Veradigm Inc.

and Rick Poulton, our President and Chief Financial Officer. We'll be making a number of forward-looking statements during the presentation and the Q&A part of this call. These statements are based on current expectations and involve a number of risks and uncertainties that can cause our actual results to vary 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 information regarding the risk factors that may affect our results. Please also reference the GAAP and non-GAAP financial statements, as well as the non-GAAP tables in our earnings release and the supplemental workbook that are both available on our investor relations website. And with that, I'm going to hand the call over to Paul Blount to begin.

Thanks, Stephan, and thanks, everyone, for joining the call. We appreciate your interest in Allscripts. I'm very pleased with our strong second quarter financial results, which represents the continuation of our strong performance this year. Our results reflect the reset of our client priorities, cost base, and balance sheet across our business that began last year and continues to be implemented. Our strong performance allowed us to innovate around value-added solutions and also provide ample free cash flow to return to shareholders. I'm proud to say that we were able to accomplish both of these objectives in the second quarter. I'd like to once again acknowledge our associates for their relentless client focus and the robust results they have been delivering. Overall, we're pleased with the bookings performance across the portfolio. We saw a steady demand for our inpatient, ambulatory, consumer, and veridigm solutions. However, while the COVID pandemic eased somewhat in the second quarter due to improving vaccination rates in North America, we still experienced residual delays in closing some new deals, particularly with large health systems markets and in international regions where the recovery from the pandemic has been more uneven. This has resulted in deals taking longer to close. The timing for these deals are inherently harder to predict. Overall, our domestic and global pipeline for health systems remains very strong. We expect to benefit from the investments we've made to deliver Sunrise as a platform of health delivered in the cloud through our partnership with Microsoft. This is resonating with our client base, and we believe it will be a critical driver to help us win new logos in the U.S. replacement market and in the international greenfield market. Our partnership with Microsoft Azure delivers our clients high availability, cybersecurity, disaster recovery, and business continuity, capabilities which has only become more important over the last year. Here are a few highlights of the second quarter. A client of 15 years, Bronx Care Health System, signed an extension with Allscript into 2031, looking to modernize its clinical documentation for nurses and physicians as they go all in for an integrated electronic health record. BronxCare has chosen to add Sunrise Mobile for nursing, Follow My Health, mobile patient engagement, professional services, managed services, and are migrating to Microsoft Azure. This showcases how our partnership with Microsoft is resonating with our installed client base. During the second quarter, we began the implementation of our Sunrise platform of health at Mercy Iowa City. As a reminder, this is a competitive win that we announced last quarter. We will provide an innovative cloud-based single patient record that enhances the clinician and patient experience across all communities that Mercy serves. In the second quarter, Mercy further expanded their relationship with us, extending their contract to include managed services for the support of existing solutions. In our ambulatory business, we added more than 500 practices in the independent ambulatory market across the Pro, TouchWorks, and Practice Fusion platforms. Our pipeline for the back half of the year remains very strong. Our success with new business and our pipeline are a direct result of the strategic investments we've made to build a complete end-to-end solution covering consumer, clinical, financial, and revenue cycle outsourcing. An example of the momentum that we are seeing in the ambulatory segment is the expansion of our relationship with the U.S. Orthopedic Alliance, which included additional TouchWorks license expansions and RCM services. USOA is a large alliance that is aggregating information from orthopedic physicians across the country, creating a narrow network for improved outcomes based on data aggregation of these providers. We see cross-selling initiatives capitalizing on the breadth of our solutions. Specifically, we have focused on our practice fusion clients, integrating Allscript's practice management and revenue cycle solutions into the practice fusion electronic health record. Giving our clients one-stop shopping helps create loyalty, and it also enables us to maintain Allscript as a segment leader in the independent physician practice market. Rick will discuss the performance of VeriDyne in more detail later in the call, so we're pleased to see this business return to double-digit growth in the second quarter. as our solutions across the payer and life sciences markets continue to gain momentum. This gives us confidence in our investments to serve these important market segments. Before I hand the call over to Rick, I'd like to expand on the comments I made in the last call regarding corporate social responsibility. This is the core of all scripts in who we are as a company. Previously, I discussed how we are addressing the inequities in our healthcare system highlighted by the pandemic and how health IT, and Allscripts in particular, are working to bridge the gaps in care. We continue to make progress towards our vision of building open, connected communities of health for everyone. This year we made significant progress at Allscripts on our DE&I initiatives. For example, Allscripts participated in diversity and bias education as part of our essential training program. We expanded college and intern recruitment efforts kicked off a DEI speaker series focused on topics related to diversity, and created the Associate Enrichment Group Program. We've also launched an internal DEI website, giving associates visibility to the program, our goals, and our vision. In the second quarter, we at Allscripts, also through our Allscripts Developer Program, kicked off a program called Empower. This new program is designed to amplify diverse voices in healthcare, technology to offer valuable resources to the underrepresented entrepreneurs to grow their businesses and to accelerate innovation. We partner with developers to help deliver the tools they need to connect their innovation to Allscript's clients. Through the ADP Empower, Allscript is creating a community of innovators. Recently recruited ADP partners were asked this question, how can we use technology and innovative solutions to share relevant patient social drivers of health information with care providers to advance equity of the healthcare access. Eight ADP partners pitched their solutions at the Advancing Health Equity Using Social Determinants of Care Developer Challenge, which was conducted last Thursday, to demonstrate how their technology shares relevant SDOH patient information with care providers so that those care providers can better understand and care for their patients. During the event, we were joined by Dr. Nikki Tripathi, ONC's National Coordinator for Health Information Technology. I recently heard a great analogy. Over the past 20 years, healthcare was appropriately focused on creating systems to avoid medical errors and eliminate waste and the delay of care, thus enabling a patient safety system through healthcare information technology. I'm quite confident that health equity will be the focus of the next decade. I look forward to keeping you updated on the progress of all facets of our CSR journey. It is not only the right thing to do, it will provide significant benefits to all Scripps, our clients, and the communities we serve and live in. To summarize, we have built a sustainable business model that delivers innovation and value to our clients. We improve clinical outcomes at the point of care and improve financial performance across all facets of our client operations. We have delivered strong results for our shareholders with expanded margins and free cash flow that allow us to reinvest in the business and return substantial amounts of capital at the same time. I continue to be optimistic about our performance in 2021. With that, I'll turn the call over to Rick to provide more detail on our financial position and our outlook. Thank you.

Okay, thanks Paul, and thanks everybody for joining us today. Just one more reminder, as Stephan indicated, additional financial details are available in the supplemental financial data workbook that's posted to our investor relations website. We were very pleased with our financial performance in the second quarter, where we saw the continuation of positive trends from the first quarter. We benefited from continued discipline in managing our cost structure, and this drove significant operating leverage. allowing us to report significant year-over-year growth in adjusted EBITDA, EPS, and free cash flow. So with that overview, let me highlight a few items, starting with our bookings performance. We reported $180 million of new bookings in the quarter, which was up 10% year-over-year as we benefited from demand across our full portfolio. We believe we are well-positioned to benefit from clients returning their focus on optimizing their clinical and financial IT environments, as patient volumes, at least for now, have for the most part returned to normal levels. While the course of the pandemic remains somewhat unpredictable, we believe our solutions will continue to resonate and our sales and implementation teams have become highly proficient in a remote working environment. Revenue in the second quarter was $374 million, which was up 1% both year-over-year and sequentially. Our revenue results, though, were really a tale of two different stories. In our core clinical and financial segment, revenue was essentially flat on both a year-over-year and sequential basis. And this continues to reflect a conscious effort on our part to boost gross margins by emphasizing quality of revenue and acceptable levels of client profitability. Accounts and opportunities that do not meet acceptable levels of margin and profitability are being passed on or actively managed. Conversely, as Paul highlighted earlier and as we foreshadowed on our last earnings call, in our data analytics and care coordination segment, which after our divestitures is now essentially our Veridigm business, we saw a nice double-digit year-over-year growth in the second quarter. It was a particularly strong quarter in our life sciences business within Veridigm, both for in-quarter revenue as well as new partnership development. We signed a partnership agreement with PRA Health Sciences, which is now part of ICON, to create the industry's leading EHR-based clinical research network, reaching more than 25,000 physicians and 40 million patients across the United States. The partnership will use Veridigm's StudySource platform alongside PRA's clinical research technology support so that physicians can offer clinical research as a care option for their patients. This is another example of the value of the last mile connection to the physician and patient that Veridigm brings to life science companies, and at a scale that is unmatched in the industry. Also in the second quarter, another ambulatory EHR competitor of ours just went live in Veridigm's EHR courier network, where we will deliver chart pulls for encounters within the last two years from more than 80,000 providers nationwide. So based on this progress during the quarter, we expect double-digit year-over-year revenue growth for the balance of the year in our Veridigm business. So now let me turn to our overall margin performance in the quarter. Consolidated non-GAAP gross margin was 42.8%, which was up 330 basis points year-over-year, and it was primarily driven by improvements to our client services margins. As we talked about on our previous calls, this reflects the margin improvement initiatives we began last year to dramatically improve the productivity and efficiency of our client services organization. Further down the P&L, we continued to manage our operating expenses tightly, and they came in very much in line with first quarter levels. So we saw a nice operating leverage down the P&L. This helped drive very strong 27% year-over-year adjusted EBITDA growth in the quarter and resulted in adjusted EBITDA margin of 18.4%. Beyond those headline numbers, I am equally pleased that the quality of both our GAAP and non-GAAP earnings continue to improve. Our R&D capitalization rate continues to go down, and we are now meaningfully burning down the deferred cost balance on our balance sheet as we amortize significantly more than we are capitalizing from current period expenditures. Also, our non-GAAP adjustments are very limited and, once again, do not include any restructuring charges during the period. Below the operating line, we had a $5 million recovery that we received related to our practice fusion DOJ settlement. This was our first of several expected recoveries related to that matter, and this GAAP income statement benefit was excluded from our non-GAAP reported income for the period. On a per share basis, we reported non-GAAP EPS of 23 cents per share. which was up 35% year over year, reflecting our strong margin performance as well as our lower share count. We retired 17 million shares during the quarter through a combination of open market repurchases as well as our accelerated share repurchase programs. We also had an excellent quarter of free cash flow generation as we generated $69 million of cash flow from continuing operations and $51 million of free cash flow. This is a direct result of our improving operating performance and our continued focus on driving down DSOs, which came in at 83 days in the second quarter, down from 96 days in the second quarter of 2020. Our free cash flow results continue the dramatic improvement from last year. And once again, I would like to publicly thank my finance team and our client-facing teams for their tremendous work in helping to drive this turnaround. We ended the quarter with $458 million face value of debt outstanding, and we had $231 million of cash on the balance sheet. This net debt level of less than one turn of adjusted EBITDA leaves us with significant firepower and provides us with additional flexibility as we look to deploy capital to generate the highest returns. Now turning to our outlook for 2021. We are increasing our 2021 adjusted EBITDA outlook to a range of $265 to $275 million from our prior outlook of $240 to $260 million. And we are also increasing our 2021 free cash flow outlook to a range of $115 to $125 million from our prior outlook of $90 million to $100 million. This reflects the performance that we've seen in the first half of the year. and our expectation that we will continue to benefit both from the cost management initiatives that we have implemented and our continued strong cash flow conversion. We continue to maintain our revenue outlook of $1.5 billion for the year. So with that, I'd like to open up the call for questions.