athenahealth, Inc. Reports Third Quarter Fiscal Year 2012 Results

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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.--(BUSINESS WIRE)-- athenahealth, Inc. (NAS: 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® at September 30, 2012, 27,013 of whom were physicians, compared to 31,675 providers and 22,477 physicians at September 30, 2011
  • 10,062 active medical providers using athenaClinicals® at September 30, 2012, 7,340 of whom were physicians, compared to 5,849 providers and 4,202 physicians at September 30, 2011
  • 12,149 active medical providers using athenaCommunicator® at September 30, 2012, 8,739 of whom were physicians, compared to 4,117 providers and 2,931 physicians at September 30, 2011

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 http://www.athenahealth.com.

Conference Call Information

To participate in the Company's live conference call and webcast, please dial 800-447-0521 (or 847-413-3238for international calls) using conference code No. 33279548, 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. 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 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 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 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 30,
2012
December 31,
2011
Assets
Current assets:
Cash and cash equivalents$112,314$57,781
Short-term investments67,88762,084
Accounts receivable - net53,31249,038
Deferred tax assets5,8955,245
Prepaid expenses and other current assets15,369 8,988 
Total current assets254,777183,136
 
Property and equipment - net54,00052,275
Restricted cash8565,007
Software development costs - net11,8956,974
Purchased intangibles - net17,79420,052
Goodwill47,30747,307
Deferred tax assets13,13612,532
Investments and other assets4,806 21,503 
Total assets$404,571 $348,786 
 
Liabilities & Stockholders' Equity
Current liabilities:
Accounts payable$3,650$6,318
Accrued compensation32,19428,176
Accrued expenses16,82917,774
Current portion of deferred revenue6,3716,345
Current portion of deferred rent1,029 960 
Total current liabilities60,07359,573
Deferred rent, net of current portion2,1742,932
Deferred revenue, net of current portion46,61944,281
Other long-term liabilities901 5,529 
Total liabilities109,767112,315
 
Stockholders' equity:

Preferred stock, $0.01 par value: 5,000 shares authorized; no shares issued and
outstanding at September 30, 2012, and December 31, 2011, respectively

Common stock, $0.01 par value: 125,000 shares authorized; 37,539 shares issued and
36,261 shares outstanding at September 30, 2012; 36,678 shares issued and 35,400
shares outstanding at December 31, 2011

376367
Additional paid-in capital292,559247,131
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' equity294,804 236,471 
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 20112012 2011
Revenue:
Business services$102,256$80,640$295,915$223,475
Implementation and other3,630 3,100 10,052 8,080 
Total revenue105,886 83,740 305,967 231,555 
Expense:
Direct operating41,86631,695121,67887,985
Selling and marketing25,60320,78476,72056,540
Research and development8,7466,14124,52916,386
General and administrative11,91311,86942,07335,306
Depreciation and amortization6,683 4,749 17,964 11,884 
Total expense94,811 75,238 282,964 208,101 
Operating income11,0758,50223,00323,454
Other income88 142 234 98 
Income before income taxes11,1638,64423,23723,552
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 per
share:

Basic35,83235,15535,84734,934
Diluted37,21236,27737,03835,901
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athenahealth, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, in thousands)

 
Nine Months Ended September 30,
2012 2011
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income$12,792$13,717
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization20,34113,353
Amortization of premium on investments1,0111,269
Provision for uncollectible accounts188649
Excess tax benefit from stock-based awards(11,310)(10,210)
Deferred income tax(1,263)(1,931)
Change in fair value of contingent consideration(4,785)340
Stock-based compensation expense20,51813,032
Other reconciling adjustments(142)73
Changes in operating assets and liabilities:
Accounts receivable(4,462)(9,735)
Prepaid expenses and other current assets4,7748,688
Other long-term assets206335
Accounts payable1,6252,383
Accrued expenses1,6392,726
Accrued compensation3,373841
Deferred revenue2,3647,059
Deferred rent(689)(3,348)
Net cash provided by operating activities46,180 39,241 
CASH FLOWS FROM INVESTING ACTIVITIES:
Capitalized software development costs(10,658)(5,251)
Purchases of property and equipment(19,126)(9,406)
Proceeds from sales and maturities of investments72,434124,804
Purchases of short-term and long-term investments(62,689)(96,366)
Payments on acquisition(34,882)
Decrease in restricted cash4,1513,309
Other investing activities172 (1,095)
Net cash (used in) investing activities(15,716)(18,887)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock under stock plans and warrants17,96912,826
Taxes paid related to net share settlement of restricted stock awards(3,686)
Excess tax benefit from stock-based awards11,31010,210
Payment of contingent consideration accrued at acquisition date(1,550)(2,980)
Payment to terminate interest rate derivative contract(563)
Payments on long-term debt and capital lease obligations (9,216)
Net cash provided by financing activities24,043 10,277 
Effects of exchange rate changes on cash and cash equivalents26 (468)
Net increase in cash and cash equivalents54,533