Leading medical billing and records software provider Athenahealth Inc. (ATHN) reported an adjusted EPS (excluding charges such as stock-based compensation expenses and amortization of intangibles) of 12 cents for second-quarter fiscal 2010, ahead of the Zacks Consensus Estimate of 6 cents and the year-ago earnings of 10 cents.
However, net income dipped 41% year-over-year to $1.3 million (or 4 cents per share) as higher revenues were more than offset by increased expenses.
Revenue
Athenahealth posted a solid top-line in the quarter as indicated by the 28% annualized growth in revenues to $58.6 million. However, sales were marginally below the Zacks Consensus Estimate of $59 million. Revenues were boosted by higher adoption of the company’s flagship revenue cycle management system “athenaCollector” and electronic health record (EHR) service “athenaClinical” by physicians and medical providers.
Margins and Expenses
Adjusted gross margin improved to 60.7% from 58.6% a year-ago. The adjusted EBITDA margin edged up to 16.9% from 16.8%. Expenses shot up 33% year-over-year to $55.7 million with direct operating costs (up 24%) and selling and marketing expenses (up 43%) contributing mostly to the increase.
Balance Sheet and Cash Flow
Athenahealth exited the first-half fiscal 2010 with cash and cash equivalents of $27.9 million, a roughly 20% year-over-year improvement. Total debt and capital lease obligations trimmed marginally year-over-year to $11 million with debt to adjusted EBITDA declining to 1.11 from 1.27, a year-ago. Cash flow from operations increased 27% year-over-year to $15.2 million.
Outlook
Athenahealth continues to expect a revenue growth of at least 30% in the third quarter. However, given the lower-than-expected physician office activities, the company no longer expects revenue growth to sustain at the same rate in the fourth quarter. For fiscal 2010, Athenahealth expects revenues to grow 29%-30%. Gross margins, EBITDA and operating margins, on an adjusted basis, are expected to grow year-over-year for the remainder of fiscal 2010.
Massachusetts-based Athenahealth is a leading provider of web-based business services for physician practices. The company’s services leverage proprietary web-native practice management and EHR software, integrated back-office service operations and automated patient communication services.
Athenahealth continues to face stiff competition across all of its operating platforms. Established Health IT players such as Allscripts-Misys (MDRX), Quality Systems (QSII) and GE Healthcare, a division of General Electric (GE), are a major threat to the company. Nevertheless, Athenahealth remains positive about the growth prospects in each of its market segments.
Read the full analyst report on “ATHN”
Read the full analyst report on “MDRX”
Read the full analyst report on “QSII”
Read the full analyst report on “GE”
Zacks Investment Research
