Allscripts-Misys Healthcare Solutions, Inc. (MDRX) reported second quarter fiscal 2010 earnings per share of 16 cents, beating the Zacks Consensus Estimate of 13 cents and the year-ago earnings of 14 cents.

Sales

Total revenues in the second quarter increased 31.6% year over year to $169.3 million. Non-GAAP revenues in the reported quarter increased 4.5% year over year to $170.7 million. Non-GAAP revenues in the second quarter of fiscal 2010 included a deferred revenue adjustment. Non-GAAP revenues in the second quarter of fiscal 2009 included the standalone Allscripts’ revenue pre-merger, a deferred revenue adjustment and elimination of prepackaged medications revenue that the company disposed off in Mar 2009.

Growth was registered across all business segments. Maintenance sales increased 31.3% year over year to $61.3 million. Transaction processing and other revenues increased 25.8% year over year to $56.1 million. System sales increased 61.5% year over year to $33.6 million. Professional services revenues increased 55.1% year over year to $18.3 million.

Total bookings for the quarter were $93.8 million, an increase of 16% year over year.

Margins

Gross margin in the reported quarter increased 450 basis points (bps) year over year to 56.4%. Non-GAAP gross margin increased 150 bps year over year to 56.8%. Selling, general and administrative (SG&A) expenses as a percentage of sales declined 1,700 bps year over year to 32.8%. Research and development (R&D) expenses as a percentage of sales declined 220 bps year over year to 6.3%.

Higher gross margin coupled with lower SG&A and R&D expenses, the latter two being based on percentage of sales, was responsible for a higher operating margin that increased 2,320 bps year over year to 15.8%.

Balance Sheet & Cash Flow

Allscripts ended the second quarter with cash and cash equivalents of $88.6 million, an increase of 24.4% in the first six months of fiscal 2010. Cash flow from operations was $19.8 million for the quarter.

Outlook

Allscripts has provided guidance for fiscal 2010. For the year, revenues are expected between $680 million and $700 million. GAAP earnings per share should be in the range of 41 cents to 43 cents. Non-GAAP earnings per share should be in the range of 61 cents to 63 cents.

Libertyville, Illinois-based Allscripts Healthcare Solutions Inc. is a leading provider of clinical software and information solutions meant for physicians. In Oct 2008, the company merged with Misys Plc ? a global applications software and services company ? to form Allscripts-Misys Healthcare Solutions Inc.

Allscripts faces strong competition from Cerner Corporation (CERN), Quality Systems Inc. (QSII) and MedAssets Inc. (MDAS). Presently, we have a ‘Neutral’ rating on Allscripts.

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