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Veradigm (MDRX) - 2020 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported an 18% year-over-year increase in non-GAAP earnings per share, reaching $0.20 per share despite lower revenue [25][36] - Revenue for the quarter was $402 million, consistent with the previous quarter, with patient volume-linked revenue improvement offset by lower EPSI revenue [29] - Adjusted EBITDA margin improved by 110 basis points sequentially, totaling a 640 basis point improvement since the margin improvement program began [31][34] Business Line Data and Key Metrics Changes - The independent ambulatory practice market saw strong sales momentum, winning 10 new logos, bringing the total to nearly 30 for the year [26] - The Veradigm unit reported strong results for solutions targeted at life science companies and payers, contributing to larger contracts [27][28] - The core Clinical and Financial Solutions segment achieved an adjusted EBITDA margin of 15.9% [31] Market Data and Key Metrics Changes - The company noted a shift in the buying environment towards subscription models rather than upfront license revenue, impacting nonrecurring revenue [30] - The regulatory environment is evolving, with the company preparing for compliance with ONC's final rule on interoperability, which may separate it from competitors [21][22] Company Strategy and Development Direction - The company is focused on unlocking shareholder value through strategic divestitures, having sold CarePort and EPSI, which represented less than 10% of consolidated revenue [39][40] - Future capital will be allocated to reduce debt, invest in growth, and support share repurchases, with a target to stay below 1.5 turns of leverage [40][41] - The company aims to continue expanding internationally and leveraging its data and analytics capabilities through the Veradigm business [42] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating the challenges posed by COVID-19, noting that clients have adapted and are focusing on strategic priorities [69] - The company anticipates modest revenue growth in Q4, despite headwinds from the sale of EPSI [30][66] - Management expects to convert 85% to 90% of non-GAAP net income into free cash flow going forward [63] Other Important Information - The company has seen a significant increase in telehealth visits by over 9,000% since the pandemic began, indicating a shift in client needs [19] - The Allscripts Client Experience event saw record attendance, highlighting the company's engagement with clients and industry leaders [16][17] Q&A Session Summary Question: What are the best growth opportunities over the next three years? - Management highlighted that growth opportunities are driven by scale and innovation, with a focus on new use cases and market share shifts [47][49] Question: How do you see margin expansion opportunities post-divestiture? - Management indicated that the core segment is not impacted by divestitures and expects continued progress on margin improvement [50][53] Question: Can you provide details on the largest contract and what drives larger contracts? - The uniqueness of the data assets and the need for life science companies to reimagine trial processes are driving larger contracts [56] Question: What is the outlook for free cash flow? - Management aims to convert a significant portion of non-GAAP net income into free cash flow, targeting 85% to 90% [63] Question: How should we model bookings performance in Q4? - Historically, Q4 is the strongest quarter for sales activity, and management expects moderate improvement in bookings [66] Question: How is the Veradigm business tied to the core EHR platform? - While data flows from EHRs, the Veradigm platform is expanding to include data from competitors, indicating a growth plan that is not solely dependent on the core EHR [72]