Leading vendor of cloud-based services for physician practices
Athenahealth
(
ATHN
) reported fourth-quarter adjusted (excluding one-time items other
than stock-based compensation expense) earnings per share of 16
cents, matching the Zacks Consensus Estimate and trailing the
year-ago earnings per share of 21 cents.
For fiscal 2011, adjusted earnings per share of 55 cents missed
the Zacks Consensus Estimate of 57 cents and exceeded the year-ago
earnings of 37 cents a share.
Net income (as reported) for the quarter dropped to $5.3 million
(or 15 cents per share) from $7.3 million (or 21 cents per share) a
year ago, due to higher expenses, including a 58.2% rise in selling
and marketing expense.
Revenues
Revenues for the reported quarter were up sharply 33% year over
year to $92.5 million, beating the Zacks Consensus Estimate of $92
million. For fiscal 2011, sales were $324.1 million, up 32%,
squeaking past the Zacks Consensus Estimate of $324 million. The
company posted collections of $2 billion in the fourth quarter, up
25%.
As for the two reporting segments, sales from Business Services
were up 33% to $89.3 million while Implementation and Other
revenues rose 41.7% to $3.2 million.
Revenues were mainly bolstered by continued adoption of the
company's revenue cycle management ("RCM") offering athenaCollector
and its electronic health record ("EHR") service athenaClinicals by
physicians. In addition, usage of the newer products
athenaCommunicator and athenaCoordinator gathered momentum.
Utilization of athenaCollector by medical providers and
physicians grew 20.7% and 20.9%, respectively, year over year, in
the fourth quarter. Furthermore, the use of athenaClinicals by
medical providers (as well as physicians) almost doubled year over
year. The usage of athenaCommunicator shot up exponentially to
5,830 medical providers (of whom 4,098 were physicians).
Margins
Adjusted gross margin dropped to 64.2% in the quarter from 66.3%
a year ago while adjusted EBITDA was down to 22.4% from 29.1%.
Adjusted operating margin dipped to 17.2% from 24.5% a year
ago.
Balance Sheet
Athenahealth exited the quarter with cash, cash equivalents and
available-for-sale investments of $138.5 million, up 13.7% year
over year.
Other
Athenahealth continued, in 2011, with its effort to create a
national health information system. Its efforts have been
successful thus far with the launch of athenaCoordinator and
permission from the regulatory authorities to build a bilateral
system for health information exchange.
Outlook
Athenahealth's web-based deployment provides a low-cost scalable
service while its flexible rules engine leads to higher efficiency
in claims settlement. The Software-as-a-Service (SaaS)-based
approach allows for a more flexible delivery mechanism that is
expected to help Athenahealth win deals. The company has
traditionally enjoyed high customer satisfaction rates, which
facilitate a larger number of referrals.
Athenahealth's unique business model makes it a strong provider
of RCM services (athenaCollector) to small physician practices. Its
EHR product (athenaClinical) is a key player in ambulatory
settings. We believe that sales of athenaClinical are likely
to remain robust, given the opportunity for physicians to earn
incentive payments under the federal stimulus. In addition, the
company will harness its newer products, namely athenaCommunicator
and athenaCoordinator.
The company should benefit from its extensive athenaCollector
client base, as only a minority of its subscriber base also
utilizes athenaClinical. Cross selling represents a real growth
opportunity in the near term. In this regard, Athenahealth has made
rapid strides in capturing the EHR business of physician practices.
However, this segment is shrinking as hospitals increasingly absorb
physician practices.
Athenahealth has geared itself for the enterprise segment
through its strategic alliance with
Microsoft
(
MSFT
) and the acquisition of Proxsys, both earlier in 2011. The company
has recently signed on, and executed several enterprise-sized
deals, which provide it with a credible and reference-able client
base.
Though the federal stimulus will gradually wind down, the
replacement market is growing. Competition is fierce and larger
competitors may benefit from the incumbency factor. Industry
stalwarts, such as
Cerner
(
CERN
), offer long-standing seamless products integrating inpatient and
ambulatory-care systems.
Quality Systems
(
QSII
) and
Allscripts Healthcare Solutions
(
MDRX
) are two other well-known competitors in a crowded field.
We currently have a Neutral recommendation on Athenahealth. The
stock currently retains a Zacks #2 Rank, which translates into a
short-term "Buy" recommendation.
ATHENAHEALTH IN (
ATHN
): Free Stock Analysis Report
CERNER CORP (
CERN
): Free Stock Analysis Report
ALLSCRIPTS HLTH (
MDRX
): Free Stock Analysis Report
MICROSOFT CORP (
MSFT
): Free Stock Analysis Report
QUALITY SYS (
QSII
): Free Stock Analysis Report
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