) revealed a 9.7% rise in earnings per share to 34 cents for the
first quarter of 2014 from 31 cents in the comparable quarter of
2013. However, earnings were flat compared with the Zacks
Consensus Estimate. Net earnings rose 8.6% to $119.5 million from
$110.0 in the first quarter of 2013.
ATHENAHEALTH IN (ATHN): Free Stock Analysis
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Revenues in the quarter grew 15.4% to $784.8 million, marginally
exceeding the Zacks Consensus Estimate of $783 million. The
increase can be attributed to stronger revenues from Support,
maintenance and services, Reimbursed Travel, and System sales.
Global revenues went down 16% due to tough comparables.
revenues rose 3.9% to $206.7 million,
Support, Maintenance and Services
went up 19.5% to $557.4 million, and from
escalated 41.7% to $20.6 million.
Bookings revenues grew 14% to all-time high of $910.2 million,
despite weak technology resale. The company did not record any
new ITWorks or RevWorks deals in the quarter, but benefited from
scope expansions at existing ITWorks clients and good sales of
Revenue Cycle solutions. For the quarter, the company recorded 23
contracts valuing over $5 million, including 13 over $10 million.
Bookings margin in the quarter was $824 million or 91% of total
bookings. This led to a 22% rise in total backlog to $9.24
billion. Of the total backlog, contract revenue backlog was $8.45
billion, up 24% from the year-ago level, while support revenue
backlog was $796 million, up 6% year-over-year.
First quarter days sales outstanding were 66 days, a decline from
69 days in the first quarter of 2013.
Gross margin for the quarter was 83.5%, up 220 basis points (bps)
from 81.3% in the prior-year quarter due to strong software and
subscription levels and a lower mix of technology resale.
However, operating margin in the quarter dipped 30 bps to 22.7%
from 23.0% in the 2013-first quarter, due to increase in
CERN had cash and cash equivalents of $219.9 million as of Mar
29, 2014, up 8.7% from $202.4 million as of Dec 28, 2013. Total
long-term debt and capital lease obligations declined 3.2% to
$160.5 million as of Mar 29, 2014 compared with $165.8 million as
of Dec 28, 2013.
In the quarter, cash flow from operating activities ebbed 27.1%
to $155.8 million from $213.6 million in the 2013-quarter.
Capital expenditure soared 40.9% to $69.7 million compared with
$49.5 million a year ago. As a result, free cash flow plunged
68.0% to $41.6 million from $129.9 million in the 2013-first
In December last year, CERN's Board of Directors approved
authorization of stock repurchase of up to $217 million of the
company's common stock. Out of that, the company has repurchased
1.3 million of shares for roughly $75 million during the quarter,
leading to $142 million worth of remaining shares under the
For the second quarter of 2014, CERN anticipates revenues between
$790 and $830 million while adjusted earnings are expected
between 36 and 37 cents per share, including share based
compensation expense. These compared with the Zacks Consensus
Estimates of $807 million 37 cents for revenues and earnings per
share, respectively for the quarter.
The leading healthcare information technology ("HCIT") solutions
provider also expects new business bookings between $1 billion
and $1.06 billion for the quarter.
For full year 2014, CERN upgraded revenue guidance to the range
of $3.25 to $3.40 billion from the prior range of $3.20 to $3.40
billion. Adjusted earnings are also expected to be higher at
$1.52-$1.55, compared with the prior range of $1.51 to $1.55,
including share-based compensation expense. These compared with
the Zacks Consensus Estimates of $3.3 billion and $1.54 for
revenues and earnings per share, respectively for the year.
For 2014, CERN expects capital expenditures between $260 million
and $280 million, down from $353 million in 2013. It also expects
capitalized software to remain in the mid-$40 million range
throughout the year.
Currently, CERN retains a Zacks Rank #3 (Hold). We believe
long-term investors may consider CERN, which serves a sizeable
installed hospital base that requires composite
clinically-oriented applications complying with "meaningful use"
needs, reimbursement difficulties and coding challenges. The
company has long-standing, integrated and seamless solutions for
both inpatient and ambulatory settings.
However, competition is fierce with well reputed names such as
Allscripts Healthcare Solutions, Inc.
) . The intensity of competition may pressure both pricing and
margin. Stringent hospital budgets place further pressure on