athenahealth, Inc. Reports Third Quarter Fiscal Year 2012 Results

26% Revenue Growth Over Third Quarter of 2011 GAAP Net Income of $6.2 Million, or $0.17 Per Diluted Share Non-GAAP Adjusted Net Income of $11.2 Million, or $0.30 Per Diluted Share

WATERTOWN, Mass. (October 18, 2012) – athenahealth, Inc. (NASDAQ: ATHN) (the “Company”), a leading provider of cloud-based practice management, electronic health record (EHR), and care coordination services to medical groups, today announced financial and operational results for the third quarter of fiscal year 2012. The Company will conduct a conference call tomorrow, Friday, October 19, 2012, 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, 2012, was $105.9 million, compared to $83.7 million in the same period last year, an increase of 26%.

“We are well into our pivot towards the world of coordinating care, accountable care organizations, and global risk. I believe that athenahealth’s DNA is ideal for this world and that we will prosper more than ever if it continues to rise,” said Jonathan Bush, the Company’s Chairman and Chief Executive Officer. “In Q3 2012, we delivered against many of our client-centric metrics, the purest indicators of the value clients place on our services, and we did this while investing in the future. From strengthening our ability to help clients succeed with risk-based payment models with the acquisition of Healthcare Data Services LLC, to generating momentum behind selling the vision of athenaCoordinator®, to galvanizing disruption for the health care industry through our ‘More Disruption Please’ program, we moved forward a number of distinct and significant initiatives that will be core to athenahealth’s future growth.”

Bush added, “Health care delivery is, fortunately, finally evolving. Within that environment, we remain committed to our 30% growth target, while best positioning the Company for a dynamic future.”

For the three months ended September 30, 2012, Non-GAAP Adjusted Gross Margin was 62.7%, down from 63.8% in the same period last year, as the Company continues to invest in its newest service offering, athenaCoordinator. Non-GAAP Adjusted EBITDA increased 38%, to $26.0 million, or 24.6% of total revenue, from Non-GAAP Adjusted EBITDA of $18.9 million, or 22.6% of total revenue, in the same period last year. For the three months ended September 30, 2012, GAAP net income was $6.2 million, or $0.17 per diluted share, compared to $5.3 million, or $0.15 per diluted share, in the same period last year. Non-GAAP Adjusted Net Income was $11.2 million, or $0.30 per diluted share, up from $8.7 million, or $0.24 per diluted share, in the same period last year. See “Use of Non-GAAP Financial Measures” below.

“Q3 2012 marked our 51st consecutive quarter of revenue growth. While our Q3 2012 revenue growth fell short of our internal expectations, we still delivered solid financial results,” said Tim Adams, the Company’s Chief Financial Officer. “The athenahealth team remains focused on delivering a strong finish to the year.”

Key metrics and milestones in the third quarter of fiscal year 2012 included the following:

  • $2.3 billion in collections posted to client accounts in the third quarter of 2012, compared to $1.9 billion in the same quarter of 2011
  • 37.6 average client Days in Accounts Receivable (DAR) in the third quarter of 2012, compared to 39.7 average client DAR in the same quarter of 2011
  • 38,145 active medical providers using athenaCollector
  • 10,062 active medical providers using athenaClinicals
  • 12,149 active medical providers using athenaCommunicator

As of September 30, 2012, the Company had cash, cash equivalents, and available-for-sale investments of $182.3 million. The Company does not have any outstanding debt obligations.

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

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. 33279548, or visit the Investors section of the Company’s web site at 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. 33279548. 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, and care coordination services. For more information, please visit 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 benefits of the Company’s service offerings; statements regarding the expansion of the types of tasks the Company performs for its clients and the Company’s continued investment in growth and development; statements regarding changes in the health care industry, including an increased emphasis on coordinated care, and the Company’s positioning in regard to those changes; and statements found under the Company’s “Reconciliation of Non-GAAP Financial Measures to Comparable GAAP 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 the acquisition and integration of companies and new technologies, including those related to the Company’s ability to successfully integrate the athenaCoordinator service and successfully scale the Healthcare Data Services and Proxsys services and technologies to achieve expected synergies; 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, please 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 and on the SEC’s website at

athenahealth, Inc. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited, in thousands, except per share amounts)
September 30,2012 December 31,2011
Current assets:
Cash and cash equivalents $ 112,314 $ 57,781
Short-term investments 67,887 62,084
Accounts receivable – net 53,312 49,038
Deferred tax assets 5,895 5,245
Prepaid expenses and other current assets 15,369 8,988
Total current assets 254,777 183,136
Property and equipment – net 54,000 52,275
Restricted cash 856 5,007
Software development costs – net 11,895 6,974
Purchased intangibles – net 17,794 20,052
Goodwill 47,307 47,307
Deferred tax assets 13,136 12,532
Investments and other assets 4,806 21,503
Total assets $ 404,571 $ 348,786
Liabilities & Stockholders’ Equity
Current liabilities:
Accounts payable $ 3,650 $ 6,318
Accrued compensation 32,194 28,176
Accrued expenses 16,829 17,774
Current portion of deferred revenue 6,371 6,345
Current portion of deferred rent 1,029 960
Total current liabilities 60,073 59,573
Deferred rent, net of current portion 2,174 2,932
Deferred revenue, net of current portion 46,619 44,281
Other long-term liabilities 901 5,529
Total liabilities 109,767 112,315
Stockholders’ equity:
Preferred stock, $0.01 par value: 5,000 shares authorized; no shares issued andoutstanding at September 30, 2012, and December 31, 2011, respectively
Common stock, $0.01 par value: 125,000 shares authorized; 37,539 shares issued and36,261 shares outstanding at September 30, 2012; 36,678 shares issued and 35,400shares outstanding at December 31, 2011 376 367
Additional paid-in capital 292,559 247,131
Treasury stock, at cost, 1,278 shares (1,200 ) (1,200 )
Accumulated other comprehensive income (loss) 3 (101 )
Retained earnings (accumulated deficit) 3,066 (9,726 )
Total stockholders’ equity 294,804 236,471
Total liabilities and stockholders’ equity $ 404,571 $ 348,786
athenahealth, Inc. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited, in thousands, except per share amounts)
Three Months Ended September 30, Nine Months Ended September 30,
2012 2011 2012 2011
Business services $ 102,256 $ 80,640 $ 295,915 $ 223,475
Implementation and other 3,630 3,100 10,052 8,080
Total revenue 105,886 83,740 305,967 231,555
Direct operating 41,866 31,695 121,678 87,985
Selling and marketing 25,603 20,784 76,720 56,540
Research and development 8,746 6,141 24,529 16,386
General and administrative 11,913 11,869 42,073 35,306
Depreciation and amortization 6,683 4,749 17,964 11,884
Total expense 94,811 75,238 282,964 208,101
Operating income 11,075 8,502 23,003 23,454
Other income 88 142 234 98
Income before income taxes 11,163 8,644 23,237 23,552
Income tax provision (4,953 ) (3,364 ) (10,445 ) (9,835 )
Net income $ 6,210 $ 5,280 $ 12,792 $ 13,717
Net income per share – Basic $ 0.17 $ 0.15 $ 0.36 $ 0.39
Net income per share – Diluted $ 0.17 $ 0.15 $ 0.35 $ 0.38
Weighted average shares used in computing net income pershare:
Basic 35,832 35,155 35,847 34,934
Diluted 37,212 36,277 37,038 35,901
athenahealth, Inc. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited, in thousands)
Nine Months Ended September 30,
2012 2011
Net income $ 12,792 $ 13,717
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 20,341 13,353
Amortization of premium on investments 1,011 1,269
Provision for uncollectible accounts 188 649
Excess tax benefit from stock-based awards (11,310 ) (10,210 )
Deferred income tax (1,263 ) (1,931 )

Source: athenahealth