ATHENAHEALTH, INC. REPORTS THIRD QUARTER 2009 RESULTS

37% Revenue Growth Over Third Quarter of 2008 61% Adjusted Gross Margin and 19% Adjusted EBITDA Margin Adjusted Net Income of $5.0 Million, or $0.14 Per Diluted Share

WATERTOWN, Mass. (October 29, 2009) – athenahealth, Inc. (Nasdaq: ATHN) (the “Company”), a leading provider of Internet-based business services for physician practices, today announced financial and operational results for the third quarter of 2009. The Company will conduct a conference call on Friday, October 30, 2009, at 8:00 a.m. Eastern Time to discuss these results and management’s outlook for future financial and operational performance.

Total revenue for the three months ended September 30, 2009, was $48.7 million, compared to $35.4 million in the same period last year, an increase of 37%.

“We made great strides in the third quarter on initiatives to improve operational scalability, client performance and market awareness of our unique capabilities” said Jonathan Bush, the Company’s Chairman, President, and Chief Executive Officer. “We continue to experience strong growth as medical groups turn to our service-based model in order to improve their clinical, financial and operational performance.”

For the three months ended September 30, 2009, non-GAAP Adjusted EBITDA grew to $9.5 million, or 19% of revenue, from non-GAAP Adjusted EBITDA of $6.1 million, or 17% of revenue, in the same period last year. As previously announced, following the reversal of a valuation allowance against U.S. deferred tax assets in the fourth quarter of 2008, the Company’s reported GAAP Net Income and non-GAAP Adjusted Net Income now reflect a full GAAP tax rate. Accordingly, non-GAAP Adjusted Net Income for the third quarter of 2009 was $5.0 million, or $0.14 per diluted share, compared to non-GAAP Adjusted Net Income of $4.8 million, or $0.14 per diluted share, in the same period last year. GAAP Net Income for the quarter was $2.1 million, compared to GAAP Net Income of $3.7 million in the same period last year.

“Our differentiated business model continues to yield rapid and reliable growth while our ongoing effort to increase automation has brought us to the threshold of our 2011 target gross margin range,” said Carl Byers, the Company’s Chief Financial Officer. “This economic engine enables us to make increasing investments in growth and innovation while also driving bottom line progress toward our long-term margin profile.”

Byers continued, “While our third quarter bottom line result was flat year-over-year due to application of a full tax rate, for the balance of 2009 our growth and margin momentum is likely to drive meaningful year-over-year bottom line progress.”

Key metrics and milestones in the third quarter of 2009 included the following:

$1.2 billion in collections posted to client accounts in the third quarter of 2009, compared to $0.9 billion in the same quarter of 2008
14,835 active physicians using athenaCollectorSM in the third quarter of 2009, compared to 11,967 in the same quarter of 2008
22,100 active medical providers using athenaCollector in the third quarter of 2009, compared to 17,297 in the same quarter of 2008
1,270 active medical providers using athenaClinicalsSM in the third quarter of 2009, 780 of whom were physicians, compared to 549 providers and 400 physicians in the same quarter of 2008
Launched federal stimulus bonus payment guarantee program for physicians nationwide

As of September 30, 2009, the Company had cash, cash equivalents, and short-term investments of $104.6 million and short- and long-term debt and capital lease obligations of $12.1 million.

A reconciliation of the Company’s financial results determined in accordance with United States Generally Accepted Accounting Principles (GAAP) to certain non-GAAP financial measures has been provided in the financial statement tables included in this press release. An explanation of these measures is also included below under the heading “Explanation of Non-GAAP Financial Measures.”

Source: ATHENAHEALTH