'll, just let's wait until we have more announcements.
Okay fair enough and you've historically been strong in the UK, where there was recently a prime minister change is anything to knowledge NHS changed or are you know from the recent Brexit developments there.
No the Jeremy Jeremy Hans is still the minister of health and matter of fact.
Boris just announced today they gave up some more monies to 20 different trust there to go spend on digital enhancements. So I'm seeing those dollars you know free up a little bit that's not clearly a meter mover, but certainly a good indication of where they want to put their money.
The government and most of the governments that.
Defeated Churchill have been big advocates and continue to spend a lot of money on a on the NHS if the national treasure for them.
All right very helpful. Thanks, guys.
Thank you. Thank you.
So thank you very much for the call today as you can see we're pretty bullish about the first half that we had clarity that we have also received on the department of Justice is very reaffirming and from my perspective. The success that we had it and specifically also with where we think we're going to end up with our friends at Northwell are all good things for the company and our shareholders.
All that drives visibility to the rest of 2019, which is why we reaffirmed guidance and races on the booking side, which is why you are hearing some of the.
Comments today, we appreciate your questions and as Rick said earlier, we appreciate everybody's attention to this company. We take these calls in what we do very seriously and we will continue to do everything we can to grow this business in a profitable manner.
Thank you.
This concludes today's conference you may disconnect your lines at this time and we thank you for your participation.
The conference has ended please disconnect your lines. Thank you.