MDRX - Veradigm: Some Promise Combined With Uncertainty

2023-09-22 10:50:17 ET

Summary

• Veradigm Inc. is a small-cap firm in the healthcare industry and its stock is trading near its 52-week low.
• The company was birthed out of Allscripts Healthcare Solutions, and the new entity provides data and analytics tools to healthcare providers.
• Veradigm's financial reports have been delayed, and it is likely to receive a delisting notice from NASDAQ.
• The analyst firm community has largely kept its faith in the firm, and the overdue financial reports should be posted in the fourth quarter.
• An analysis on Veradigm follows in the paragraphs below.

As far as the laws of mathematics refer to reality, they are not certain; and as far as they are certain, they do not refer to reality. ”? Albert Einstein.

Today, we put Veradigm Inc. ( MDRX ) in the spotlight for the first time here on the Biotech Forum. This small cap firm provides various services and solutions to the healthcare industry. The stock is currently trading near its 52-week low.

This company was formerly known as Allscripts Healthcare Solutions, but officially changed its name to Veradigm, Inc. at the beginning of 2023. This follows the company's divestiture and sale of its hospitals and large physician practices segments to a subsidiary of Constellation Software that was announced in the spring of 2022.

Veradigm was initially launched out of Allscripts in 2018 to market data and analytics tools that link providers with insurers and life sciences companies. The now remaining part of the company provides the Veradigm Network to some 300,000 healthcare providers. This platform allows Veradigm's life science and health plan organization clients to access to de-identified patient data, provider connectivity and analytics at scale.

Since no one has penned an article here on Seeking Alpha since Veradigm started as a freestanding entity in its own name, I thought I would be the first to do so. An analysis follows below.

Company Overview:

Veradigm, Inc. is headquartered in Chicago. The company develops and offers information technology solutions and services to healthcare organizations. These include information connectivity, private cloud hosting, outsourcing, analytics, patient access, and population health management solutions as well as electronic health records [EHR]. The stock currently trades around $12.50 a share and sports an approximate market capitalization of $1.4 billion.

Second Quarter Results:

The company's 10-K for 2022 has been delayed for some time now due to previously disclosed accounting and internal control errors taking longer than management previously guided to resolve. Veradigm also has not filed first or second quarter 10-Qs due to the same problems. Monday, management stated that it will file these backlogged reports sometime in the fourth quarter of this year. This means the company is likely to receive a delisting notice from the NASDAQ, which it can appeal and hopefully put to bed officially by filing the reports.

More clarity around the specific time period of when these reports will be rectified would have been appreciated by the investment community. However, management did at least provide guidance on how it sees its current fiscal year.

Leadership see FY2023 sales of between $615 million to $635 million. It believes the company will deliver between 80 cents and 90 cents a share of Non-GAAP profit, as well as between $160 million and $170 million in adjusted EBITDA for the fiscal year as well.

Analyst Commentary & Balance Sheet:

Since mid-June, BAML ($21.50 price target), Deutsche Bank ($18.50 price target) and RBC Capital ($22 price target) have reiterated their Buy ratings on MDRX. Argus Research downgraded the shares from Buy to Hold on July 6th.

The company's CEO sold nearly $350,000 worth of shares of MDRX in mid-February. That has been the only insider activity in the shares so far in 2023. Yahoo! Finance has Veradigm holding just over $490 million of cash and marketable securities against total debt of just under $220 million. Seeking Alpha has different metrics around the company's balance sheet . The company initiated a $250 million stock purchase authorization late last year and bought back just over $55 million of stock in the fourth quarter of 2022 as well.

Verdict:

Veradigm Inc. made $1.43 a share on revenues of $1.58 billion in FY2022. Thanks to the sales of some of the company's previous core assets in 2022, revenues should shrink to around $615 million in FY2023 according to the current analyst firm consensus as profits fall to 82 cents a share. Revenues should rebound in the low to mid-single digits in FY2024 and profits move up a nickel a share to 87 cents, according to this same consensus.

Now, the stock seems reasonable and valued at just over 15 times this year's earnings projections, a discount to the overall market. It is cheaper still if Yahoo's balance sheet statistics are correct. In addition, a somewhat similar company called NextGen Healthcare, Inc. ( NXGN ) was just bought out with a significant buyout premium. Most analyst firms have an optimistic view on the stock as well.

There seems to be some potential here. However, until the company puts out its 10-K from 2022 and past two quarterly 10-Q reports, I am passing on any investment recommendation on Veradigm. There is simply too much uncertainty around the company's financials in what has become a skittish market recently.

Although our intellect always longs for clarity and certainty, our nature often finds uncertainty fascinating .”? Karl Von Clausewitz.

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