athenahealth, Inc. Reports Second Quarter Fiscal Year 2010 Results

–28% Revenue Growth Over Second Quarter of 2009 –GAAP Net Income of $1.3 Million, or $0.04 Per Diluted Share –Non-GAAP Adjusted Net Income of $4.1 Million, or $0.12 Per Diluted Share

WATERTOWN, Mass. (July 22, 2010) – athenahealth, Inc. (Nasdaq: ATHN), (the “Company”), a leading provider of web-based practice management, electronic health record (EHR), and patient communication services to medical groups, today announced financial and operational results for the second quarter of fiscal year 2010. The Company will conduct a conference call on Friday, July 23, 2010, at 8:00 a.m. Eastern Time to discuss these results and management’s outlook for future financial and operational performance. In addition, the Company has furnished prepared remarks in conjunction with this press release via a Current Report on Form 8-K. These prepared remarks, including supplemental charts containing non-financial metrics commonly reported with quarterly results, are available within the Investors section of the Company’s website at www.athenahealth.com.

Total revenue for the three months ended June

“athenahealth has successfully evolved from a single-product company to a full service partner across billing, medical records and patient communications,” said Jonathan Bush, the Company’s Chairman, President and Chief Executive Officer. “As part of this evolution, the sale of multiple services to clients is becoming a more significant driver of growth.”

For the three months ended June 30, 2010, Non-GAAP Adjusted Gross Margin was 60.7%, up from 58.6% in the same period last year. Non-GAAP Adjusted EBITDA was $9.9 million, or 16.9% of total revenue, compared to Non-GAAP Adjusted EBITDA of $7.7 million, or 16.8% of total revenue in the same period last year. GAAP Net Income for the second quarter of 2010 was $1.3 million, or $0.04 per diluted share compared to GAAP Net Income of $2.2 million or $0.06 per diluted share in the same period last year. Non-GAAP Adjusted Net Income was $4.1 million, or $0.12 per diluted share compared to $3.4 million or $0.10 per diluted share in the same period last year.

“The Company demonstrated strong revenue growth and increased adoption of our services during the first half of 2010,” said Tim Adams, the Company’s Chief Financial Officer and Treasurer. “Despite continued softness in physician office activity as well as the June Medicare claims hold that shifted about $1 million in business services revenue out of Q2 2010 and into Q3 2010, we grew revenue by 28% over Q2 2009 and continued to expand our Adjusted Gross Margin as well.”

Adams continued, “Looking ahead to the second half of 2010, we continue to expect Q3 2010 annual revenue growth of at least 30%. However, due to the lighter than expected physician office activity our clients are experiencing, we do not expect Q4 2010 annual revenue growth to reach our prior 30% target. Thus, for the full year 2010 we currently expect to achieve 29-30% growth in total revenue. In terms of profitability, we continue to expect year-over-year expansion in Adjusted Gross Margins as well as year-over-year expansion in Adjusted EBITDA and Adjusted Operating Margins during Q3 2010 and Q4 2010.”

Key metrics and milestones in the second quarter of 2010 included the following:

• $1.4 billion in collections posted to client accounts, compared to $1.2 billion in the same quarter of 2009
• 38.8 average client Days in Accounts Receivable (DAR), compared to 40.2 average client DAR in the same quarter of 2009
• 17,136 active physicians using athenaCollector
• 24,782 active medical providers using athenaCollector at June
• 2,256 active medical providers using athenaClinicalsSM at June
• 689 active medical providers using athenaCommunicatorSM at June 30, 2010, 442 of which were physicians.

As of June 30, 2010, the Company had cash, cash equivalents, and short-term investments of $89.4 million and short- and long-term debt and capital lease obligations of $11.0 million.

Use of Non-GAAP Financial Measures

In the Company’s earnings releases, conference calls, slide presentations, or webcasts, the Company may use or discuss non-GAAP financial measures as defined by SEC Regulation G. The GAAP financial measure most directly comparable to each non-GAAP financial measure used or discussed, and a reconciliation of the differences between each non-GAAP financial measure and the comparable GAAP financial measure, are included in this press release after the condensed consolidated financial statements. The Company’s earnings press releases containing such non-GAAP reconciliations can be found on the Investors section of the Company’s web site at http://www.athenahealth.com.

Conference Call Information

To participate in the Company’s live conference call and webcast, please dial 877-303-6175 (678-809-1072 for international calls) using conference code No. 84476278 or visit the Investors section of the Company’s web site: www.athenahealth.com. A replay will be available for one week following the conference call at 800-642-1687 (706-645-9291 for international calls) using conference code No. 84476278. A webcast replay will also be archived on the Company’s website.

About athenahealth

athenahealth, Inc. is a leading provider of web-based business services for medical groups. athenahealth’s service offerings are based on proprietary web-native practice management and electronic health record (EHR) software, a continuously updated payer knowledge-base, integrated back-office service operations, and automated and live patient communication services. For more information, please visit www.athenahealth.com or call (888) 652-8200.

Forward-Looking Statements

This press release contains forward-looking statements, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including statements reflecting management’s expectations for future financial and operational performance and operating expenditures, expected growth, including anticipated annual growth rates, profitability and business outlook, the benefits of the Company’s current service offerings, and statements found under the Company’s Reconciliation of Non-GAAP Financial Measures section of this release. The forward-looking statements in this release do not constitute guarantees of future performance. These statements are neither promises nor guarantees, and are subject to a variety of risks and uncertainties, many of which are beyond the Company’s control, which could cause actual results to differ materially from those contemplated in these forward-looking statements. In particular, the risks and uncertainties include, among other things: the Company’s fluctuating operating results; the Company’s variable sales and implementation cycles, which may result in fluctuations in its quarterly results; risks associated with its expectations regarding its ability to maintain profitability; the impact of increased sales and marketing expenditures, including whether increased expansion in revenues is attained and whether impact on margins and profitability is longer term than expected; changes in tax rates or exposure to additional tax liabilities; the highly competitive industry in which the Company operates and the relative immaturity of the market for its service offerings; and the evolving and complex governmental and regulatory compliance environment in which the Company and its clients operate. Existing and prospective investors are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The Company undertakes no obligation to update or revise the information contained in this press release, whether as a result of new information, future events or circumstances, or otherwise. For additional disclosure regarding these and other risks faced by the Company, see the disclosures contained in its public filings with the Securities and Exchange Commission, available on the Investors section of the Company’s website at http://www.athenahealth.com and on the SEC’s website at http://www.sec.gov.

Source: athenahealth