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,
2012

December 31,
2011

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
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

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
share:

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