Company Announces Record Provider
Additions; Management Reaffirms Fiscal Year 2016
Guidance
athenahealth, Inc. (NASDAQ:ATHN) (“athenahealth” or
“we”), a leading provider of network-enabled services and mobile
applications for healthcare providers nationwide, today announced
financial and operational results for the third quarter of fiscal
year 2016. We will hold a conference call tomorrow, Friday,
October 21, 2016, at 8:00 a.m. Eastern Time to discuss
these results and management’s outlook for future financial and
operational performance.
“As we continue to build our national network - today, having
connected over 85,000 providers, 83 million unique patient records,
and 140,000 network endpoints - athenahealth is well-positioned to
improve healthcare delivery in this country,” said Jonathan Bush,
chairman and chief executive officer, athenahealth. “We are also
uniquely positioned to leverage our network data for good and are
making great strides in furtherance of our mission to unbreak
healthcare. To this end, we recently launched athenaInsight, an
editorial hub reporting from the heart of the healthcare internet
on healthcare’s bright spots, drivers of effective physician
leadership and engagement, and trends tied to public health. As we
look ahead, our strategic priorities and investments will be
focused on further leveraging our unique platform to deliver true
client success.”
Q3 2016 and Year-to-Date 2016 Financial
Results
- Total revenue for the three months ended September 30,
2016, was $276.7 million, compared to $236.1 million in the same
period last year, an increase of 17%.
- Total revenue for the nine months ended September 30,
2016, was $794.8 million, compared to $667.2 million in the same
period last year, an increase of 19%.
- Net new active physicians added to the network:
athenaCollector® (3,829 physicians added), athenaClinicals® (2,090
physicians added), and athenaCommunicator® (3,416 physicians added)
for the three months ended September 30, 2016, compared to
athenaCollector (3,953 physicians added), athenaClinicals (2,818
physicians added), and athenaCommunicator (3,422 physicians added)
in the same period last year.
- Net new active providers added to the network: athenaCollector
(5,092 providers added), athenaClinicals (2,844 providers added),
and athenaCommunicator (4,478 providers added) for the three months
ended September 30, 2016, compared to athenaCollector (4,784
providers added), athenaClinicals (3,430 providers added), and
athenaCommunicator (4,084 providers added) in the same period last
year.
“The athenahealth team continued to make progress against many
of our financial and operational goals in the third quarter and are
thrilled with another quarterly record number of providers added to
our network,” said Karl Stubelis, chief financial officer,
athenahealth. “Year-to-date, we have delivered against our internal
financial goals, adding over 10,000 providers to our network and
growing consolidated revenue by over 19%. We remain positioned to
continue to drive meaningful change in healthcare and look forward
to providing an update on our strategic priorities at our upcoming
investor summit in December.”
- For the three months ended September 30, 2016, Non-GAAP
Adjusted Gross Margin was 65.0%, compared to 62.9% in the same
period last year.
- For the three months ended September 30, 2016, GAAP
Operating Income was $15.2 million, or 5.5% of total revenue,
compared to GAAP Operating Income of $3.2 million, or 1.4% of total
revenue, in the same period last year.
- For the three months ended September 30, 2016, Non-GAAP
Adjusted Operating Income was $41.5 million, or 15.0% of total
revenue, compared to $25.4 million, or 10.8% of total revenue, in
the same period last year.
- For the three months ended September 30, 2016, GAAP Net
Income was $13.9 million, or $0.35 per diluted share, compared to
GAAP Net Income of $5.8 million, or $0.15 per diluted share, in the
same period last year.
- For the three months ended September 30, 2016, Non-GAAP
Adjusted Net Income was $24.1 million, or $0.60 per diluted share,
compared to $14.3 million, or $0.36 per diluted share, in the same
period last year.
Fiscal Year 2016 Outlook
We communicated our fiscal year 2016 guidance on December 10,
2015 at our 8th Annual Investor Summit. Our fiscal year 2016
guidance is summarized in the following table:
For the Fiscal Year Ending December 31,
2016 |
Forward-Looking Guidance1 |
GAAP Total Revenue |
$1,085 - $1,115 million |
Non-GAAP Adjusted Gross Margin |
63.5% - 64.5% |
Non-GAAP Adjusted Operating Income |
$120 - $135 million |
Non-GAAP Adjusted Net Income per Diluted Share |
$1.65 - $1.85 |
Non-GAAP Tax Rate |
|
40 |
% |
We are not making any changes to the fiscal year 2016 guidance
we communicated on December 10, 2015 at our 8th Annual Investor
Summit. However, based on our year-to-date performance that was
relatively in line with our internal financial goals and our
current expectations for Q4 2016, we are providing additional
insight into our fiscal year 2016 guidance as follows:
- We expect GAAP Total Revenue to be near the mid-point of the
$1,085 million to $1,115 million guidance range.
- We expect Non-GAAP Adjusted Gross Margin to be near the
mid-point of the 63.5% to 64.5% guidance range.
- We expect Non-GAAP Adjusted Operating Income to be near the
mid-point of the $120 million to $135 million guidance range.
- Finally, we expect Non-GAAP Adjusted Net Income per Diluted
Share to be near the mid-point of the $1.65 to $1.85 guidance
range.
1 We release annual guidance once per year at our annual
investor summit. Recently, the U.S. Securities and Exchange
Commission staff issued updates to its Compliance and Disclosure
Interpretations regarding the use of non-GAAP financial measures.
However, we believe that revising this table mid-year during 2016
to present the GAAP equivalent may confuse the investment
community. As a result, we plan to present both the non-GAAP
financial measure and the applicable GAAP financial measure in this
table beginning with the release of our fiscal year 2017
guidance.
Use of Non-GAAP Financial Measures
In our earnings releases, prepared remarks, conference calls,
slide presentations, and webcasts, we may use or discuss non-GAAP
financial measures, as defined by Regulation G. The GAAP financial
measure most directly comparable to each non-GAAP financial measure
used or discussed, and a reconciliation of the differences between
each non-GAAP financial measure and the comparable GAAP financial
measure, are included in this press release after the condensed
consolidated financial statements. Our earnings press releases
containing such non-GAAP reconciliations can be found in the
Investors section of our website at www.athenahealth.com.
Conference Call Information
To participate in our live conference call and webcast, please
dial 877-853-5645 (or 408-940-3868 for international calls) using
conference code no. 75527226, or visit the Investors section of our
website at www.athenahealth.com. A replay will be available for one
week following the conference call at 855-859-2056 (and
404-537-3406 for international calls) using conference code no.
75527226. A webcast replay will also be archived on our
website.
About athenahealth, Inc.
athenahealth is a leading provider of network-enabled services
for electronic health records (EHR), revenue cycle management and
medical billing, patient engagement, care coordination, and
population health management, as well as Epocrates and other
point-of-care mobile apps. We connect care and drive meaningful,
measurable results for more than 85,000 healthcare providers
nationwide. For a view of network effect in action by exploring
data as it flows across athenahealth’s nationwide network, please
visit
https://insight.athenahealth.com/interactive-a-look-at-interoperability.
For more information, please visit www.athenahealth.com.
Forward-Looking Statements
This press release contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended, including statements regarding management’s expectations
for future financial and operational performance and operating
expenditures, expected growth, and business outlook, including
fiscal 2016 guidance; statements regarding our ability to improve
healthcare delivery in the U.S., to leverage our network data for
good, to unbreak healthcare, to deliver client success, and to
drive meaningful change in healthcare; and statements found under
our “Reconciliation of Non-GAAP Financial Measures to Comparable
GAAP Measures” and “Reconciliation of Non-GAAP Financial Measures
to Comparable GAAP Measures for Fiscal Year 2016 Guidance” sections
of this release. Forward-looking statements may be identified with
words such as “will,” “may,” “expect,” “plan,” “anticipate,”
“upcoming,” “believe,” “estimate” or similar terminology, and the
negative of these terms. Forward-looking statements are not
promises or guarantees of future performance, and are subject to a
variety of risks and uncertainties, many of which are beyond our
control, which could cause actual results to differ materially from
those contemplated in these forward-looking statements. These risks
and uncertainties include: our highly competitive industry and our
ability to compete effectively and remain innovative; the
development of the market for cloud-based healthcare information
technology services; changes in the healthcare industry and their
impact on the demand for our services; our ability to maintain
consistently high growth rates due to lengthening customer sales
cycles; the impact of changes in our business model and structure;
our ability to effectively manage our growth; our ability to
protect our intellectual property; current and future litigation,
including for intellectual property infringement; our dependence on
third-party providers; risks and costs associated with our
worldwide operations; our ability to attract and retain highly
skilled employees; our ability to successfully implement our
management transition plans; our fluctuating operating results; our
ability to retain our clients and maintain client revenue; our tax
liability; our variable sales and implementation cycles; the timing
at which we recognize certain revenue and our ability to evaluate
our prospects; defects and errors in our software or services, or
interruptions or damages to our systems or those of third parties
on which we rely; a data security breach; limitations on our use of
data; the effect of payer and provider conduct; the failure of our
services to provide accurate and timely information; increasing
government regulation and the costs and challenges of compliance;
the potential for illegal behavior by employees or subcontractors;
and the price volatility of our common stock. Forward-looking
statements speak only as of the date hereof and, except as required
by law, we undertake no obligation to update or revise these
forward-looking statements. For additional information regarding
these and other risks faced by us, refer to our public filings with
the Securities and Exchange Commission (“SEC”), available on the
Investors section of our website at www.athenahealth.com and on the
SEC’s website at www.sec.gov.
|
athenahealth, Inc. |
CONDENSED CONSOLIDATED BALANCE
SHEETS |
(Unaudited, in thousands, except per share
amounts) |
|
|
|
|
|
|
|
September 30, 2016 |
|
December 31, 2015 |
Assets |
|
|
|
|
Current assets: |
|
|
|
|
Cash and
cash equivalents |
|
$ |
129,994 |
|
|
$ |
141,927 |
|
Accounts
receivable, net |
|
151,313 |
|
|
148,157 |
|
Prepaid
expenses and other current assets |
|
39,210 |
|
|
30,176 |
|
Total
current assets |
|
320,517 |
|
|
320,260 |
|
Property and equipment,
net |
|
332,737 |
|
|
321,524 |
|
Capitalized software
costs, net |
|
127,135 |
|
|
107,517 |
|
Purchased intangible
assets, net |
|
117,149 |
|
|
126,239 |
|
Goodwill |
|
240,662 |
|
|
229,157 |
|
Investments and other
assets |
|
16,488 |
|
|
13,965 |
|
Total assets |
|
$ |
1,154,688 |
|
|
$ |
1,118,662 |
|
Liabilities &
Stockholders’ Equity |
|
|
|
|
Current
liabilities: |
|
|
|
|
Accounts
payable |
|
$ |
13,903 |
|
|
$ |
10,768 |
|
Accrued
compensation |
|
82,929 |
|
|
88,122 |
|
Accrued
expenses |
|
46,183 |
|
|
51,452 |
|
Long-term
debt |
|
14,531 |
|
|
10,762 |
|
Deferred
revenue |
|
30,373 |
|
|
32,593 |
|
Total
current liabilities |
|
187,919 |
|
|
193,697 |
|
Deferred rent, net of
current portion |
|
31,209 |
|
|
31,118 |
|
Long-term debt, net of
current portion |
|
276,452 |
|
|
287,353 |
|
Deferred revenue, net
of current portion |
|
50,375 |
|
|
55,946 |
|
Long-term deferred tax
liability, net |
|
4,000 |
|
|
1,254 |
|
Other long-term
liabilities |
|
4,845 |
|
|
5,988 |
|
Total liabilities |
|
554,800 |
|
|
575,356 |
|
Stockholders’
equity: |
|
|
|
|
Preferred
stock, $0.01 par value: 5,000 shares authorized; no shares issued
and outstanding at September 30, 2016 and December 31, 2015 |
|
— |
|
|
— |
|
Common
stock, $0.01 par value: 125,000 shares authorized; 40,695 shares
issued and 39,417 shares outstanding at September 30, 2016; 40,209
shares issued and 38,931 shares outstanding at December 31,
2015 |
|
407 |
|
|
403 |
|
Additional paid-in capital |
|
567,712 |
|
|
522,443 |
|
Treasury
stock, at cost, 1,278 shares |
|
(1,200 |
) |
|
(1,200 |
) |
Accumulated other comprehensive loss |
|
(732 |
) |
|
(848 |
) |
Retained
earnings |
|
33,701 |
|
|
22,508 |
|
Total stockholders’
equity |
|
599,888 |
|
|
543,306 |
|
Total liabilities and
stockholders’ equity |
|
$ |
1,154,688 |
|
|
$ |
1,118,662 |
|
|
|
|
|
|
|
|
|
|
athenahealth, Inc. |
CONDENSED CONSOLIDATED STATEMENTS OF
INCOME |
(Unaudited, in thousands, except per share
amounts) |
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
|
2016 |
|
2015 |
|
2016 |
|
2015 |
Revenue: |
|
|
|
|
|
|
|
|
Business
services |
|
$ |
267,118 |
|
|
$ |
224,990 |
|
|
$ |
768,734 |
|
|
$ |
638,156 |
|
Implementation and other |
|
9,553 |
|
|
11,078 |
|
|
26,025 |
|
|
29,040 |
|
Total
revenue |
|
276,671 |
|
|
236,068 |
|
|
794,759 |
|
|
667,196 |
|
Expense: |
|
|
|
|
|
|
|
|
Direct
operating |
|
103,238 |
|
|
94,850 |
|
|
312,518 |
|
|
269,306 |
|
Selling
and marketing |
|
59,067 |
|
|
55,927 |
|
|
182,563 |
|
|
163,705 |
|
Research
and development |
|
24,860 |
|
|
22,560 |
|
|
73,619 |
|
|
70,675 |
|
General
and administrative |
|
41,889 |
|
|
34,778 |
|
|
124,076 |
|
|
107,093 |
|
Depreciation and amortization |
|
32,466 |
|
|
24,763 |
|
|
87,774 |
|
|
67,216 |
|
Total
expense |
|
261,520 |
|
|
232,878 |
|
|
780,550 |
|
|
677,995 |
|
Operating income
(loss) |
|
15,151 |
|
|
3,190 |
|
|
14,209 |
|
|
(10,799 |
) |
Other (expense)
income: |
|
|
|
|
|
|
|
|
Interest
expense |
|
(1,335 |
) |
|
(1,620 |
) |
|
(4,803 |
) |
|
(4,192 |
) |
Other
income |
|
10 |
|
|
7,590 |
|
|
57 |
|
|
28,715 |
|
Total
other (expense) income |
|
(1,325 |
) |
|
5,970 |
|
|
(4,746 |
) |
|
24,523 |
|
Income before income
tax benefit (provision) |
|
13,826 |
|
|
9,160 |
|
|
9,463 |
|
|
13,724 |
|
Income tax benefit
(provision) |
|
115 |
|
|
(3,365 |
) |
|
1,730 |
|
|
(7,412 |
) |
Net income |
|
$ |
13,941 |
|
|
$ |
5,795 |
|
|
$ |
11,193 |
|
|
$ |
6,312 |
|
Net income per share –
Basic |
|
$ |
0.35 |
|
|
$ |
0.15 |
|
|
$ |
0.29 |
|
|
$ |
0.16 |
|
Net income per share –
Diluted |
|
$ |
0.35 |
|
|
$ |
0.15 |
|
|
$ |
0.28 |
|
|
$ |
0.16 |
|
Weighted average shares
used in computing net income per share: |
|
|
|
|
|
|
|
|
Basic |
|
39,356 |
|
|
38,714 |
|
|
39,223 |
|
|
38,523 |
|
Diluted |
|
40,000 |
|
|
39,536 |
|
|
40,024 |
|
|
39,476 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
athenahealth, Inc. |
CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS |
(Unaudited, in thousands) |
|
|
|
|
|
Nine Months Ended September 30, |
|
|
2016 |
|
2015 |
CASH FLOWS FROM
OPERATING ACTIVITIES: |
|
|
|
|
Net
income |
|
$ |
11,193 |
|
|
$ |
6,312 |
|
Adjustments to reconcile net income to net cash provided by
operating activities: |
|
|
|
|
Depreciation and amortization |
|
103,989 |
|
|
85,869 |
|
Excess
tax benefit from stock-based awards |
|
(1,359 |
) |
|
(8,367 |
) |
Deferred
income tax |
|
(3,107 |
) |
|
(1,652 |
) |
Stock-based compensation expense |
|
50,676 |
|
|
47,943 |
|
Gain on
sale of marketable securities |
|
— |
|
|
(28,656 |
) |
Other
reconciling adjustments |
|
(296 |
) |
|
6 |
|
Changes
in operating assets and liabilities: |
|
|
|
|
Accounts
receivable, net |
|
(3,069 |
) |
|
(21,941 |
) |
Prepaid
expenses and other current assets |
|
(7,659 |
) |
|
(1,296 |
) |
Other
long-term assets |
|
(3,237 |
) |
|
(2,090 |
) |
Accounts
payable |
|
2,179 |
|
|
5,611 |
|
Accrued
expenses and other long-term liabilities |
|
1,369 |
|
|
4,232 |
|
Accrued
compensation |
|
(7,534 |
) |
|
4,085 |
|
Deferred
revenue |
|
(7,791 |
) |
|
6,015 |
|
Deferred
rent |
|
619 |
|
|
6,848 |
|
Net cash
provided by operating activities |
|
135,973 |
|
|
102,919 |
|
CASH FLOWS FROM
INVESTING ACTIVITIES: |
|
|
|
|
Capitalized software costs |
|
(68,135 |
) |
|
(77,714 |
) |
Purchases
of property and equipment |
|
(52,867 |
) |
|
(65,090 |
) |
Payments
on acquisitions, net of cash acquired |
|
(16,852 |
) |
|
(39,890 |
) |
Proceeds
from sales of marketable securities |
|
— |
|
|
29,756 |
|
Other
investing activities |
|
830 |
|
|
(2,610 |
) |
Net cash
used in investing activities |
|
(137,024 |
) |
|
(155,548 |
) |
CASH FLOWS FROM
FINANCING ACTIVITIES: |
|
|
|
|
Proceeds
from issuance of common stock under stock plans and warrants |
|
14,089 |
|
|
18,046 |
|
Taxes
paid related to net share settlement of stock awards |
|
(18,707 |
) |
|
(20,664 |
) |
Excess
tax benefit from stock-based awards |
|
1,359 |
|
|
8,367 |
|
Proceeds
from line of credit |
|
— |
|
|
60,000 |
|
Payments
on line of credit |
|
— |
|
|
(95,000 |
) |
Proceeds
from long-term debt |
|
— |
|
|
300,000 |
|
Payments
on long-term debt |
|
(7,500 |
) |
|
(173,750 |
) |
Debt
issuance costs |
|
— |
|
|
(987 |
) |
Other
financing activities |
|
(70 |
) |
|
— |
|
Net cash
(used in) provided by financing activities |
|
(10,829 |
) |
|
96,012 |
|
Effect of exchange rate
changes on cash and cash equivalents |
|
(53 |
) |
|
(458 |
) |
Net decrease in cash
and cash equivalents |
|
(11,933 |
) |
|
42,925 |
|
Cash and
cash equivalents at beginning of period |
|
141,927 |
|
|
73,787 |
|
Cash and
cash equivalents at end of period |
|
$ |
129,994 |
|
|
$ |
116,712 |
|
|
|
|
|
|
|
|
|
|
athenahealth,
Inc.STOCK-BASED
COMPENSATION(Unaudited, in thousands)
Set forth below is a breakout of stock-based compensation
impacting the Condensed Consolidated Statements of Income for the
three and nine months ended September 30, 2016, and 2015:
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
2016 |
|
2015 |
|
2016 |
|
2015 |
Stock-based
compensation charged to Condensed Consolidated Statements of
Income: |
|
|
|
|
|
|
|
Direct operating |
$ |
4,363 |
|
|
$ |
3,584 |
|
|
$ |
13,652 |
|
|
$ |
10,883 |
|
Selling and
marketing |
5,133 |
|
|
4,162 |
|
|
14,325 |
|
|
13,745 |
|
Research and
development |
3,121 |
|
|
2,164 |
|
|
9,333 |
|
|
6,707 |
|
General and
administrative |
4,514 |
|
|
5,070 |
|
|
13,366 |
|
|
16,608 |
|
Total
stock-based compensation expense |
17,131 |
|
|
14,980 |
|
|
50,676 |
|
|
47,943 |
|
Amortization of
capitalized stock-based compensation related to software
development (1) |
1,283 |
|
|
1,244 |
|
|
3,813 |
|
|
3,013 |
|
Total |
$ |
18,414 |
|
|
$ |
16,224 |
|
|
$ |
54,489 |
|
|
$ |
50,956 |
|
|
|
|
|
|
|
|
|
(1) In addition, for the three months ended September 30,
2016, and 2015, $0.9 million and $1.8 million, respectively, of
stock-based compensation was capitalized in the line item
Capitalized software costs, net in the Condensed Consolidated
Balance Sheets for which $1.3 million and $1.2 million,
respectively, of amortization was included in the line item
Depreciation and amortization in the Condensed Consolidated
Statements of Income. For the nine months ended September 30,
2016, and 2015, $2.1 million and $5.4 million, respectively, of
stock-based compensation was capitalized in the line item
Capitalized software costs, net in the Condensed Consolidated
Balance Sheets for which $3.8 million and $3.0 million,
respectively, of amortization was included in the line item
Depreciation and amortization in the Condensed Consolidated
Statements of Income.
athenahealth,
Inc.AMORTIZATION OF PURCHASED INTANGIBLE
ASSETS(Unaudited, in thousands)
Set forth below is a breakout of amortization of purchased
intangible assets impacting the Condensed Consolidated Statements
of Income for the three and nine months ended September 30,
2016, and 2015:
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
Amortization of
purchased intangible assets allocated to: |
2016 |
|
2015 |
|
2016 |
|
2015 |
Direct operating |
$ |
1,991 |
|
|
$ |
3,662 |
|
|
$ |
7,063 |
|
|
$ |
11,177 |
|
Selling and
marketing |
2,959 |
|
|
2,373 |
|
|
8,784 |
|
|
7,119 |
|
Total amortization of
purchased intangible assets |
$ |
4,950 |
|
|
$ |
6,035 |
|
|
$ |
15,847 |
|
|
$ |
18,296 |
|
|
|
|
|
|
|
|
|
athenahealth,
Inc.RECONCILIATION OF NON-GAAP FINANCIAL
MEASURESTO COMPARABLE GAAP
MEASURES(Unaudited, in thousands, except per share
amounts)
The following is a reconciliation of the non-GAAP financial
measures used by us to describe our financial results determined in
accordance with accounting principles generally accepted in the
United States of America (“GAAP”). An explanation of these measures
is also included below under the heading “Explanation of Non-GAAP
Financial Measures.”
While management believes that these non-GAAP financial measures
provide useful supplemental information to investors regarding the
underlying performance of our business operations, investors are
reminded to consider these non-GAAP measures in addition to, and
not as a substitute for, financial performance measures prepared in
accordance with GAAP. In addition, it should be noted that these
non-GAAP financial measures may be different from non-GAAP measures
used by other companies, and management may utilize other measures
to illustrate performance in the future. Non-GAAP measures have
limitations in that they do not reflect all of the amounts
associated with our results of operations as determined in
accordance with GAAP.
Please note that these figures may not sum exactly due to
rounding.
Non-GAAP Adjusted Gross MarginSet forth below
is a presentation of our “Non-GAAP Adjusted Gross Profit” and
“Non-GAAP Adjusted Gross Margin,” which represents Non-GAAP
Adjusted Gross Profit as a percentage of total revenue.
(unaudited, in
thousands) |
Three Months Ended |
|
Nine Months Ended |
|
September 30, |
|
September 30, |
|
2016 |
|
2015 |
|
2016 |
|
2015 |
|
|
|
|
|
|
|
|
Total revenue |
$ |
276,671 |
|
|
$ |
236,068 |
|
|
$ |
794,759 |
|
|
$ |
667,196 |
|
Direct operating
expense |
103,238 |
|
|
94,850 |
|
|
312,518 |
|
|
269,306 |
|
|
|
|
|
|
|
|
|
Total
revenue less direct operating expense |
173,433 |
|
|
141,218 |
|
|
482,241 |
|
|
397,890 |
|
Add:
Stock-based compensation allocated to direct operating expense |
4,363 |
|
|
3,584 |
|
|
13,652 |
|
|
10,883 |
|
Add:
Amortization of purchased intangible assets allocated to direct
operating expense |
1,991 |
|
|
3,662 |
|
|
7,063 |
|
|
11,177 |
|
Add: Exit
costs, including restructuring costs allocated to direct operating
expense |
107 |
|
|
— |
|
|
371 |
|
|
— |
|
|
|
|
|
|
|
|
|
Non-GAAP Adjusted Gross
Profit |
$ |
179,894 |
|
|
$ |
148,464 |
|
|
$ |
503,327 |
|
|
$ |
419,950 |
|
|
|
|
|
|
|
|
|
Non-GAAP Adjusted Gross
Margin |
65.0 |
% |
|
62.9 |
% |
|
63.3 |
% |
|
62.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP Adjusted Operating IncomeSet forth
below is a reconciliation of our “Non-GAAP Adjusted Operating
Income” and “Non-GAAP Adjusted Operating Income Margin,” which
represents Non-GAAP Adjusted Operating Income as a percentage of
total revenue.
(unaudited, in
thousands) |
Three Months Ended |
|
Nine Months Ended |
|
September 30, |
|
September 30, |
|
2016 |
|
2015 |
|
2016 |
|
2015 |
|
|
|
|
|
|
|
|
Total revenue |
$ |
276,671 |
|
|
$ |
236,068 |
|
|
$ |
794,759 |
|
|
$ |
667,196 |
|
|
|
|
|
|
|
|
|
GAAP net income |
13,941 |
|
|
5,795 |
|
|
11,193 |
|
|
6,312 |
|
Add:
(Benefit from) provision for income taxes |
(115 |
) |
|
3,365 |
|
|
(1,730 |
) |
|
7,412 |
|
Add:
Total other expense (income) |
1,325 |
|
|
(5,970 |
) |
|
4,746 |
|
|
(24,523 |
) |
GAAP operating income
(loss) |
$ |
15,151 |
|
|
$ |
3,190 |
|
|
$ |
14,209 |
|
|
$ |
(10,799 |
) |
|
|
|
|
|
|
|
|
GAAP operating margin
(loss) |
5.5 |
% |
|
1.4 |
% |
|
1.8 |
% |
|
(1.6 |
)% |
|
|
|
|
|
|
|
|
Add:
Stock-based compensation expense |
17,131 |
|
|
14,980 |
|
|
50,676 |
|
|
47,943 |
|
Add:
Amortization of capitalized stock-based compensation related to
software development |
1,283 |
|
|
1,244 |
|
|
3,813 |
|
|
3,013 |
|
Add:
Amortization of purchased intangible assets |
4,950 |
|
|
6,035 |
|
|
15,847 |
|
|
18,296 |
|
Add:
Integration and transaction costs |
775 |
|
|
— |
|
|
1,125 |
|
|
964 |
|
Add: Exit
costs, including restructuring costs |
2,425 |
|
|
— |
|
|
4,358 |
|
|
4,446 |
|
Less:
Gain on investments, net |
(243 |
) |
|
— |
|
|
(243 |
) |
|
— |
|
|
|
|
|
|
|
|
|
Non-GAAP Adjusted
Operating Income |
$ |
41,472 |
|
|
$ |
25,449 |
|
|
$ |
89,785 |
|
|
$ |
63,863 |
|
|
|
|
|
|
|
|
|
Non-GAAP Adjusted
Operating Income Margin |
15.0 |
% |
|
10.8 |
% |
|
11.3 |
% |
|
9.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP Adjusted Net IncomeSet forth below is
a reconciliation of our “Non-GAAP Adjusted Net Income” and
“Non-GAAP Adjusted Net Income per Diluted Share.”
(unaudited, in
thousands) |
Three Months Ended |
|
Nine Months Ended |
|
September 30, |
|
September 30, |
|
2016 |
|
2015 |
|
2,016 |
|
2,015 |
|
|
|
|
|
|
|
|
GAAP net income |
$ |
13,941 |
|
|
$ |
5,795 |
|
|
$ |
11,193 |
|
|
$ |
6,312 |
|
Add:
Stock-based compensation expense |
17,131 |
|
|
14,980 |
|
|
50,676 |
|
|
47,943 |
|
Add:
Amortization of capitalized stock-based compensation related to
software development |
1,283 |
|
|
1,244 |
|
|
3,813 |
|
|
3,013 |
|
Add:
Amortization of purchased intangible assets |
4,950 |
|
|
6,035 |
|
|
15,847 |
|
|
18,296 |
|
Add:
Integration and transaction costs |
775 |
|
|
— |
|
|
1,125 |
|
|
964 |
|
Add: Exit
costs, including restructuring costs |
2,425 |
|
|
— |
|
|
4,358 |
|
|
4,446 |
|
Less:
Gain on investments, net |
(243 |
) |
|
(7,585 |
) |
|
(243 |
) |
|
(28,656 |
) |
|
|
|
|
|
|
|
|
Sub-total
of tax deductible items |
26,321 |
|
|
14,674 |
|
|
75,576 |
|
|
46,006 |
|
|
|
|
|
|
|
|
|
Less: Tax
impact of tax deductible items (1) |
(10,528 |
) |
|
(5,870 |
) |
|
(30,230 |
) |
|
(18,402 |
) |
Less: Tax
impact resulting from applying non-GAAP tax rate (2) |
(5,646 |
) |
|
(299 |
) |
|
(5,516 |
) |
|
1,922 |
|
|
|
|
|
|
|
|
|
Non-GAAP Adjusted Net
Income |
$ |
24,088 |
|
|
$ |
14,300 |
|
|
$ |
51,023 |
|
|
$ |
35,838 |
|
|
|
|
|
|
|
|
|
Weighted average shares
- diluted |
40,000 |
|
|
39,536 |
|
|
40,024 |
|
|
39,476 |
|
|
|
|
|
|
|
|
|
Non-GAAP Adjusted Net
Income per Diluted Share |
$ |
0.60 |
|
|
$ |
0.36 |
|
|
$ |
1.27 |
|
|
$ |
0.91 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Tax impact calculated using a statutory tax rate of 40%.
(2) Represents adjusting the GAAP net income to a non-GAAP tax
rate of 40%. We used a non-GAAP tax rate of 40% to normalize the
tax impact to our Non-GAAP Adjusted Net Income per Diluted Share
based on the fact that a relatively small change in pre-tax GAAP
income (loss) in any one period could result in a volatile GAAP
effective tax rate.
(unaudited, in
thousands) |
Three Months Ended |
|
Nine Months Ended |
|
September 30, |
|
September 30, |
|
2016 |
|
2015 |
|
2016 |
|
2015 |
|
|
|
|
|
|
|
|
GAAP net income per
share - diluted |
$ |
0.35 |
|
|
$ |
0.15 |
|
|
$ |
0.28 |
|
|
$ |
0.16 |
|
Add:
Stock-based compensation expense |
0.43 |
|
|
0.38 |
|
|
1.27 |
|
|
1.21 |
|
Add:
Amortization of capitalized stock-based compensation related to
software development |
0.03 |
|
|
0.03 |
|
|
0.10 |
|
|
0.08 |
|
Add:
Amortization of purchased intangible assets |
0.12 |
|
|
0.15 |
|
|
0.40 |
|
|
0.46 |
|
Add:
Integration and transaction costs |
0.02 |
|
|
— |
|
|
0.03 |
|
|
0.02 |
|
Add: Exit
costs, including restructuring costs |
0.06 |
|
|
— |
|
|
0.11 |
|
|
0.11 |
|
Less:
Gain on investments, net |
(0.01 |
) |
|
(0.19 |
) |
|
(0.01 |
) |
|
(0.73 |
) |
|
|
|
|
|
|
|
|
Sub-total
of tax deductible items |
0.66 |
|
|
0.37 |
|
|
1.89 |
|
|
1.17 |
|
|
|
|
|
|
|
|
|
Less: Tax
impact of tax deductible items (1) |
(0.26 |
) |
|
(0.15 |
) |
|
(0.76 |
) |
|
(0.47 |
) |
Add: Tax
impact resulting from applying non-GAAP tax rate (2) |
(0.14 |
) |
|
(0.01 |
) |
|
(0.14 |
) |
|
0.05 |
|
|
|
|
|
|
|
|
|
Non-GAAP Adjusted Net
Income per Diluted Share |
$ |
0.60 |
|
|
$ |
0.36 |
|
|
$ |
1.27 |
|
|
$ |
0.91 |
|
|
|
|
|
|
|
|
|
Weighted average shares
- diluted |
40,000 |
|
|
39,536 |
|
|
40,024 |
|
|
39,476 |
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Tax impact calculated using a statutory tax rate of 40%.
(2) Represents adjusting the GAAP net income to a non-GAAP tax
rate of 40%. We used a non-GAAP tax rate of 40% to normalize the
tax impact to our Non-GAAP Adjusted Net Income per Diluted Share
based on the fact that a relatively small change in pre-tax GAAP
income (loss) in any one period could result in a volatile GAAP
effective tax rate.
athenahealth,
Inc.RECONCILIATION OF NON-GAAP FINANCIAL
MEASURESTO COMPARABLE GAAP MEASURES FOR FISCAL
YEAR 2016 GUIDANCE(Unaudited, in millions, except
per share amounts)
Please note that the figures presented below may not sum exactly
due to rounding.
Non-GAAP Adjusted Gross Margin GuidanceSet
forth below is a presentation of our “Non-GAAP Adjusted Gross
Profit” and “Non-GAAP Adjusted Gross Margin” guidance for fiscal
year 2016, which represents Non-GAAP Adjusted Gross Profit as a
percentage of total revenue.
|
LOW |
HIGH |
|
Fiscal Year Ending December 31,
2016 |
Total revenue |
$ |
1,085.0 |
|
$ |
1,115.0 |
|
Direct operating
expense |
423.4 |
|
423.2 |
|
Total revenue less
direct operating expense |
$ |
661.6 |
|
$ |
691.7 |
|
Add:
Stock-based compensation expense allocated to direct operating
expense |
19.0 |
|
19.0 |
|
Add:
Amortization of purchased intangible assets allocated to direct
operating expense |
8.4 |
|
8.4 |
|
|
|
|
Non-GAAP Adjusted Gross
Profit |
$ |
689.0 |
|
$ |
719.2 |
|
|
|
|
Non-GAAP Adjusted Gross
Margin |
63.5 |
% |
64.5 |
% |
|
|
|
|
|
Non-GAAP Adjusted Operating Income GuidanceSet
forth below is a reconciliation of our “Non-GAAP Adjusted Operating
Income” and “Non-GAAP Adjusted Operating Income Margin” guidance
for fiscal year 2016, which represents Non-GAAP Adjusted Operating
Income as a percentage of total revenue.
|
LOW |
HIGH |
|
Fiscal Year Ending December 31,
2016 |
Total revenue |
$ |
1,085.0 |
|
$ |
1,115.0 |
|
|
|
|
GAAP net income |
10.8 |
|
19.5 |
|
Add:
Provision for income taxes |
7.6 |
|
12.9 |
|
Add:
Total other expense |
5.3 |
|
6.4 |
|
GAAP operating
income |
$ |
23.7 |
|
$ |
38.8 |
|
|
|
|
GAAP operating income
margin |
2.2 |
% |
3.5 |
% |
|
|
|
Add:
Stock-based compensation expense |
69.4 |
|
69.4 |
|
Add:
Amortization of capitalized stock-based compensation related to
software development |
6.8 |
|
6.8 |
|
Add:
Amortization of purchased intangible assets |
20.0 |
|
20.0 |
|
|
|
|
Non-GAAP Adjusted
Operating Income |
$ |
120.0 |
|
$ |
135.0 |
|
|
|
|
Non-GAAP Adjusted
Operating Income Margin |
11.1 |
% |
12.1 |
% |
|
|
|
|
|
Non-GAAP Adjusted Net Income GuidanceSet forth
below is a reconciliation of our “Non-GAAP Adjusted Net Income” and
“Non-GAAP Adjusted Net Income per Diluted Share” guidance for
fiscal year 2016.
|
LOW |
HIGH |
|
Fiscal Year Ending December 31,
2016 |
GAAP net income |
$ |
10.8 |
|
$ |
19.5 |
|
Add:
Stock-based compensation expense |
69.4 |
|
69.4 |
|
Add:
Amortization of capitalized stock-based compensation related to
software development |
6.8 |
|
6.8 |
|
Add:
Amortization of purchased intangible assets |
20.0 |
|
20.0 |
|
|
|
|
Sub-total
of tax deductible items |
$ |
96.2 |
|
$ |
96.2 |
|
|
|
|
(Less):
Tax impact of tax deductible items (1) |
(38.5 |
) |
(38.5 |
) |
Add: Tax
impact resulting from applying a normalized non-GAAP tax rate
(2) |
0.2 |
|
(0.1 |
) |
|
|
|
Non-GAAP Adjusted Net
Income |
$ |
68.8 |
|
$ |
77.2 |
|
|
|
|
Weighted average shares
- diluted |
41.7 |
|
41.7 |
|
|
|
|
Non-GAAP Adjusted Net
Income per Diluted Share |
$ |
1.65 |
|
$ |
1.85 |
|
|
|
|
|
|
|
|
(1) Tax impact calculated using a statutory tax rate of 40%.
(2) Represents adjusting the GAAP net income to a non-GAAP tax
rate of 40%. For 2016, we are using non-GAAP tax rate of 40% to
normalize the tax impact to our Non-GAAP Adjusted Net Income per
Diluted Share based on the fact that a relatively small change in
pre-tax GAAP income (loss) in any one period could result in a
volatile GAAP effective tax rate.
|
LOW |
HIGH |
|
Fiscal Year Ending December 31,
2016 |
GAAP net income per
share - diluted |
$ |
0.26 |
|
$ |
0.47 |
|
Add:
Stock-based compensation expense |
1.66 |
|
1.66 |
|
Add:
Amortization of capitalized stock-based compensation related to
software development |
0.16 |
|
0.16 |
|
Add:
Amortization of purchased intangible assets |
0.48 |
|
0.48 |
|
|
|
|
Sub-total
of tax deductible items |
$ |
2.31 |
|
$ |
2.31 |
|
|
|
|
(Less):
Tax impact of tax deductible items (1) |
(0.92 |
) |
(0.92 |
) |
Add: Tax
impact resulting from applying a normalized non-GAAP tax rate
(2) |
0.01 |
|
— |
|
|
|
|
Non-GAAP Adjusted Net
Income per Diluted Share |
$ |
1.65 |
|
$ |
1.85 |
|
|
|
|
Weighted average shares
- diluted |
41.7 |
|
41.7 |
|
|
|
|
|
|
(1) Tax impact calculated using a statutory tax rate of 40%.
(2) Represents adjusting the GAAP net income to a non-GAAP tax
rate of 40%. For 2016, we are using a non-GAAP tax rate of 40% to
normalize the tax impact to our Non-GAAP Adjusted Net Income per
Diluted Share based on the fact that a relatively small change in
pre-tax GAAP income (loss) in any one period could result in a
volatile GAAP effective tax rate.
Explanation of Non-GAAP Financial Measures
We report our financial results in accordance with accounting
principles generally accepted in the United States of America, or
GAAP. However, management believes that, in order to properly
understand our short-term and long-term financial and operational
trends, investors may wish to consider the impact of certain
non-cash or non-recurring items, when used as a supplement to
financial performance measures in accordance with GAAP. These items
result from facts and circumstances that vary in frequency and
impact on continuing operations. Management also uses results of
operations before such items to evaluate the operating performance
of athenahealth and compare it against past periods, make operating
decisions, and serve as a basis for strategic planning. These
non-GAAP financial measures provide management with additional
means to understand and evaluate the operating results and trends
in our ongoing business by eliminating certain non-cash expenses
and other items that management believes might otherwise make
comparisons of our ongoing business with prior periods more
difficult, obscure trends in ongoing operations, or reduce
management’s ability to make useful forecasts. Management believes
that these non-GAAP financial measures provide additional means of
evaluating period-over-period operating performance. In addition,
management understands that some investors and financial analysts
find this information helpful in analyzing our financial and
operational performance and comparing this performance to our peers
and competitors.
Management defines “Non-GAAP Adjusted Gross Profit” as total
revenue, less direct operating expense, plus (1) stock-based
compensation expense allocated to direct operating expense, (2)
amortization of purchased intangible assets allocated to direct
operating expense, and (3) exit costs, including restructuring
costs allocated to direct operating expense, and “Non-GAAP Adjusted
Gross Margin” as Non-GAAP Adjusted Gross Profit as a percentage of
total revenue. Management considers these non-GAAP financial
measures to be important indicators of our operational strength and
performance of our business and a good measure of our historical
operating trends. Moreover, management believes that these measures
enable investors and financial analysts to closely monitor and
understand changes in our ability to generate income from ongoing
business operations.
Management defines “Non-GAAP Adjusted Operating Income” as the
sum of GAAP net income before (benefit from) provision for income
taxes; total other expense (income); stock-based compensation
expense; amortization of capitalized stock-based compensation
related to software development; amortization of purchased
intangible assets; integration and transaction costs; exit costs,
including restructuring costs; and gain or loss on investments; and
“Non-GAAP Adjusted Operating Income Margin” as Non-GAAP Adjusted
Operating Income as a percentage of total revenue. Management
defines “Non-GAAP Adjusted Net Income” as the sum of GAAP net
income before stock-based compensation expense; amortization of
capitalized stock-based compensation related to software
development; amortization of purchased intangible assets;
integration and transaction costs; exit costs, including
restructuring costs; and gain or loss on investments and any tax
impact related to these preceding items; and an adjustment to the
tax provision for the non-GAAP tax rate and “Non-GAAP Adjusted Net
Income per Diluted Share” as Non-GAAP Adjusted Net Income divided
by weighted average diluted shares outstanding. Management
considers all of these non-GAAP financial measures to be important
indicators of our operational strength and performance of our
business and a good measure of our historical operating trends, in
particular the extent to which ongoing operations impact our
overall financial performance.
Management excludes or adjusts each of the items identified
below from the applicable non-GAAP financial measure referenced
above for the reasons set forth with respect to that excluded
item:
- Stock-based compensation expense and amortization of
capitalized stock-based compensation related to software
development — excluded because these are non-cash expenditures that
management does not consider part of ongoing operating results when
assessing the performance of our business, and also because the
total amount of the expenditure is partially outside of our control
because it is based on factors such as stock price, volatility, and
interest rates, which may be unrelated to our performance during
the period in which the expenses are incurred.
- Amortization of purchased intangible assets — purchased
intangible assets are amortized over their estimated useful lives
and generally cannot be changed or influenced by management after
the acquisition. Accordingly, this item is not considered by
management in making operating decisions. Management does not
believe such charges accurately reflect the performance of our
ongoing operations for the period in which such charges are
incurred.
- Integration and transaction costs — Integration costs are the
severance payments and retention bonuses for certain employees
related to specific transactions. Transaction costs are costs
related to strategic transactions. Accordingly, management believes
that such expenses do not have a direct correlation to future
business operations, and therefore, these costs are not considered
by management in making operating decisions. Management does not
believe such charges accurately reflect the performance of our
ongoing operations for the period in which such charges are
incurred.
- Exit costs, including restructuring costs — represents costs
related to workforce reductions and to terminate certain lease or
other contract agreements for strategic realignment purposes.
Management does not believe such costs accurately reflect the
performance of our ongoing operations for the period in which such
costs are incurred.
- Gain or loss on investments — represents gain on sale of
marketable securities, gain on sale of More Disruption Please
(“MDP”) Accelerator investments, and loss on impairment of MDP
Accelerator investments. Management does not believe such gains or
losses accurately reflect the performance of our ongoing operations
for the period in which such gains or losses are reported.
- Non-GAAP tax rate — We use a non-GAAP tax rate of 40% to
normalize the tax impact to our Non-GAAP Adjusted Net Income per
Diluted Share based on the fact that a relatively small change in
pre-tax GAAP income (loss) in any one period could result in a
volatile GAAP effective tax rate.
Contact Info:
Dana Quattrochi
athenahealth, Inc. (Investors)
investorrelations@athenahealth.com
(617) 402-1329
Holly Spring
athenahealth, Inc. (Media)
media@athenahealth.com
(617) 402-1631
Athenahealth, Inc. (NASDAQ:ATHN)
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