athenahealth, Inc. Updates Fiscal Year 2012 Guidance and Initiates Guidance for Fiscal Year 2013

Wed Dec 5, 2012 4:01pm EST

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athenahealth, Inc. Updates Fiscal Year 2012 Guidance and Initiates Guidance for Fiscal Year 2013

athenahealth, Inc. (NASDAQ: ATHN) (the “Company”), a leading provider of cloud-based electronic health record (EHR), practice management, and care coordination services to medical groups and health systems, today updated financial guidance for fiscal year 2012 and announced financial guidance for fiscal year 2013. The Company will host its Fifth Annual Investor Summit tomorrow, Thursday, December 6, 2012, starting at 8:30 a.m. Eastern Time to provide an update on the Company’s business and share management’s outlook for future financial and operational performance.

The Company’s fiscal year 2012 and 2013 guidance is presented below:

 
For the Fiscal Year Ending:
        December 31, 2012   December 31, 2013
GAAP Total Revenue       $420 - $425 million   $525 - $550 million
Non-GAAP Adjusted Gross Margin       62% - 63%   62% - 63%
Non-GAAP Adjusted Operating Income       $61 - $65 million   $75 - $82 million
Non-GAAP Adjusted Net Income per Diluted Share       $0.95 - $1.00   $1.15 - $1.25
GAAP Effective Tax Rate       45% - 46%   43% - 44%
       

“We believe that athenahealth’s business model of innovative, integrated cloud-based services is the platform of the future,” said Tim Adams, the Company’s Chief Financial Officer. “athenahealth is uniquely positioned to help medical care givers thrive in a rapidly changing and complex environment. We are excited about our growth opportunities and are pleased to present our ambitious expectations for fiscal year 2013. We continue to build plans that give us the opportunity to achieve our 30% annual top-line growth objective. Accordingly, we will continue to invest wisely towards achieving our growth objectives and look to deliver higher profitability and shareholder value over the long term.”

Use of Non-GAAP Financial Measures

In the Company’s earnings releases, conference calls, slide presentations, and webcasts, the Company may use or discuss non-GAAP financial measures, as defined by SEC 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. The Company’s earnings press releases containing such non-GAAP reconciliations can be found on the Investors section of the Company’s web site at http://www.athenahealth.com.

Webcast Information

A live webcast of athenahealth’s Fifth Annual Investor Summit can be accessed via the Investors section of athenahealth’s website at http://www.athenahealth.com. A replay of this webcast will be available on the website within 24 hours following the event and will remain available through March 6, 2013.

About athenahealth

athenahealth, Inc. is a leading provider of cloud-based Best in KLAS electronic health record (EHR), practice management, and care coordination services to medical groups and health systems. athenahealth's mission is to be the most trusted service to medical care givers, helping them do well by doing the right thing. For more information, please visit http://www.athenahealth.com/ or call (888) 652-8200.

Forward-Looking Statements

This press release contains forward-looking statements, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including statements reflecting management’s expectations for future financial and operational performance and operating expenditures, expected growth, and business outlook; statements regarding the benefits of and potential market for the Company’s service offerings; statements about the Company’s investments in growth; and statements found under the Company’s “Reconciliation of Non-GAAP Financial Measures to Comparable GAAP Measures For Fiscal Year 2012 Guidance” and “Reconciliation of Non-GAAP Financial Measures to Comparable GAAP Measures For Fiscal Year 2013 Guidance” sections of this release. The forward-looking statements in this release do not constitute guarantees of future performance. These statements are neither promises nor guarantees, and are subject to a variety of risks and uncertainties, many of which are beyond the Company’s control, which could cause actual results to differ materially from those contemplated in these forward-looking statements. In particular, the risks and uncertainties include, among other things: the Company’s fluctuating operating results; the Company’s variable sales and implementation cycles, which may result in fluctuations in its quarterly results; risks associated with the acquisition and integration of companies and new technologies, including those related to the Company’s ability to successfully integrate the athenaCoordinator service and successfully scale the Healthcare Data Services and Proxsys services and technologies to achieve expected synergies; risks associated with its expectations regarding its ability to maintain profitability; the impact of increased sales and marketing expenditures, including whether increased expansion in revenues is attained and whether impact on margins and profitability is longer term than expected; changes in tax rates or exposure to additional tax liabilities; the highly competitive industry in which the Company operates and the relative immaturity of the market for its service offerings; and the evolving and complex governmental and regulatory compliance environment in which the Company and its clients operate. Existing and prospective investors are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The Company undertakes no obligation to update or revise the information contained in this press release, whether as a result of new information, future events or circumstances, or otherwise. For additional disclosure regarding these and other risks faced by the Company, please see the disclosures contained in its public filings with the Securities and Exchange Commission, available on the Investors section of the Company’s website at http://www.athenahealth.com and on the SEC’s website at http://www.sec.gov.

athenahealth, Inc.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

TO COMPARABLE GAAP MEASURES FOR FISCAL YEAR 2012 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 Guidance

Set forth below is a presentation of the Company’s “Non-GAAP Adjusted Gross Profit” and “Non-GAAP Adjusted Gross Margin” guidance for fiscal year 2012, which represents Non-GAAP Adjusted Gross Profit as a percentage of total revenue.

       
LOW   HIGH
Fiscal Year Ending December 31, 2012
Total revenue $ 420.0 $ 425.0
Direct operating expense 168.2     165.9  
Total revenue less direct operating expense $ 251.8     $ 259.1  
 
Add: Stock-based compensation expense 5.6 5.6
allocated to direct operating expense
Add: Amortization of purchased intangibles 3.0 3.0
     
Non-GAAP Adjusted Gross Profit $ 260.4     $ 267.7  
 
Non-GAAP Adjusted Gross Margin 62.0 % 63.0 %
 

Non-GAAP Adjusted Operating Income Guidance

Set forth below is a reconciliation of the Company’s “Non-GAAP Adjusted Operating Income” and “Non-GAAP Adjusted Operating Income Margin” guidance for fiscal year 2012, which represents Non-GAAP Adjusted Operating Income as a percentage of total revenue.

       
LOW   HIGH
Fiscal Year Ending December 31, 2012
Total revenue $ 420.0 $ 425.0
 
GAAP net income 16.4 18.5
Add: Provision for income taxes 13.5 15.5
Add (less): Total other (income) expense (0.3 ) (0.3 )
Add: Stock-based compensation expense 28.4 28.4
Add: Amortization of purchased intangibles 3.0 3.0
     
Non-GAAP Adjusted Operating Income $ 61.0     $ 65.0  
 
Non-GAAP Adjusted Operating Income Margin 14.5 % 15.3 %
 

Non-GAAP Adjusted Net Income Guidance

Set forth below is a reconciliation of the Company’s “Non-GAAP Adjusted Net Income” and “Non-GAAP Adjusted Net Income per Diluted Share” guidance for fiscal year 2012.

       
LOW   HIGH
Fiscal Year Ending December 31, 2012
GAAP net income $ 16.4 $ 18.5
Add: Stock-based compensation expense 28.4 28.4
Add: Amortization of purchased intangibles 3.0 3.0
     
Sub-total of tax deductible items $ 31.4     $ 31.4  
 
(Less): Tax impact of tax deductible items (1) (12.5 ) (12.5 )
     
Non-GAAP Adjusted Net Income $ 35.2     $ 37.3  
 
Weighted average shares - diluted 37.1 37.1
     
Non-GAAP Adjusted Net Income per Diluted Share $ 0.95     $ 1.00  
(1) Tax impact calculated using a statutory tax rate of 40%
 
 
LOW   HIGH
Fiscal Year Ending December 31, 2012
GAAP net income per share - diluted $ 0.44 $ 0.50
Add: Stock-based compensation expense 0.76 0.76
Add: Amortization of purchased intangibles 0.08 0.08
     
Sub-total of tax deductible items $ 0.85     $ 0.85  
 
(Less): Tax impact of tax deductible items (1) (0.34 ) (0.34 )
     
Non-GAAP Adjusted Net Income per Diluted Share $ 0.95     $ 1.00  
 
Weighted average shares - diluted 37.1 37.1
(1) Tax impact calculated using a statutory tax rate of 40%
 

athenahealth, Inc.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

TO COMPARABLE GAAP MEASURES FOR FISCAL YEAR 2013 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 Guidance

Set forth below is a presentation of the Company’s “Non-GAAP Adjusted Gross Profit” and “Non-GAAP Adjusted Gross Margin” guidance for fiscal year 2013, which represents Non-GAAP Adjusted Gross Profit as a percentage of total revenue.

       
LOW   HIGH
Fiscal Year Ending December 31, 2013
Total revenue $ 525.0 $ 550.0
Direct operating expense 210.5     214.5  
Total revenue less direct operating expense $ 314.5     $ 335.5  
 
Add: Stock-based compensation expense 7.1 7.1
allocated to direct operating expense
Add: Amortization of purchased intangibles 3.9 3.9
     
Non-GAAP Adjusted Gross Profit $ 325.5     $ 346.5  
 
Non-GAAP Adjusted Gross Margin 62.0 % 63.0 %
 

Non-GAAP Adjusted Operating Income Guidance

Set forth below is a reconciliation of the Company’s “Non-GAAP Adjusted Operating Income” and “Non-GAAP Adjusted Operating Income Margin” guidance for fiscal year 2013, which represents Non-GAAP Adjusted Operating Income as a percentage of total revenue.

       
LOW   HIGH
Fiscal Year Ending December 31, 2013
Total revenue $ 525.0 $ 550.0
 
GAAP net income 19.9 23.6
Add: Provision for income taxes 15.6 18.9
Add (less): Total other (income) expense (0.2 ) (0.2 )
Add: Stock-based compensation expense 35.9 35.9
Add: Amortization of purchased intangibles 3.9 3.9
     
Non-GAAP Adjusted Operating Income $ 75.0     $ 82.0  
 
Non-GAAP Adjusted Operating Income Margin 14.3 % 14.9 %
 

Non-GAAP Adjusted Net Income Guidance

Set forth below is a reconciliation of the Company’s “Non-GAAP Adjusted Net Income” and “Non-GAAP Adjusted Net Income per Diluted Share” guidance for fiscal year 2013.

       
LOW   HIGH
Fiscal Year Ending December 31, 2013
GAAP net income $ 19.9 $ 23.6
Add: Stock-based compensation expense 35.9 35.9
Add: Amortization of purchased intangibles 3.9 3.9
     
Sub-total of tax deductible items $ 39.7     $ 39.7  
 
(Less): Tax impact of tax deductible items (1) (15.9 ) (15.9 )
     
Non-GAAP Adjusted Net Income $ 43.7     $ 47.5  
 
Weighted average shares - diluted 37.9 37.9
     
Non-GAAP Adjusted Net Income per Diluted Share $ 1.15     $ 1.25  
(1) Tax impact calculated using a statutory tax rate of 40%
 
 
LOW   HIGH
Fiscal Year Ending December 31, 2013
GAAP net income per share - diluted $ 0.52 $ 0.62
Add: Stock-based compensation expense 0.95 0.95
Add: Amortization of purchased intangibles 0.10 0.10
     
Sub-total of tax deductible items $ 1.05     $ 1.05  
 
(Less): Tax impact of tax deductible items (1) (0.42 ) (0.42 )
     
Non-GAAP Adjusted Net Income per Diluted Share $ 1.15     $ 1.25  
 
Weighted average shares - diluted 37.9 37.9
(1) Tax impact calculated using a statutory tax rate of 40%
 

Explanation of Non-GAAP Financial Measures

The Company reports its 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 the Company’s 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 the Company 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 the Company’s ongoing business by eliminating certain non-cash expenses and other items that management believes might otherwise make comparisons of the Company’s 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 the Company’s financial and operational performance and comparing this performance to its 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 and (2) amortization of purchased intangibles, 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 the Company’s operational strength and performance of its business and a good measure of its historical operating trends. Moreover, management believes that these measures enable investors and financial analysts to closely monitor and understand changes in the Company’s ability to generate income from ongoing business operations.

Management defines “Non-GAAP Adjusted Operating Income” as the sum of GAAP net income before provision for income taxes, total other (income) expense, stock-based compensation expense, and amortization of purchased intangibles, 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 purchased intangibles, and any tax impact related to these items, 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 the Company’s operational strength and performance of its business and a good measure of its historical operating trends, in particular the extent to which ongoing operations impact the Company’s overall financial performance.

Management excludes 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 - excluded because these are non-cash expenses that management does not consider part of ongoing operating results when assessing the performance of the Company’s business, and also because the total amount of expense is partially outside of the Company’s control because it is based on factors such as stock price, volatility, and interest rates, which may be unrelated to the Company’s performance during the period in which the expense is incurred.
  • Amortization of purchased intangibles - purchased intangibles are amortized over their estimated useful life and generally cannot be changed or influenced by management after the acquisition. Accordingly, this item is not considered by management in making operating decisions. Thus, including such charge does not accurately reflect the performance of the Company’s ongoing operations for the period in which such charge is incurred.

athenahealth (Investors)
Dana Quattrochi, 617-402-1329
investorrelations@athenahealth.com
or
athenahealth (Media)
Holly Spring, 617-402-1631
hspring@athenahealth.com

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