ALLSCRIPTS HEALTHCARE SOLUTIONS, INC. Management’s Discussion and Analysis of Financial Condition and Results of Operations (form 10-K) – marketscreener.com

 The following discussion should be read in conjunction with the consolidated financial statements and notes thereto included in Part II, Item 8, "Financial Statements and Supplementary Data" of this Form 10-K under the heading "Financial Statements and Supplementary Data" and the other financial information that appears elsewhere in this Form 10-K. We assume no obligation to revise or update any forward-looking statements for any reason, except as required by law.  

Overview

Our Business Overview and Regulatory Environment

  We deliver information technology ("IT") solutions and services to help healthcare organizations achieve optimal clinical, financial and operational results. We sell our solutions to physicians, hospitals, governments, health systems, health plans, life sciences companies, retail clinics, retail pharmacies, pharmacy benefit managers, insurance companies, employer wellness clinics, post-acute organizations, such as home health and hospice agencies, and venture capital firms. We help our clients improve the quality and efficiency of health care with solutions that include electronic health records ("EHRs"), information connectivity, private cloud hosting, outsourcing, analytics, patient access and population health management. We derive our revenues primarily from sales of our proprietary software (either as a perpetual license sale or under a subscription delivery model), support and maintenance services, and managed services, such as outsourcing, private cloud hosting and revenue cycle management.  Our solutions empower healthcare professionals with the data, insights and connectivity to other caregivers they need to succeed in an industry that is rapidly changing from fee-for-service models to fee-for-value advanced payment models. We believe we offer some of the most comprehensive solutions in our industry today. Healthcare organizations can effectively manage patients and patient populations across all care settings using a combination of our physician, hospital, health system, post-acute care and population health management products and services. We believe these solutions will help transform health care as the industry seeks new ways to manage risk, improve quality and reduce costs.  Globally, healthcare providers continue to face the COVID-19 crisis, as well as an aging population and the challenge of caring for an increasing number of patients with chronic diseases. At the same time, practitioners worldwide are also under growing pressure to demonstrate the delivery of high-quality care at lower costs and to fully embrace expectations of efficient, patient-centered information exchange. Congressional oversight of EHRs and health information technology has increased in recent years. This increased oversight has impacted and could continue to impact our clients and our business. Most recently, the passage of the 21st Century Cures Act in December 2016 assuaged some concerns about interoperability and possible U.S. Food and Drug Administration ("FDA") oversight of EHRs, and the ensuing regulations on data blocking and interoperability were released by the Department of Health and Human Services ("DHHS") in March 2020 and became applicable under Office of the National Coordinator for Health Information Technology ("ONC") oversight in April 2021. Additional regulatory clarity will come with the final rule expected shortly from the DHHS Office of the Inspector General. Some aspects of the new regulations will have a significant effect on our business processes and how our clients must exchange patient information. In particular, Allscripts will need to complete development work to satisfy the revised and new certification criterion, and we and our clients will continue making adjustments to business practices associated with information exchange and provision of Electronic Health Information.  Population health management, analytics, data connectivity based on open APIs and other exchange mechanisms, and patient engagement are strategic imperatives that can help address these challenges. In the United States, for example, such initiatives are critical tools for success under the framework of the Quality Payment Program ("QPP"), launched by the Centers for Medicare & Medicaid Services ("CMS") in response to the passage of the Medicare Access and CHIP Reauthorization Act ("MACRA"). As healthcare providers and payers continue to migrate from volume-based to value-based care delivery and also weigh compliance with the newly finalized information blocking and interoperability regulations from the ONC and CMS, solutions that are connected to the consumer marketplace are the key to market leadership in the new healthcare reality. Additionally, there is a small but growing portion of the market interested in payment models not reliant on insurance, such as the direct primary care model, where doctors and other healthcare professionals understand the clinical value of the interoperable EHR separate and apart from payment mechanisms established by public or commercial payers or associated reporting requirements.  We believe our solutions are delivering value to our clients by providing them with powerful connectivity, as well as increasingly robust patient engagement and care coordination tools, enabling users to successfully participate in alternative payment models that reward high value care delivery. Population health management is commonly viewed as one of the critical next frontiers in healthcare delivery, and we expect this evolving area to be a key driver of our future growth, both domestically and globally.                                          31 --------------------------------------------------------------------------------   Specific to the United States, the healthcare IT industry in which we operate continues to experience a period of change, primarily due to new laws and regulations, as well as modifications to industry standards. Various incentives that exist today (including alternative payment models that reward high value care delivery) have rapidly moved health care toward a time where EHRs are as common as practice management or other financial systems in all provider offices and hospitals. As a result, we believe that legislation, such as the aforementioned MACRA, as well as other government-driven initiatives (including at the state level), will continue to affect healthcare IT adoption and expansion, including products and solutions like ours. We must take steps to comply with state-specific laws and regulations governing companies in the health information technology space. We believe that we are well-positioned in the market to take advantage of the ongoing opportunity presented by these changes.  The recently finalized ONC regulation on interoperability, information blocking and certification is the most recent major government action that will affect the health IT industry. The rule requires that we evaluate changes to business processes related to requests for the access, exchange or use of Electronic Health Information, as defined in the ONC regulation. The rule, which involves complex and specific requirements, will necessitate adjustments in our interactions with the market, but we also believe it may lead healthcare organizations to further invest in technologies, such as those sold by Allscripts, that facilitate the exchange of health data and support patients' access to their information. Given Allscripts' OPEN strategy, the Company's application programming interface-based approach to connectivity launched more than a decade ago that exemplified for policy makers the potential benefits of APIs, Allscripts has adjusted quickly to the requirement to remove barriers to information exchange.  In addition, given that CMS annually proposes new and revised regulations, including payment rules for upcoming years requiring the use of EHRs and other health information technology, Allscripts continues to prepare on an ongoing basis for additional areas in which we must execute compliance. Similarly, our ability to achieve newly expanded applicable product certification requirements resulting from changing strategies at the ONC and the scope of related development and other efforts required to meet regulatory standards could both materially impact our capacity to maximize the market opportunity. All of our market-facing EHR solutions and several other relevant products have successfully completed the testing process and are certified as 2015 Edition-compliant by an ONC-Authorized Certification Body (the most recent edition), and we remain committed to satisfying the new certification requirements and meeting the 2015 Edition conditions of certification that were finalized in March 2020 by the ONC.  The MACRA encouraged the adoption of health IT necessary to satisfy new requirements more closely associating the report of quality measurements to Medicare payments. Following the finalization of the Physician Fee Schedule rule each year, providers accepting payment from Medicare must select one of two payment models: the Merit-based Incentive Payment System ("MIPS") or an Advanced Alternative Payment Model ("APM"). Both of these approaches require substantive reporting on quality measures. Additionally, the MIPS consolidated several preexisting incentive programs, including Medicare Meaningful Use and Physician Quality Reporting System, under one umbrella, as required by statute. We believe this law, coupled with other pay for value programs, continues to drive additional interest in our products among providers who were not eligible for or chose not to participate in the Health Information Technology for Economic and Clinical Health Act ("HITECH") incentive program but now need EHRs and other health IT solutions and among those looking to move to more robust systems to comply with increasingly complex MACRA requirements. Additional regulations continue to be released annually, clarifying requirements related to reporting and quality measures, which will enable physician populations and healthcare organizations to make strategic decisions about the purchase of analytic software or other solutions important to comply with the new law and associated regulations.  Given the ongoing expansion of payment models requiring analytics, reporting and greater data connectivity, we believe large physician groups will continue to purchase and enhance their use of EHR technology; while the number of very large practices with over 100 physicians that have not yet acquired such technology is insignificant, the number of those considering replacement purchases is increasing. Such practices may choose to replace old EHR technology in the future as regulatory requirements (such as those related to Advanced APMs) and business realities dictate the need for updates and upgrades, as well as additional features and functionality. As incentive payment strategies shift again through policies released by the Biden Administration in the United States (including the anticipated growth in Medicaid payment models), as well as the role of commercial payers and their continued expansion of alternative payment models and interest in attaining larger volumes of clinical data, we expect that there will be additional incentives for purchase and expansion of EHR technology.  We also continue to see activity in local community-based buying, whereby individual hospitals, health systems and integrated delivery networks subsidize the purchase of EHR licenses or related services for local, affiliated physicians and physicians across their employed physician base in order to leverage buying power and to help those practices take advantage of payment reform opportunities. We believe that the rules related to exceptions to the Stark Law and Anti-Kickback Statute, which were revised to continue to allow hospitals and other organizations to subsidize the purchase of EHRs, will possibly further contribute to the growth of this market dynamic. We expect that these regulatory revisions from DHHS will further support value-based payment models and their associated purchasing arrangements between hospitals and physician practices, including allowing subsidization of replacement EHRs and not just initial purchases. The associated challenge we face is to successfully position, sell, implement and support our products sold to hospitals, health systems or integrated delivery networks that subsidize their affiliated physicians. We believe the community programs we have in place will help us penetrate these markets.                                          32 --------------------------------------------------------------------------------   We believe we have taken and continue to take the proper steps to maximize the opportunity presented by the QPP and other new payment programs. However, given the effects the laws are having on our clients, there can be no assurance that they will result in significant new orders for us in the near term, and if they do, that we will have the capacity to meet the additional market demand in a timely fashion.  Additionally, other public laws to reform the United States healthcare system contain various provisions that may impact us and our clients. The previous Trump Administration and several state governments took steps to alter aspects of the PPACA, including through litigation. Although PPACA was upheld by the United States Supreme Court, it continues to create uncertainty for us and for our clients. We expect that the Biden Administration will take a different approach to the PPACA, including attempting to expand the number of citizens covered by health insurance, which would be favorable for our clients. Some laws currently in place may have a positive impact by requiring the expanded use of EHRs, quality measurement, prescription drug monitoring and analytics tools to participate in certain federal, state or private sector programs. Others, such as laws or regulations mandating reductions in reimbursement for certain types of providers, restrictions on "surprise billing" for certain services and by certain provider types, or increasing regulatory oversight of our products or our business practices, may have a negative impact by reducing the resources available to purchase our products. Increases in fraud and abuse enforcement and payment adjustments for non-participation in certain programs or overpayment of certain incentive payments may also adversely affect participants in the healthcare sector, including us.  Allscripts continues to see increased opportunities stemming from the large stores of patient data accumulated from our industry-leading client base and partnerships with other EHR companies, including NextGen Healthcare Inc., a leading provider of ambulatory-focused healthcare technology solutions. Through collaboration with researchers and life sciences companies, we believe Allscripts may play a role in the study of real-world evidence as it relates to post-market surveillance of new medicines or the study of therapeutics related to COVID-19, as examples. We continue to closely monitor regulations and/or guidance from DHHS, the CDC and the FDA, as well as any new laws that take shape in Congress that may touch third-party uses of patient data and/or any related privacy implications for patient consent.  Congressional focus on addressing the opioid epidemic in part through technological applications and reducing clinician burden is likely to continue. Further, CMS has finalized changes to the Evaluation & Management coding structure that ties closely to our clients' requirements to document the care they are delivering prior to payment. We expect these changes may have a positive effect on clinician satisfaction with our EHRs, though the fundamentals of payment will remain in transition to value-based payment models.  

Impacts of COVID-19

  The global outbreak of COVID-19 has resulted in volatile economic activity around the world, and the degrees of any economic recovery in various jurisdictions have not been linear. We have been carefully monitoring the COVID-19 pandemic and its impact on our global operations. We are conducting business with certain modifications to employee travel and employee work locations, and have implemented certain cost reduction initiatives, among other modifications. We will continue to actively monitor the situation and may take further actions that alter our business operations as may be required by federal, state or local authorities or that we determine are in the best interests of our employees, customers, partners and stockholders.  Allscripts, along with other health IT vendors, was asked by the White House, DHHS, the CDC, and state and local governments to support public health efforts to contain the pandemic by expanding COVID-19 reporting options available to our clients. Our technology has been instrumental to the provision of high-quality care, aiding not only public health surveillance but also in clinical decision support interventions to aid in triage, diagnosis and treatment; information exchange as patients are moved from site to site and/or discharged; predictive analytics based on local data for surge anticipation and vaccine management; and research based on real-world data informing the world's evolving understanding of post-acute sequelae of COVID-19 (known colloquially as Long COVID).  However, the COVID-19 pandemic negatively impacted revenue for the year ended December 31, 2021, as we continued to see delays in deals with upfront software revenue and professional services implementations across our inpatient and outpatient base. During 2020, we implemented cost reduction actions across all functional disciplines of the Company, including headcount reductions and temporary salary measures. We believe the cost reduction actions that were implemented in 2020 and our current liquidity provide us with operating and financial flexibility to assist us in navigating through this uncertain environment.  The extent to which the COVID-19 pandemic will continue to impact the Company's results of operations and financial condition will depend on future developments that are highly uncertain and cannot be predicted, including the duration and severity of the COVID-19 pandemic, additional "waves" of outbreaks and variants of the virus, the impact of the pandemic on economic activity, and the actions taken by health authorities and policy makers to contain its impacts on public health and the global economy. See Part I, Item 1A, Risk Factors, for an additional discussion of risks related to COVID-19.                                          33 --------------------------------------------------------------------------------

Summary of Results

  During 2021, Allscripts continued making progress on our key strategic, financial and operational imperatives aimed at driving higher client satisfaction. In doing so, we improved our competitive positioning by expanding the depth and breadth of our products and, ultimately, aligning the Company for sustainable long-term growth both domestically and globally. In that regard, we had success across the below key areas:  

 U.S. Core Solutions and Services: In 2021, we continued leveraging our long-standing strategic partnership with Microsoft to enable the expanded development and delivery of cloud-based health IT solutions. Our partnership with Microsoft Azure helps us enhance our clients' high availability, cybersecurity, disaster recovery and business continuity capabilities, which have become more important over the last year.  Mercy Iowa City selected the Allscripts Sunrise Platform of Health, which operates on Microsoft Azure, as a core EHR for its community hospital and clinics across Eastern Iowa. Another client, Blessing Health System, a not-for-profit healthcare organization, has substantially expanded its Allscripts partnership to three facilities-Blessing Health Keokuk, Hannibal Clinic, and partner provider Scotland County Hospital. The health system has also acquired Allscripts® Managed Services and has extended its agreement through 2028. Also in 2021, a client of 15 years, BronxCare Health System, signed an extension with Allscripts into 2031, looking to modernize its clinical documentation for nurses and physicians as they go all in for an integrated EHR.  

 Veradigm: From the beginning and throughout the pandemic, Allscripts has been a trusted partner to our clients. Specifically, we maintain a tight focus on ensuring we are helping provide our clients with the value needed to manage the COVID-19 pandemic across all varying phases.  A pertinent example of how we are continuing our commitment to our clients and their patients is through our Veradigm study source platform. This platform modernizes clinical research while extending Allscripts EHR systems to include research workflows. For instance, it identifies eligible study patients and efficiently enrolls them in studies and uses the healthcare data to assist with the research.  Veradigm® also signed a partnership agreement with PRA Health Sciences, Inc. (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.  In 2021, Veradigm signed a teaming agreement to enable the U.S. Centers for Disease Control and Prevention access to our Health Insights' EHR data set to advance and assist in the CDC's COVID-19 research. The real-world data that we provide will aid CDC scientists in analyzing and developing insights related to variants, vaccinations, long-term effects and other emerging questions related to COVID-19 and its existing and subsequent strains.  Along with that effort, Veradigm signed a deal with Moderna to provide research consulting and data analytics services for eight real-world database studies focused on gaining a better understanding of the different aspects of Moderna's COVID-19 vaccine in the U.S. population.  

 Capital Deployment and Operational Efficiency: Allscripts continued to exert discipline in managing our cost structure in 2021. We divested our 2bPrecise business to a third party for a non-controlling interest in the combined entity. We also sold a third-party investment, resulting in a $61 million gain. The net proceeds from these activities positively impacted our consolidated statements of operations, which will allow us to further invest in the growth of our solutions.  

Total revenue for the year ended December 31, 2021 was $1.5 billion, which remained relatively flat as compared with the year ended December 31, 2020. Software delivery, support and maintenance revenue totaled $916 million in the year ended December 31, 2021, a decrease of 1% compared to the prior year. Client services revenue totaled $587 million in the year ended December 31, 2021, an increase of 1% compared to the prior year.

  Gross profit increased during 2021 compared to 2020, primarily due to revenue mix, decreases in hosting costs and the impact of the cost reduction initiatives implemented throughout 2020. Gross margin increased by 3.6% to 41.2% compared with the prior year period gross margin of 37.6%, primarily due to the previously mentioned revenue mix, decreases in hosting costs and the impact of the cost reduction initiatives implemented throughout 2020.  

Our contract backlog as of December 31, 2021 was $3.8 billion, a decrease of 7% compared with our contract backlog of $4.1 billion as of December 31, 2020.

Revenues and Expenses

  Revenues are derived primarily from sales of our proprietary software (either under a perpetual or term license delivery model), subscription-based software sales, post-contract client support and maintenance services, and managed services solutions, such as outsourcing, private cloud hosting and revenue cycle management.                                          34
--------------------------------------------------------------------------------   Cost of revenue consists primarily of salaries, incentive compensation and benefits for our billable professionals, third-party software costs, third-party transaction processing and consultant costs, amortization of acquired proprietary technology and capitalized software development costs, depreciation and other direct engagement costs.  Selling, general and administrative expenses consist primarily of salaries, incentive compensation and benefits for management and administrative personnel, sales commissions and marketing expenses, facilities costs, depreciation and amortization and other general operating expenses.  

Research and development expenses consist primarily of salaries, incentive compensation and benefits for our development personnel, third­party contractor costs and other costs directly or indirectly related to development of new products and upgrading and enhancing existing products.

  Asset impairment charges consist primarily of non-cash charges related to the write-off of deferred costs related to our private cloud hosting operations, our decision to discontinue certain software development projects and the impairment of certain intangible assets.  

Goodwill impairment charges incurred related to our historical Hospital and Health System reporting unit during the year ended December 31, 2019.

Amortization of intangible and acquisition-related assets consists of amortization of customer relationships, tradenames and other intangibles acquired through business combinations recorded under the purchase method of accounting.

  Interest expense consists primarily of interest on the 0.875% Convertible Senior Notes (the "0.875% Notes"), on the 1.25% Cash Convertible Senior Notes (the "1.25% Notes") and on the outstanding debt under our senior secured credit facility, including the amortization of debt discounts and debt issuance costs. On July 1, 2020, the 1.25% Notes matured and were paid in full.  Other income (loss), net included a gain related to the sale of a third-party cost-method investment during the year ended December 31, 2021. The activity during the year ended December 31, 2019 included a settlement with the Department of Justice ("DOJ") related to our Practice Fusion business.  

Gain on sale of businesses, net consists of net gains from the divestiture of the 2bPrecise business during the year ended December 31, 2021.

Impairment of long-term investments primarily consists of other-than-temporary and realized losses associated with our available for sale marketable securities.

Equity in net income of unconsolidated investments represents our share of the equity earnings of our investments in third parties accounted for under the equity method, including a gain on the sale of a third-party equity-method investment and the amortization of cost basis adjustments.

  (Loss) income from discontinued operations during the years ended December 31, 2021, 2020 and 2019 includes activity associated with CarePort and the EPSiTM business ("EPSi"). The activity during 2021 relates to certain adjustments made in connection with the sale of CarePort and EPSi, which primarily relates to net working capital adjustments that impacted the gain on the sale of the discontinued operations.  

Gain on sale of discontinued operations consists of net gains from the divestitures of EPSi and CarePort during 2020.

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Overview of Consolidated Results

                                                                                        2021 %           2020 %                                                Year Ended December 31,                 Change           Change (In thousands)                          2021            2020            2019          from 2020        from 2019 Revenue: Software delivery, support and       $   916,186     $   923,737     $ 1,010,993            (0.8 %)          (8.6 %) maintenance Client services                          586,851         578,963         621,618             1.4 %           (6.9 %) Total revenue                          1,503,037       1,502,700       1,632,611             0.0 %           (8.0 %) Cost of revenue: Software delivery, support and           278,551         287,954         319,140            (3.3 %)          (9.8 %) maintenance Client services                          486,221         530,652         595,310            (8.4 %)         (10.9 %) Amortization of software development and   acquisition-related assets             118,700         118,399         107,874             0.3 %            9.8 % Total cost of revenue                    883,472         937,005       1,022,324            (5.7 %)          (8.3 %)   Gross profit                           619,565         565,695         610,287             9.5 %           (7.3 %) Gross margin %                              41.2 %          37.6 %          37.4 % Selling, general and                     313,814         389,941         400,808           (19.5 %)          (2.7 %) administrative expenses Research and development                 193,671         206,061         245,443            (6.0 %)         (16.0 %) Asset impairment charges                  11,772          74,969          10,837           (84.3 %)            NM Goodwill impairment charge                     0               0          25,700             0.0 %         (100.0 %) Amortization of intangible and acquisition-related assets                23,109          25,604          27,188            (9.7 %)          (5.8 %) Income (loss) from operations             77,199        (130,880 )       (99,689 )        (159.0 %)          31.3 % Interest expense                         (13,166 )       (34,104 )       (43,172 )         (61.4 %)         (21.0 %) Other income (loss), net                  87,666              54        (138,904 )            NM           (100.0 %) Gain on sale of businesses, net            8,370               0               0           100.0 %            0.0 % Impairment of long-term                        0          (1,575 )          (651 ) investments                                                                               (100.0 %)         141.9 % Equity in net income of unconsolidated investments                 1,757          17,194             665           (89.8 %)            NM Income (loss) from continuing operations before income taxes           161,826        (149,311 )      (281,751 )            NM            (47.0 %) Income tax (provision) benefit           (27,851 )        16,692          43,340              NM            (61.5 %) Effective tax rate                          17.2 %          11.2 %          15.4 % Income (loss) from continuing operations, net of tax                   133,975        (132,619 )      (238,411 )            NM            (44.4 %) (Loss) income from discontinued operations                                   (15 )        71,448          75,235          (100.0 %)          (5.0 %) Gain on sale of discontinued operations                                   647       1,156,504               0           (99.9 %)         100.0 % Income tax effect on discontinued operations                                  (169 )      (394,926 )       (19,426 )        (100.0 %)            NM Income from discontinued operations, net of tax                       463         833,026          55,809           (99.9 %)            NM Net income (loss)                        134,438         700,407        (182,602 )         (80.8 %)            NM Net loss attributable to                                                                     0.0 % non-controlling interests                      0               0             424                           (100.0 %) Net income (loss) attributable to Allscripts Healthcare Solutions, Inc. stockholders                    $   134,438     $   700,407     $  (182,178 )         (80.8 %)            NM   

NM-We define “NM” as not meaningful for increases or decreases greater than 200%.

Revenue

  Recurring revenue consists of subscription-based software sales, support and maintenance revenue, recurring transactions revenue and recurring revenue from managed services solutions, such as outsourcing, private cloud hosting and revenue cycle management. Non-recurring revenue consists of perpetual software licenses sales, hardware resale and non-recurring transactions revenue, and project-based client services revenue.                                                                                          2021 %          2020 %                                                 Year Ended December 31,                 Change          Change (In thousands)                           2021            2020            2019         from 2020        from 2019 Revenue: Recurring revenue                     $ 1,209,746     $ 1,222,731     $ 1,278,456           (1.1 %)          (4.4 %) Non-recurring revenue                     293,291         279,969         354,155            4.8 %          (20.9 %) Total revenue                         $ 1,503,037     $ 1,502,700     $ 1,632,611            0.0 %           (8.0 %)                                            36
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Year Ended December 31, 2021 Compared with the Year Ended December 31, 2020

  Recurring revenue decreased during the year ended December 31, 2021 compared to prior year due to attrition. The decrease was partially offset by an increase in recurring transaction-related revenues and subscription revenues. Non-recurring revenue increased due to an increase in transaction-related revenues. The increase was partially offset by lower upfront software revenues.  The percentage of recurring and non-recurring revenue of our total revenue was 80% and 20%, respectively, during the year ended December 31, 2021 and 81% and 19%, respectively, during the year ended December 31, 2020.  

Year Ended December 31, 2020 Compared with the Year Ended December 31, 2019

  Recurring revenue decreased during the year ended December 31, 2020 compared to prior year due to attrition. The decrease was partially offset by an increase in subscription revenue. Non-recurring revenue decreased due to lower upfront software revenues and project delays that impacted client services revenue. The decrease was partially offset by new deals in upfront software revenue.  The percentage of recurring and non-recurring revenue of our total revenue was 81% and 19%, respectively, during the year ended December 31, 2020 and 78% and 22%, respectively, during the year ended December 31, 2019.  Gross Profit                                                                        2021 %          2020 %                                 Year Ended December 31,               Change          Change (In thousands)            2021          2020           2019         from 2020       from 2019 Total cost of revenue   $ 883,472     $ 937,005     $ 1,022,324           (5.7 %)         (8.3 %) Gross profit            $ 619,565     $ 565,695     $   610,287            9.5 %          (7.3 %) Gross margin %               41.2 %        37.6 %          37.4 %   

Year Ended December 31, 2021 Compared with the Year Ended December 31, 2020

  Gross profit and margin increased during the year ended December 31, 2021 compared to prior year primarily due to revenue mix, decreases in hosting costs and the impact of the cost reduction initiatives implemented throughout 2020. The gross profit increase was partially offset by attrition.  

Year Ended December 31, 2020 Compared with the Year Ended December 31, 2019

  Gross profit decreased during the year ended December 31, 2020 compared to prior year primarily due to attrition, revenue mix, project delays and higher amortization of software development costs. The decrease was partially offset by new business in software subscription revenues and cost reduction initiatives.  

Gross margin slightly increased during the year ended December 31, 2020 compared to prior year primarily due to cost reduction initiatives.

Selling, General and Administrative Expenses

                                                                                   2021 %           2020 %                                              Year Ended December 31,              Change           Change (In thousands)                          2021          2020          2019         from 2020       from 2019 Selling, general and administrative expenses                              $ 313,814     $ 389,941     $ 400,808 

(19.5 %) (2.7 %)

Year Ended December 31, 2021 Compared with the Year Ended December 31, 2020

  Selling, general and administrative expenses decreased during the year ended December 31, 2021 compared with the prior year, primarily due to lower legal costs and the impact of the cost reduction initiatives implemented throughout 2020.  

Year Ended December 31, 2020 Compared with the Year Ended December 31, 2019

  Selling, general and administrative expenses decreased during the year ended December 31, 2020 compared with the prior year, primarily due to the impact of cost reduction initiatives.  Research and Development                                                                         2021 %          2020 %                                   Year Ended December 31,              Change          Change (In thousands)               2021          2020          2019        from 2020        from 2019 Research and development   $ 193,671     $ 206,061     $ 245,443           (6.0 %)         (16.0 %)                                            37
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Year Ended December 31, 2021 Compared with the Year Ended December 31, 2020

Research and development expenses decreased during the year ended December 31, 2021 compared with the prior year, primarily due to the impact of the cost reduction initiatives implemented throughout 2020.

Year Ended December 31, 2020 Compared with the Year Ended December 31, 2019

  Research and development expenses decreased during the year ended December 31, 2020 compared with the prior year, primarily due to the impact of cost reduction initiatives.  Asset Impairment Charges                                                                      2021 %          2020 %                                 Year Ended December 31,             Change          Change (In thousands)               2021         2020         2019        from 2020       from 2019 Asset impairment charges   $ 11,772     $ 74,969     $ 10,837           (84.3 %)          NM  

Year Ended December 31, 2021 Compared with the Years Ended December 31, 2020 and 2019

  Asset impairment charges during the year ended December 31, 2021 were primarily due to the write-offs of deferred costs related to our private cloud hosting operations. The write-offs were driven by the termination of our previous agreement with a private cloud hosting partner as part of a transition to another partner. We recorded several non-cash asset impairment charges during the year ended December 31, 2020. We recorded a non-cash asset impairment charge of $23.1 million related to the write-off of the remaining Health Grid acquired customer relationship intangible balance. This was partially offset by the write-off of $13.9 million related to the Health Grid contingent consideration accrual. We recorded $31.2 million of non-cash asset impairment charges related to the write-off of capitalized software due to the asset values exceeding the product's net realizable value. The write-off was primarily related to one product in which we determined it would no longer be placed into service. We also recorded a $34.3 million non-cash asset impairment charge due to the write-off of deferred costs related to our private cloud hosting operations. The write-off was driven by the expectation of improved efficiencies in the utilization of our contract compared with historical deferred costs, which was identified through our broader cost reduction initiatives. Asset impairment charges for the year ended December 31, 2019 were primarily the result of impairing the remaining NantHealth acquired customer relationship intangible balance of $8.1 million. We also recognized non-cash impairment charges of $2.7 million on the retirement of certain hosting assets due to data center migrations.  Goodwill Impairment Charge                                                                      2021 %          2020 %                                  Year Ended December 31,            Change          Change (In thousands)               2021        2020          2019        from 2020       from 2019 Goodwill impairment charge   $   0       $   0       $ 25,700             0.0 %        (100.0 %)  

Year Ended December 31, 2021 Compared with the Years Ended December 31, 2020 and 2019

  We recorded a goodwill impairment charge of $25.7 million related to our historical Hospitals and Health Systems reporting unit during the year ended December 31, 2019. Refer to Note 8, "Goodwill and Intangible Assets" to our consolidated financial statements included in Part II, Item 8, "Financial Statements and Supplementary Data" of this Form 10-K for further information regarding this impairment.  

Amortization of Intangible and Acquisition-Related Assets

                                                                                2021 %          2020 %                                            Year Ended December 31,             Change          Change (In thousands)                          2021         2020         2019       from 2020       from 2019 Amortization of intangible and acquisition-related assets            $ 23,109     $ 25,604     $ 27,188    

(9.7 %) (5.8 %)

Year Ended December 31, 2021 Compared with the Year Ended December 31, 2020

The decrease in amortization expense for the year ended December 31, 2021 compared with the prior year was due to normal amortization expense in 2021 and certain intangible assets being fully amortized in 2020.

Year Ended December 31, 2020 Compared with the Year Ended December 31, 2019

The decrease in amortization expense for the year ended December 31, 2020 compared with the prior year was due to normal amortization expense in 2020 and certain intangible assets being fully amortized in 2019.

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  Interest Expense                                                              2021 %           2020 %                         Year Ended December 31,             Change           Change (In thousands)       2021         2020         2019        from 2020        from 2019 Interest expense   $ 13,166     $ 34,104     $ 43,172           (61.4 %)         (21.0 %)  

Year Ended December 31, 2021 Compared with the Year Ended December 31, 2020

  The decrease in interest expense for the year ended December 31, 2021 compared with the prior year was primarily due to lower outstanding debt levels during the current year. The 1.25% Notes matured and were repaid in full in the third quarter of 2020. The senior secured credit facility was repaid in full in the fourth quarter of 2020. The decrease was partially offset as a result of new borrowings from the senior secured revolving facility ("Revolving Facility") that occurred in the second quarter of 2021.  

Year Ended December 31, 2020 Compared with the Year Ended December 31, 2019

  The decrease in interest expense for the year ended December 31, 2020 compared with the prior year was primarily due to a decline in the effective interest rates on outstanding debt, along with allocating a portion of interest expense to discontinued operations related to the required paydown of outstanding debt as a result of sale of CarePort and EPSi. The decrease was partially offset by the increase in debt discounts and issuance cost amortization related to the early retirement of the senior secured term loan.  Other income (loss), net                                                                    2021 %       2020 %                                 Year Ended December 31,           Change       Change (In thousands)               2021       2020         2019        from 2020    from 2019 Other income (loss), net   $ 87,666     $  54     $ (138,904 )          NM        (100.0 %)  

Year Ended December 31, 2021 Compared with the Years Ended December 31, 2020 and 2019

  Other income (loss), net for the year ended December 31, 2021 consisted of a $60.9 million gain as a result of the sale of a third-party cost method investment; a $9.7 million gain as a result of a note conversion and the revaluation of our existing investment with a third-party cost method investment; a $5.0 million distribution received from the an escrow account related to Practice Fusion; $2.8 million in distributions received from a third-party cost method investment and a $1.6 million gain as a result of the sale of a third-party cost method investment. Other income (loss), net also consists of a combination of interest income and miscellaneous receipts and expenses.  

Year Ended December 31, 2020 Compared with the Year Ended December 31, 2019

  Other income (loss), net for the year ended December 31, 2019 consisted of a $145 million settlement with the DOJ related to the Company's civil and criminal investigations of Practice Fusion. Refer to Note 22, "Contingencies" to our consolidated financial statements included in Part II, Item 8, "Financial Statements and Supplementary Data" of this Form 10-K for further information regarding the investigations. This was partially offset by a $5 million reversal of an earnout related to a prior acquisition. Other income (loss), net also consists of a combination of interest income and miscellaneous receipts and expenses.  

Gain on Sale of Businesses, Net

                                                                                        2021 %          2020 %                                                Year Ended December 31,                 Change          Change (In thousands)                            2021             2020          2019         from 2020       from 2019 Gain on sale of businesses, net       $      8,370       $       0     $       0           100.0 %           0.0 %   

Year Ended December 31, 2021 Compared with the Years Ended December 31, 2020 and 2019

Gain on sale of businesses, net for the year ended December 31, 2021 consisted of a $8.4 million gain from the divestiture of the 2bPrecise business.

Impairment of Long-term Investments

                                                                                    2021 %           2020 %                                              Year Ended December 31,               Change           Change (In thousands)                          2021            2020          2019 

from 2020 from 2019 Impairment of long-term investments $ 0 $ (1,575 ) $ (651 ) (100.0 %) 141.9 %

                                            39 --------------------------------------------------------------------------------

Year Ended December 31, 2021 Compared with the Years Ended December 31, 2020 and 2019

  Impairment of long-term investments during the year ended December 31, 2020 consisted of $1.6 million, which included $1.0 million related to one of our cost method investments and $0.6 million related to one of our third-party equity method investments. Impairment of long-term investments during the year ended December 31, 2019 consisted of an impairment of $1.7 million associated with one of our long-term equity investments. The impairment was partially offset with a $1.0 million recovery of a long-term equity investment that had previously been impaired.  

Equity in Net Income of Unconsolidated Investments

                                                                                 2021 %          2020 %                                             Year Ended December 31,             Change          Change (In thousands)                          2021          2020         2019        from 2020       from 2019 Equity in net income of unconsolidated investments            $   1,757     $ 17,194     $    665           (89.8 %)          NM  

Year Ended December 31, 2021 Compared with the Years Ended December 31, 2020 and 2019

  Equity in net income of unconsolidated investments represents our share of the equity earnings (losses) of our investments in third parties accounted for under the equity method of accounting based on one quarter lag. During the year ended December 31, 2020, we recorded a $16.8 million gain from the sale of a third-party equity-method investment.  

Income Tax (Provision) Benefit

                                                                                2021 %       2020 %                                             Year Ended December 31,            Change       Change (In thousands)                          2021          2020         2019       from 2020    from 2019 Income tax (provision) benefit        $ (27,851 )   $ 16,692     $ 43,340            NM         (61.5 %) Effective tax rate                         17.2 %       11.2 %       15.4 %   

Year Ended December 31, 2021 Compared with the Year Ended December 31, 2020

  Our provision for income taxes differs from the tax computed at the U.S. federal statutory income tax rate due primarily to valuation allowance, permanent differences, income attributable to foreign jurisdictions taxed at rates different from the United States federal statutory income tax rate, state taxes, tax credits and certain discrete items. Our effective tax rate for the year ended December 31, 2021, compared with the prior year, differs primarily due to the release of valuation allowance of $1.5 million recorded in the year ended December 31, 2021, compared to the $16.9 million valuation allowance recorded in the year ended December 31, 2020. The Company continually evaluates the realization of its U.S. deferred tax assets and based on historical trends and current activity; we may release the remaining U.S. valuation allowance in 2022. For additional information, refer to Note 11, "Income Taxes" to our consolidated financial statements included in Part II, Item 8, "Financial Statements and Supplementary Data" of this Form 10-K.  

Year Ended December 31, 2020 Compared with the Year Ended December 31, 2019

  Our provision for income taxes differs from the tax computed at the U.S. federal statutory income tax rate due primarily to valuation allowance, permanent differences, income attributable to foreign jurisdictions taxed at rates different from the United States federal statutory income tax rate, state taxes, tax credits and certain discrete items. Our effective tax rate for the year ended December 31, 2020, compared with the prior year, differs primarily due to the non-deductible portion of the DOJ settlement recorded in the year ended December 31, 2019 and the valuation allowance of $16.9 million recorded in the year ended December 31, 2020, compared to the $0.9 million valuation allowance recorded in the year ended December 31, 2019. For additional information, refer to Note 11, "Income Taxes" to our consolidated financial statements included in Part II, Item 8, "Financial Statements and Supplementary Data" of this Form 10-K.  Discontinued Operations                                                                                     2021 %           2020 %                                              Year Ended December 31,               Change           Change (In thousands)                          2021          2020           2019         from 2020        from 2019 (Loss) income from discontinued operations                            $    (15 )   $    71,448     $  75,235          (100.0 %)          (5.0 %) Gain on sale of discontinued operations                                 647       1,156,504             0           (99.9 %)         100.0 % Income tax effect on discontinued operations                                (169 )      (394,926 )     (19,426 )        (100.0 %)            NM Income from discontinued operations, net of tax                $    463     $   833,026     $  55,809           (99.9 %)            NM                                            40
--------------------------------------------------------------------------------

Year Ended December 31, 2021 Compared with the Years Ended December 31, 2020 and 2019

  On October 15, 2020 and December 31, 2020, we completed the sale of the EPSi and CarePort businesses, respectively. Prior to the sale of EPSi, it was part of the "Unallocated Amounts" category as it did not meet the requirements to be a reportable segment nor the criteria to be aggregated into our two reportable segments. Prior to the sale of CarePort, it was part of the former Data, Analytics and Care Coordination reportable segment. Both businesses were part of the same strategic initiative and were sold within the same period, and given that the combined sale of EPSi and CarePort represented a strategic shift that had a major effect on our operations and financial results, we reported them together as discontinued operations for all periods presented. The (loss) income from discontinued operations during the years ended December 31, 2020 and 2019 represents income generated from both EPSi and CarePort. The gain on sale of discontinued operations during the year ended December 31, 2020 represents the gain from the sale of both EPSi and CarePort. The gain on sale of discontinued operations during the year ended December 31, 2021 primarily represents net working capital adjustments to the gain from the sale of CarePort. Refer to Note 18, "Discontinued Operations" to our consolidated financial statements included in Part II, Item 8, "Financial Statements and Supplementary Data" of this Form 10-K for additional information regarding discontinued operations.  

Non-Controlling Interests

                                                                                       2021 %          2020 %                                                Year Ended December 31,                Change          Change (In thousands)                          2021            2020            2019         from 2020       from 2019 Net loss attributable to non-controlling interests             $       0       $       0       $     424             0.0 %        (100.0 %)   

Year Ended December 31, 2021 Compared with the Years Ended December 31, 2020 and 2019

  The net loss attributable to non-controlling interest represents the share of earnings of consolidated affiliates that is attributable to the affiliates' common stock that is not owned by us for each of the periods presented. The remaining minority interest of Pulse8 was purchased during the first quarter of 2019. We have no remaining non-controlling interest activities to report.  Segment Operations  Overview of Segment Results                                                                                        2021 %            2020 %                                               Year Ended December 31,                 Change            Change (In thousands)                         2021            2020            2019          from 2020         from 2019 Revenue: Hospitals and Large Physician Practices                           $   927,590     $   950,155     $ 1,052,267            (2.4 %)           (9.7 %) Veradigm                                552,208         527,968         554,910             4.6 %            (4.9 %) Unallocated Amounts                      23,239          24,577          25,434            (5.4 %)           (3.4 %) Total revenue                       $ 1,503,037     $ 1,502,700     $ 1,632,611             0.0 %            (8.0 %)  Gross Profit: Hospitals and Large Physician Practices                           $   330,720     $   293,672     $   317,776            12.6 %            (7.6 %) Veradigm                                272,540         254,631         274,103             7.0 %            (7.1 %) Unallocated Amounts                      16,305          17,392          18,408            (6.3 %)           (5.5 %) Total gross profit                  $   619,565     $   565,695     $   610,287             9.5 %            (7.3 %)  Income (loss) from operations: Hospitals and Large Physician Practices                           $    (7,231 )   $  (154,315 )   $  (132,593 )         (95.3 %)           16.4 % Veradigm                                 81,456          38,338          51,195           112.5 %           (25.1 %) Unallocated Amounts                       2,974         (14,903 )       (18,291 )        (120.0 %)          (18.5 %) Total income (loss) from operations                          $    77,199     $  (130,880 )   $   (99,689 )        (159.0 %)           31.3 %   The results for the years ended December 31, 2020 and 2019 have been recast to conform to the current year presentation, which reflects several changes made to our organizational and reporting structure during the year ended December 31, 2021. Refer to Note 19, "Business Segments" to our consolidated financial statements included in Part II, Item 8, "Financial Statements and Supplementary Data" of this Form 10-K for detailed discussion about these changes to our segments.                                          41 --------------------------------------------------------------------------------

Hospitals and Large Physician Practices

  Our Hospitals and Large Physician Practices segment derives its revenue from the sale of integrated clinical and financial management solutions, which primarily include EHR-related software, related installation, support and maintenance, outsourcing and private cloud hosting.                                                                                         2021 %           2020 %                                               Year Ended December 31,                  Change           Change (In thousands)                         2021            2020            2019           from 2020       from 2019 Revenue                              $ 927,590      $  950,155      $ 1,052,267             (2.4 %)         (9.7 %) Gross profit                         $ 330,720      $  293,672      $   317,776             12.6 %          (7.6 %) Gross margin %                            35.7 %          30.9 %           30.2 % Loss from operations                 $  (7,231 )    $ (154,315 )    $  (132,593 )          (95.3 %)         16.4 % Operating margin %                        (0.8 %)        (16.2 %)         

(12.6 %)

Year Ended December 31, 2021 Compared with the Year Ended December 31, 2020

  Hospitals and Large Physician Practices revenue decreased during the year ended December 31, 2021, compared with the prior year due to lower upfront software revenues and attrition. The decrease was partly offset by an increase in software subscription and outsourcing revenues.  Gross profit and margin increased during the year ended December 31, 2021 compared with the prior year primarily due to the decreases in hosting costs and the impact of the cost reduction initiatives implemented throughout 2020. The gross profit increase was partially offset by attrition.  Loss from operations decreased during the year ended December 31, 2021 compared with the prior year due to an increase in gross profit, the impact of the cost reduction initiatives implemented throughout 2020 and the decrease in asset impairment charges in 2021.  

Year Ended December 31, 2020 Compared with the Year Ended December 31, 2019

  Hospitals and Large Physician Practices revenue decreased during the year ended December 31, 2020, compared with the prior year due to attrition, lower upfront software revenues and project delays that impacted client services revenue. The decrease was partly offset by an increase in hardware revenues. In 2019, hardware revenues were included within "Unallocated Amounts", but in 2020 we began to allocate hardware revenues between the operating segments.  Gross profit decreased during the year ended December 31, 2020 compared with the prior year primarily due to the previously mentioned attrition, revenue profile and project delays. The decrease was partially offset by cost reduction initiatives. Gross margin increased slightly during the year ended December 31, 2020 compared with the prior year primarily due to cost reduction initiatives.  Loss from operations increased during the year ended December 31, 2020 compared with the prior year, primarily due to the decline in gross profit. The increase was partially offset by cost reduction initiatives.  

Veradigm

  Our Veradigm segment derives its revenue from payer and life sciences solutions, which are mainly targeted at payers, life sciences companies and other key healthcare stakeholders. Additionally, revenue is derived from software applications for patient engagement and the sale of EHR software to single-specialty and small and mid-sized physician practices, including related clinical, financial, administrative and operational solutions. These solutions enable clients to transition, analyze, coordinate care and improve the quality, efficiency and value of healthcare delivery across the entire care community.                                                                       2021 %          2020 %                                 Year Ended December 31,              Change          Change (In thousands)             2021          2020          2019         from 2020       from 2019 Revenue                  $ 552,208     $ 527,968     $ 554,910             4.6 %          (4.9 %) Gross profit             $ 272,540     $ 254,631     $ 274,103             7.0 %          (7.1 %) Gross margin %                49.4 %        48.2 %        49.4 % 

Income from operations $ 81,456 $ 38,338 $ 51,195 112.5 % (25.1 %) Operating margin %

            14.8 %         7.3 %         9.2 %   

Year Ended December 31, 2021 Compared with the Year Ended December 31, 2020

  Veradigm revenue increased during the year ended December 31, 2021 compared with the prior year, primarily due to an increase in subscription and transaction-related revenues. The increase was partially offset by lower upfront software revenues and attrition.                                          42 --------------------------------------------------------------------------------

Gross profit and gross margin increased during the year ended December 31, 2021 compared with the prior year, primarily due to the previously mentioned increases in revenue, which were partially offset due to attrition.

Income from operations and operating margin increased during the year ended December 31, 2021 compared with the prior year, primarily due to the increase in gross profit and the cost reduction initiatives implemented throughout 2020.

Year Ended December 31, 2020 Compared with the Year Ended December 31, 2019

  Veradigm revenue decreased during the year ended December 31, 2020 compared with the prior year, primarily due to decreases in maintenance, client services and transaction-related revenues. The decrease was partially offset by an increase in subscription revenue.  

Gross profit and gross margin decreased during the year ended December 31, 2020 compared with the prior year, primarily due to the previously mentioned decreases in revenue.

  Income from operations and operating margin decreased during the year ended December 31, 2020 compared with the prior year, primarily due to the decline in gross profit. The decrease was partially offset by lower selling, general and administrative, and research and development expenses driven by cost reduction initiatives.  Unallocated Amounts  The "Unallocated Amounts" category consists of the 2bPrecise business, certain products that were shifted from the previous Core Clinical and Financial Solutions reportable segment due to the organizational changes ("Certain Products"), transfer pricing revenues and certain corporate-related expenses. The amounts included in the "Unallocated Amounts" category for 2bPrecise and Certain Products do not meet the requirements to be reportable segments nor the criteria to be aggregated into the two reportable segments.                                                                                    2021 %           2020 %                                             Year Ended December 31,               Change           Change (In thousands)                         2021         2020           2019          from 2020        from 2019 Revenue                              $ 23,239     $  24,577      $  25,434             (5.4 %)          (3.4 %) Gross profit                         $ 16,305     $  17,392      $  18,408             (6.3 %)          (5.5 %) Gross margin %                           70.2 %        70.8 %         72.4 %

Income (loss) from operations $ 2,974 $ (14,903 ) $ (18,291 ) (120.0 %) (18.5 %) Operating margin %

                       12.8 %       (60.6 %)       (71.9 %)   

Year Ended December 31, 2021 Compared with the Year Ended December 31, 2020

  Revenue decreased slightly during the year ended December 31, 2021 compared to the prior year, primarily due to an increase in transfer pricing revenues and a decrease in maintenance revenues. The decrease was partially offset by an increase in upfront software revenues.  

Gross profit and gross margin decreased slightly during the year ended December 31, 2021 compared to the prior year, primarily due to the decrease in revenues.

  The category recorded income from operations during the year ended December 31, 2021 compared to loss from operations for the prior year, primarily due to lower selling, general and administrative expenses.  

Year Ended December 31, 2020 Compared with the Year Ended December 31, 2019

Revenue decreased slightly during the year ended December 31, 2020 compared to the prior year, primarily due to an increase in transfer pricing revenues.

Gross profit and gross margin decreased during the year ended December 31, 2020 compared to the prior year, primarily due to the decrease in revenues.

Loss from operations decreased during the year ended December 31, 2020 compared to the prior year, primarily due to the decline in gross profit and lower selling, general and administrative expenses.

Contract Backlog

  Contract backlog represents the value of bookings and support and maintenance contracts that have not yet been recognized as revenue. A summary of contract backlog by revenue category is as follows:                                                 As of December 31, (In millions)                                   2021          2020        % 

Change

Software delivery, support and maintenance $ 2,005 $ 2,153

   (6.9 %) Client services                                   1,782        1,918           (7.1 %) Total contract backlog                       $    3,787      $ 4,071           (7.0 %)                                            43
--------------------------------------------------------------------------------   Total contract backlog as of December 31, 2021 decreased compared with December 31, 2020. Total contract backlog can fluctuate between periods based on the level of revenue and bookings as well as the timing and mix of renewal activity and periodic revalidations.  

We estimate that the aggregate contract backlog as of December 31, 2021 will be recognized as revenue in future years as follows:

                            (Percentage of Year Ended December 31,    Total Backlog) 2022                                    34 % 2023                                    20 % 2024                                    16 % 2025                                    11 % 2026                                     8 % Thereafter                              11 % Total                                  100 %    

Liquidity and Capital Resources

  The primary factors that influence our liquidity include, but are not limited to, the amount and timing of our revenues, cash collections from our clients, capital expenditures and investments in research and development efforts, including investments in or acquisitions of third parties, and divestitures. As of December 31, 2021, our principal sources of liquidity consisted of cash and cash equivalents of $191 million and available borrowing capacity of $724 million under our Revolving Facility. The change in our cash and cash equivalents balance is reflective of the following:  

Operating Cash Flow Activities

                                                                                       2021$          2020$                                               Year Ended December 31,                Change         Change (In thousands)                           2021           2020           2019        from 2020      from 2019 Net income (loss)                     $  134,438     $  700,407     $ (182,602 )   $ (565,969 )   $  883,009 Less: Income from discontinued operations                                   463        833,026         

55,809 (832,563 ) 777,217

   Income (loss) from continuing operations                               133,975       (132,619 )     (238,411 )      266,594        105,792 Non-cash adjustments to net income (loss)                                   137,852        277,934        243,215       (140,082 )       34,719 Cash impact of changes in operating assets and liabilities                   (23,487 )     (132,982 )       

10,591 109,495 (143,573 )

Net cash provided by operating activities – continuing operations 248,340 12,333 15,395 236,007 (3,062 )

   Net cash (used in) provided by operating activities - discontinued operations                              (323,768 )     (119,048 )       

30,859 (204,720 ) (149,907 )

   Net cash (used in) provided by operating activities                  $  (75,428 )   $ (106,715 )   $   

46,254 $ 31,287 $ (152,969 )

Year Ended December 31, 2021 Compared with the Year Ended December 31, 2020

  Net cash provided by operating activities - continuing operations increased during the year ended December 31, 2021, compared with the prior year. The change from loss from continuing operations for the year ended December 31, 2020 to income from continuing operations for the year ended December 31, 2021 reflects cost savings related to the cost reduction initiatives implemented throughout 2020, the investment gains and distributions received from our third-party cost method investments, the gain from the sale of our business that was divested in 2021 and lower interest expense, due to the repayment of the 1.25% Notes and the senior secured credit facility in the third and fourth quarters of 2020, respectively. The decrease from non-cash adjustments to net income (loss) in 2021 is primarily related to a decrease in asset impairment charges, the sale of a third-party cost method investment and lower depreciation and amortization, which was partially offset by lower equity in net income of unconsolidated investments. The cash impact of changes in operating assets and liabilities during 2021 is absent of the $147 million of payments and interests included in 2020 that is related to the settlement with the DOJ in connection with the Practice Fusion investigations.  Net cash used in operating activities - discontinued operations during the year ended December 31, 2021 primarily reflects the income tax payment related to the gain realized from the sale of EPSi and CarePort on October 15, 2020 and December 31, 2020, respectively.                                          44 --------------------------------------------------------------------------------

Year Ended December 31, 2020 Compared with the Year Ended December 31, 2019

  Net cash provided by operating activities - continuing operations decreased during the year ended December 31, 2020, compared with the prior year. The decrease in loss from continuing operations in 2020 was primarily related to the absence of the accrual recorded in 2019 for a $145 million settlement with the DOJ in connection with the Practice Fusion investigations. The increase in non-cash adjustments to net income in 2020 is primarily related to an increase in asset and long-term investment impairment charges and an increase in deferred taxes, which were partially offset by lower depreciation, the sale of a third-party equity-method investment and a decrease in stock-based compensation expenses. The cash impact of changes in operating assets and liabilities during 2020 reflects $147 million of payments and interests related to the settlement with the DOJ in connection with the Practice Fusion investigations.  Net cash used in operating activities - discontinued operations during the year ended December 31, 2020 reflects transaction expenses and the additional tax provision related to the gain from the sale of EPSi and CarePort on October 15, 2020 and December 31, 2020, respectively.  

Investing Cash Flow Activities

                                                                                       2021$            2020$                                               Year Ended December 31,                 Change          Change (In thousands)                          2021           2020            2019         from 2020        from 2019 Capital expenditures                  $  (5,295 )   $   (17,025 )   $  (16,450 )   $     11,730     $      (575 ) Capitalized software                    (73,265 )       (87,993 )     (103,317 )         14,728          15,324 Cash paid for business acquisitions, net of cash acquired            0               0        (23,443 )              0          23,443 Sale of businesses and other investments, net of cash divested, and distributions received               68,806       1,734,967          1,044       (1,666,161 )     1,733,923 Purchases of equity securities, other investments and related intangible assets, net                   (2,421 )        (7,097 )       (8,235 )          4,676           1,138 Other proceeds from investing activities                                    0               0             14                0             (14 )   Net cash (used in) provided by investing activities - continuing operations                              (12,175 )     1,622,852       

(150,387 ) (1,635,027 ) 1,773,239

   Net cash used in investing activities - discontinued operations                                    0          (7,664 )      (10,669 )          7,664           3,005   Net cash (used in) provided by investing activities                  $ (12,175 )   $ 1,615,188     $ 

(161,056 ) $ (1,627,363 ) $ 1,776,244

Year Ended December 31, 2021 Compared with the Year Ended December 31, 2020

The change from net cash provided by investing activities – continuing operations for the year ended December 31, 2020 to net cash used in investing activities – continuing operations for the year ended December 31, 2021 was primarily due to the absence of cash received from the sales of EPSi and CarePort on October 15, 2020 and December 31, 2020, respectively.

  Net cash used in investing activities - discontinuing operations during the year ended December 31, 2020 primarily consisted of capitalized software costs for EPSi and CarePort.  

Year Ended December 31, 2020 Compared with the Year Ended December 31, 2019

  Net cash provided by investing activities - continuing operations during the year ended December 31, 2020 primarily resulted from the cash received from the sales of EPSi and CarePort on October 15, 2020 and December 31, 2020, respectively.  

Net cash used in investing activities – discontinuing operations decreased during the year ended December 31, 2020 compared to the prior year, primarily due to a decrease in capitalized software costs for EPSi and CarePort.

                                       45 --------------------------------------------------------------------------------

Financing Cash Flow Activities

                                                                                         2021$           2020$                                                Year Ended December 31,                 Change           Change (In thousands)                           2021            2020            2019         from 2020       from 2019 Taxes paid related to net share settlement of equity awards           $  (14,023 )   $     (6,033 )   $   (7,286 )   $    (7,990 )   $      1,253 Proceeds from issuance of 0.875% Convertible Senior Notes                       0                0        218,000               0         (218,000 ) Payments for issuance costs on 0.875% Convertible Senior Notes                0             (758 )       (5,445 )           758            4,687 Payments for capped call transaction on 0.875% Convertible Senior Notes                                   0                0        (17,222 )             0           17,222 Repayment of Convertible Senior Notes                                          0         (352,361 )            0         352,361         (352,361 ) Credit facility payments                 (75,000 )     (1,315,000 )     (220,000 )     1,240,000       (1,095,000 ) Credit facility borrowings, net of issuance costs                           250,000          903,625        279,241        (653,625 )        624,384 Repurchase of common stock              (417,443 )       (334,863 )     (111,460 )       (82,580 )       (223,403 ) Payment of acquisition and other financing obligations                     (2,400 )         (4,369 )      (14,685 )         1,969           10,316 Purchases of subsidiary shares owned by non-controlling interest              0                0        (53,800 )             0           53,800    Net cash (used in) provided by financing activities                  $ (258,866 )   $ (1,109,759 )   $   

67,343 $ 850,893 $ (1,177,102 )

Year Ended December 31, 2021 Compared with the Year Ended December 31, 2020

  Net cash used in financing activities decreased during the year ended December 31, 2021 compared with the prior year, primarily due to the absence of repayments of convertible senior notes and lower credit facility payments in 2021. The decrease was partially offset by lower credit facility borrowings and higher repurchases of common stock in 2021.  

Year Ended December 31, 2020 Compared with the Year Ended December 31, 2019

  The change from net cash provided by financing activities for the year ended December 31, 2019 to net cash used in financing activities for the year ended December 31, 2020 was primarily due to (i) the repayment of debt under our senior secured credit facility, (ii) the absence of issuance of new debt, (iii) the repayment of certain convertible senior notes and (iv) the payment made to an accelerated share purchase program. This was partially offset by credit facility borrowings in 2020 and the absence of purchasing the remaining minority interest in Pulse8.  Future Capital Requirements  We enter into obligations with third parties in the ordinary course of business. These future cash obligations will be funded from future cash flows from the sale of our products and services. The material cash requirements include the following contractual and other obligations:  

Debt Obligations

  As of December 31, 2021, we had outstanding convertible senior notes and the Revolving Facility (collectively the "Debt Obligations") with maturity dates of 2027 and 2023, respectively, for an aggregate principal amount of $382.9 million which are fully due on their respective maturity dates. Future interest payments associated with the Debt Obligations total $16.4 million, with $6.9 million payable within the next 12 months. During the quarter ended December 31, 2021, the conditional conversion feature of the 0.875% Notes was triggered as a result of the sale price of Allscripts' common stock being greater than or equal to 130% of the conversion price for the requisite period during such quarter. As a result, holders of the 0.875% Notes are entitled to convert the 0.875% Notes into common stock at their option at any time during the quarter ending March 31, 2022. If we do not elect to satisfy our conversion obligation by delivering solely shares of our common stock, then we will settle a portion or all of our conversion obligations through the payment of cash. Our capped call transactions may help reduce the potential dilution to Allscripts' common stock upon any conversion of the notes and/or may help to offset any cash payments Allscripts is required to make in excess of the principal amount of the converted notes upon conversion.  

Non-cancelable Operating Leases

  We have lease arrangements for certain facilities and equipment. As of December 31, 2021, we had fixed lease payment obligations of $91.4 million, with $22.1 million payable within the next 12 months.  

Purchase Obligations

  Purchase obligations consist of minimum purchase commitments for Microsoft services, computer equipment, maintenance, consulting and other commitments. As of December 31, 2021, we had purchase obligations of $121.3 million, with $58.6 million payable within the next 12 months.                                          46 --------------------------------------------------------------------------------

Letters of Credit

As of December 31, 2021, we had $1.0 million in letters of credit outstanding under the Second Amended Credit Agreement.

Income Taxes

  Our liability for uncertain tax positions was $30 million as of December 31, 2021. It is uncertain the amount that is payable within the next 12 months for liabilities that may result from this exposure, as we cannot predict, with reasonable reliability, the outcome of discussions with the respective taxing jurisdictions, which may or may not result in cash settlements. We also have net deferred tax liabilities of $10 million as of December 31, 2021. It is uncertain the amount that is payable within the next 12 months as the future amounts that will be settled in cash are uncertain.  

Revolving Credit Facilities

  We have a $900 million Revolving Facility that expires on February 15, 2023. A total of up to $50 million of the Revolving Facility is available for the issuance of letters of credit, up to $10 million of the Revolving Facility is available for swingline loans, and up to $100 million of the Revolving Facility could be borrowed under certain foreign currencies. We had $175 million of borrowings and $1 million of letters of credit outstanding under the Revolving Facility as of December 31, 2021. We had $724 million available, net of outstanding letters of credit, under the Revolving Facility as of December 31, 2021. There can be no assurance that we will be able to draw on the full available balance of the Revolving Facility if the financial institutions that have extended such credit commitments become unwilling or unable to fund such borrowings. Refer to Note 10, "Debt" to our consolidated financial statements included in Part II, Item 8, "Financial Statements and Supplementary Data" of this Form 10-K for further information.  

Other Matters Affecting Future Capital Requirements

  Our total investment in research and development efforts during 2021 decreased compared to 2020, as the Company continued to benefit from margin improvement initiatives that commenced in 2020. Our total spending consists of research and development costs directly recorded to expense, which are offset by the capitalization of eligible development costs.  We believe that our cash and cash equivalents of $191 million as of December 31, 2021, our future cash flows, our borrowing capacity under our Revolving Facility and access to capital markets, taken together, provide adequate resources to meet future operating needs as well as scheduled payments of short and long-term debt. We cannot provide assurance that our actual cash requirements will not be greater than we expect as of the date of this Form 10-K. We will, from time to time, consider the acquisition of, or investment in, complementary businesses, products, services and technologies, and the repurchase of our common stock under our stock repurchase program, any of which might impact our liquidity requirements or cause us to borrow under our Revolving Facility or issue additional equity or debt securities.  If sources of liquidity are not available or if we cannot generate sufficient cash flow from operations during the next twelve months, we might be required to obtain additional sources of funds through additional operating improvements, capital market transactions, asset sales or financing from third parties, a combination thereof or otherwise. We cannot provide assurance that these additional sources of funds will be available or, if available, would have reasonable terms.  

Critical Accounting Estimates

  The preparation of our consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the amounts reported and disclosed in our consolidated financial statements and the accompanying notes. The estimates discussed in this section are those that we consider to be particularly critical to an understanding of our consolidated financial statements because their application involves significant judgment regarding the effect of inherently uncertain matters on our financial results. Actual results could differ materially from these estimates under different assumptions or conditions.  

Impairment of Goodwill and Intangible Assets

We monitor our goodwill and long-lived assets for the existence of impairment indicators and apply judgments in the valuation methods and underlying assumptions utilized in such assessments.

  We performed our 2021 goodwill impairment test as of October 1, 2021. The fair value of each of our reporting units substantially exceeded its carrying value and no indicators of impairment were identified as a result of the annual impairment test. If future anticipated cash flows from our reporting units are significantly lower or materialize at a later time than projected, our goodwill could be impaired, which could result in significant charges to earnings.  We performed our 2020 goodwill impairment test as of October 1, 2020. The fair value of each of our reporting units substantially exceeded its carrying value and no indicators of impairment were identified as a result of the annual impairment test. If future anticipated cash flows from our reporting units are significantly lower or materialize at a later time than projected, our goodwill could be impaired, which could result in significant charges to earnings.                                          47 --------------------------------------------------------------------------------  We performed our 2019 goodwill impairment test as of October 1, 2019. As a result of this test, we concluded that the carrying value of the historical Hospitals and Health Systems ("HHS") reporting unit, which is now reported within the Hospitals and Large Physician Practices reporting unit, exceeded its fair value. As a result, we recognized a goodwill impairment charge of $25.7 million. This goodwill impairment charge is reflected on the "Goodwill impairment charge" line in our consolidated statements of operations. The fair values of all other reporting units substantially exceeded their carrying values. As of December 31, 2019, the goodwill allocated to the historical HHS reporting unit was $485.5 million.  

Uncertain Tax Positions

  We are subject to income taxes in the U.S. and numerous foreign jurisdictions. The evaluation of the uncertain tax positions involves significant judgment in the interpretation and application of GAAP and complex domestic and international tax laws, including the Act and matters related to the allocation of international taxation rights between countries. Although we believe the reserves are reasonable, no assurance can be given that the final tax outcome of these matters will not be different from that which is reflected in the reserves. Reserves are adjusted considering changing facts and circumstances, such as the closing of a tax examination or the refinement of an estimate. Resolution of these uncertainties in a manner that are inconsistent with expectations could have a material impact on our financial condition and operating results.  

Legal and Other Contingencies

  We are subject to various legal proceedings and claims that arise in the ordinary course of business, the outcomes of which are inherently uncertain. A liability is recorded when it is probable that a loss has been incurred and the amount is reasonably estimable, the determination of which requires significant judgment. Resolution of legal matters in a manner inconsistent with management's expectations could have a material impact on our financial condition and operating results.  

Fair Value Measurements

  Fair value measurements are based upon observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect our view of market participant assumptions in the absence of observable market information. We utilize valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. The fair values of assets and liabilities required to be measured at fair value are categorized based upon the level of judgment associated with the inputs used to measure their value in one of three categories (Levels 1 to 3). The values of assets and liabilities assigned to Level 3 require the most judgement and are based unobservable inputs or prices for which little or no market data exists. Therefore, Level 3 values can be susceptible to significant fluctuations, both positive and negative, from changes in the underlying assumption used by management. Refer to Note 6, "Fair Value Measurements and Other Investments" to our consolidated financial statements included in Part II, Item 8, "Financial Statements and Supplementary Data" of this Form 10-K for detailed information about financial assets and liabilities measured at fair value on a recurring basis.  

Recent Accounting Pronouncements

  For information with respect to recent accounting pronouncements and the impact of these pronouncements on our consolidated financial statements, refer to Note 1, "Basis of Presentation and Significant Accounting Policies" to our consolidated financial statements included in Part II, Item 8, "Financial Statements and Supplementary Data" of this Form 10-K.                                          48

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