Allscripts Healthcare Solutions (MDRX) Q3 2017 Results - Earnings Call Transcript

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Allscripts Healthcare Solutions, Inc. (NASDAQ:MDRX) Q3 2017 Earnings Call November 2, 2017 4:30 PM ET

Executives

Seth R. Frank - Allscripts Healthcare Solutions, Inc.

Richard J. Poulton - Allscripts Healthcare Solutions, Inc.

Dennis M. Olis - Allscripts Healthcare Solutions, Inc.

Paul M. Black - Allscripts Healthcare Solutions, Inc.

Analysts

Matthew D. Gillmor - Robert W. Baird & Co., Inc.

Charles Rhyee - Cowen & Co. LLC

Nicholas M. Jansen - Raymond James & Associates, Inc.

Richard Collamer Close - Canaccord Genuity Group, Inc.

George Hill - RBC Capital Markets LLC

Ricky R. Goldwasser - Morgan Stanley & Co. LLC

Sean Dodge - Jefferies LLC

Steven Halper - Cantor Fitzgerald Securities

Sean W. Wieland - Piper Jaffray & Co.

Operator

Greetings and welcome to the Allscripts' Third Quarter 2017 Earnings 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.

It is now my pleasure to introduce your host, Seth Frank, Vice President of Investor Relations. Thank you, Mr. Frank. You may begin.

Seth R. Frank - Allscripts Healthcare Solutions, Inc.

Thanks very much. Good afternoon, everyone. Our speakers today are Paul Black, Allscripts' Chief Executive Officer; Rick Poulton, our President; and Dennis Olis, our Chief Financial Officer.

We'll be making a number of forward-looking statements during the presentation and the Q&A part of the call. These statements are based on current expectations and involve a number of risks and uncertainties that could cause our actual results to differ materially. We undertake no obligation to revise these forward-looking statements in light of new information or future events. Please refer to our earnings release and SEC filings for more detailed descriptions of the risk factors that may affect our results.

Also, as management reviews the third quarter details, please reference the GAAP and non-GAAP financial statements, as well as the non-GAAP tables in our earnings release and the supplemental data book that are both available on our Investor Relations website.

And with that, I'm going to hand the call over to Rick Poulton.

Richard J. Poulton - Allscripts Healthcare Solutions, Inc.

Okay. Thanks, Seth. Good afternoon, everybody, and thanks for joining our third quarter call. We've been very busy in the three months since we last talked to you. Before jumping into the details on numbers and client deals for the quarter, I want to catalog a few of the highlights that I'm most proud of during the quarter.

First, we finished restructuring and extending our contract with our largest colo hosting facility vendor, Atos. This will provide significant financial benefits to Allscripts over its 10-year term and, equally important, will provide a significant improvement to service level and performance standards for the benefits of our clients.

Second, we made significant inroads with clients both through our Netsmart and CarePort subsidiaries, sharing and delivering on the vision of seamlessly connecting the traditional healthcare provider networks and the post-acute healthcare provider networks. This is a challenge of ever-increasing importance in the industry and nobody has the scale or market presence we do to make this a reality.

Third, at the MGMA industry show last month, we introduced our newest EHR platform for the ambulatory market. This true cloud offering re-imagines the EHR and brings physician usability, clinical interoperability, ease of mobility and embedded AI tools to a whole new level. With design and certification now complete, we look forward to making this generally available to the market next year.

Fourth, as I'll discuss in more detail later, our payer and life-sciences group launched a new product line, and continues to lead the industry in innovating new opportunities to bring real-time information to the point of care. This benefits both our ambulatory clients as well as their patients.

And finally, we closed on our acquisition from McKesson. This is an important transaction for the company as it doubles the number of hospital-based EHR clients we now have in the U.S. and it greatly enhances our operational scale.

Paul will discuss where we are with the acquisition from the perspective of clients and early integration efforts. But I want to spend a minute on the topic of scale. The vendor universe for healthcare IT and provider solutions has been changing rapidly, and we expect it to continue to change in the years ahead.

The industry will continue to expand globally, and we'll need to continue to innovate and develop new solutions beyond the clinical record, yet with a tight and seamless connection to the patient and physician experience. This requires healthcare IT vendors with distribution scale, efficient overhead structures, reliable access to capital, and an unambiguous staying power.

With the closing of this transaction, our pro forma annual revenue now exceeds $2 billion annually. This makes us the second largest stand-alone public healthcare IT vendor in the world, and it's by a wide margin.

Our scale checks all the boxes I just outlined for long-term competitiveness. And we have never been better positioned in the history of the company to use that scale to deliver solutions of value to our clients, financial value to our shareholders, career opportunities for our associates, and investment back to the communities that we operate in.

So, with that backdrop, now let me briefly go through some of our financial highlights and client accomplishments during the quarter. The third quarter was a strong showing for Allscripts. Dennis will take you through the financial details. But, in summary, we delivered double-digit revenue, adjusted EBITDA, non-GAAP income, and EPS growth.

Total consolidated bookings of $304 million represents 4% year-over-year growth and is another third quarter record. And our consolidated bookings were split one-third from new clients and with the balance coming from expanded business with existing clients. This is a higher mix towards new clients than a year ago and it's consistent with the second quarter of 2017 mix. And we also had a very nice balance between software and services bookings.

Now let me drill down to our major end markets, starting with the U.S. hospitals and health systems. As we highlighted in the press release, we had several EHR clients expand their relationship with us. For example, one of the largest faith-based healthcare systems in the United States and long-time Allscripts' partner across acute care, ambulatory care and population health management, increased its acute care investment in Sunrise by adding additional departmental-level solutions, including the emergency department and surgery across multiple hospitals and geographies.

Also, a teaching hospital in Brooklyn, New York, who has been a long-time Sunrise user in the acute setting, elected to take advantage of our fully-integrated Sunrise Ambulatory solution, electing to replace the stand-alone ambulatory physician EHR vendor.

We also added a new Sunrise hospital logo in the quarter, Huggins Hospital in New Hampshire. In evaluating its IT needs, Huggins considered the major integrated HIT vendors and concluded Allscripts was the right partners to support their vision of a connected community of health and advance their broader objectives. Huggins is replacing its stand-alone acute and ambulatory solutions, and will migrate to Sunrise and multiple other solutions, including the FollowMyHealth patient engagement platform.

Another example is Catholic Medical Center, also in New Hampshire and a long-time Sunrise client, selected our care coordination tools, as it strengthens its focus on population health. This agreement includes Allscripts' Care Management, Care Director and CarePort to tightly manage its post-acute transitions of care.

And finally, within the managed services area, we signed new agreements for remote hosting and managed services during the quarter with multiple clients. Health First, a Sunrise client, signed a managed services agreement for application management services across core systems and population health management. This enhanced relationship provides Health First optimized support levels to improve its operational efficiency and enables a consistent predictable cost structure for IT for them going forward.

Now I'm going to move to the independent ambulatory segment. Allscripts' strategy there continues to focus on leveraging our significant installed base to drive cross-selling and add-on services to our physician clients. For example, we signed a hosting agreement with a large multi-specialty group practice consisting of hundreds of providers in the Northeast. This group also elected to replace its legacy practice management system with Allscripts' PM system.

Additionally, interest in revenue cycle management services among the TouchWorks and professional client base continues to be very robust. We signed multiple new agreements inside and outside Allscripts' EHR practice management base. Year-to-date, we have added almost $600 million in new annualized physician revenue that we are managing across provider groups, large and small, as well as primary care and specialty.

Upgrades have progressed very well across our ambulatory client base ahead of the mandated MACRA, MIPS, QPP programs. We continue to work proactively to educate our clients on the critical importance of staying ahead of the regulatory curve and provide market-leading support to the industry around maximizing the key benefits of the QPP program.

Finally, the Allscripts Developer Program continues to be a major differentiator for us as a company in the ambulatory arena. We currently have 6,500 registered developers using our Intelligent APIs, and they are averaging 100 million API data shares per month. And right now we have approximately 1,500 client activations of third-party API solutions to-date.

Reflecting all this innovation in this area, Allscripts was honored to receive the top health IT honors at Microsoft during the quarter at their Microsoft Inspire Conference.

Next, moving to the payer and life-science end market, we had an excellent third quarter of new sales. There are several factors influencing this momentum, including the rising influence of value-based care and the need for payers to connect real-time to the point of care. And also the 21st Century Cures Act is also acting as a tailwind for this business, as life-science companies look for new opportunities to efficiently recruit patients and providers for clinical trials.

During the quarter, we announced the partnership with eviCore healthcare, a leading medical benefits management company, to develop and deploy preauthorization solutions for medical procedures at the point of care. We will leverage the Allscripts API to accelerate solution development and adoption of this.

Now moving to international, our Q3 was very active. Early in the third quarter, we signed Bolton NHS Foundation Trust to adopt Sunrise as a replacement for an ageing legacy system. Bolton is an integrated care organization serving patients from the 750-bed Royal Bolton Hospital and more than 20 health centers and clinics.

In Australia, we had an excellent quarter as well. South Western Sydney Primary Health Network selected dbMotion as its interoperability solution between primary and acute care settings. South Western Sydney Primary Health Network is a not-for-profit health organization that supports general practitioners, nurses and other primary health providers.

Primary Health Networks were established by the Australian Government in 2015 to improve care coordination and support general practices to drive more integrated care. There are 31 of these Primary Health Networks across the country and we look forward to continuing our sales efforts across that base.

We also had success expanding Allscripts' geographic reach for clinical systems beyond South Australia, with several sales of the Sunrise-BOSSnet EHR platform to hospitals in Western Australia. These organizations are undergoing a transition from paper to electronic medical records, and the Sunrise-BOSSnet platform is a value-based platform that helps them make this transition, and ease the move from paper to clinical records. We see BOSSnet as an outstanding on-ramp to EHRs where they do not exist today and are evaluating additional geographic opportunities to deploy them.

We also achieved a major operational milestone in the quarter with the official go-live at Royal Adelaide Hospital in South Australia. This is a brand new 800-bed state-of-the-art facility and the largest implementation of Sunrise in Australia. We're proud of the partnership and success we've built in South Australia Health over the last six years.

Overall, I'd say our position and competitiveness outside the U.S. continues to strengthen, and we remain very enthusiastic about Allscripts' ability to continue to grow in the segments and geographies that we've invested in.

Lastly, in the post-acute segment, Netsmart had a very strong sales quarter, which continues recent trends. The company is hitting its stride and expanding its reach from behavioral-health and social services into home health and long-term care as well. Netsmart added approximately 500 facilities year-to-date, and is enjoying success with cross-sales and the addition of these new clients.

In the quarter, the company had multiple large agreements for software and services. One example is Metrocare, a large multi-facility mental health service provider in the Southwest that serves tens of thousands of individuals with special needs. This organization signed a comprehensive long-term agreement for software and services, moving away from legacy and homegrown platforms to a commercial system, and selecting revenue cycle management and managed care services with it.

Netsmart also continued to add to its footprint outside of behavioral-health. In July, we acquired DeVero, a cloud-based platform to accelerate the company's offerings in home healthcare, and it brings with it some important strategic partnerships as well.

So, with that summary, I'd like to turn the call over to Dennis to go through some of the financial highlights for the quarter.

Dennis M. Olis - Allscripts Healthcare Solutions, Inc.

Thanks, Rick, and good afternoon. As we review this quarter's numbers, please reference the schedules in the earnings release as well as the supplemental data workbook available on the Allscripts Investor Relations website. My comments on the income statement will largely focus on non-GAAP metrics unless otherwise stated. Full reconciliations of GAAP and non-GAAP figures are available in the earnings release.

With the Enterprise Information Systems business acquisition closing on October 2, there was no impact from this transaction from a P&L perspective in Q3. The acquisition of NantHealth assets, which closed in late August, was immaterial in Q3.

Finally, all references to Allscripts' current or future results are made before considering the impact of industry-wide revenue changes and revenue recognition issued jointly by FASB and IASB as Topic 606 and IFRS 15 respectively. It is premature to discuss the impact of this change in detail to our results in 2018. We will provide perspective on the impact this accounting change will have on our 2018 financial forecast during our Q4 call in February of 2018.

With Rick having covered bookings in detail, I will begin with backlog, which stood at $4.1 billion in September. This reflects both the impact of bookings as well as renewals in the quarter that are not included in the bookings metric. The software component of backlog comprises 58% of the total and services accounts for the remaining 42%.

Turning to the income statement. Third quarter non-GAAP revenue totaled $451 million, an increase of $47 million or 12% versus Q3 of 2018. Non-GAAP revenue excludes $2 million in acquisition-related deferred revenue adjustments in the third quarter of 2017. This adjustment was $12 million in the year-ago quarter, which resulted in GAAP revenue growth of 15% in the third quarter.

Netsmart's non-GAAP revenue totaled $85 million, growing 32% year-over-year. Excluding the impact of acquisition, Netsmart revenue was in the mid-teen range year-over-year, a strong performance consistent with our long-term expectations, and an acceleration from the second quarter.

Looking at the recurring and non-recurring mix, total recurring revenue grew 7% and non-recurring revenue grew 27% versus the same period a year ago. Thus, our total recurring revenue mix came in at 75% in Q3, reflecting a relatively strong mix on non-recurring revenue in the third quarter.

Looking at revenue results by line item. Total software revenue in Q3 increased 12% year-over-year, totaling $295 million. Recurring software revenue, consisting of subscriptions, recurring transactions, support and new maintenance, increased 6% year-over-year. As discussed last quarter, we saw a return to recurring revenue growth quarter-over-quarter.

Non-recurring software revenue increased 49% year-over-year, a very strong performance, driven by the mix of revenue recognized in Q3 as well as a stronger mix of one-time software bookings in the quarter. We anticipate quarterly fluctuations in non-recurring software from quarter-to-quarter and would not view the Q3 results as necessarily sustainable for Q4, given the multiple variables in this metric.

Turning to client services. As a result of growth in recurring service revenue, consolidated non-GAAP revenue grew 10% year-over-year to $156 million in Q3. Recurring services revenue increased 11% year-over-year, driven by private cloud hosting, managed services, revenue cycle services and other multi-year service offerings. Similar offerings from Netsmart such as hosting, RCMS and managed services also contributed to this increase. Allscripts' non-recurring service revenue increased 9% year-over-year, driven primarily by additional revenue from implementations and upgrades.

Results this quarter are encouraging. We have reported strong bookings for multiple quarters and indicated we expect revenue growth to begin to accelerate. This quarter, with better software revenue growth across the board as well as continued strength in recurring services, we see Allscripts' underlying top-line growth potential. Stability of non-recurring services within Allscripts is also an important contributor to the results.

Looking at non-GAAP gross margin, total gross margin was up 80 basis points year-over-year. Analyzing revenue by component, software gross margin increased 150 basis points year-over-year, reflecting an increase in higher margin of Allscripts' software sales. Client service margins for Q3 came in at 15.6%, compared to 16.8% for the same period last year. Gross margins on services are trending consistently in the mid-teens as anticipated with periodic quarterly variances.

Looking at operating expenses, non-GAAP SG&A totaled $101 million, a 12% increase year-over-year. The non-GAAP SG&A figure excludes non-cash cost, transaction-related expense, and other expenses for non-GAAP purposes. The increase in SG&A is a function of additional acquired expenses, higher variable compensation accruals given our year-to-date results and higher healthcare costs. We have also increased head count in key international markets where we see significant growth potential.

Gross R&D was $80 million, up 17% year-over-year, reflecting acquired R&D expense at Netsmart and Allscripts. Allscripts' software capitalization rate was 36%, a step-down from Q2, consistent with our commentary on the Q2 call. We anticipate a similar rate going into Q4. Given the Q3 software capitalization rate decrease, R&D expense as reported on the income statement was $51 million, up $5 million or 10% from Q2.

Adjusted EBITDA totaled $97 million, a 22% increase year-over-year and also equal to a 22% adjusted EBITDA margin. Netsmart adjusted EBITDA was strong in the quarter and is trending in the high-20% range as a percentage of total Allscripts' total reported EBITDA, right in line with our expectations for the contribution in 2017 of between $90 million and $100 million.

Looking below the operating line, total cash interest increased to $18 million, compared to $15 million a year ago from higher non-course (sic) [non-recourse] (21:18) debt at Netsmart due to the acquisition discussed as well as slightly higher Allscripts' debt.

Please note that GAAP results this quarter include a non-cash loss of $20.7 million related to the sale of Allscripts' investment in NantHealth's common stock. This additional amount represents the final amount of the loss on the sale based on the actual date of the close of the NantHealth transaction discussed last quarter.

In addition to the loss on sale, which is excluded from non-GAAP reporting purposes, GAAP net income included transaction-related and other costs of $11 million. Approximately half of these expenses are related to severance accruals listed at the bottom of Table 4 of the earnings release under legal and other costs.

Severance is attributed to our ongoing strategy to streamline cost in advance of the EIS acquisition. The remaining costs are associated with the transaction-related expenses, including approximately $1 million of transaction-related expense attributed to the McKesson transaction in Q3.

Finally, excluding non-cash adjustments and transaction-related and other expenses, non-GAAP net income attributable to Allscripts Healthcare Solutions totaled $30 million and non-GAAP EPS was $0.16 for the quarter.

As a reminder, non-GAAP EPS is calculated net of non-controlling interest to reflect Allscripts' ownership portion of the partially owned, controlled and consolidated businesses. Non-GAAP net income attributed to Allscripts Healthcare Solutions grew approximately 14% year-over-year.

Allscripts ended the quarter with a principal balance of $470 million in secured debt and $345 million on our convertible senior notes, a $17 million increase in long-term debt quarter-over-quarter. Netsmart's total debt, which is non-recourse to Allscripts but reported for consolidation purposes, totaled $647 million, a $50 million increase, reflecting the DeVero acquisition.

Turning to cash, operating cash flow improved to $64 million, up from Q3 of 2016 on improved working capital management. Free cash flow totaled $13 million after adjusting for capital expenditures, capitalized software and purchase software. As we've noted in the past, cash flow will vary from quarter-to quarter, and as stated in Q2, we expect improvements in both operating and free cash flow throughout the second half of the year.

Turning to our outlook, given our year-to-date performance, we are adjusting our 2017 financial outlook as follows; The company anticipates non-GAAP revenue to be at the high-end of our prior range of $1.79 billion to $1.82 billion, Company anticipates adjusted EBITDA to also be at the high end of our prior range of between $345 million and $365 million, And finally, we are reaffirming Allscripts' non-GAAP earnings per share growth target of between 10% to 15% or $0.61 to $0.63 per diluted share respectively.

Looking to the fourth quarter, we will report additional revenue and expenses attributed to the Horizon Clinical business, which will wind down by March of 2018 as discontinued operations. Our outlook for the year excludes the impact of discontinued operations.

As discussed last quarter, we expect to incur charges attributed to severance and transaction cost in the fourth quarter from the EIS transaction. We continue to expect the total of these charges to be in the $50 million range, with the majority recognized in Q4 of 2017 and the first half of 2018.

Finally, as previously disclosed, we closed the NantHealth transaction during the third quarter. We will file the required pro forma disclosures on Form 8-K/A next week prior to Thursday, November 9. Since the 10-Q requires references to Nant's pro forma results, we will file our 10-Q simultaneously next week with the 8-K/A.

And with that, I'll turn it over to Paul.

Paul M. Black - Allscripts Healthcare Solutions, Inc.

Thanks, Dennis. My comments will focus primarily on the positive reception to the acquisition of McKesson's Enterprise Information Solutions business. Since announcing this acquisition early in August, reception from the client base and associates, plus the market at large, has exceeded our expectations.

Paragon clients and prospects have expressed to us their optimism, and candidly relief, that a dedicated healthcare information technology leader, now owns and will invest and innovate in these important solutions. Allscripts' reputation as a trusted open solutions provider focused on interoperability and our client success resonates among EIS healthcare executives and clinicians.

In October, we held multiple client welcome events all over the country. In these sessions, we have reinforced clarity regarding key areas of client interests. They are; we're investing in Paragon and it will excel from a strong history and foundation to emerge as a preferred integrated EHR and Revenue Cycle Management Solution for the community hospital segment. STAR and HealthQuest Revenue Cycle Management Solutions will continue to be supported and maintained to meet regulatory requirements. Allscripts maintains a parallel commitment to Sunrise as a preferred platform for large health systems and smaller hospitals with complex service lines.

Sunrise and Paragon clients and prospects will benefit from the enhanced collective offerings we now provide across key ancillary areas, including enterprise content management, laboratory, tissue tracking, and ERP. Our CareInMotion post-acute consumer engagement and precision medicine platforms are brand new opportunities for Paragon and other EIS clients. These solutions are of keen interest based on direct feedback I have had from our customers.

Supporting this feedback are the results published by the largest survey of Paragon clients conducted by Black Book Research, who invited 1,200 leaders to the poll from 216 McKesson Paragon organizations, and determined that 96% of the board and executive financial leaders are confidently optimistic that the Allscripts acquisition will improve Paragon client processes and technologies, and benefit their organizations.

100% of the Paragon client hospital boards confirmed they have not approved capital expenditures for a replacement EHR. A proof point on that is that four healthcare organizations extended their Paragon agreements with McKesson in September prior to the acquisition.

From a corporate integration standpoint, we began the important work to seamlessly integrate McKesson EIS organization into Allscripts' existing hospital and health systems business on October 2. Allscripts and EIS leadership were on site the day we closed to answer questions and to introduce EIS associates to Allscripts.

We have also begun to take the required actions to eliminate corporate overhead redundancy, particularly in non-client-facing areas. These actions will ultimately yield much of the significant cost synergy benefits we've outlined.

We are on track with our integration objectives and we will execute on the next phases of the plan in the coming quarters. A significant benefit of this asset has been the identification of talent within the EIS that will help drive better results from the combined organization. We move forward with the most engaged, talented associate pool we have ever had.

So, as we work to finish the year on a strong note, I like our positioning at a turbulent time in healthcare. There are no shortage of challenges within the healthcare industry attributed to uncertainty, given the deliberations in Washington and the hands-on issues clients continue to face from the three natural disasters that impacted millions during Q3.

We are proud that Allscripts could help healthcare providers giving back to communities in Texas, Florida and Puerto Rico during unprecedented challenges and disruptions from the hurricanes. During power outages and flooding, we worked with hospital clients in Texas and Florida, utilizing dbMotion to provide access to critical medical information in lieu of spotty EHR access. We also partnered with Surescripts, providing free access to patient-specific medication history to pharmacists across Texas and Louisiana.

In Puerto Rico, which is struggling one month after Hurricane Maria hit the Island, we are working to provide much needed direct assistance to Auxilio Mutuo, an Allscripts' hospital client based in San Juan. We are indebted to Northwell Health for their leadership in sending medical supplies, personnel and emergency aid to Puerto Rico and for introducing us to MedShare. We partnered with MedShare to directly deliver critical medical supplies that will help our client provide essential medical services to the people of Puerto Rico. We are honored to help medical care in Puerto Rico as a byproduct of our company together with Northwell within days of Hurricane Maria.

We are more optimistic than ever about the prospects for Allscripts realizing its full potential in the industry we steadfastly serve. The year-to-date 2017 results support this view. For Black Book Rankings, Allscripts is number one in the large hospitals over 245 beds category, and has held this first-place ranking for four consecutive years.

In a mid-year 2017 report with nearly 5,000 respondents, Black Book Rankings validates that Allscripts will hold on to the number one spot again for another year. Of their 18 operational excellence indicators, we ranked number one in 13 of them. Allscripts continuously ranks number one in the category of trust, which we believe solidly demonstrates our obligation to our clients and the patients they serve.

Putting together these important observations, plus our enhanced scale from EIS, I believe elevates Allscripts' standing in healthcare globally. As Rick highlighted, we are now one of the three largest vendors in the world, solely dedicated to this industry with the critical mass, resources and scale of offerings to go the distance.

And with that, we'll turn it over to take your questions.

Question-and-Answer Session

Operator

Thank you. Our first question comes from the line of Matthew Gillmor from Robert W. Baird. Please proceed with your question.

Matthew D. Gillmor - Robert W. Baird & Co., Inc.

Hey. Thanks for the question. Let me start with McKesson and the corporate overhead expenses you mentioned. Any initial observations about your ability to take out costs and how quickly that can be achieved relative to your initial expectations? And do you have any updated commentary you can share in terms of the margin ramp we should be thinking about that asset?

Dennis M. Olis - Allscripts Healthcare Solutions, Inc.

Yeah. Thanks for the question, Matt. So we did take some actions immediately upon acquisition. There were some head count reductions that we had taken within the McKesson base. We had done a similar project within the Allscripts' base in the third quarter, which is what resulted in some of the one-time severance charges that we had in the third quarter.

So we did take some actions on head count, as Paul mentioned, for non-customer-facing people. We have completed the facility actions that we had planned in the quarter, which was to shut down a number of their smaller sites and actually shut down a Allscripts site in Atlanta and consolidated into the McKesson's Alpharetta site.

Regarding future plans to reduce cost, I think we're on track according to where we plan to be. In Q4, we're integrating the teams into the Allscripts' existing teams at a functional level and a product level. So we feel good about where that integration has begun because they were on track for the reductions in the plans this quarter, and we will continue to provide guidance as we progress throughout 2018.

Matthew D. Gillmor - Robert W. Baird & Co., Inc.

Got it.

Richard J. Poulton - Allscripts Healthcare Solutions, Inc.

Yeah. And Matt, I just want to pile on one thing to that because it was at the end of your question. Recognize that the reason and the way we get some of the benefits of scale is by deeply integrating this business with Allscripts. So it'll probably be only a couple of quarters before it loses its stand-alone identity. And we'll just be talking of progress as one entity, not separate component.

Matthew D. Gillmor - Robert W. Baird & Co., Inc.

Got it. That's helpful. And then Rick, you'd also talked about a new cloud platform and I was hoping to see if you can provide some more details on that. Where does it fit in the market in terms of the types of physicians that it serves? And is there any comments you can make about how it's differentiated versus maybe some of the other cloud competitors?

Richard J. Poulton - Allscripts Healthcare Solutions, Inc.

Well, I mean, I don't want to be overly repetitive, Matt, with what I said earlier and, at the same time, there's not a lot more to add. I mean, we introduced the solution at the MGMA show last month. So, think of that as the beginning of what will be a progressive story from us on it.

But rather than just be a me too replication of what you see today and some of the other real cloud and some kind of full cloud solutions that are out there, this is architected in the cloud but it's built with a completely different approach to again usability, the embeddedness of AI in the platform and the way that clinical interoperability will occur.

So we're excited about it because it's unique, very differentiated. And it'll be an alternative for our ambulatory clients that we have today and it will be a selling point to ambulatory clients that we'll acquire in the future.

Matthew D. Gillmor - Robert W. Baird & Co., Inc.

Got it. Thanks very much.

Richard J. Poulton - Allscripts Healthcare Solutions, Inc.

Sure.

Operator

Our next question comes from the line of Charles Rhyee with Cowen & Company. Please proceed with your question.

Charles Rhyee - Cowen & Co. LLC

Hey. Yeah. Thanks for taking the question and congrats on the quarter. Question on the revenue growth. Obviously, a strong growth in the non-recurring business. And just wanted to get your sense here. Obviously, last year, with Netsmart that kind of skewed sort of the visible results, can you talk about so your comfort with – what do you think we should think about the run rate?

Obviously, you gave us guidance for the rest of the year. And I understand this may be some one-time things that doesn't repeat next quarter. But as we think about the model as we go out, and I know you gave the three-year targets, but maybe in terms of a ramp on the underlying sort of core Allscripts business, how do you see sort of the trajectory – how should we think about the trajectory there?

Richard J. Poulton - Allscripts Healthcare Solutions, Inc.

Charles, I'll start and then Dennis can go. Look, we said strong recurring revenue growth and pretty strong non-recurring revenue growth, right? And you've followed us long enough to know that what we had out there as guidance for revenue growth, I think that recurring revenue we saw this quarter is very much in line with that and, frankly, at the high end of what we just said for recurring.

So there's a reason Dennis updated you on our outlook for the balance of the year and guided you toward the high end of the range. So, that gives you some indication of what you should expect for the balance of the year. But all-in-all, we would say, this is just executing on the plan we outlined in fair amount of detail back in March.

Charles Rhyee - Cowen & Co. LLC

Right. Okay. That's helpful. And then with the – just I might have missed it earlier. The other Horizon part of the business goes into discontinued ops and now we're going to really just see is the Paragon business?

Dennis M. Olis - Allscripts Healthcare Solutions, Inc.

Yeah. The Horizon Clinicals will go...

Charles Rhyee - Cowen & Co. LLC

Horizon Clinicals.

Dennis M. Olis - Allscripts Healthcare Solutions, Inc.

...into the discontinued operation, correct.

Charles Rhyee - Cowen & Co. LLC

Okay.

Dennis M. Olis - Allscripts Healthcare Solutions, Inc.

That will start in Q4 and continue through Q1 of next year.

Charles Rhyee - Cowen & Co. LLC

And is there anything in the corporate piece in terms of the costs? How are you allocating sort of the corporate costs related between the two businesses within EIS?

Dennis M. Olis - Allscripts Healthcare Solutions, Inc.

Any costs that are specific to the Horizon Clinical business will be captured in the discontinued operation P&L. The other costs will flow through the standard EIS business. And those exactly are the costs that we're going after and attacking and trying to get some synergies and reductions out of over the course of the next nine months or so.

Richard J. Poulton - Allscripts Healthcare Solutions, Inc.

And costs we expect to go away, Charles, will be in disco and costs we expect to stay with us will be in continuing ops.

Charles Rhyee - Cowen & Co. LLC

And I guess just because it's in GAAP, I mean I know that we're looking at non-GAAP, but in terms of sort of a use of cash to support the Horizon Clinicals business. Do you have a sense on timeframe that you're kind of thinking about supporting this group of customers or is there sort of a transition plan that you've kind of communicated to these clients?

Dennis M. Olis - Allscripts Healthcare Solutions, Inc.

Well, the decision to discontinue the product was made by McKesson quite some time ago.

Charles Rhyee - Cowen & Co. LLC

Well, I understand that. Yeah, of course.

Dennis M. Olis - Allscripts Healthcare Solutions, Inc.

And we're working (39:33) with that plan to access the Horizon Clinicals business by March of 2018.

Charles Rhyee - Cowen & Co. LLC

So, do all clients have to make a decision to – like a some type of decision by next year is what you're saying?

Dennis M. Olis - Allscripts Healthcare Solutions, Inc.

Yeah. And that was the plan that McKesson had rolled out. If they wish to remain on Horizon Clinicals, it will not be supported by Allscripts.

Richard J. Poulton - Allscripts Healthcare Solutions, Inc.

Won't be supported by us, but there are third parties out there that will provide some level of support for clients who have not yet made the transition.

Charles Rhyee - Cowen & Co. LLC

Okay. All right. I'll hop back in queue. Thanks.

Dennis M. Olis - Allscripts Healthcare Solutions, Inc.

Thank you.

Operator

Our next question comes from the line of Nick Jansen with Raymond James. Please proceed with your question.

Nicholas M. Jansen - Raymond James & Associates, Inc.

Hey, guys. Congrats on another strong quarter. Just wanted to talk a little bit about kind of the EBITDA guidance for the full year. It looks like, if my math is correct, that you're not really going to see much of an EBITDA – sequential improvement to hit that high-end of the range. So, just wanted to get your thoughts on will EIS actually be accretive to EBITDA? And if it will be, then maybe just the puts and takes with regards to the strong performance in 3Q? What wouldn't recur next quarter in the core? Thanks.

Dennis M. Olis - Allscripts Healthcare Solutions, Inc.

So, as we guided at the end of Q3, the impact from EIS in fourth quarter, there won't be any impact on EPS or EBITDA going into Q4. Okay. And if you look at then some of the items that will affect earnings per share, the EPS below the line items, we will see an increase in interest expense in Q4 as it relates to the acquisition of McKesson and as well as the investments that Netsmart's made in DeVero and other companies. So, that will have an impact on our EPS and will be an adjustment that will be made below EBITDA.

You also need to recall that, because we can fully consolidate all of Netsmart into our EBITDA figures, when we do our EPS calculation we're eliminating the minority interest in that company. So those are a couple of adjusting items that would be made in the EBITDA going into Q4.

Nicholas M. Jansen - Raymond James & Associates, Inc.

Great. And then my second question is, as you guys delivered another quarter of bookings growth, it looks like some of your peers are challenging to grow bookings right now. So, just wanted to kind of get your thoughts on kind of the broader drivers within your business. You have a tough fourth quarter comparison. Just trying to get a sense of what you're seeing in the marketplace as we exit 2017? Thank you.

Paul M. Black - Allscripts Healthcare Solutions, Inc.

This is Paul. The strategy and what we've been doing over the course of the last, fundamentally, five years is brought us to a point where we've made some investments that are absolutely paying off. So the diversity of what we have to sell and the diversity of the marketplaces that we sell to, allows us to be able to take into the market a number of different – and the breadth and depth of what we offer has been met well in the marketplace.

So those investments specifically in our payer, life sciences, our global, our population health, our post-acute care, and revenue cycle, those are all things that have been selling quite well, as we said, a pretty balanced performance across what we're doing.

Secondly, what we do and what I think the rest of the industry does is we're selling mission-critical applications. And so it's not like the clients can't continue to expand, can't continue to upgrade, can't continue to think about other things that we could help them out with.

When clients are in trouble, that creates an opportunity for us and I mean that in a positive way for both of us. And that when they have financial pressures, they look at certain line items as they say, perhaps somebody else should run these computers for me. That's something we do well and we could do it more cost effectively. Maybe somebody should operate these things for us, that's something else we do well. That's total outsourcing. And maybe that somebody else can help me with my revenue cycle capture, and that's another thing that we do well.

So, from a services standpoint, in times of trouble or times of financial pressure, that actually creates opportunities for us. And to the extent that we are a trusted supplier and that we will align with them in a partnership way, I think that allows us to take a different position than perhaps what we would have been in 2012 and 2013. And quite frankly, that I think helps to distinguish us in the marketplace from 2017 and beyond.

Nicholas M. Jansen - Raymond James & Associates, Inc.

Thanks for the color. Congrats again.

Paul M. Black - Allscripts Healthcare Solutions, Inc.

Thank you. Appreciate it.

Operator

Our next question comes from the line of Richard Close with Canaccord Genuity. Please proceed with your question.

Richard Collamer Close - Canaccord Genuity Group, Inc.

Yeah. Congratulations on a strong quarter. Just I guess to tag along on that, with respect to bookings, and now that you have EIS, you had a great bookings quarter in the fourth quarter of 2016. You were able to show some growth here in the most recent third quarter. Do you think you'll be able to show bookings growth in the fourth quarter?

Richard J. Poulton - Allscripts Healthcare Solutions, Inc.

It's a tough comp, Richard, as you know. Nick's question pointed that out. And then, frankly, it's a little early in the quarter to say a whole lot definitively about that. We would encourage everybody – the EIS business didn't measure bookings the way we did and so would do, and so we're going to have to get to consistent approach. We're still working through that.

And so we don't really have the ability to guide anybody on what to expect for EIS, I think what we would suggest everybody is don't change your models or outlooks for EIS. And then, when we get to the end of the quarter, we'll just tell everybody what the impact was, because we just don't even have really a basis to guide on that right now.

But it's a tough comp. We're working hard. There's nice – Paul, you can elaborate, but there's a lot of stuff in the pipeline, and I think it just depends on timing of deals and getting people, seeing the same kind of behavior where fourth quarter tends to end strong. If we see that same seasonal behaviour, then I think we feel good about where we stand. But, as you know, lots of uncertainty in the market right now.

Paul M. Black - Allscripts Healthcare Solutions, Inc.

Yeah. We're not forecasting any more hurricanes, thank goodness. But historically Q4 is strong, and historically Q3 is very light, which is another reason why we're very proud of the results that we posted. There's nothing there to lead us to believe that there's going to be something else that's going to be out there that's a bad guy. But we've given you the guidance we've given you, and we've given that guidance in March, and we continue to hit it. That's probably where I would lead that discussion.

I've not been nor I have anybody around this table been to every single one of the largest EIS clients, and there's a lot of them, a lot of large IDNs that are out there that we expect to have really important partnership discussions with soon, and that will also I expect to bear fruit.

Richard Collamer Close - Canaccord Genuity Group, Inc.

Great. Congratulations.

Paul M. Black - Allscripts Healthcare Solutions, Inc.

Thank you.

Operator

Our next question comes from the line of George Hill with RBC. Please proceed with your question.

George Hill - RBC Capital Markets LLC

Hey. Good afternoon, guys, and thanks for taking the question. Paul, I'm going to assume that you have met with some of the EIS customers who may be on the fence about whether they stay and partner with Allscripts or whether they look for another vendor. I guess, from your perspective, what do those customers need to see from you guys to stay?

And then, as we think about that customer base, what do you think are the most fertile cross-sales opportunities, either from the McKesson footprint into Allscripts customers or Allscripts into McKesson, and dbMotion obviously jumps out, but any other comment would be great?

Paul M. Black - Allscripts Healthcare Solutions, Inc.

Sure. On the what it's going to take to stay, they've been in purgatory, as Rick would say, this business from at a minimum of June 30 of 2016 when it was announced, it was going to be for sale. So these folks have been on pause and that has caused them a little bit of consternation.

So the fact that it's off pause, there's clarity about who owns them and they're owned by an HIT supplier, they have told me directly that that makes them feel a lot better. The fact that we own them quite frankly and have given them, if you will, a path with their current platforms versus we're going to buy it but please behind door number two is a real solution we want you to go to versus the one you're currently on, has also given them I think a breath of fresh air.

We're going to continue to invest specifically. And the ones that I talked about today, George, which they also like even some of the MetaPack clients that I've seen, the large patient accounting things in some of the very larger IDNs, when I met with those guys, I've only met with a couple, but the face-to-face reaction there was quite positive.

The other things that I'm getting universally is what are you going to do with the people that support us today. So they have a pretty good – which is reassuring to me that they like the McKesson people. They like them, they respect them, and those people have been operating in a trusted manner for the course of that relationship. And they are worried that we're going to come in and, if you will, let those people go. That's not the plan. So they are worried about what's the future of the product, what's the future of the people. And then, lastly, it's just, if you will, taking your finger off the pause button.

Now moving on to the cross-sell piece. I'm surprised positively at the feedback I'm getting, especially from the larger organizations about this one content solution and that is the enterprise content management component, and they're saying that that's something they rely on pretty heavily. These are large IDMs.

I've also got a fair number of people that are pretty excited about the fact that they now have access to an interoperability platform that's proven and they also have access to a consumer engagement platform that's proven, which are not things that they quite frankly have enjoyed, other than some success with things that are specifically tied to a McKesson platform. So they like that.

I haven't looked, George, to have direct feedback yet on the lab system, but I'm very interested in getting to know more about that. And the last thing I'll say is, I'm rambling here, is I'm getting calls from some of the bigger organizations and say, before you as Allscripts, you are an important player, but you actually didn't quite make it to the top of my, if you will, window if you are Horizon on my dashboard, because you are somewhat of a smaller player in our accounts payable profile.

Now, with Allscripts plus McKesson, you're actually one of the top two or three people we're doing business with and we actually should have a deeper, broader discussion. Those are the discussions I'm exceptionally interested in having with those people and our teams are.

George Hill - RBC Capital Markets LLC

No, that's great commentary. If I could sneak one more in for Rick. I mean, Rick, if there's been any resonant theme this selling season from the healthcare IT vendors, it's been the move away from stimulus-driven spending and the move towards spending driven by return on investment.

I guess, which are the key products that you guys are focused on right now as driving key ROI for clients that should be showing the best and what seems to be a lumpier, more challenging sales environment?

Richard J. Poulton - Allscripts Healthcare Solutions, Inc.

Well, I think, everything in the services category, George, is an ROI investment. Fundamentally, I think everything we do or we offer either drives efficiency at a client or lowers their direct cost. So, certainly the services, it's the easiest and probably shortest-term payback. So, that would include outsourcing any kind of form of hosting operation, revenue cycle management services, et cetera.

On the software side, I think, depending on where a client is on the risk curve, that has a lot to do with how interested they are in talking about pop health type solutions. But almost everybody has some form of risk and need to connect to the post-acute market, which was the theme I talked about earlier is important to them.

So we have some solutions, I think, software solutions that are more near-term ROI-based than others. But there's action happening across the whole portfolio right now, George. So, I mean, we feel good about the diversity of the solution set and the client base and the end markets where you invested in and exist in right now. So we're seeing action all over the place.

George Hill - RBC Capital Markets LLC

Okay. I appreciate the color. Thanks, guys.

Paul M. Black - Allscripts Healthcare Solutions, Inc.

Thanks, George.

Operator

Our next question comes from the line of Ricky Goldwasser from Morgan Stanley. Please proceed with your question.

Ricky R. Goldwasser - Morgan Stanley & Co. LLC

Yeah. Hi. Good afternoon, and congrats on a very good quarter. So, most of our questions have been answered, but just a macro question around utilization. Some of your competitors talked about some slowdown in utilization environment. What trends are you seeing?

Paul M. Black - Allscripts Healthcare Solutions, Inc.

Yeah. We're seeing some of the same of that with the hospitals. And again, the ones we're talking to, the ones I've been talking to as recently as last night, I was surprised quite frankly, Ricky, especially with some of the folks from the West Coast, I expected them to tell me the woes of what was going on.

The ones that I talked to are actually pretty good sized integrated delivery networks in California that are almost fully at risk or full cap. And they were still talking about making 4% margins, which I was pleasantly surprised that while they're, if you will, battening down the hatches a smidge, it's not killing them. The other parts of the country may be getting hurt if there're really, really small organization or they haven't been preparing for this.

But, quite frankly, there are a lot of people that we do business with that have been looking at and forecasting, if you will, a tightening of the belt on how they're going to get reimbursed for a long period of time. And they have been focused on ROI-based solutions. They've been focused on not overspending on IT. They've been focusing on getting value for the dollars that they do spend. They've been focused on looking at each one of their service lines to make sure that they might be able to – could they outsource that to somebody else, and if so, they're looking at that.

So I'm not broadly seeing this, if you will, trend that other people are reporting. We don't talk to every single healthcare organization out there in the world. But I think a lot of the folks that we work with have been preparing for this and are battling through it.

Ricky R. Goldwasser - Morgan Stanley & Co. LLC

Thank you.

Paul M. Black - Allscripts Healthcare Solutions, Inc.

Thank you.

Operator

Our next question comes from the line of Sean Dodge with Jefferies. Please proceed with your question.

Sean Dodge - Jefferies LLC

Yeah. Good afternoon. Thanks. Rick, maybe going back to your comments on the plans for the McKesson platform, how should we think about how extensive an undertaking the software integration there is going to be? I know you said you don't intend to keep it stand-alone much longer. How heavy of a lift is that? Is that a project that can largely be completed in the 2018 timeframe or does is potentially stretch a bit longer?

Richard J. Poulton - Allscripts Healthcare Solutions, Inc.

Yeah, Sean, just to be clear. So, when I say it's going to kind of lose its identity, think of that more from an operational standpoint as opposed to technical. I think one of the themes you've heard from us since we announced the deal and why we're excited about this acquisition, is it's very complementary on a solutions portfolio basis.

So, think of it from the catalog of solutions, there's very little that has to be kind of reasoned out or edited out, right? I mean, so Paragon, as we said from the beginning, is the right solution for community health or community hospital market. Paul alluded to that in his comments as well. Whereas Sunrise is really built for the larger health system, larger IDN and/or maybe community hospital but with running some sophisticated service lines in it.

So, that's on the EHR side. Some of the rev cycle systems and clients they have, no problem continuing to support those systems. So there's really not a technical overlap, if you will, that has to be reasoned out very far.

Sean Dodge - Jefferies LLC

Okay.

Richard J. Poulton - Allscripts Healthcare Solutions, Inc.

So the – okay. Maybe I'll just hold it there.

Sean Dodge - Jefferies LLC

Okay.

Richard J. Poulton - Allscripts Healthcare Solutions, Inc.

It's more...

Sean Dodge - Jefferies LLC

Yeah. Good to know. And then maybe one on booking. There's lots of activity there. Can you give us some idea of what proportion of what you did in the third quarters came from outside of your existing client base, so from new clients, and which solutions are resonating most strongly there?

Richard J. Poulton - Allscripts Healthcare Solutions, Inc.

Well, on the first question, I had made some comment earlier in my script or my prepared comments, which was that we had a third of our overall bookings came from new clients and the balance came from the existing client base. And that mix is skewing a little more towards new than it had been a year ago. So we feel very good about where the business is coming from.

What's resonating? Again, if you go across the major end markets, and I'll go in reverse order, Netsmart continues to have a very robust demand growth. So they're bringing solutions to post-acute providers. And that runs the gamut of EHR solutions through revenue cycle solutions, through some level of what you think of as population health-type solutions as well. So they have a pretty complete portfolio that they bring to that base.

Our payer and life-science end market, as I shared earlier, is very robust. The payers are quite anxious to get closer to the clinical point of care with real-time data and solutions. And again, we think we are the industry innovators in that space right now. So we feel really good about our momentum there.

And I think, in the international markets, I shared a couple of our wins and stories there. Those tend to be full EHR, almost full catalog of EHR. Certainly, they're EHR-centric and then they usually come with some degree of the pop health stack on top of it.

And then, here in the U.S., both the ambulatory and the hospital markets, it's a pretty good mix between software and services. And some of that's replacement, some of it's expansions, as some of our larger clients get bigger, you name it. So, again, I don't want to drone on. But it's a pretty broad mix when we start talking about where the bookings are coming from.

Sean Dodge - Jefferies LLC

Okay. Thanks, again.

Richard J. Poulton - Allscripts Healthcare Solutions, Inc.

You're welcome.

Paul M. Black - Allscripts Healthcare Solutions, Inc.

Thanks, John.

Operator

Our next question comes from the line of Steve Halper with Cantor Fitzgerald. Please proceed with your question.

Steven Halper - Cantor Fitzgerald Securities

Hi. Just a follow-up on the ambulatory cloud product. What market is that in terms of physician group size that targeted? And then, is there a transition path from your existing customers, say, from your mid-size groups?

Richard J. Poulton - Allscripts Healthcare Solutions, Inc.

Yeah. So, Steve, it's all cloud, so it's pretty scalable. So it can be an effective tool for smaller physicians as well as larger multi-group practices. I think to have all workflows for all specialties, that'll be a little longer before we have probably large multi-group practices, but not significantly, not outside of reasonable planning scope. So we feel it has a broad applicability. And we're excited about it.

You asked about transition. Here's the way we think about it. Right now, Steve, we're just – it's a tool that is meant to continue to penetrate and grow our presence in the ambulatory or independent ambulatory markets, first and foremost. To the extent our existing clients want to avail themselves of that tool, we will make it very easy or as easy as possible for them to transition. But that's not going to be a requirement. I mean...

Steven Halper - Cantor Fitzgerald Securities

Right.

Richard J. Poulton - Allscripts Healthcare Solutions, Inc.

...we're not going to be spending investment in the Pro and TouchWorks platforms in fact.

Steven Halper - Cantor Fitzgerald Securities

Right. So, no intention to Sunset Pro or TouchWorks anytime soon?

Richard J. Poulton - Allscripts Healthcare Solutions, Inc.

Unequivocally, no intention.

Steven Halper - Cantor Fitzgerald Securities

Okay. Great. Thanks.

Paul M. Black - Allscripts Healthcare Solutions, Inc.

Thanks, Steve. Okay. It's about nearly an hour. We have time for one more question.

Operator

Our last question comes from the line of Sean Wieland from Piper Jaffray. Please proceed with your question.

Sean W. Wieland - Piper Jaffray & Co.

Thanks for squeezing me in here. So, my question is around the strong non-recurring software revenues. Can you talk a little bit about the factors that contributed to that? Specifically, is it a lot of little things, was it a few big things, and how much of that was booked in the quarter?

Richard J. Poulton - Allscripts Healthcare Solutions, Inc.

A lot of little things, Sean. And it would all have been or preponderance of it would have been probably bookings in the quarter.

Sean W. Wieland - Piper Jaffray & Co.

Okay. So, not a big fish. That's good. And then quickly what was the software capitalization rate in the quarter?

Paul M. Black - Allscripts Healthcare Solutions, Inc.

The software cap was 36% in the quarter.

Sean W. Wieland - Piper Jaffray & Co.

All right. Perfect.

Paul M. Black - Allscripts Healthcare Solutions, Inc.

So, down from 40% last quarter.

Sean W. Wieland - Piper Jaffray & Co.

Yes. Okay. Thank you.

Richard J. Poulton - Allscripts Healthcare Solutions, Inc.

Thank you.

Paul M. Black - Allscripts Healthcare Solutions, Inc.

Thanks, Sean.

Dennis M. Olis - Allscripts Healthcare Solutions, Inc.

Thanks.

Paul M. Black - Allscripts Healthcare Solutions, Inc.

Thanks, everybody, for joining the call today. We are pleased to have delivered a solid quarter of double-digit revenue earnings growth and a number of other metrics. We're pleased to adjust our outlook for revenue and adjusted EBITDA at the high end of our range. We introduced this outlook back in January despite the regulatory uncertainty and complexities in the industry. We feel good about achieving the commitments we make to Allscripts' clients and to you and to our shareholders. Please remember, we just closed the EIS business and look forward to the integration of this business into Allscripts.

And with that, we'll say good night. Thank you.

Operator

Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time and have a wonderful day.

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