MDRX - Earnings call transcript Q3 2018

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Operator

Greetings and welcome to the Allscripts' Third Quarter 2018 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation.

As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Stephen Shulstein, Vice President, IR. you. Thank

f begin. may You

Stephen Shulstein

you very Allscripts' welcome the afternoon much. quarter XXXX Good third and earnings to Thank conference call.

of are obligation President; the our and the a our and Our well the Rick for non-GAAP no of forward-looking to be today our that, affect and call Please hand Paul part our supplemental the Chief number reference new our filings available risks more can cause Allscripts' speakers to detailed earnings revise financial Relations number refer the the presentation during workbook GAAP descriptions Executive making Poulton, actual We a I'm our website. our results. Financial as call. and release of risk and to Chief future on as information Olis, Q&A to uncertainties statements tables both These materially. may Dennis statements with Poulton. Officer. We'll events. Black, are And non-GAAP to statements based of on forward-looking of Please Investor current that expectations and vary SEC results earnings are the release in statements, in involve and these going the that undertake or factors Rick light that Officer; over

Richard J. Poulton

earnings of in left discussed both investment last of lot Thanks today where time a and call And, afternoon, the joining in you call want in as our potentially appreciate We've where to monetizing everybody. at end today. so Stephen. I received We your the Good our your Okay. always, this I we thanks our call Netsmart. start for Allscripts. topic interest interest

spent third interest. the recall, point time enter with accomplished based definitive on were a was tremendous that highlighted we sale of in been to documentation we made the the in earnings And we in our more parties on Since expected has interest and team the at on Netsmart a call on amount that spent that considerable As public would quarter. transaction. that in There Netsmart that the comments our call, we and comments working negotiations the we last time at sale management work the the made to of had during call table stake. significant that acquiring time of brought may that market you before our multiple parties ownership even interest possible the engaged expressing at we

sale more we're substantial to of the to hire process decided value run given we to The sales advisors of maximize further on color bearing in selling So dispositions, complexity controlling interest for is our the do. process of the interest shareholders. stake, our complexity financial Unlike we we a and to not a traditional a it corporate decide full formal may sale ultimately ensure the Netsmart. what little because worth have

of some agreement the addition, In accept difficult without parties have some contained JV modification. provisions to are our therein current governance and the and partner for with liquidity we

Allscripts with but our a and complexity created these modifying this also has some just process. JV provisions not require existing However, negotiation partner lengthier

we the rewarded these for a deserve the it there, the notwithstanding with have value whether great company have near-term team, road. be convinced we a is shareholders created than little vision great down great get fairly So ever in to collectively that remain a Netsmart complexities, for who and or more the further future that Allscript

a late stage where sponsors. negotiations right on diligence backdrop, me update of So stand auction final engaged We've financial in the let we completed group now. and are with formal with process you that now and

not. these discussions to we make the transact or will and the a conclusion weeks whether run decision We at over expect several of these to negotiations next on

me let to results. now quarter turn third So

on say, will very in As were earlier, as quarter. a and year-over-year below on in results both leadership lighter a for suffice we down earnings the the to business and Netsmart year-over-year, performance tremendous it of later sale performance specific dedicated their revenues spent some our down expectations. a make was comp came but this considerably tough I albeit consolidated consequence, weighed third process during time comments and Dennis the Bookings the team to mentioned our Netsmart quarter. the of amount than expected

generation want migrations this than next their launch repeat also beginning quite of the third their remain has sign to I clients impacted new what platform to this existing of While XX earlier. about Netsmart. our sale quarter Netsmart bullish clients our new earlier I year, We Since said to process and more platform. post-acute for clearly results, outlook added are

are the year leader part the Additionally, become very the to behavioral bookings received proof This the year-over-year over care these the markets two now of health senior bookings. have strategies Netsmart recently in market a that decade market selections, the home post-acute solid and bear major by to a is made large expects are by the that last vendor segment. XX% memorialized up results with post-acute starting point same they for they contracts, and Netsmart segment. one in in of the selections large one choice will end provider home care When a VOC recorded provider. living

to basis, the non-GAAP quarter, earnings overall XX% growth revenues and share. for So GAAP revenue $XXX share. in to XX% year-over-year $X.XX we million, a in per an had on non-GAAP and a growth growth million, consolidated we double-digit revenue to $XXX reported growth in On basis EPS in XX%

Turning that acute is our both lengthening the due cycles results as in continue sales we same bookings see now to to we quarter we trend demand ROI-driven segments. what last spaced and in to ambulatory saw primarily overall bookings, our

as XXXX to And increase I to bookings businesses. year-over-year, both to core contribution look of reflecting third in in will ahead our grew excluding the expect continue Excluding bookings third we the year-over-year. Allscripts of bookings, quarter volatility that XXXX, QX, Netsmart's quarter and base slightly less Netsmart,

quarter of trends Sunrise highlight me extensions contract let in system hospital and the Now, a Paragon we quarter. client during the activity In customers. both some the across lot saw and the health market, in

signed for in of For Britain, Hospital a Registration Scheduling example, Care Sunrise at seven-year the for and Special extension including the addition Sunrise Connecticut. modules New we Clinicals,

We base, also (sic) at a Hospital]. New Hospital five-year five-year with signed Island, extension on managed agreement signed Nassau Communities services Hospital Paragon expansion a Memorial Bingham In [Bingham Long the South York. we

a the second shy to also community. with client. from number in this in momentum takeouts their Solution just Also, Northwell confidence X,XXX finally, has FollowMyHealth clients and to double In use In great of cross-selling quarter. extension added an Paragon of system. with Paragon the X,XXX is additional our base of their bought that in XXX will and Paragon users dbMotion. We're extended to agreement we TouchWorks And and continue the market, its of addition, ambulatory Hospital providers Health Community engagement as platform. from traction This dbMotion five our the the was physicians solutions. largest of for competitive years had vote Bingham a connect expect Mission to our They'll have client patient our to pleased five-year agreed with several

of was value with providers For in solutions. locations patient our our example, mid-level the EHR, providers it Management, XX This competitors demonstrates but clients. Premier deal multiple over Orthopaedics engagement offerings, with and and cross-selling replacement Practice XXX of a only full not also XX full-licensed adopted opportunities clearinghouse and illustrates of suite our other comprehensive

and & saw the the a our quarter XX-provider this future. in are EHR, continue for experienced activity, and believe Additionally, clearinghouse to continuing Florida. gain also And strong evaluation there the market expand Colorado patient this engagement great results We marketplace. Allscripts as In for a a opportunities we and in services California including is wins and to other lastly, process, of traction after cross-sell selected Science Life adopted our group number we XX-provider they start physician with pharma and foreseeable business, partners cycle client we our CRO see trend an group relationship a solutions. This revenue Payer in extensive well. our but in

Our phase analytics real world invest solutions. research and paying made And this hires growth to recently off. accelerate area strategy clinical in key and data evidence and late some on to is we focus

expect our to businesses. Life & growth continue Science Payer We strong from

to tether them unique currently clients processes as provide Overall, to of reduce these offerings we forward compelling value we go their that the in care. up inefficient our Our point confident speed costs and remain strategy.

leading clients outpatient across solutions medicine, But as to asset mature likely only We to market business growth our and industry and some and to finally, net modest coordination, our are precision recognize patient and utilization, platform the Life well extensive cycle earnings. profit all opportunities decision like and opportunity in traditional the an wide opportunity and of and continue both areas term our is our expand footprint here care share solutions and leverage end innovative opportunities Allscripts U.S. the as replacement around for our provide grow into any unique new with a industry bring & opportunity EHR collectively internationally, causes but important eyes Science the to churn with near the existing participants. inpatient markets, our to exciting expand Payer wallet care opportunity to engagement, support, financial in market revenue for open

for to the the Dennis to call quarter and third for with balance our over details go So through the year. that, of I'll financial turn outlook more now the back

Dennis M. Olis

Thanks, Rick.

release, numbers, in As the schedules Relations workbook please the data earnings this as Investor the as Allscripts' we the supplemental review reference available website. quarter's on well

into opening For diving few remarks clarity the let me purposes, a make results. before

release. statement and the are unless First, non-GAAP focus Full otherwise GAAP non-GAAP my earnings income reconciliations on comments in stated. available on figures the largely metrics will of

we adjustment of year, in revenue, materially using not third modified and Second, a effective impact single our new results. adopted of to The retrospective quarter the XXX X digit new standard approach. the did adoption therefore January recognition the standard this revenue resulted

all standard. after disclosures such, our are results made applying references further around to new for the standard. XX-Q new Please As recognition the our revenue review current

the this Fusion began consolidating QX XX Fusion both which that our the business year, on a Practice X of financial therefore, date. results of from we April EIS results reminder, as closed the closed this contribution of Third, include a OneContent Fourth, back not on from do from year divestiture February this October Practice our results full includes transaction and unit. as quarter QX business of and flows in XXXX. and of

quarter. quarter. results Now, the Bookings let's million totaled dive $XXX in into for the

QX noted, Rick from down year, Netsmart's up bookings, year-over-year. our were bookings marginally while the if As we exclude are last of bookings impact

now impact are that quarter well not backlog $X.X the substantial billion, at metric. year-over-year. stands of a in in This included reflects both as bookings, bookings the renewals as number up Our XX% of the

the $XX of increase adjustments quarter income third orXX% QX of the XXXX, $X of the revenue $XX and statement, in Netsmart's a reflects $XX totaled XXXX of totaled million million GAAP third million such QX adjustment third the year $XXX quarter. the totaled of growing million quarter revenue revenue third revenue to $XXX an versus $XX non-GAAP revenue deferred contributed year-over-year. XXXX. therefore a quarter million, non-GAAP non-GAAP the of acquisition-related growth Turning million revenue XX% Non-GAAP versus ago. of In quarter QX represents million, EIS XXXX. in in XX%

As revenue this also expectations million. acquisition-related and our business. EIS deferred OneContent the $X.X for the portion line the of of is EIS includes a in with reminder, excludes adjustment This

our period non-recurring a recurring same total in mix our versus came at recurring split, year at total and X% XX%. grew revenue XX% Looking revenue revenue Thus, the total ago. decreased revenue

the quarters, volatility be in this we changes as will discussed into revenue XXXX year. incorporate the measurement As recognition ASC previous throughout XXX there reporting, of some couple in our the

to quarter in XX% expect high to the and for fourth trend to XX% XXXX continue the beyond. We the range low of

consisting by results Recurring In line and increased business. revenue quarter, A new portion million. EIS maintenance revenue support increased XX% subscriptions, by the now year-over-year software the and software of consolidation total decreased in revenue recurring totals revenue of transactions, large driven year-over-year. of at Looking this XX% non-recurring growth XX% $XXX the year-over-year. QX item, software was

cycle year-over-year XX% revenue cycle primarily by year-over-year, QX. increased revenue the this the grew of the services revenue EIS as contributed revenue year-over-year also $XXX service driven driven Allscripts' and Recurring non-recurring to non-GAAP service business. multiyear Similar million in offerings consolidated and revenue and managed hosting, from XX% Netsmart EIS by increased other addition services, offerings XX% to client to such services Turning service acquisition. increase. services

margin points margin, attributed software increased gross gross XXX total down by year-over-year XXX non-GAAP to primarily basis was basis same license client gross and revenue. Moving decreased decrease the to gross year-over-year, the non-recurring in margin Analyzing period. XXX margin software points component, points by margin software for

increase containing excludes successful R&D HealthGrid. at excludes of XX% $XXX in expenses, from the XX% non-GAAP increase from our The recent Allscripts. Fusion quarter gross operating related The second to EIS, $XX additional at we was acquisitions totaled SG&A Netsmart were SG&A million, and expenses that a and costs in Compared R&D other and additional as the other Looking non-GAAP primarily Practice decreased to Sequentially, driving non-GAAP expenses. expenses additional million Recall SG&A function non-GAAP a is acquisition. was of and transaction the year-over-year, gross reflecting down slightly. attributed figure up XXXX, expenses. gross R&D year-over-year. Non-GAAP by related R&D transaction non-GAAP acquired synergies SG&A the million, $X and

EIS Adjusted to the in to the upwards as $XXX prior throughout XXXX. acquisition. EBITDA and the reported Netsmart year quarter margin both have EIS enter be balance in slightly trend the adjusted Our adjusted XX% sequentially total mentioned. software the since rate EBITDA is margin. came XX% Rick the integration our range X% third reiterate equates we mid-XX% This to which and was margins a expectations trending and for below will for we improvement represents reasons EBITDA XXXX. the as efforts continue EBITDA of the a year-over-year the would capitalization to totaled EBITDA, the expectation since due in within acquisition, stated to percentage Allscripts the To expect million and and of is our range low in XX% we what highest quarter

to XX% below increased the from $XX EIS and Practice GAAP in business million million, $X.XX. Change Healthcare's required to costs Looking this fund This share transaction to $XX million. July year quarter year. ago. acquisitions total cash which in driven was interest the line, results the Netsmart early Please compares loss Fusion and this quarter acquisition a by and of other note related of costs, of was per $XX home the care fees included GAAP that financing severance

other net the was transaction-related XX% and a Finally, income and and year-over-year adjustments totaled expenses, excluding $X.XX Allscripts growth. EPS million for to non-cash quarter, non-GAAP $XX representing non-GAAP attributed

Solutions debt ownership net is We $XXX portion partially approximately acquisition. convertible grew reminder, on non-GAAP net increase a due million million the up debt Allscripts the a X% secured to amounts consolidated Netsmart's of attributed senior Change is calculated million, non-recourse but a Healthcare principal As in interest to of purposes Healthcare exclude EPS to $XXX which Allscripts owned, long-term and in non-recourse notes, quarter-over-quarter, non-controlling to year-over-year. These $XXX $XX quarter is reported businesses. ended quarter-over-quarter. and Non-GAAP million Allscripts' total controlled income of consolidation reflect totaled Netsmart's total debt debt which primarily the Allscripts. to with balance for

capital ago. $XX adjusting purchased totaled software. for capitalized expenditures, a Turning loss with after flow year $XX to million free and operating cash, QX of flow cash a totaled cash million million $XX QX compared software

the free a Netsmart quarter was to EIS quarters. contracts first the of of in to payment flow negatively substantial businesses related certain are due timing Netsmart EIS and as and the receive cash number to in receivables Our structured the fourth impacted and

we've As in quarter-to-quarter. cash will the past, vary flow noted from

to tend XXXX, Netsmart the contractually As we fourth flow from to fourth quarter. EIS and quarter we the collections increase businesses move the as cash timed expect improve into free in

our XXXX guidance. Turning annual to outlook, we our are maintaining

the at However, outlook we for fourth based guidance end our performance now the of date range expect in on the metrics to quarter. the to all come in lower for

diluted our and be Netsmart, million excluding adjusted of previous $X.XX and EBITDA per to $X.XX be adjusted $XXX will of And and and guidance million. million and non-GAAP between $X.XX between $XXX million, revenue annual $XXX per called between finally, reminder, a $XXX EBITDA between As billion, non-GAAP for billion share earnings share. $X.XX

we effective Finally, of full an to year. Paul. with over turn tax for And I'll to expect it the that, continue XX% rate

Paul M. Black

today offerings and and tremendous Allscripts' competitive Allscripts services formidable on touch depth industry. the going in opportunities will rivals our see remarks any software breadth, has and we portfolio My Dennis. positioning Thanks, forward. the and

EHR investments acute the surround solutions markets core our compete across ambulatory past allowed have us world. and around in to the the few and successfully Over years,

It services client in and out base this non-GAAP consumer not we well-positioned as in to and as clear have era the continuous outpaced success it adjusted and additional earnings sell & large that during solutions growth was saw Sciences the our Our the a the segments per Meaningful Five has well we annual compound Payer This industry. our to purchasing in by nearly recent provides accident competitor now R&D two of regulatory fastest-growing more we no share. public every XX.X% three-year environment Life seen in are years the results sector. of XX.X% from our our opportunities in proven us in in Use other revenue, investment is EBITDA, the us marketplaces, indefinitely. have that ago, would acquisitions. results The as efficiently been XX.X% continue rate

XX% decision made is Payer rapid As as Life clip. other result, Population Sciences & Life a Payer the business we is and Sciences avenues & such expand a in This at resulted a growth our has approaching of growing and of and revenues now Health, consumer to pursue services.

addition in We the engagement offerings consumer patient have recent compelling of space, and with particularly HealthGrid. the

these to Population Our gaining and traction we driving are further Health offerings look through growth solutions. forward

out including further success and these recently have a high-growth Payer consumer most in would focused through solutions Sciences be our ago Fusion with to as Practice expect investments EIS to expanding we & and and We set McKesson build solution Life capital deployment, demonstrated look disciplined year areas. We HealthGrid.

$XXX $XXX repurchases. a also we year shareholders our a strategy, have robust allocation balanced available through us. share repurchase million this we Currently, part million returned to of than authorization have capital to more As share

Rick about Allscripts' ultimately we in As growth not in the are post-acute shareholders benefit transaction very a closed Ultimately, from Netsmart. or the we believe Netsmart's continue If term. transaction a mentioned, consummated prospects, strong in will whether will in the sector. bullish is from is our we near the term, not near to benefit investment

have our resonating solutions clients. been Our with

We saw the that increasing last pace year. our seen we pace have from

October, Allscripts and in clients systems meaningful health and great on a focus group we that we ACE know innovation hospitals them hosted user healthcare's on deal In our the St. towards As know, Louis. hinges this future with or partnering as early solution seekers for we Client Experience innovation.

innovators event, Allscripts Innovation Excellence the During we Awards. recognized client first the with Client

We next also In provided hosted clients to of a solutions confidence. taking year, best our six forward the line open made and those share to to them practices events to our I let's enhancements ACE the year. with ambulatory With avail up that, we for client our and questions. shareholders closer your latest our for we and it their want doing for again look hard similar work, we've our specific base. investments the look by substantial upgrades. loyalty, the thank We all conduct associates at clients meetings our themselves for during content clients for regional asked innovations, in them their

Operator

At we'll conducting you. question-and-answer Thank session. be a this time,

your of from question. Cherny first America. question with proceed Our comes Michael Bank with Please

Michael Cherny

that out large – the there where manifest driving If dive that you to in in come there the hoped through where of shook a were underperformance potentially management of not supposed any to Good I team or to sense the had itself underperformance of give terms you talked quarter the about just versus did Is what afternoon. the shake any Thanks out? that you some numbers magnitude, but distraction of bit, maybe expected. necessarily Netsmart on way the for how versus for you results were given the didn't, deals could a time.

Richard J. Poulton

Yeah.

that So certainly, split Mike, definitely the – on – I And big is deals. big biggest bookings mean a of the be it. piece would

quite And have the year successful but segment. growth I segment, very behavioral that's the well specifically from a As didn't is to full for on year-over-year the doing my you heard the also. comment in comments, post-acute health outlook

We So say it well it's as departure on effect a I and deals. just the some in growth. felt big trickledown split those it bookings the was of would P&L that's – split from

Michael Cherny

and on managed just And on services timing TouchWorks, Northwell of quickly Sunrise long Got update on the contracts extension the it. the some there? then how on you of any have

Richard J. Poulton

pretty has already. started it's about services a agreement have managed we have year talk more still in augmentation and them to we their to to them IT the it with Well, we've where good than staff, a conversation a

So I'll a we're that. are margin high those services – managed not do continuing remind to services. That's you

renewal interested quite piece in a it's we're does of it extending earnings. while represent and So not a our expanding, material

Michael Cherny

Rick. Thanks, Okay.

Operator

with question Wells comes Fargo. your question. with Please next from proceed Our Stockton Jamie

Jamie Stockton

the for performance Thanks one Netsmart more I evening. good the quarter. maybe Hey, taking guess, bookings questions. my during just and on

couple on component where seemed potential had was and for period in there impact around I comp an strong of that seasonally business the or some had there's guys – from else that that year, bookings the commentary deal, otherwise weak anything in in ago, QX of distraction just it for really that environmental third just a think bookings. softer, that quarter like Is said Netsmart it this business guess quarter a business? is aside a had a I you difficult of is there years Last the in that kind a is quarter. third softness seasonal a was this

Richard J. Poulton

Jamie, repeat I a had it. year-over-year They very their tremendous my mean, third They've in I'll good. it comp. ago very, very quarter. but had a year in said in They quarter are very, comments the the fundamentals space, I've – had a difficult

larger of size Some little lumpy We deals selected get slippage was with bit been force. in of they've mentioned of a in of VOC team and a attribute and of particular, had in deals. the The large tremendous selling is management time – do their the there couple big management amount part a a invested I process. to their that and team piece I

So...

Jamie Stockton

that as it. looked third of margin us, the and update are of like the required that'd you margin guys the the when be to Having process are kind most of gotten there, you drive could have to just business, actions behind us where far give EIS The behind things improvement as stand to you of us? looking there, Okay. improvement in for relative the to touch it EBITDA that just drive wanted what XXXX on been trying it bought also an quarter If great. I kind

Dennis M. Olis

it. is Jamie. Dennis. Thanks, Got This

relates So to top as revenue reported for as line third I about quarter it $XX the the million. was the

quarter You'll it about we've $XX million $XX to was note the continue that around and believe that. last said million that it stabilize would we and mark

and So cost a We're we obligation place when we that we believe attrition into originally EBITDA acquisition. range actually we cost we've to from track we're the our did margin the and where XX% from take out XX% year in to drive a October our something models single into standpoint. business when we – to on the to digit as an in than good done modeled last standpoint, meet continuing acquired go it had EIS From XXXX. of was in a better it of

there's while So down and still improve margin still to we're business path of that to in continue some quarter do doing far action that the that well we'll little the by fourth majority have we're the overall work year expect of the of and I complete or be bit into the of actions that a XXXX, the completed the maybe but a end to spillover pretty

Jamie Stockton

you. Thank Okay.

Operator

from Goldman proceed question. with Jones Sachs. with your Our comes next Please question Robert

Unknown Speaker

margins Bob. taking for were you my sense from Fusion on quarter? and to (XX:XX) for is This much Practice subscriptions us for that the of how on can Can guys Jack business contributor update retention of a give maybe in revenue a then questions. you Thanks Great. us

Richard J. Poulton

pleased introducing – lot very of After Payer model, probably to fee other And our We're our efforts over strong. in a in it's that. expectations. Science very that & performed a with expand Life our it's blending arena. is Retention with we're

margins during give exact part certainly number you why story the grew on But benefit. a an of of the the That quarter. So, EBITDA EBITDA is helped it contribution. we can't

Dennis M. Olis

on in And last were into while few clients June we there started went a and the of from price to add – receiving adjustments to live them that that, in effect started of went actually their X on year, May. that quite some revenue May

the was impact from QX. with quarter earlier QX had receiving started not revenue full impact to clients QX, some a it as of So, the in

Unknown Speaker

Thanks. it. Got

Operator

Our your question. proceed next Ross Muken Evercore. with with comes question from Please

Suzie Yoon

taking Hey, for Suzie Thanks for guys. Yoon question. the Ross. It's on

of in your the competitors well and smaller years. on seeing And commented activity there versus One as change with Is what deals then that of less you're the seeing buying software recently market seeing? any you're this level in prior is last that stand think you quarters you a four as Thanks. quick the next follow-up, I sizable about feeling mentioned you quarter course are that and or expect the Does some pipeline say of over deals how so. still opportunity? of

Richard J. Poulton

my market people's market for Look, comments, relatively a last of composition. I'll – as U.S. is fuel cetera, the I mature as growth solutions, the that EHR, traditional in rev acknowledged the lot mean, with deals I things et the made the start Well, years. I few over cycle, a

financial new of coordination for care support, them, highlighted stands of services. that coming software some opportunities. contrast We in decision think are solutions problems clearly that of very these new So, experiencing. a and areas growth in new like I lot medicine are comments software. healthcare great There precision is have like we're them well. that. – and as things areas business And we And by for for well-positioned augmenting to providers the my

it's software decent around is A I the off was of areas quarter. growth So happening bookings were But in bookings. that days. pretty true these in our you'll really services fall the lot in note software that services the think more than

difficult the pipeline, our opportunities predict, may about Yeah we Paul? to that some good real the mean for anything feel Do to want to we size. pipeline. this. international of you are we – are feel As particularly I we to And timing, They're Paul, they're in have nevertheless and but that well-positioned. we're in add opportunities feel want to – very opportunities mean some so, large I add

Paul M. Black

add the what the would our everybody a for forecasts part just they're did the do – meeting XX. different process, that what they what last I from we quarterly have a sectors in where of quarter, as on committee to of have going comes and we all have they quarter, rolling and business

amount go that need a pipeline have have And So we the continues to for to we in do in seem strong fair to to what process QX. a order well.

not I'm there. any seeing So weakness

just and and things turn actually about revenue and As signed turn get – it's it mentioned, into Rick all it actual it booking. an when make into

And to very good. been be in our – optimistic that helpful here. is has pipeline So continuing

Suzie Yoon

Got you. Thanks the for color.

Operator

question with Please next Ricky Goldwasser Morgan Our with question. Stanley. your proceed is from

Ricky R. Goldwasser

Thank afternoon. you here. my taking good Hi, question. for Two Yeah. questions

of can as we if the is secondly, Fusion understanding And context outlined markets think us think potential that interest? core booking growing of when of from business? on buyback you about one slightly, just the think legacy portion the came the within it First Netsmart, help the to you of what better EIS about us get versus sale you Practice should and are capital that before deployment about we or how

Richard J. Poulton

in opportunistically said, will First term near to process when we repurchase the part the be of we the question, delever started priorities and as our see shares fit as we around market. Netsmart,

be it. continue will to that So

and that'll free plenty powder. powder fact and fit, we this in more the just to transaction to see as we have of expand. decide just even in up transact We a dry business will invest dry reach then If

will Dennis our of the question. are part capital take priorities. second your those So

Dennis M. Olis

Ricky. Yeah. Thanks,

or In that year-over-year, is Fusion. – that any contribution terms Practice bookings of excludes number both core growth those, of from EIS the

and the So year. the about does that's impact last excluding over And we that excludes of we made bookings, – when the it we're also an organic include of our core Netsmart. number any acquisitions talk not

Ricky R. Goldwasser

you. Thank Right.

Operator

your W. Matthew Our next question with comes question. Robert with Please Gillmor proceed Baird. from

Matthew D. Gillmor

Hey, thanks for the question.

Netsmart help Following-up said final of discussion, weeks through I on you the take the diligence. you understand us can meant of by sort more to what think you timing? a sort it'll couple

governance us constraints some potential sort the can of the give with dialogue liquidity sense expect announcement of you of the before part of year-end? do buyers? And are some So sort you then an and that for

Richard J. Poulton

lot a very traditional stage the a I've of run what And doing of diligence auction and repetitive said sponsors people very final as to and in eliminate course largely late negotiations. Well, that going that, style We've of formal Matt, we're financial a said, you I down way. process. be it's We're in of to along group kind the of earlier.

So it's is play my ball out. are processes very be about. to to difficult a best it'll But that be weeks few crystal precise these – inherently

decision, would today, guys we're here we'll sitting decision, But before make over. still we certainly, make a that be if is the we means know. a if But you think to the first So, year working. will know something don't I

is our complexities, out what alluding to for with this on But we're the characterize controlling was all I under public partners that As agreement we I just JV the what I generic current of mean shared, not share it's live – in I again, selling. what as is domain. there. a

all outlined into are So the you now liquidity perspective, step not JV. a certain that where in are entering shoes half we but two it's to And step that were things with somebody what years governance a you're original and potentially that into when a who our filed fine And things going formed only the that but it we had after of that it. it, in different we model allows particularly to is future. was those do has them into our there participant documents, provisions a partner again, the driver

it So that's want that's what on what but I details if mean really up I'm there's out you want about. to talking talking ad I'm nauseam you about. – there, if read

Matthew D. Gillmor

And services that wanted a that saw I bit call to to metric. out I client sequentially. declined about enough. just with see respect Fair anything wanted to ask backlog. to if there's then the also I

Dennis M. Olis

No.

the at there look were the you happened some that between reclassifications and metrics, combined backlog. line for software If service the

between As service this software. into did was EIS and and got we're we diving consistent made It some making that It split adjustment the gaps, across total. sure just not lines, noticed we the the so we've the that product backlog definitions quarter. impact

Matthew D. Gillmor

Thanks, Dennis. it. Got

Operator

question from next with Our Research. your proceed comes Nephron Please Percher question. with Eric

Eric Percher

Thank you.

fairly the a in EBITDA than we talked would you say dependency about As wide the we the year, revenue. wider contingency on had past, a we or EBITDA, entered had range I and seen

help understanding and elements the in relative you pointed the set to now low for progress As of when end quarter we're third what the I'll really the to you guidance. at the most impacted now have ask range, are we that

in me of that high make through would improvement the help as year have that very But think I material some determination. you walk end and takes a represent the business. the throughout puts impacted now you the

Dennis M. Olis

looked in jump that guidance around set at year from to going start biggest and set item beginning in, I'll our contribution at I we dealt the then were the bookings Paul the of but plans and So the to the financial we get we can think quarters. or Rick

that's So the the of on little while bookings, of the impact softness our we've a bit during that course had year. in some revenue seen

to terms Now that to and aggressive been were part in of at taking bottom the the going at synergies meeting obligations costs we that pretty in end, offset out recognize. we've our

gone an the business a But as has very portion that the removed now been our I term of softness financial the of services overall, upfront highly we've bit bit down bookings results OneContent and and contributor we software. short right margins also business in has think from little that of which at We on profitable EBITDA been biggest had McKesson a impact around a was gross P&L. had

Richard J. Poulton

big bunch the businesses. taking. of margin. bigger on and savings maybe that's to that a company. I bigger think in a EBITDA certain it's mean, your integrating actions end And range the do what end of Yes. actually – you big, implied new we're unpredictability I cost if it's at But had And start we're had very I not we We of range question. I'm range that it of we're spread the is there's top dollar businesses. top margin have a these was going that of EBITDA mean a at reflective bottom because look the you of the terms the Eric amount in don't

pretty range EBITDA range with revenue think I tightly the comported the guidance So that we gave.

sound So quarters if end doing missing what's under three I'm the but defensive, what down I that is and belt in of I beginning I is your don't happened you to-date. telling our ranges. pointing we're not we're you question, Dennis we've got those lower just – now am of want but sure toward just to the something

Eric Percher

well like strength assume acquisition, fact to talked for I feel what opportunity running that like which the does are in those X% looking are they perspective there? via a So means ROI it is drive on without are need running there's that your organic businesses is about running they well, I reasonable it I'm also or payer is how know well in Maybe to and financial growth X% looks growth to you you management. X% and X% range? and expectation, more and

Richard J. Poulton

running they're well. A,

with run happy we've sets both that leadership to and very some organization are the We of solutions structured these the and their the inside teams we way ability them. put

But but prospects. they I not and I & good other profile we those the chunks. for really the new about growth robust that at as appropriate deliver But era. have the when profits have you because heart year, have create EHRs. my I is that people transparency then that only legacy out the Use very more acknowledged relevant our set And of in in areas people's we'll with what think a prospects, client ahead. market comments my relatively built growth of are have clients Life that think we've we entire EHR growth can core different think those the our that combine think large in look made statement expectations business that today and very today fundamentals over a and to is it's better comments, try the we little suffice have the growth to Science good are And of strong And across chunks the I look end as platform is areas to that at Payer growth as has business. we modest which the the different to we I earnings that composite behind think a for still solutions business still ahead of expected to say, we how our that it about around Meaningful have

we're So we're very compiled and managing happy with today. it what how we've

Eric Percher

That's asking you. Great. going that to helpful. I'm question. keep Thank

Richard J. Poulton

Great.

Operator

Our comes next proceed Cowen with with Rhyee Charles your from Please and Company. question. question

Samantha Warman

opportunities business looks start in what like Samantha Payer compete Life competitive a you the little is I what to there, on and see segment. switch Can talk some the This & the and want guess that Thanks. cycle you for Sciences Hi. has about the you landscape gears bit I Charles. to in been maybe of as talk sales it? about

Richard J. Poulton

so That's common needs life very their markets. – cases of payers The it's the would of inefficiencies think there's we – emerging that two again, research in have of lot speed say have interests point is evidence process lot a very of of different CROs. Well, one is things. I partners, those helps company and a group we've of the cost, helps the world an to lot companies area growth. as them element a the than of valuable up with it the of different and And both real in they with area to we In to end combined eliminate inefficiencies. and the they life part intersecting science but set lower can science an some clinical them though, care, them. has It

are So that for in or there's not Allscripts. these opportunity nice small a of even small markets that markets lot represent space, companies EHR of a a play but these slice big and segment can

Samantha Warman

Thanks.

Richard J. Poulton

Thanks, Samantha.

Operator

from with with Capital proceed Markets. Our Please question. your next RBC George Hill question is

George Hill

we feel list here? follow-up a do on and from over and question down a of need the has health point guess conversations eight CapEx we IT, perspective, is could hospital now been healthcare demand at I of having CapEx like given has you executives those lot the can guys now where healthcare Paul. list. be hospitals falling around have system guys. neglected? lag kind are which been years, is if the know that is the investment on the you for last down to made the seven with that's And of other I kind a with ranking troughed or the another about talk Paul to I'm you're in question And Hey, macro IT there wondering the to I traffic now priorities spend money where priority cycle priority

Paul M. Black

an historically The standpoint that folks the they value-based only well report have on, the mission into it's now the to for only and have that's understand and critical historical the the venturing in for now of of processes IT getting they care to but that that mandatory, continue George, care. having have financial marketplaces, not complexity service I patient not from paid nice it's also system talk to been and clinical might to, the fee but also reimbursed reporting quality getting mandatory

some these of many of doing have doing of they're the value-based ACO schedule part capitated model or risk into either some or people a or of employee-based an – form sort in. they're payment So ventured country or you're depending what at upon an

consumers, that to the they to as for as look clinical at able system weapon as as themselves accommodate a could they brand using have that increasingly in they really them. be marketplace. that this They the to them for has are in ability to at which both financial well a their the by versus and are the other looking be side also So, important can side competitive platform folks offensive competitive a marketplaces been

being additional pre regard That's George, of that's recurring some Use more last of it to and why or than percentage they potentially spend an Meaningful other model, of really and to towards expectation over MUX spend the what new cloud rotating dissipating, a course operating a have some bit expense be. the expense the Do five and So, had In they we quite as in buildings to cases, important I also what them not to was doing revenue the that. normal years they're that a kind that a go the that's models they're Sure. aging that are why well. acquisitions? see, line which wish new is capital going of is

for say voice as transactions also able macro will what back opportunity. anyway fact reality a all and if a I the from they standpoint to deals don't see levels for or for continue what market or So, I we're those that electronic At pre-XXXX record to spend in don't the new there being in the good-sized that population pretty XXXX not can up expect in the for a it we're that new doing the we have and off expect they as add of big spend markets all in at deals to out, or replacement historical to the Those would I them what medical be era. all are market in doing may you are are new have as to there were precision level, size intelligence, those everybody to we're But that in whether But are there's it's this a interesting solution that States transactions artificial Those medical telemedicine there's pointed recognition what fundamentally the long-term that new out with the you us. other perhaps I cloud-based up the say let's applications, normal timeframe. that an be new, Rick a is solutions going medicine. the very all, and on go record, United take demand see retreat level. all to of cost standpoint, some a health, it on necessarily. regard does there. fact a electronic opportunity From that

George Hill

answer. in Rick, to get process? is guess, between prior or Rick of the reading the gets the that deal, I of the or to an to to sponsor on return is, see on is the kind the rate which of out which Can an want we is the follow-up issue that required other just half to I comprehensive is, the Netsmart I'm flushed correctly, not impetus really that's if transaction of when throw was here this I something the That execution from in Netsmart, of becoming is that valuation transaction end a a lines that

Richard J. Poulton

asking I for mean, the to but IRR have that our you might answer is saying want it. George, to keep partner I are issue current I looking our is an your expected process? in question,

George Hill

Yeah.

part your originally So, transaction of of asking part to at that and minimum sponsor they required look that's the kind are as you guys I'm the to of asset? is as that people of What looking like is into. rate return entered be there's that the that cautious causing to people

Richard J. Poulton

they not liquidation pref Yeah. – have... that be you It's referring to might

George Hill

Yeah. Yeah.

Richard J. Poulton

the all. an of pref. problem. and a that It's now. ...in significantly mean wouldn't say pref provisions gone but their not up that's That's the company really around issue again, at deal? I at issues all liquidity right such issue I that other governance not the liquidation is not the has current liquidation that value

George Hill

Okay, Thank you. helpful. okay. That's

Paul M. Black

to It's very And growth has George, that know that an team they've experienced really been the as three that's over last extremely you and have five a strong years attractive asset. the – pretty been impressive.

George Hill

Yes. Thank you.

Paul M. Black

bet. You

Operator

from Our Citi. is question next with your Demko with proceed question. Stephanie Please

Stephanie J. Demko

you Thank questions. guys. taking for Hey, my

end in as from Just business growth each the and the kind EHR about contributions us could the thinking Payer versus & post-Netsmart, help of Sciences? you market such core walk Life core through business

Richard J. Poulton

without comments we've that help and transition you made in QX. the Netsmart. some comments to We've But – of think made are people take the things should of about we we've I of told bunch there starting with a we're think let's progression Look, is that. some today. so There Yeah. in what kind other far right I with

closer closer happens typically better. the get time Let's the new a then it anything. that's up for see set expectations the year And when when we'll front into we as if to little the set to we transaction what on future, and start

Stephanie J. Demko

to Understood. assuming for does business about retain guys, And the stay then should it? for your thoughts how entity we have that as you go that on Netsmart if at one, owned its you follow-up forward a potential think

Richard J. Poulton

We're right. ahead We're mean Well, again, active in process. in of what to I think you still. we actively discussions. shouldn't is we're I we're ourselves, monetize get We're telling in negotiations. looking

true it's that ahead to decide is outcome the we'll possible So retain of get It is ourselves. a we ownership. shouldn't

great a of if But, it's as that'll far whole to trigger that. us around great do concerned. of in kind that, we're segment growing look, like think account day every it's And right have now. other bunch value we a decisions things to it do market the how team operating for of we that's I and a as

that's So for shareholders. good our

Stephanie J. Demko

Thank guys. All you, right.

Paul M. Black

you. Thank

Operator

Ladies Stephen the back At like and for the closing session. to time, question-and-answer gentlemen, of I'd call this Shulstein reached we've to comments. turn the end

Stephen Shulstein

Thank you.

revenue, As adjusted complete the including have and our Thanks, the transaction in deals and potential joint proceeds and joining, timing night. Netsmart the of will new into for timing we the of a enter sale the the client venture, everyone, and our potential whether great ownership These transaction. the EBITDA, footprint, to this a reminder, core include, of in of statements forward-looking international aren't growth businesses to non-GAAP and we've made a outside outlook number related our our well EPS, limited statements during call. as as statements related but to non-GAAP and of

Operator

conference. today's This concludes

disconnect may time, participation. lines and thank your at You this for we your you

Veradigm (MDRX) 1 Nov 182018 Q3 Earnings call transcript