Athenahealth Beats on All Fronts - Analyst Blog

Leading medical billing and records software provider Athenahealth Inc (ATHN) has reported third-quarter fiscal 2010 adjusted earnings (excluding amortization charges) of 12 cents per share, exceeding the Zacks Consensus Estimate of 8 cents. Net income more than tripled year-over-year to $3.8 million (or 11 cents a share) riding on solid top line growth.

The better-than-expected results drove up Athenahealth shares, which jumped $3.01 (or 9.87%) to $33.50 in after-market trading on October 21.

Revenues

Revenues cruised 33% year-over-year to $63.1 million, beating the Zacks Consensus Estimate of $62 million. Sales were boosted by higher adoption of the company's flagship billing and practice management solution athenaCollector and electronic health record (EHR) service athenaClinical by physicians and medical providers. Use of athenaCollector by physicians and medical providers rose 25% and 19% year-over-year, respectively.

Margins

Adjusted gross margin improved to 62.8% from 58.9% a year-ago while adjusted EBITDA margin climbed to 23% from 16.6%. Adjusted operating margin increased to 18.5% from 12.2% from a year-ago.

Balance Sheet & Cash Flow

Athenahealth exited the quarter with cash, cash equivalents and short-term investments of $97.6 million, down 6.7% year-over-year. Total debt and capital lease obligations trimmed 16.5% year-over-year to $10.1 million with debt to adjusted EBITDA declining to 0.7 from 1.27, a year-ago. Cash flow from operations for the nine months (ended Sep 30) increased 17% year-over-year to $25.3 million.  

Outlook

Athenahealth expects revenues to grow 29% (versus prior forecast of 29%-30%) year-over-year in fiscal 2010. For the fourth quarter, gross margin, EBITDA and operating margin, on an adjusted basis, are expected to be flat year-over-year. Moreover, the company expects sales and marketing expenses to be roughly 21% of revenues in 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.