athenahealth, Inc. Reports Third Quarter Fiscal Year 2012 Results
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, | December 31, | |||||||
Assets | ||||||||
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 and | — | — | ||||||
Common stock, $0.01 par value: 125,000 shares authorized; 37,539 shares issued and | 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 | |||||||||||||
Revenue: | ||||||||||||||||
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 | ||||||||||||
Expense: | ||||||||||||||||
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 per | ||||||||||||||||
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 | |||||||
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 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 | ) | ||||
Change in fair value of contingent consideration | (4,785 | ) | 340 | |||||
Stock-based compensation expense | 20,518 | 13,032 | ||||||
Other reconciling adjustments | (142 | ) | 73 | |||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | (4,462 | ) | (9,735 | ) | ||||
Prepaid expenses and other current assets | 4,774 | 8,688 | ||||||
Other long-term assets | 206 | 335 | ||||||
Accounts payable | 1,625 | 2,383 | ||||||
Accrued expenses | 1,639 | 2,726 | ||||||
Accrued compensation | 3,373 | 841 | ||||||
Deferred revenue | 2,364 | 7,059 | ||||||
Deferred rent | (689 | ) | (3,348 | ) | ||||
Net cash provided by operating activities | 46,180 | 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 investments | 72,434 | 124,804 | ||||||
Purchases of short-term and long-term investments | (62,689 | ) | (96,366 | ) | ||||
Payments on acquisition | — | (34,882 | ) | |||||
Decrease in restricted cash | 4,151 | 3,309 | ||||||
Other investing activities | 172 | (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 warrants | 17,969 | 12,826 | ||||||
Taxes paid related to net share settlement of restricted stock awards | (3,686 | ) | — | |||||
Excess tax benefit from stock-based awards | 11,310 | 10,210 | ||||||
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 activities | 24,043 | 10,277 | ||||||
Effects of exchange rate changes on cash and cash equivalents | 26 | (468 | ) | |||||
Net increase in cash and cash equivalents | 54,533 | |||||||
