Shares of Allscripts Healthcare Solutions plunged 35 percent Friday on news that the company’s chairman had been ousted and three directors and the company’s CFO have left the company.
The Chicago-based electronic health records provider did not explain the reason for terminating Philip Pead’s role as chairman of the board, saying only that the board held “extensive deliberations regarding the leadership of the company” prior to making the decision.
Three directors, Catherine Burzik, Eugene Fife and Edward Kangas, disagreed with the decision and immediately offered their resignations, according to a filing with the Securities and Exchange Commission.
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At the same time, Allscripts said, its CFO, William Davis, is resigning May 18 for another position. W. David Morgan, the company’s senior vice president of finance since August 2010, was appointed to become the company’s interim CFO.
“While the news of my departure coincides with the announcements of our first quarter results and revised guidance, I want to make clear that the timing of my departure was not driven by these factors,” Davis said on an investor call. “I would have preferred to end my tenure with more upbeat news, but an attractive opportunity came along and I couldn’t pass it up at this point in my personal and professional life.”
Allscripts’ severance agreement with outgoing chairman Pead is for “termination without cause” and entitles him to a severance package of twice his salary and target bonus, medical benefits for one year and accelerated vesting of any outstanding equity awards, among other benefits.
The news came as Allscripts announced first quarter earnings of $5.8 million, or 3 cents a share, from $12.6 million, or 7 cents a share, a 54 percent drop in first quarter earnings.
Allscripts stock was trading around $10 on Friday afternoon after closing at $16.02 on Thursday.
Allscripts has struggled to right itself following a 2010 merger with Eclipsys Corporation. Allscripts CEO and director Glen Tullman told investors Thursday that a number of clients have delayed commitments as they wait for the company to demonstrate a more robust integration. The directors who quit Friday were from Eclipsys.
“We still have thousands of employees who came from the legacy Eclipsys organization,” Tullman said.
The integration of the companies’ sales and service teams into a single organization in the first quarter impacted the company’s bookings performance that contributed to backlog increases. Unclear time windows for the rollout of new products also impacted the company’s bottom line as established and new clients pulled back orders and waited on commitments, the company said.
Tullman said the company will invest more than $190 million this year to improve performance and accelerate the integration process.
On the call, analysts fired questions at Tullman about his future at the company and asked if a vote of confidence might be needed.
“I am not trying to single you out,” said George Hill, an analyst with Citigroup Global Markets. “But given the performance that’s been reported as the company faces its greatest tailwind in history, I would have expected … the board to fire any CEO in this position.”
Tullman said the company will be naming a new chairman soon and adding new members to the board.
“There is no question that this was a very, very tough quarter, very difficult quarter,” Tullman said. “In my career, I am not sure, I have had one that was this tough. What I can tell you is that our management team is focused and it will deliver as we’ve done that before.”