March 2013
The first quarter earnings release was slated for after market close on May 7, 2012, and the news wasn't going to be good. But missing guidance was only one concern at Allscripts Healthcare Solutions (NASDAQ: MDRX), which delivers electronic health record, practice management and other technology solutions for physicians, hospitals and post-acute healthcare organizations.
The chief financial officer informed the CEO and board that in May, he planned to leave the company to serve as CFO of a private company outside the healthcare industry. Then, Allscripts' board fired its chairman after "extensive deliberations regarding the leadership of the company." Three directors who didn't agree with the decision resigned in protest. The chairman and two of the three directors had joined the Allscripts board due to their prior roles at Eclipsys, which was acquired by Allscripts in September 2010.
"We decided to package all the news into a single announcement, which caused us to pre-empt our earnings announcement to very late in the day on April 26," said Seth Frank, Allscripts' vice president of investor relations. "Because we didn't know the final outcome of all issues until just hours before the announcement, we developed a number of different scenarios: CEO departure, board departure, both, CFO departure. You can imagine the personal dynamics, uncertainty and anxiety internally – and the shocked, angry and viscerally raw reactions from shareholders after the news went out. The headlines were not good and the stock went down 36 percent on volume of nearly half our float in one day. I took calls from investors even before our conference call, although we had to be very careful not to go outside the facts in the news release. The conference call itself was a challenge, as were the calls with shareholders and analysts afterward."
The rest of 2012 was very challenging at Allscripts – yet a valuable learning experience, Frank said, as investors kept asking, "now what?" and anger over the company's direction and performance led a major shareholder to sue. Later, the company disclosed it was evaluating strategic alternatives, a process which concluded with the company remaining public. Frank said the hiring of a new CEO in December 2012 was a turning point. After the new CEO's "inaugural address" to investors in concert with the fourth quarter earnings in February 2013, the stock went up 7 percent. Investor outreach has included a town hall-style event in New Orleans as well as the usual conference presentations, one- on-one calls with key holders and prospects. In addition, the entire newly constituted board purchased MDRX stock in the open market. This move was well-received by investors. Among other stockholder- friendly moves by the board, Allscripts announced that its poison pill will expire.
"Things feel much better now, but only time will tell," Frank said. "We have to execute. In the end, that is what really matters."