Log in
Log in
Or log in with
GoogleGoogle
Twitter Twitter
Facebook Facebook
Apple Apple     
Sign up
Or log in with
GoogleGoogle
Twitter Twitter
Facebook Facebook
Apple Apple     
  1. Homepage
  2. Equities
  3. United States
  4. Nasdaq
  5. Veradigm Inc.
  6. News
  7. Summary
    MDRX   US01988P1084

VERADIGM INC.

(MDRX)
  Report
Delayed Nasdaq  -  04:00:00 2023-02-06 pm EST
17.00 USD   -1.73%
02/01Jopari Solutions and Veradigm Collaborate to Provide Electronic Claim & Attachment Solutions for Veradigm Payerpath™ Customers
CI
02/01Piper Sandler Downgrades Veradigm to Neutral From Overweight, Adjusts Price Target to $18.50 From $17
MT
01/31Veradigm Network EHR Data is Now Available in the Observational Medical Outcomes Partnership (OMOP) Common Data Model (CDM) Format
AQ
SummaryQuotesChartsNewsRatingsCalendarCompanyFinancialsConsensusRevisionsFunds 
SummaryMost relevantAll NewsAnalyst Reco.Other languagesPress ReleasesOfficial PublicationsSector news

ALLSCRIPTS HEALTHCARE SOLUTIONS, INC. Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

11/07/2022 | 04:41pm EST
This "Management's Discussion and Analysis of Financial Condition and Results of
Operations" section and other sections of this Quarterly Report on Form 10-Q
("Form 10-Q") contain forward-looking statements, within the meaning of the
Private Securities Litigation Reform Act of 1995, that involve risks and
uncertainties. Forward-looking statements provide current expectations of future
events based on certain assumptions and include any statement that does not
directly relate to any historical fact or pattern, including statements
regarding the potential impacts of the COVID-19 pandemic and steps we have taken
or plan to take in response thereto, statements related to the effect of
macroeconomic trends, statements regarding evolving patient care models,
statements regarding legislative, administrative and regulatory actions on our
business and opportunities related to accumulated patient data, statements
regarding our expected future investment in research and development efforts and
statements regarding our operations following the sale of the Hospitals and
Large Physician Practices Business. Forward-looking statements can also be
identified by the use of words such as "future," "anticipates," "believes,"
"estimates," "expects," "intends," "plans," "predicts," "will," "would,"
"could," "can," "may," and similar terms. Forward-looking statements are not
guarantees of future performance. Actual results could differ significantly from
those set forth in the forward-looking statements, and reported results should
not be considered an indication of future performance or events. Certain factors
that could cause our actual results to differ materially from those described in
the forward-looking statements include, but are not limited to: our ability to
achieve the margin targets associated with our profitability initiatives within
the contemplated time periods, if at all; the continued impact of the COVID-19
pandemic, including the impacts of our responses and the responses by
governments and other businesses to the pandemic, on our business, our
employees, our clients and our suppliers; security breaches resulting in
unauthorized access to our or our clients' computer systems or data, including
denial-of-services ransomware or other Internet-based attacks; the failure by
Practice Fusion to comply with the terms of the settlement agreements with the
U.S. Department of Justice (the "DOJ"); the costs and burdens of compliance by
Practice Fusion with the terms of its settlement agreements with the DOJ;
additional investigations and proceedings from governmental entities or third
parties other than the DOJ related to the same or similar conduct underlying the
DOJ's investigations into Practice Fusion's business practices; our ability to
recover from third parties (including insurers) any amounts paid in connection
with Practice Fusion's settlement agreements with the DOJ and related inquiries;
the expected financial results of businesses acquired by us; the successful
integration of businesses acquired by us; the anticipated and unanticipated
expenses and liabilities related to businesses acquired by us, including the
civil investigation by the U.S. Attorney's Office involving our Enterprise
Information Solutions business; other risks associated with investments and
acquisitions; risks associated with the disposition of the Hospitals and Large
Physician Practices Business; our failure to compete successfully; consolidation
in our industry; current and future laws, regulations and industry initiatives;
increased government involvement in our industry; the failure of markets in
which we operate to develop as quickly as expected; our or our customers'
failure to see the benefits of government programs; changes in interoperability
or other regulatory standards; our ability to maintain and expand our business
with existing clients or effectively transition clients to newer products; the
effects of the realignment of our sales, services and support organizations;
market acceptance of our products and services; the unpredictability of the
sales and implementation cycles for our products and services; our ability to
manage future growth; our ability to introduce new products and services; our
ability to establish and maintain strategic relationships; the performance of
our products; our ability to protect our intellectual property rights; the
outcome of legal proceedings involving us; our ability to hire, retain and
motivate key personnel; performance by our content and service providers;
liability for use of content; price reductions; our ability to license and
integrate third-party technologies; risks related to global operations;
variability of our quarterly operating results; risks related to our outstanding
indebtedness; changes in tax rates or laws; business disruptions; our ability to
maintain proper and effective internal controls; asset and long-term investment
impairment charges; inflationary pressures and macroeconomic volatility; and the
other factors discussed in Part I, Item 1A of our Annual Report on Form 10-K for
the year ended December 31, 2021, as amended (our "Form 10-K") under the heading
"Risk Factors" and elsewhere. The following discussion should be read in
conjunction with the unaudited consolidated financial statements and notes
thereto included in Part I, Item 1, "Financial Statements" in this Form 10-Q, as
well as our Form 10-K filed with the Securities and Exchange Commission (the
"SEC"). We assume no obligation to revise or update any forward-looking
statements for any reason, except as required by law.

Each of the terms "we," "us," "our," "Company," or "Allscripts" as used herein refers collectively to Allscripts Healthcare Solutions, Inc. and/or its wholly-owned subsidiaries and controlled affiliates, unless otherwise stated.

Overview

Our Business Overview and Regulatory Environment


We deliver information technology ("IT") solutions and services to help
healthcare organizations achieve optimal clinical, financial and operational
results. We sell our solutions to physicians, hospitals, governments, health
systems, health plans, life sciences companies, retail clinics, retail
pharmacies, pharmacy benefit managers, insurance companies, employer wellness
clinics and post-acute organizations, such as home health and hospice agencies.
We help our clients improve the quality and efficiency of health care with
solutions that include electronic health records ("EHRs"), information
connectivity, private cloud hosting, outsourcing, analytics, patient access and
population health management. We derive our revenues primarily from sales of our
proprietary software (either as a perpetual license sale or under a subscription
delivery model), support and maintenance services, and managed services, such as
outsourcing, private cloud hosting and revenue cycle management.

                                       29
--------------------------------------------------------------------------------
Our solutions empower healthcare professionals with the data, insights and
connectivity to other caregivers they need to succeed in an industry that is
rapidly changing from fee-for-service models to fee-for-value advanced payment
models. We believe we offer some of the most comprehensive solutions in our
industry today. Healthcare organizations can effectively manage patients and
patient populations across all care settings using a combination of our
physician, hospital, health system, post-acute care and population health
management products and services. We believe these solutions will help transform
health care as the industry seeks new ways to manage risk, improve quality and
reduce costs.

Globally, healthcare providers continue to face the challenges of caring for an
aging population with an increasing number of patients with chronic diseases, as
well as the ongoing novel coronavirus ("COVID-19") crisis. At the same time,
practitioners worldwide are also under growing pressure to demonstrate the
delivery of high-quality care at lower costs and to fully embrace expectations
of efficient, patient-centered information exchange. Congressional oversight of
EHRs and health information technology has increased in recent years. This
increased oversight has impacted and could continue to impact our clients and
our business. The passage of the 21st Century Cures Act in December 2016
assuaged some concerns about interoperability and possible U.S. Food and Drug
Administration oversight of EHRs, and the ensuing regulations on data blocking
and interoperability were released by the Department of Health and Human
Services ("HHS") in March 2020 and became applicable under Office of the
National Coordinator for Health Information Technology oversight in April 2021.
Additional regulatory clarity will come with the final rule expected shortly
from the HHS Office of the Inspector General, as well as a rule from HHS that
will outline disincentives for providers who may be engaged in blocking
behaviors. Some aspects of the new regulations are having a significant effect
on our business processes and how our clients must exchange patient information.
In particular, Allscripts must complete development work to satisfy the revised
and new certification criterion, and we and our clients will continue making
adjustments to business practices associated with information exchange and
provision of Electronic Health Information.

Following several high-profile ransomware and other cybersecurity attacks both
in and outside the healthcare industry, as well as increased conversation about
the expanding use of patient health data outside of HIPAA-covered environments,
including through consumer applications, policy makers have taken action
affecting Allscripts and our clients and are currently considering additional
legislative and regulatory vehicles to expand privacy protections. Allscripts
remains committed to working to securely protect the patient data within our
system and complying with requirements associated with the transmission of
patient data to both HIPAA- and non-HIPAA-covered entities.

Please refer to the section entitled "Our Business Overview and Regulatory Environment" in Part II, Item 7 of our Form 10-K for additional information.

Impacts of COVID-19


The global outbreak of COVID-19 continues to cause volatile economic activity
around the world, and the degrees of any economic recovery in various
jurisdictions have not been linear. We have been carefully monitoring the
COVID-19 pandemic and its impact on our global operations. We are conducting
business with certain modifications to employee travel and employee work
locations, and have implemented certain cost reduction initiatives, among other
modifications. We will continue to actively monitor the situation and may take
further actions that alter our business operations as may be required by
federal, state or local authorities or that we determine are in the best
interests of our employees, customers, partners and stockholders.

Allscripts, along with other health IT vendors, was asked by the White House,
HHS, the Centers for Disease Control and Prevention, and state and local
governments to support public health efforts to contain the pandemic by
expanding COVID-19 reporting options available to our clients. Our technology
has been instrumental to the provision of high-quality care, aiding not only
public health surveillance but also in clinical decision support interventions
to aid in triage, diagnosis and treatment; information exchange as patients are
moved from site to site and/or discharged; predictive analytics based on local
data for surge anticipation and vaccine management; and research based on
real-world data informing the world's evolving understanding of post-acute
sequelae of COVID-19 (known colloquially as Long COVID). Allscripts and our
clients may also be affected by changed requirements at the federal, state or
local levels as efforts to modernize public health systems, including
technologies (e.g., telehealth), are implemented following the inclusion of
associated appropriations within COVID-19-related bills that passed in 2020,
2021 and 2022.

The COVID-19 pandemic negatively impacted revenue for the three and nine months
ended September 30, 2022, as projects and buying decisions from the prior year
were delayed due in part to the pandemic. However, the negative impacts on our
business in the first, second and third quarters of 2022 were minimal compared
to the prior year periods. The extent to which the COVID-19 pandemic will
continue to impact the Company's results of operations and financial condition
will depend on future developments that are highly uncertain and cannot be
predicted. Future developments include resurgences or additional "waves" of
outbreaks of COVID-19 in various jurisdictions (including new lineages of the
virus), the impact of COVID-19 on economic activity, the actions taken by health
authorities and policy makers to contain its impacts on public health and the
global economy, and the availability, effectiveness and public acceptance of
vaccines.

Changes in Macroeconomic Conditions

A potential economic recession and uncertainty in financial markets have resulted in changes in market conditions and produced market volatility. The impact of inflation and rising interest rates may affect the financial performance of the customers we serve and influence customer demand.

                                       30

--------------------------------------------------------------------------------

Third Quarter 2022 Summary


During the third quarter of 2022, we continued to make progress on our key
strategic, financial and operational imperatives, which are aimed at driving
higher client satisfaction, increasing operating margins and improving our
competitive position by expanding the depth and breadth of our products.
Additionally, we believe there are still opportunities to continue to improve
our operating leverage and further streamline our operations, and such efforts
are ongoing.

Total revenue for the third quarter of 2022 was $152 million, an increase of $7
million compared to the third quarter of 2021. For the three months ended
September 30, 2022, provider revenue and payer & life sciences revenue were $123
million and $29 million, respectively, compared with $118 million and $27
million, respectively, during the three months ended September 30, 2021. Gross
profit for the third quarter of 2022 was $83 million, an increase of $14 million
compared to the third quarter of 2021. Gross margin increased to 54.9% in the
third quarter of 2022 compared to a 48.1% gross margin in the third quarter of
2021.

Overview of Consolidated Results

Three and Nine Months Ended September 30, 2022 Compared with the Three and Nine Months Ended September 30, 2021


                                      Three Months Ended September 30,                Nine Months Ended September 30,
(In thousands, except
percentages)                         2022             2021        % Change           2022            2021        % Change
Revenue:
Provider                         $    122,811       $ 118,179           3.9 %    $    360,415      $ 345,253           4.4 %
Payer & Life Sciences                  29,111          26,489           9.9 %          85,077         74,273          14.5 %
Total revenue                         151,922         144,668           5.0 %         445,492        419,526           6.2 %
Cost of revenue:
Provider                               57,252          61,606          (7.1 %)        172,595        180,566          (4.4 %)
Payer & Life Sciences                  11,234          13,422         (16.3 %)         36,498         37,984          (3.9 %)
Total cost of revenue                  68,486          75,028          (8.7 %)        209,093        218,550          (4.3 %)
Gross profit                           83,436          69,640          19.8 %         236,399        200,976          17.6 %
Gross margin %                           54.9 %          48.1 %                          53.1 %         47.9 %
Selling, general and
administrative expenses                32,518          27,392          18.7 %         133,683         87,680          52.5 %
Research and development               23,681          21,042          12.5 %          69,851         62,644          11.5 %
Asset impairment charges                    0             359        (100.0 %)              0            531        (100.0 %)
Amortization of intangible and
acquisition-related assets              2,236           2,363          (5.4 %)          6,648          7,090          (6.2 %)
Income from operations                 25,001          18,484          35.3 %          26,217         43,031         (39.1 %)
Interest expense                       (1,246 )        (3,617 )       (65.6 %)         (5,269 )       (9,709 )       (45.7 %)
Other income, net                       1,655           4,493         (63.2 %)          3,800         21,819         (82.6 %)
Gain on sale of businesses,
net                                         0           8,363        (100.0 %)              0          8,363        (100.0 %)
Equity in net loss of
unconsolidated investments               (617 )          (257 )       140.1 %          (1,222 )         (321 )          NM
Income from continuing
operations before income taxes         24,793          27,466          (9.7 %)         23,526         63,183         (62.8 %)
Income tax (provision) benefit        (13,868 )        (7,190 )        92.9 %           9,132        (12,464 )      (173.3 %)
Effective tax rate                       55.9 %          26.2 %                          38.8 %         19.7 %
Income from continuing
operations, net of tax                 10,925          20,276         (46.1 %)         32,658         50,719         (35.6 %)
Loss from discontinued
operations                               (434 )        (6,187 )       (93.0 %)         (9,252 )       (6,545 )        41.4 %
Gain on sale of discontinued
operations                              5,174               0         100.0 %           7,939            647            NM
Income tax effect on
discontinued operations                (1,137 )         2,091        (154.4 %)        (57,986 )        2,342            NM
Income (loss) from
discontinued operations, net
of tax                                  3,603          (4,096 )       188.0 %         (59,299 )       (3,556 )          NM
Net income (loss)                $     14,528       $  16,180         (10.2 %)   $    (26,641 )    $  47,163        (156.5 %)


NM - We define "NM" as not meaningful for increases or decreases greater than
200%.

Revenue

                                        Three Months Ended September 30,                   Nine Months Ended September 30,
(In thousands)                       2022                2021          % Change          2022              2021         % Change
Revenue:
Provider                         $     122,811       $     118,179           3.9 %   $    360,415       $  345,253            4.4 %
Payer & Life Sciences                   29,111              26,489           9.9 %         85,077           74,273           14.5 %
Total revenue                    $     151,922       $     144,668           5.0 %   $    445,492       $  419,526            6.2 %



                                       31

--------------------------------------------------------------------------------

Three and Nine Months Ended September 30, 2022 Compared with the Three and Nine Months Ended September 30, 2021


Provider revenue consists of revenue derived from software applications for
patient engagement and the sale of EHR software to single-specialty and small
and mid-sized physician practices, including related clinical, financial,
administrative and operational solutions. Payer and life sciences revenue
primarily consists of sales of our integrated data systems solutions and related
services to key healthcare stakeholders, including health plans and
pharmaceutical companies, to help them improve the quality, efficiency and value
of healthcare delivery.

Provider revenue increased for the three and nine months ended September 30,
2022 compared to the prior year comparable periods, reflecting increases in
transaction-related, subscription and upfront software revenues. Payer and life
sciences revenue increased for the three and nine months ended September 30,
2022 compared to the prior year comparable periods, primarily due to an increase
in subscription revenues and transaction-related revenues.

The percentage of provider and payer and life sciences revenue of our total revenue was 81% and 19%, respectively, during the three and nine months ended September 30, 2022 and 82% and 18%, respectively, during the three and nine months ended September 30, 2021.

Gross Profit


                                            Three Months Ended September 30,                   Nine Months Ended September 30,
(In thousands, except percentages)       2022               2021          % Change           2022              2021         % Change
Total cost of revenue                $     68,486       $     75,028           (8.7 %)   $    209,093       $  218,550           (4.3 %)
Gross profit                         $     83,436       $     69,640           19.8 %    $    236,399       $  200,976           17.6 %
Gross margin %                               54.9 %             48.1 %                           53.1 %           47.9 %

Three and Nine Months Ended September 30, 2022 Compared with the Three and Nine Months Ended September 30, 2021


Gross profit and margin increased during the three and nine months ended
September 30, 2022 compared with the prior year comparable periods, primarily
due to increases in revenues, lower contractor usage and improvements to our
hosting infrastructure costs.

Selling, General and Administrative Expenses


                                        Three Months Ended September 30,                  Nine Months Ended September 30,
(In thousands)                       2022               2021          % Change          2022              2021         % Change
Selling, general and
administrative expenses          $     32,518       $     27,392           18.7 %   $     133,683       $  87,680           52.5 %

Three and Nine Months Ended September 30, 2022 Compared with the Three and Nine Months Ended September 30, 2021


Selling, general and administrative expenses increased during the three and nine
months ended September 30, 2022, compared with the prior year comparable
periods, primarily due to higher legal costs and increases in stock-based
compensation expense. In addition, certain corporate expenses that remained
after the disposition of the Hospitals and Large Physician Practices business
are being fully recognized in 2022, whereas in 2021 those comparable expenses
were allocated between Veradigm and the Hospitals and Large Physician Practices
businesses.

Research and Development

                                        Three Months Ended September 30,                   Nine Months Ended September 30,
(In thousands)                       2022               2021          % Change          2022               2021          % Change
Research and development         $     23,681       $     21,042           12.5 %   $     69,851       $     62,644           11.5 %

Three and Nine Months Ended September 30, 2022 Compared with the Three and Nine Months Ended September 30, 2021


Research and development expenses increased during the three and nine months
ended September 30, 2022 compared with the prior year comparable periods,
primarily due to the increased investment in Veradigm products for both provider
and payer and life sciences.

Asset impairment charges

                                     Three Months Ended September 30,                 Nine Months Ended September 30,
(In thousands)                     2022           2021          % Change         2022           2021             % Change
Asset impairment charges         $      0       $     359          (100.0 %)   $      0       $     531               (100.0 %)

Three and Nine Months Ended September 30, 2022 Compared with the Three and Nine Months Ended September 30, 2021


Asset impairment charges for the three and nine months ended September 30, 2021
were due to the write-off of deferred costs related to our private cloud hosting
operations.

                                       32

--------------------------------------------------------------------------------

Amortization of Intangible and Acquisition-related Assets


                                       Three Months Ended September 30,                   Nine Months Ended September 30,
(In thousands)                      2022              2021           % Change          2022              2021          % Change
Amortization of intangible and
acquisition-related assets       $     2,236       $     2,363            (5.4 %)   $     6,648       $     7,090           (6.2 %)


Three and Nine Months Ended September 30, 2022 Compared with the Three and Nine Months Ended September 30, 2021


The decrease in amortization expense for the three and nine months ended
September 30, 2022, compared with the prior year comparable periods, was due to
normal amortization expense and certain intangible assets being fully amortized
in 2021.

Interest Expense

                                       Three Months Ended September 30,                  Nine Months Ended September 30,
(In thousands)                      2022              2021          % Change          2022              2021          % Change
Interest expense                 $     1,246       $     3,617          (65.6 %)   $     5,269       $     9,709          (45.7 %)

Three and Nine Months Ended September 30, 2022 Compared with the Three and Nine Months Ended September 30, 2021


Interest expense decreased during the three and nine months ended September 30,
2022 compared with the prior year comparable periods, primarily due to lower
outstanding debt levels in the current year and the absence of accreted interest
expense in the current year for the equity component of the 0.875% Convertible
Senior Notes. As of January 1, 2022, we adopted Accounting Standards Update No.
2020-06, "Debt-Debt with Conversion and Other Options (Subtopic 470-20) and
Derivatives and Hedging-Contracts in Entity's Own Equity (Subtopic 815-40):
Accounting for Convertible Instruments and Contracts in an Entity's Own Equity",
which required us to remove the equity component from Additional paid-in
capital. Refer to Note 10, "Debt" of the Notes to Consolidated Financial
Statements in Part I, Item 1 of this Form 10-Q for additional information.

Other Income, Net


                                       Three Months Ended September 30,                  Nine Months Ended September 30,
(In thousands)                      2022              2021          % Change          2022              2021          % Change
Other income, net                $     1,655       $     4,493          (63.2 %)   $    3,800       $     21,819          (82.6 %)

Three and Nine Months Ended September 30, 2022 Compared with the Three and Nine Months Ended September 30, 2021


Other income, net for the three and nine months ended September 30, 2022 and
2021 consisted of a combination of interest income and miscellaneous receipts
and expenses. Income during the three months ended September 30, 2021 was
primarily due to a $1.4 million distribution received from a third-party cost
method investment and a $1.6 million gain as a result of the sale of a
third-party cost method investment. In addition to the items previously
mentioned, the income during the nine months ended September 30, 2021 included a
$5.0 million distribution received from the Practice Fusion escrow account
related to the settlement agreements with the DOJ, a $9.7 million gain as a
result of a note conversion, the revaluation of our existing investment with a
third-party cost method investment, and a $1.4 million distribution received
from a third-party cost method investment.

Gain on Sale of Businesses, Net


                                          Three Months Ended September 30,                    Nine Months Ended September 30,
(In thousands)                      2022             2021              % Change           2022             2021           % Change
Gain on sale of businesses, net   $      0       $      8,363               

(100.0 %) $ 0 $ 8,363 (100.0 %)

Three and Nine Months Ended September 30, 2022 Compared with the Three and Nine Months Ended September 30, 2021

Gain on sale of businesses, net during the three and nine months ended September 30, 2021 consisted of a gain of $8.4 million from the divestiture of our 2bPrecise business.

Equity in Net Loss of Unconsolidated Investments


                                       Three Months Ended September 30,               Nine Months Ended September 30,
(In thousands)                      2022             2021           % Change         2022             2021        % Change
Equity in net loss of
unconsolidated investments       $     (617 )     $     (257 )          140.1 %   $    (1,222 )     $    (321 )   NM

Three and Nine Months Ended September 30, 2022 Compared with the Three and Nine Months Ended September 30, 2021


Equity in net loss of unconsolidated investments represents our share of the
equity earnings (or losses) of our investments in third parties accounted for
under the equity method of accounting based on a one quarter lag.

Income Taxes


                                            Three Months Ended September 30,                 Nine Months Ended September 30,
(In thousands, except percentages)       2022               2021          % Change         2022             2021        % Change

Income tax (provision) benefit $ (13,868 ) $ (7,190 )

   92.9 %   $    9,132       $  (12,464 )      (173.3 %)
Effective tax rate                            55.9 %            26.2 %                        38.8 %           19.7 %

NM - We define "NM" as not meaningful for percentages greater than 200%

                                       33

--------------------------------------------------------------------------------

Three and Nine Months Ended September 30, 2022 Compared with the Three and Nine Months Ended September 30, 2021


Our provision for income taxes differs from the tax computed at the U.S. federal
statutory income tax rate primarily due to permanent differences, income
attributable to foreign jurisdictions taxed at different rates, state taxes, tax
credits and certain discrete items including a windfall benefit of $12.6 million
for the nine months ended September 30, 2022 and a windfall benefit of $4.6
million for the nine months ended September 30, 2021. Our effective tax rate for
the three and nine months ended September 30, 2022, compared with the prior year
comparable periods, differs primarily due to the release of valuation allowance
of $11.2 million in the three and nine months ended September 30, 2022. In
addition, the permanent items, credits and the impact of foreign earnings had
more impact on the pre-tax income of $24.8 million and $23.5 million in the
three and nine months ended September 30, 2022, respectively, compared to the
impact of these items on a pre-tax income of $27.5 million and $63.2 million for
the three and nine months ended September 30, 2021, respectively.

In evaluating our ability to recover our deferred tax assets within the
jurisdictions from which they arise, we consider all available evidence,
including scheduled reversals of deferred tax liabilities, tax-planning
strategies, and results of recent operations. In evaluating the objective
evidence that historical results provide, we consider three years of cumulative
operating income (loss). During the nine months ended September 30, 2022, we
released valuation allowances of $11.2 million related to U.S. deferred tax
assets.

Discontinued Operations

                                      Three Months Ended September 30,                  Nine Months Ended September 30,
(In thousands)                      2022              2021         % Change           2022              2021         % Change
Loss from discontinued
operations                       $      (434 )     $    (6,187 )       (93.0 %)   $      (9,252 )     $  (6,545 )         41.4 %
Gain on sale of discontinued
operations                             5,174                 0         100.0 %            7,939             647             NM
Income tax effect on
discontinued operations               (1,137 )           2,091        (154.4 %)         (57,986 )         2,342             NM
Income (loss) from
discontinued operations, net
of tax                           $     3,603       $    (4,096 )       188.0 %    $     (59,299 )     $  (3,556 )           NM

Three and Nine Months Ended September 30, 2022 Compared with the Three and Nine Months Ended September 30, 2021


On May 2, 2022, we completed the sale of our Hospitals and Large Physician
Practices business, including the Sunrise and TouchWorks solutions (the
"Hospitals and Large Physician Practices Business") to Altera Digital Health
Inc. (formerly known as Harris Dawn Holdings Inc.), a Delaware corporation
("Altera"), a wholly-owned subsidiary of Constellation Software Inc., an Ontario
corporation, pursuant to a purchase agreement (the "Altera Purchase Agreement")
by which Altera purchased substantially all of the assets of the Hospitals and
Large Physician Practices Business. The Hospitals and Large Physician Practices
Business sale represented a strategic shift that had a major effect on our
operations and financial results. As of June 30, 2022, we reported the Hospitals
and Large Physician Practices Business as discontinued operations.

On October 15, 2020 and December 31, 2020, we completed the sale of the EPSi and
CarePort businesses, respectively. Prior to the sale of EPSi, it was part of the
"Unallocated Amounts" category as it did not meet the requirements to be a
reportable segment nor the criteria to be aggregated into our two reportable
segments at the time. Prior to the sale of CarePort, it was part of the former
Data, Analytics and Care Coordination reportable segment. Both businesses were
part of the same strategic initiative and were sold within the same period, and
given that the combined sale of EPSi and CarePort represented a strategic shift
that had a major effect on our operations and financial results, we reported
them together as discontinued operations for all periods presented.

The loss from discontinued operations for the three and nine months ended
September 30, 2022 represents the operating statement activity related to the
Hospitals and Large Physician Practices Business. The gain on sale of
discontinued operations for the three and nine months ended September 30, 2022
is a result of the sale of the Hospitals and Large Physician Practices Business.
The income tax effect on discontinued operations for the three and nine months
ended September 30, 2022 represents the income tax expense related to the
Hospitals and Large Physician Practices Business. The three months ended
September 30, 2022 included certain adjustments made in connection with the sale
of the Hospitals and Large Physician Practices Business, primarily relating to
net working capital adjustments that impacted the gain on the sale of the
discontinued operations.

The loss from discontinued operations for the three months ended September 30,
2021 and the income from discontinued operations for the nine months ended
September 30, 2021 primarily represent the operating statement activity related
to the Hospitals and Large Physician Practices Business. The gain on sale of
discontinued operations for the nine months ended September 30, 2021 represents
the net working capital adjustments to the gain from the sale of CarePort. The
income tax effect on discontinued operations for the three and nine months ended
September 30, 2021 primarily represents the income tax expense related to the
Hospitals and Large Physician Practices Business. Refer to Note 15,
"Discontinued Operations" of the Notes to Consolidated Financial Statements in
Part I, Item 1 of this Form 10-Q for further information regarding discontinued
operations.

                                       34

--------------------------------------------------------------------------------

Segment Operations


On March 2, 2022, we entered into a purchase agreement to sell substantially all
of the assets of our Hospitals and Large Physician Practices Business. As of
March 31, 2022, the operating segment was classified in discontinued operations
as the disposition represented a strategic shift that had a major effect on our
operations and financial results. Therefore, we changed our reportable segments,
which previously included Hospitals and Large Physician Practices. As of March
31, 2022, we had two operating segments: (i) Veradigm and (ii) Certain Products.
The Veradigm operating segment was the equivalent to our one reportable segment.
On May 2, 2022, we completed the sale of the Hospitals and Large Physician
Practices Business. As of September 30, 2022, our two operating segments and one
reportable segment remained unchanged from the end of the first quarter of 2022.
The segment disclosures below for the three and nine months ended September 30,
2021 have been revised to conform to the current period presentation. Refer to
Note 16 "Business Segments" of the Notes to Consolidated Financial Statements in
Part I, Item 1 of this Form 10-Q for further discussion on the impact of the
change.

Overview of Segment Results

                                       Three Months Ended September 30,                  Nine Months Ended September 30,
(In thousands)                       2022              2021         % Change           2022             2021         % Change
Revenue:
Veradigm                         $    145,391       $  137,169            6.0 %    $    426,306       $ 396,988            7.4 %
Unallocated Amounts                     6,531            7,499          (12.9 %)         19,186          22,538          (14.9 %)
Total revenue                    $    151,922       $  144,668            5.0 %    $    445,492       $ 419,526            6.2 %

Gross Profit:
Veradigm                         $     78,801       $   65,696           19.9 %    $    223,405       $ 187,960           18.9 %
Unallocated Amounts                     4,635            3,944           17.5 %          12,994          13,016           (0.2 %)
Total gross profit               $     83,436       $   69,640           19.8 %    $    236,399       $ 200,976           17.6 %

Income (loss) from operations:
Veradigm                         $     27,707       $   17,099           62.0 %    $     69,796       $  46,607           49.8 %
Unallocated Amounts                    (2,706 )          1,385             NM           (43,579 )        (3,576 )           NM

Total income from operations $ 25,001 $ 18,484 35.3 % $ 26,217 $ 43,031 (39.1 %)



Veradigm

Our Veradigm segment derives its revenue from payer and life sciences solutions,
which are mainly targeted at payers, life sciences companies and other key
healthcare stakeholders. Additionally, revenue is derived from software
applications for patient engagement and the sale of EHR software to
single-specialty and small and mid-sized physician practices, including related
clinical, financial, administrative and operational solutions. These solutions
enable clients to transition, analyze, coordinate care and improve the quality,
efficiency and value of healthcare delivery across the entire care community.

                                      Three Months Ended September 30,                  Nine Months Ended September 30,
(In thousands)                     2022               2021          % Change          2022              2021         % Change
Revenue                        $    145,391       $    137,169            6.0 %   $    426,306       $  396,988            7.4 %
Gross profit                   $     78,801       $     65,696           19.9 %   $    223,405       $  187,960           18.9 %
Gross margin %                         54.2 %             47.9 %                          52.4 %           47.3 %
Income from operations         $     27,707       $     17,099           62.0 %   $     69,796       $   46,607           49.8 %
Operating margin %                     19.1 %             12.5 %                          16.4 %           11.7 %

Three and Nine Months Ended September 30, 2022 Compared with the Three and Nine Months Ended September 30, 2021


Veradigm revenue increased for the three and nine months ended September 30,
2022 compared with the prior year comparable periods, due to increases in
subscription, upfront software and transaction-related revenues. The increase
was partially offset by decreases in maintenance and client services revenues.

Gross profit and gross margin increased during the three and nine months ended
September 30, 2022 compared with the prior year comparable periods, primarily
due to increases in revenues, lower contractor usage and improvements to our
hosting infrastructure costs.

Income from operations and operating margin increased during the three and nine
months ended September 30, 2022 compared with the prior year comparable periods,
primarily due to the increase in gross profit. The increases were partially
offset due to higher research and development costs related to the increased
investment in Veradigm products for both provider and payer and life sciences
and the decrease in capitalized software costs.

                                       35

--------------------------------------------------------------------------------

Unallocated Amounts


The "Unallocated Amounts" category consists of the 2bPrecise business, certain
products that were shifted from the previous Core Clinical and Financial
Solutions reportable segment due to the organizational changes ("Certain
Products") and certain corporate-related expenses. The amounts included in the
"Unallocated Amounts" category for 2bPrecise and Certain Products do not meet
the requirements to be reportable segments nor the criteria to be aggregated
into our Veradigm reportable segment.

                                      Three Months Ended September 30,                  Nine Months Ended September 30,
(In thousands)                     2022               2021         % Change           2022             2021         % Change
Revenue                         $     6,531        $    7,499          (12.9 %)   $     19,186       $ 22,538           (14.9 %)
Gross profit                    $     4,635        $    3,944           17.5 %    $     12,994       $ 13,016            (0.2 %)
Gross margin %                         71.0 %            52.6 %                           67.7 %         57.8 %

(Loss) income from operations $ (2,706 ) $ 1,385 NM

      $    (43,579 )     $ (3,576 )    NM
Operating margin %                    (41.4 %)           18.5 %                             NM          (15.9 %)

Three and Nine Months Ended September 30, 2022 Compared with the Three and Nine Months Ended September 30, 2021


Revenue decreased during the three and nine months ended September 30, 2022,
compared with the prior year comparable periods, primarily due to a decrease in
upfront software revenues.

Gross profit increased during the three months ended September 30, 2022,
compared with the prior year comparable period, primarily due to a decrease in
cost of revenues as certain corporate bonus expense previously recorded to the
"Unallocated Amounts" category was recorded to the Veradigm segment in 2022. The
increase in gross profit was partially offset by a decrease in revenues. Gross
profit was essentially flat during the nine months ended September 30, 2022,
compared with the prior year comparable period. Gross margin increased during
the nine months ended September 30, 2022, compared with the prior year
comparable period, primarily due to the decrease in revenues being partially
offset by a decrease in cost of revenues as certain corporate bonus expense
previously recorded to the "Unallocated Amounts" category was recorded to the
Veradigm segment in 2022.

Loss from operations increased during the three and nine months ended September
30, 2022, compared with the prior year comparable periods, primarily due to
higher legal costs, increases in stock-based compensation expense and changes
attributed to corporate allocations from 2021 to 2022.

Liquidity and Capital Resources


The primary factors that influence our liquidity include, but are not limited
to, the amount and timing of our revenues, cash collections from our clients,
capital expenditures and investments in research and development efforts,
including investments in or acquisitions of third parties, and divestitures. As
of September 30, 2022, our principal sources of liquidity consisted of cash and
cash equivalents of $494 million and available borrowing capacity of $699
million under our Revolving Facility. The change in our cash and cash
equivalents balance is reflective of the following:

Operating Cash Flow Activities

                                                     Nine Months Ended September 30,
(In thousands)                                     2022            2021         $ Change
Net (loss) income                               $   (26,641 )   $   47,163     $  (73,804 )
Less: Loss from discontinued operations             (59,299 )       (3,556 

) (55,743 )

  Income from continuing operations                  32,658         50,719        (18,061 )
Non-cash adjustments to net (loss) income            53,926         41,689  

12,237

Cash impact of changes in operating assets
and liabilities                                      32,417          6,137  

26,280

Net cash provided by operating activities -

    continuing operations                           119,001         98,545 

20,456

Net cash used in operating activities -

    discontinued operations                         (23,234 )     (239,018 

) 215,784

  Net cash provided by (used in) operating
activities                                      $    95,767     $ (140,473 

) $ 236,240

Nine Months Ended September 30, 2022 Compared with the Nine Months Ended September 30, 2021


Net cash provided by operating activities - continuing operations increased
during the nine months ended September 30, 2022 compared with the prior year
comparable period. Income from continuing operations for the nine months ended
September 30, 2022 included a deferred tax benefit. However, during the nine
months ended September 30, 2021 we recorded higher income from operations, a
$8.4 million gain from the divestiture of our 2bPrecise business and higher
other income, which included a distribution received from the Practice Fusion
escrow account related to the settlement agreements with the DOJ, the investment
gain and distribution received from our third-party cost method investments.
Non-cash adjustments to net (loss) income increased primarily due to higher
stock-based compensation expense and the absence of the gain from the sale of
our 2bPrecise business. The increase was partially offset due to the change in
deferred taxes and lower depreciation and amortization expense. The increase in
cash impact of changes in operating assets and liabilities for the nine months
ended September 30, 2022 was primarily a result of working capital changes.

                                       36
--------------------------------------------------------------------------------
Net cash used in operating activities - discontinued operations decreased for
the nine months ended September 30, 2022 primarily due to the absence of the tax
payment relating to the gain from the sale of CarePort on December 31, 2020,
which was paid in the second quarter of 2021.

Investing Cash Flow Activities

                                                     Nine Months Ended September 30,
(In thousands)                                     2022             2021         $ Change
Capital expenditures                            $    (1,876 )    $   (1,050 )   $     (826 )
Capitalized software                                (26,207 )       (26,595 )          388
Cash paid for business acquisitions, net of
cash acquired                                       (24,106 )             0        (24,106 )
Sale of businesses and other investments, net
of cash divested, and distributions received        672,498           5,380 

667,118

Purchases of equity securities, other
investments and related intangible assets,
net                                                  (1,342 )          (219 

) (1,123 )

  Net cash provided by (used in) investing
activities -
    continuing operations                           618,967         (22,484

) 641,451

Net cash used in investing activities -

    discontinued operations                         (15,248 )       (32,388

) 17,140

  Net cash provided by (used in) investing
activities                                      $   603,719      $  (54,872 

) $ 658,591

Nine Months Ended September 30, 2022 Compared with the Nine Months Ended September 30, 2021


The change from net cash used in operating activities - continuing operations
for the nine months ended September 30, 2021 to net cash provided by operating
activities - continuing operations for the nine months ended September 30, 2022
was primarily due to the cash received as a result of the sale of the Hospitals
and Large Physician Practices Business, which was partially offset by cash paid
for the Babel Health acquisition.

Net cash used in investing activities - discontinued operations during the nine months ended September 30, 2022 and 2021 primarily reflects spending for capitalized software costs related to the Hospitals and Large Physician Practices Business.

Financing Cash Flow Activities


                                                    Nine Months Ended September 30,
(In thousands)                                     2022           2021         $ Change
Taxes paid related to net share settlement of
equity awards                                   $  (32,666 )   $  (12,718 )   $  (19,948 )
Credit facility payments                          (200,000 )      (50,000 )     (150,000 )
Credit facility borrowings, net of issuance
costs                                               22,335        250,000       (227,665 )
Repurchase of common stock                        (177,031 )     (308,953 ) 

131,922

Intercompany to/from parent/subsidiaries            11,685         47,323        (35,638 )
Payment of acquisition and other financing
obligations                                              0         (2,400 )        2,400
  Net cash used in financing activities -
    continuing operations                         (375,677 )      (76,748 )     (298,929 )
  Net cash used in financing activities -
    discontinued operations                        (11,697 )      (48,572 )       36,875
   Net cash used in financing activities        $ (387,374 )   $ (125,320 )   $ (262,054 )

Nine Months Ended September 30, 2022 Compared with the Nine Months Ended September 30, 2021


Net cash used in financing activities - continuing operations increased for the
nine months ended September 30, 2022 primarily due to higher credit facility
payments and lower credit facility borrowings in 2022. The increase was
partially offset due to lower share repurchases of common stock.

Net cash used in financing activities - discontinuing operations during both the
nine months ended September 30, 2022 and 2021 primarily reflects the cash for
operations for the Hospitals and Large Physician Practices Business.

Future Capital Requirements


We enter into obligations with third parties in the ordinary course of business.
These future cash obligations will be funded from future cash flows from the
sale of our products and services. The material cash requirements include the
following contractual and other obligations.

Debt Obligations

As of September 30, 2022, we had outstanding convertible senior notes in an aggregate principal amount of $207.9 million, which is fully due on the convertible senior notes' maturity date. As of September 30, 2022, we had no outstanding borrowings under the Revolving Facility.

                                       37

--------------------------------------------------------------------------------

Non-cancelable Operating Leases


We have lease arrangements for certain facilities. As of September 30, 2022, we
had fixed lease payment obligations of $19.7 million, with $6.7 million payable
within the next 12 months.

Purchase Obligations

Purchase obligations consist of minimum purchase commitments for Microsoft services, computer equipment, maintenance, consulting and other commitments. As of September 30, 2022, we had purchase obligations of $38.3 million, with approximately $14.6 million payable within the next 12 months.

Letters of Credit

As of September 30, 2022, we had $0.8 million letters of credit outstanding under the Third Amended Credit Agreement.

Income Taxes


Our liability for uncertain tax positions was $31.7 million as of September 30,
2022. It is uncertain the amount that is payable within the next 12 months for
liabilities that may result from this exposure, as we cannot predict, with
reasonable reliability, the outcome of discussions with the respective taxing
jurisdictions, which may or may not result in cash settlements.

Other Matters Affecting Future Capital Requirements


Our total investment in research and development is expected to increase in
2022, as compared to 2021, as the Company plans to make continued investments in
expanding the capabilities and functionality of our Veradigm provider, payer and
life sciences solutions. Our total spending consists of research and development
costs directly recorded to expense, which are offset by the capitalization of
eligible development costs.

We believe that our cash and cash equivalents of $494 million as of September
30, 2022, our future cash flows, our borrowing capacity under our Revolving
Facility and access to capital markets, taken together, provide adequate
resources to meet future operating needs as well as scheduled payments of short
and long-term debt. We cannot provide assurance that our actual cash
requirements will not be greater than we expect as of the date of this Form
10-Q. We will, from time to time, consider the acquisition of, or investment in,
complementary businesses, products, services and technologies and the repurchase
of our common stock under our stock repurchase program, any of which might
impact our liquidity requirements or cause us to borrow additional amounts under
our Revolving Facility or issue additional equity or debt securities.

Critical Accounting Estimates

There were no material changes to our critical accounting estimates from those previously disclosed in our Form 10-K.

© Edgar Online, source Glimpses

All news about VERADIGM INC.
02/01Jopari Solutions and Veradigm Collaborate to Provide Electronic Claim & Attachment Solu..
CI
02/01Piper Sandler Downgrades Veradigm to Neutral From Overweight, Adjusts Price Target to $..
MT
01/31Veradigm Network EHR Data is Now Available in the Observational Medical Outcomes Partne..
AQ
01/30Veradigm« Network EHR Data is Now Available in the Observational Medical Outcomes Partn..
BU
01/11Transcript : Veradigm Inc. Presents at 41st Annual J.P. Morgan Healthcare Con..
CI
01/11Veradigm Approves Share Buyback Plan of Up to $250 Million, Provides Fiscal 2023 Guidan..
MT
01/11Veradigm Inc. : Regulation FD Disclosure, Financial Statements and Exhibits (form 8-K)
AQ
01/11Tranche Update on Veradigm Inc.'s Equity Buyback Plan announced on January 24, 2022.
CI
01/11Veradigm Inc. announces an Equity Buyback for $250 million worth of its shares.
CI
01/11Veradigm Announces New Share Repurchase Program and Initial Financial Guidance for Fisc..
BU
More news
Analyst Recommendations on VERADIGM INC.
More recommendations