It was no ordinary quarterly meeting Thursday for Allscripts. Its chairman Phil Pead was, by many accounts, forced out. Three board members apparently resigned in protest. And this morning, the EHR vendor's shares have plunged almost 43 percent to $9.15.
The company also reported that CFO Bill Davis would be exiting May 18 for another position outside the healthcare sector, leaving analysts downgrading the firm's stock from “buy” to “neutral.”
Sean Wieland, senior analyst from Piper Jaffrey was among those downgrading.
“Any one of these items would be a concern, but all three happening simultaneously leads us to question what else is there that we don't know,” he wrote in an analyst brief today. He added that a rule of thumb is to downgrade on any CFO turnover.
Allscripts CEO Glen Tullman is left standing, but at least one analyst has called for his resignation, according to Forbes, which suggested the company would need new leadership to regain confidence.
Efforts to reach Tullman Friday morning were unsuccessful. A press release from Allscripts said Pead's tenure on the board had been "terminated" but offered no reason for his departure.
“While only speculation, we believe it came down to a showdown of Glen vs. Phil, with Glen prevailing, and all those that voted with Phil followed his exit,” Wieland wrote.
In the quarterly report, which showed net income down by 54 percent, Tullman blamed lower than expected sales for the poor quarterly showing.
"Our overall results were primarily affected by lower than expected sales and an unfavorable sales mix, which directly impacted revenue and profit," he said in a statement. "In addition, our investments in improving client experience and accelerating product development, as well as higher than expected software development expense, also put pressure on our bottom line.
"While Allscripts continued to win important new clients, including three new Sunrise Clinical Manager contracts in the quarter, a number of our clients and prospects delayed commitments as they wait for us to introduce new releases and demonstrate more robust integration," he added. "This dynamic, combined with the recent reorganization of our sales and service teams, were the primary factors that caused sales to be lower than our expectations.”
Citi analyst George Hill was among the analysts downgrading shares from “buy” to “neutral." The Asssociated Press reported that Hill called the company's quarter "strongly disappointing.”
"Allscripts appears to be losing (market) share faster than originally thought, and the negative leverage from a lack of new software sales is now readily apparent," he wrote. He too speculated that the board departures reflect a power struggle won by Tullman.
The firing of Pead, who joined Allscripts in the Eclipsys/Allcripts merger in June 2010, seems a far cry from expectations of what was once described as a perfect match, giving Allscripts a push into the hospital market.
“I've known Phil for years,” Tullman told Healthcare IT News then. “We both have a healthy degree of respect for each other, and a friendship. So as we began to show up at the same meetings .. those clients suggested we put the companies together.”
- Bookings of approximately $194.6 million. This compares to bookings of $212.4 million in the first quarter of 2011.
- GAAP revenue of $364.7 million and non-GAAP revenue of $365.5 million. This compares to GAAP and non-GAAP revenue of $335.3 and $346.1 million, respectively, in the first quarter of 2011.
- GAAP operating income of $13.0 million; non-GAAP operating income of $40.9. This compares to $24.5 million and $72.1 million, respectively, in the first quarter of 2011.
- GAAP net income(1) of $5.8 million; diluted earnings per share of $0.03. This compares to $12.6 million and $0.07, respectively, in the first quarter of 2011.
- Non-GAAP diluted earnings per share of $0.12, compared to $0.21 in the first quarter of 2011.
- $74.6 million in cash flow from operations; reduced debt by another $24.5 million, decreasing total outstanding debt to approximately $343.0 million as of March 31, 2012.