athenahealth, Inc. Reports Third Quarter Fiscal Year 2010 Results
— 33% Revenue Growth Over Third Quarter of 2009 — GAAP Net Income of $3.8 Million, or $0.11 Per Diluted Share — Non-GAAP Adjusted Net Income of $6.4 Million, or $0.18 Per Diluted Share
WATERTOWN, Mass. (October 21, 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 third quarter of fiscal year 2010. The Company will conduct a conference call on Friday, October 22, 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 September
“athenahealth expanded its industry leadership position this quarter,” said Jonathan Bush, the Company’s Chairman, President and Chief Executive Officer. “Providing clients with new revenue opportunities, such as those available from our partnership with Humana, and most recently, delivering a Meaningful Use-certified EHR to all athenaClinicals clients instantaneously, demonstrates the power of our web-based service model and our commitment to clients’ success.”
For the three months ended September 30, 2010, Non-GAAP Adjusted Gross Margin was 62.8%, up from 58.9% in the same period last year. Non-GAAP Adjusted EBITDA was $14.6 million, or 23.0% of total revenue, up from Non-GAAP Adjusted EBITDA of $7.9 million, or 16.6% of total revenue in the same period last year. GAAP Net Income for the third quarter of 2010 was $3.8 million, or $0.11 per diluted share compared to GAAP Net Income of $1.2 million or $0.03 per diluted share in the same period last year. Non-GAAP Adjusted Net Income was $6.4 million, or $0.18 per diluted share, compared to $3.2 million or $0.09 per diluted share in the same period last year.
“We achieved strong revenue growth and expanded profitability during Q3 2010 while continuing to invest in sales and marketing,” said Tim Adams, the Company’s Chief Financial Officer and Treasurer. “In addition, we were pleased with the significant level of physician additions we achieved during the third quarter as we brought new clients onto the network and expanded relationships with existing clients.”
Adams added, “Looking ahead, we expect that revenue growth for the full year 2010 will be approximately 29% over full year 2009. In terms of Q4 2010, we expect that Non-GAAP Adjusted Gross Margin, Non-GAAP Adjusted EBITDA Margin and Non-GAAP Adjusted Operating Margins should be roughly in line with the margin levels we achieved in Q4 2009. Finally, we continue to expect that our GAAP sales and marketing expense will be approximately 21% of total revenue for the full year of 2010.”
Key metrics and milestones in the third quarter of 2010 included the following:
- $1.5 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 39.3 average client DAR in the same quarter of 2009
- 18,573 active physicians using athenaCollector
- 26,317 active medical providers using athenaCollector at September
- 2,818 active medical providers using athenaClinicals
- 946 active medical providers using athenaCommunicatorSM at September 30, 2010, 625 of which were physicians
As of September 30, 2010, the Company had cash, cash equivalents, and short-term investments of $97.6 million and short- and long-term debt and capital lease obligations of $10.1 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 800-638-5495 (617-614-3946 for international calls) using conference code No. 49182074 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 888-286-8010 (617-801-6888 for international calls) using conference code No. 95235326. 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.
| athenahealth, Inc. | ||||||||
| CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||||
| (Unaudited, in thousands, except per share amounts) | ||||||||
| September | December | |||||||
| 30, 2010 | 31, 2009 | |||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 24,054 | $ | 30,526 | ||||
| Short-term investments | 73,560 | 52,323 | ||||||
| Accounts receivable – net | 36,151 | 33,323 | ||||||
| Deferred tax assets | 3,945 | 5,544 | ||||||
| Prepaid expenses and other current assets | 6,635 | 4,663 | ||||||
| Total current assets | 144,345 | 126,379 | ||||||
| Property and equipment – net | 32,389 | 24,871 | ||||||
| Restricted cash | 8,885 | 9,216 | ||||||
| Software development costs – net | 2,954 | 2,324 | ||||||
| Purchased intangibles – net | 13,111 | 14,490 | ||||||
| Goodwill | 22,407 | 22,120 | ||||||
| Deferred tax assets | 14,217 | 10,284 | ||||||
| Other assets | 3,235 | 1,393 | ||||||
| Total assets | $ | 241,543 | $ | 211,077 | ||||
| Liabilities & Stockholders’ Equity | ||||||||
| Current liabilities: | ||||||||
| Current portion of long-term debt and capital lease obligations | $ | 3,116 | $ | 3,437 | ||||
| Accounts payable | 1,102 | 1,880 | ||||||
| Accrued compensation | 16,608 | 15,774 | ||||||
| Accrued expenses | 10,827 | 10,781 | ||||||
| Current portion of deferred revenue | 5,408 | 4,038 | ||||||
| Interest rate derivative liability | 766 | 291 | ||||||
| Current portion of deferred rent | 1,369 | 1,288 | ||||||
| Total current liabilities | 39,196 | 37,489 | ||||||
| Deferred revenue, net of current portion | 33,766 | 28,684 | ||||||
| Other long-term liabilities | 1,681 | 1,191 | ||||||
| Deferred rent, net of current portion | 6,403 | 7,444 | ||||||
| Debt and capital lease obligations, net of current portion | 6,943 | 8,951 | ||||||
| Total liabilities | 87,989 | 83,759 | ||||||
| Stockholders’ equity: | ||||||||
| Preferred stock, $0.01 par value: 5,000 shares authorized; no shares issued | ||||||||
| and outstanding at September 30, 2010 and December 31, 2009, respectively | – | – | ||||||
| Common stock, $0.01 par value: 125,000 shares authorized; 35,519 shares | ||||||||
| issued, and 34,241 shares outstanding at September 30, 2010; 35,166 | ||||||||
| shares issued and 33,888 shares outstanding at December 31, 2009. | 355 | 352 | ||||||
| Additional paid-in capital | 190,588 | 169,715 | ||||||
| Treasury stock, at cost, 1,278 shares | (1,200 | ) | (1,200 | ) | ||||
| Accumulated other comprehensive loss | (114 | ) | (73 | ) | ||||
| Accumulated deficit | (36,075 | ) | (41,476 | ) | ||||
| Total stockholders’ equity | 153,554 | 127,318 | ||||||
| Total liabilities and stockholders’ equity | $ | 241,543 | $ | 211,077 |
| athenahealth, Inc. | ||||||||||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||||||||
| (Unaudited, in thousands, except per share amounts) | ||||||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2010 | 2009 | 2010 | 2009 | |||||||||||||
| (as restated) | (as restated) | |||||||||||||||
| Revenue: | ||||||||||||||||
| Business services | $ | 61,087 | $ | 45,609 | $ | 170,051 | $ | 129,933 | ||||||||
| Implementation and other | 2,056 | 1,796 | 6,121 | 4,148 | ||||||||||||
| Total revenue | 63,143 | 47,405 | 176,172 | 134,081 | ||||||||||||
| Expense: | ||||||||||||||||
| Direct operating | 24,543 | 19,942 | 72,163 | 57,900 | ||||||||||||
| Selling and marketing | 13,233 | 8,963 | 37,986 | 24,850 | ||||||||||||
| Research and development | 4,645 | 3,748 | 13,543 | 10,368 | ||||||||||||
| General and administrative | 10,390 | 9,732 | 33,470 | 26,327 | ||||||||||||
| Depreciation and amortization | 2,869 | 2,098 | 7,946 | 5,535 | ||||||||||||
| Total expense | 55,680 | 44,483 | 165,108 | 124,980 | ||||||||||||
| Operating income | 7,463 | 2,922 | 11,064 | 9,101 | ||||||||||||
| Other income (expense): | ||||||||||||||||
| Interest income | 75 | 216 | 219 | 938 | ||||||||||||
| Interest expense | (102 | ) | (270 | ) | (437 | ) | (727 | ) | ||||||||
| (Loss) gain on interest rate derivative contract | (111 | ) | (125 | ) | (475 | ) | 375 | |||||||||
| Other income | 33 | 96 | 96 | 211 | ||||||||||||
| Total other (expense) income | (105 | ) | (83 | ) | (597 | ) | 797 | |||||||||
| Income before income taxes | 7,358 | 2,839 | 10,467 | 9,898 | ||||||||||||
| Income tax provision | (3,532 | ) | (1,673 | ) | (5,066 | ) | (4,950 | ) | ||||||||
Source: athenahealth
