Why Greenway Medical Technologies Shares Slumped
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of Greenway Medical Technologies , a cloud-based health-care management services company, dipped as much as 17% after the company revised its full-year 2013 outlook.
So what: Before the opening bell, Greenway offered an update for its remaining fiscal 2013 based on preliminary results for the third quarter. Greenway now expects full-year revenue of $132 million to $134 million, and a GAAP EPS loss of $0.11 to $0.13 on gross margin ranging from 51.5% to 52.2%. At the end of the second quarter in mid-February, it had been forecasting revenue of $145 million to $150 million, and a GAAP EPS profit of $0.10 to $0.17 on gross margin of 54.5% to 56%. Greenway's CEO, Tee Green, noted that a shift away from one-time licensing models to a recurring revenue stream is what hurt Greenway's revenue outlook. He also noted that recurring revenue is up to 56% of total revenue in the current quarter, as opposed to just 46% in the year-ago period.
Now what: It's pretty easy based on the above figures to see why the Street isn't one bit happy with Greenway today. As a provider of electronic health records and other cloud-based health-management tools, I don't see any reason why it should be struggling to recruit new customers and/or boosting its recurring revenue stream. I applauded Greenway for landing a whale in Walgreen last summer, and I feel it could offer a very compelling investment thesis on paper moving forward; unfortunately it has failed to deliver for investors now on multiple occasions.
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