athenahealth, Inc. Reports Third Quarter Fiscal Year 2011 Results

October 20th, 2011 | Computer Software , Technology | 0 Comments »

— 33% Revenue Growth Over Third Quarter of 2010 — GAAP Net Income of $5.3 Million, or $0.15 Per Diluted Share — Non-GAAP Adjusted Net Income of $8.7 Million, or $0.24 Per Diluted Share

WATERTOWN, Mass. (October 20, 2011) – athenahealth, Inc. (NASDAQ: ATHN) (the “Company”), a leading provider of cloud-based practice management, electronic health record (EHR), patient communication, and care coordination services to medical groups, today announced financial and operational results for the third quarter of fiscal year 2011. The Company will conduct a conference call tomorrow, Friday, October 21, 2011, 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, 2011 was $83.7 million, compared to $63.1 million in the same period last year, an increase of 33%.

“During Q3, athenahealth made significant progress toward our vision of an information infrastructure that makes health care work as it should,” said Jonathan Bush, the Company’s Chairman, President, and Chief Executive Officer. “Our cloud-based services continue to chip away at inefficiency in the health care supply chain and to disrupt the legacy software model.”

Bush continued, “In keeping with our mission to be medical groups’ most trusted business service, we set a new industry standard for transparency with our Meaningful Use performance dashboard, exposing our clients’ performance across all measures in near real-time. Each update to this dashboard illustrates the combined power of our cloud-based application and services model to successfully guide clients through complex payment programs. We enhanced the power of this model by completing the acquisition of Proxsys LLC and launching athenaCoordinator to enable hospitals and other receivers of patient referrals to better coordinate care.”

For the three months ended September 30, 2011, Non-GAAP Adjusted Gross Margin was 63.8%, up from 62.8% in the same period last year. Non-GAAP Adjusted EBITDA grew to $18.9 million, or 22.6% of total revenue, from Non-GAAP Adjusted EBITDA of $14.6 million, or 23.0% of total revenue, in the same period last year. For the three months ended September 30, 2011, GAAP net income was $5.3 million, or $0.15 per diluted share, and Non-GAAP Adjusted Net Income was $8.7 million, or $0.24 per diluted share. See “Use of Non-GAAP Financial Measures” below.

“The growth we achieved during Q3 reflects strong market demand for our services,” said Tim Adams, the Company’s Chief Financial Officer. “It was a very productive quarter during which we leveraged strong top line performance to invest in continued growth and innovation. As we approach the close of 2011, we are updating our fiscal year 2011 guidance.”

athenahealth’s revised fiscal year 2011 guidance is presented below:

For the Fiscal Year Ending December 31, 2011
GAAP Total Revenue $320-325 million
Non-GAAP Adjusted Gross Margin 63.0-63.5%
Non-GAAP Adjusted EBITDA $64-68 million
Non-GAAP Adjusted Net Income per Diluted Share $0.78-0.85
GAAP Effective Tax Rate ~42%

Key metrics and milestones in the third quarter of fiscal year 2011 included the following:

  • $1.9 billion in collections posted to client accounts in the third quarter of 2011, compared to $1.5 billion in the same quarter of 2010
  • 39.7 average client Days in Accounts Receivable (DAR) in the third quarter of 2011, compared to 38.8 average client DAR in the same quarter of 2010
  • 31,675 active medical providers using athenaCollector
  • 5,849 active medical providers using athenaClinicals
  • 4,117 active medical providers using athenaCommunicator
  • Completed the acquisition of Proxsys LLC in an all-cash transaction on August 31, 2011 and launched the athenaCoordinator service offering

As of September 30, 2011, the Company had cash, cash equivalents, short and long-term investments of $122.2 million. The Company does not have any outstanding debt obligations. Subsequent to the quarter ended September 30, 2011, athenahealth entered into a five-year $100 million revolving credit facility. The Credit Agreement replaces a $15 million credit facility that expired September 30, 2011.

Use of Non-GAAP Financial Measures

In the Company’s earnings releases, conference calls, slide presentations, and 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 800-447-0521 (or 847-413-3238 for international calls) using conference code No. 30770697, or visit the Investors section of the Company’s web site at www.athenahealth.com. A replay will be available for one week following the conference call at 888-843-7419 (and 630-652-3042 for international calls) using conference code No. 30770697. A webcast replay will also be archived on the Company’s website.

About athenahealth

athenahealth, Inc. is a leading provider of cloud-based business services for physician practices. 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, automated and live patient communication services, and the coordination of care among participants in the health care system. For more information, please visit http://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 and business outlook, statements regarding the expected benefits resulting from the Proxsys LLC acquisition, 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; risks associated with the acquisition and integration of companies and new technologies; 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, 2011 31, 2010
Assets
Current assets:
Cash and cash equivalents $ 66,107 $ 35,944
Short-term investments 52,359 80,231
Accounts receivable – net 47,116 36,870
Deferred tax assets 4,598 3,856
Prepaid expenses and other current assets 8,295 6,749
Total current assets 178,475 163,650
Property and equipment – net 40,480 31,899
Restricted cash 5,382 8,691
Software development costs – net 5,826 3,642
Purchased intangibles – net 19,812 12,651
Goodwill 48,307 22,450
Deferred tax assets 12,148 10,959
Investments and other assets 6,188 7,228
Total assets $ 316,618 $ 261,170
Liabilities & Stockholders’ Equity
Current liabilities:
Current portion of long-term debt and capital lease obligations $ – $ 2,909
Accounts payable 3,230 559
Accrued compensation 20,962 19,178
Accrued expenses 15,053 10,981
Current portion of deferred revenue 5,723 4,978
Interest rate derivative liability – 490
Current portion of deferred rent 930 1,497
Total current liabilities 45,898 40,592
Deferred rent, net of current portion 3,179 5,960
Deferred revenue, net of current portion 41,975 35,661
Other long-term liabilities 5,550 1,897
Debt and capital lease obligations, net of current portion – 6,307
Total liabilities 96,602 90,417
Stockholders’ equity:
Preferred stock, $0.01 par value: 5,000 shares authorized; no shares issued
and outstanding at September 30, 2011 and December 31, 2010, respectively – –
Common stock, $0.01 par value: 125,000 shares authorized; 36,599 shares
issued, and 35,322 shares outstanding at September 30, 2011; 35,808 shares
issued and 34,530 shares outstanding at December 31, 2010. 366 358
Additional paid-in capital 236,307 200,339
Treasury stock, at cost, 1,278 shares (1,200 ) (1,200 )
Accumulated other comprehensive (loss) income (402 ) 28
Accumulated deficit (15,055 ) (28,772 )
Total stockholders’ equity 220,016 170,753
Total liabilities and stockholders’ equity $ 316,618 $ 261,170
athenahealth, Inc. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited, in thousands, except per share amounts)
Three Months Ended Nine Months Ended
September 30, September 30,
2011 2010 2011 2010
Revenue:
Business services $ 80,640 $ 61,087 $ 223,475 $ 170,051
Implementation and other 3,100 2,056 8,080 6,121
Total revenue 83,740 63,143 231,555 176,172
Expense:
Direct operating 31,695 24,543 87,985 72,163
Selling and marketing 20,784 13,233 56,540 37,986
Research and development 6,141 4,645 16,386 13,543
General and administrative 11,869 10,390 35,306 33,470
Depreciation and amortization 4,749 2,869 11,884 7,946
Total expense 75,238 55,680 208,101 165,108
Operating income 8,502 7,463 23,454 11,064
Other income (expense):
Interest income 84 75 300 219
Interest expense (6 ) (102 ) (237 ) (437 )
Loss on interest rate derivative contract – (111 ) (73 ) (475 )
Other income 64 33 108 96
Total other income (expense) 142 (105 ) 98 (597 )
Income before income taxes 8,644 7,358 23,552 10,467
Income tax provision

Source: athenahealth