) reported adjusted earnings of $8.0 million or 21 cents per
share (excluding amortization and integration and transaction
costs) in the third quarter of the year, exceeding the Zacks
Consensus Estimate of 15 cents per share. This translated into a
15.5% rise in net earnings from $7.0 million and 10.5% rise in
earnings per share from 19 cents in the comparable quarter a year
ATHENAHEALTH IN (ATHN): Free Stock Analysis
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Revenues in the quarter surged 43.1% to $151.5 million but missed
the Zacks Consensus Estimate of $155 million. Excluding the
Epocrates and other revenues (consisting of third-party tenant
revenues) totaling $17.2 million, core athenahealth revenues rose
27% to $134.3 million. Growth was led by expanded clientele for
the company's offerings since the acquisition of Healthcare Data
Services and strong athenaCoordinator business.
On a segment-wise basis, revenues from Business Services rose
38.2% year over year to $141.3 million (including $13.4 million
from Epocrates) while Implementation and Other revenues nearly
tripled to $10.2 million in the quarter under study.
Adjusted gross earnings rose nearly 42% to $92.0 million but
adjusted gross margin fell 50 basis points (bps) to 60.7% due to
higher operating expenses. Adjusted operating earnings dipped
19.6% to $9.5 million while adjusted operating margin decreased
490 bps to 6.3% in the quarter.
ATHN had cash and cash equivalents of $62.3 million as of Sep 30,
2013, down from $155.0 million as of Dec 31, 2012. Total debt
rose to $192.5 million as of Jun 30, 2013 compared with no debt
at the end of 2012.
In the first nine months of 2013, cash flow from operating
activities rose 21.7% to $56.2 million from $46.2 million in the
same period of 2012. Capital expenditure grew 11.9% to $21.4
million compared with $19.1 million in the first three quarters
athenahealth stuck to its 2013 guidance provided in May this
year. Total sales are expected to be in the midpoint of the range
of $580 million to $615 million. The current Zacks Consensus
Estimate of $594 million lies within the company's expected
We are encouraged by athenahealth's third quarter results as the
company's top-line beat both the Zacks Consensus Estimate and the
year-ago earnings. We believe that the company will benefit from
cross-selling opportunities, Epocrates buyout and the successful
implementation of the Meaningful Use Stage 2 (MU2) criteria
across its nationwide, cloud-based network.
Despite Athenahealth's strong presence and unique business model
in the health care information technology (HCIT) industry, we
remain cautious owing to the crowded field with larger players
), which has a Zacks Rank #2 (Buy).
Currently, ATHN carries a Zacks Rank #3 (Hold). While we prefer
no other stocks from the medical information systems industry at
this moment other than Cerner, we view
Bio-Rad Laboratories, Inc.
INSYS Therapeutics, Inc.
) from the medical products industry as worth considering. Both
of them carry a Zacks Rank #1 (Strong Buy).