Leading vendor of cloud-based services for physician practices
and inpatient settings,
) reported first quarter 2013 adjusted (excluding one-time items
other than stock-based compensation expense) earnings per share
of 16 cents beating the Zacks Consensus Estimate of 12 cents per
Reported net income in the first quarter dropped 71.2% year
over year to $0.7 million (or 2 cents per share).
Revenues climbed 30% year over year to $125.6 million in the
quarter beating the Zacks Consensus Estimate of $122 million.
Excluding revenues of $5.5 million from the acquisition of
Epocrates, sales were $120.1 million, up 24% year over year. The
company posted collections of $2.6 billion in the first quarter,
On a segment-wise basis, revenues from Business Services
surged 29.8% year over year to $121.5 million (including $5.5
million from Epocrates) while Implementation and Other revenues
improved 37% to $4.1 million.
Utilization of athenaCollector by medical providers and
physicians grew 20.7% and 19.7% respectively, year over year in
the first quarter. Furthermore, the use of athenaClinicals by
medical providers and physicians jumped 64% and 64.6%,
respectively, year over year. The utilization of
athenaCommunicator increased almost two and a half times to
16,296 medical providers (of whom 11,840 were physicians) from
6,800 medical providers (of whom 4,820 were physicians) in the
Adjusted gross margin decreased 110 basis points year over
year to 60.4% whereas adjusted operating margin dropped 450 basis
points to 7.5% in the quarter. Adjusted EBITDA margin declined to
14% from 17.7% a year ago.
Athenahealth ended the first quarter with cash and cash
equivalents and short-term investments of $47.8 million, down
69.2% on a sequential basis.
Athenahealth updated its guidance for 2013. Total sales are
expected in the range of $580 million to $615 million (earlier
$525 million to $550 million). The band for Epocrates sales is
$46 million to $55 million, while Arsenal is expected to
contribute $10 million of revenues by way of tenancy. The company
forecasts adjusted gross margin of 63% to 64% (earlier 62% to
63%) and adjusted operating income of $68 million to $80 million
(earlier $75 million to $82 million). Athenahealth guided to
adjusted earnings per share of $1.05 to $1.15 (earlier $1.15 to
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 helps Athenahealth win deals. The company has
traditionally enjoyed high customer satisfaction rates, which
facilitates a larger number of referrals.
Athenahealth's unique business model makes it a strong
provider of RCM services (athenaCollector) designed for small
physician practices. Its EHR product (athenaClinicals) is a key
player in ambulatory settings. We believe that sales of
athenaClinicals are likely to remain robust. In addition, the
company will harness its newer products, namely
athenaCommunicator and athenaCoordinator.
Athenahealth should benefit from its extensive athenaCollector
client base, as only a minority of its subscriber base also
utilizes athenaClinicals. 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's medical practices.
Athenahealth is geared to enter the enterprise segment. The
company has recently signed on, and executed several
enterprise-sized deals, which provide it with a credible and
referenceable client base. In Mar 2013, Athenahealth completed
the takeover of Epocrates, a provider of point-of-care digital
solutions in the healthcare industry. The acquisition will enable
Athenahealth to increase its user network and improve its brand
Though the federal stimulus is winding down, the replacement
market has been growing. Competition is fierce and larger
competitors may benefit from the incumbency factor. Industry
stalwarts such as
) offer long-standing seamless products, which integrate
inpatient and ambulatory-care systems.
Allscripts Healthcare Solutions, Inc.
) is another competitor in a crowded field.
We currently have a Zacks Rank #3 (Hold) on the company.
However, we are more positive about other stocks such as
Merge Healthcare Incorporated
) which carries a Zacks Rank #2 (Buy) and is expected to do well.
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