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Allscripts' revenue pipeline offsets worries over $50 million loss

By Andrew L. Wang, Crain's Chicago Business
Posted: November 8, 2013 - 1:30 pm ET

Allscripts Healthcare Solutions swung to a steep net loss of nearly $50 million in the third quarter, as revenue fell and expenses crept up, but concerns about the weak results were apparently offset by stronger prospects for future revenue.

The Chicago-based health IT company reported a sharp increase during the period in bookings, a measure of contracts in the pipeline not yet recorded as revenue, to $236 million, 47% over the year-earlier period and 10% more than in the second quarter, the medical records company announced yesterday. Bookings were up 14% through the first nine months of 2013, compared to 2012.

Allscripts has shown signs of regaining its footing this year after nearly two years of uncertainty caused by a difficult merger, management upheaval and a failed attempt to sell the company.

"We believe the company is clearly seeing stabilization in its business and expect the new management team will prove to be stronger stewards of value creation going forward," Ryan Daniels, a Chicago-based analyst for William Blair & Co. wrote in a research note. "We also view the bookings performance as a key leading indicator of a successful turnaround underway."

In mid-morning trading, shares fell back to about their Thursday closing price of $14.18 in trading, after jumping as high as 5% at the opening bell.

For the quarter, lost $48.9 million loss for the third quarter, compared with net income of $9.4 million gain in the third quarter of 2012, while revenue fell 8.5% to $330.2 million in the quarter, from $360.7 million in the year earlier period.

The company lost 27 cents a share in the quarter, well more than earnings of 4.6 cents a share estimated by 12 analysts polled by Bloomberg LP. Excluding one-time items, Allscripts earned 5 cents a share, below the 8.5 cents analysts had predicted.

Results for the first nine months of 2013 followed similar trends. The net loss was $83.4 million during the first three quarters of the year, compared with net income of $23.2 million during the same period of 2012. Revenue fell 6.7%, to $1.02 billion during the first three quarters of the year, compared with $1.10 billion during the same period of 2012.

Still, analysts looked favorably on the increase in bookings.

Greg Bolan of Sterne Agee Group Inc., said in a note: "We reiterate our Buy rating given our belief that Allscripts' profitability is primed to significantly recover in" calendar years 2014 and 2015.

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