Morgan Stanley Gives Update On Athenahealth Following Recent Earnings Release

Athenahealth ATHN reported a solid headline result with revenues of $69.9 mil, including a ~$1.1 mil benefit of one extra day in 1Q11. Non-GAAP 1Q11 EPS of $0.17, which came in line with Morgan Stanley's estimates, but above consensus benefited from less physician implementations in the quarter, and a lower tax rate. Athenahealth is on pace to reach $314 million of revenues, on the upper end of management's guidance of $300 to $315 million and versus consensus of $311 million, and $0.77 of non-GAAP EPS versus guidance range of $0.68 to $0.78 and consensus $0.79. Of note, the non-GAAP EPS includes ~$0.33 of share comp add-back. Sales and marketing expenses now have out-grown revenues for ten straight quarters. Moreover, S&M spending, as a percent of NTM revenues, has steadily increased to an estimated 17.0% in 1Q11, from 15.0% in 1Q10 and from 12.5% in 1Q09. ATHN's ability to show follow thru revenues is a key focus area in the coming quarters. Morgan Stanley has an Underweight rating on ATHN ATHN closed Friday at $46.21