Company Achieves 15% Revenue Growth and
Expands Operating Margin; Reaffirms Fiscal
Year 2017 Financial Outlook
athenahealth, Inc. (NASDAQ:ATHN) (“athenahealth”
or “we”), a leading provider of network-enabled services and
point-of-care mobile applications for hospital and ambulatory
clients nationwide, today announced financial and operational
results for the second quarter of fiscal year 2017. We will hold a
conference call tomorrow, Friday, July 21, 2017, at
8:00 a.m. Eastern Time to discuss these results and
management’s outlook for future financial and operational
performance.
“Over the past 20 years, we’ve made great progress on our vision
to build the healthcare internet. Today, our network has grown to
over 100,000 providers, 98 million unique patient records, and 2.8
million covered lives,” said Jonathan Bush, chief executive
officer, athenahealth. “Our second quarter results were in line
with our expectations, and we remain focused on delivering against
our 2017 objectives to deepen our services, execute in the small
hospital market, invest in our platform, and build out nationwide
connectivity for the network.”
athenahealth also noted today that it has received significant
shareholder feedback over the past several months. The athenahealth
Board of Directors, in consultation with its advisors, is fully
evaluating this feedback and will provide an update in due
course.
Q2 2017 Financial Results
- Total revenue for the three months ended June 30, 2017,
was $301.1 million, compared to $261.9 million in the same period
last year, an increase of 15%.
- For the three months ended June 30, 2017, GAAP Gross
Margin was 52.2%, compared to 49.3% in the same period last
year.
- For the three months ended June 30, 2017, Service
Automation Rate, formerly referred to as Non-GAAP Adjusted Gross
Margin, was 64.2%, compared to 62.8% in the same period last
year.
- For the three months ended June 30, 2017, GAAP Operating
Income was $12.2 million, or 4.1% of total revenue, compared to
GAAP Operating Loss of $1.3 million, or 0.5% of total revenue, in
the same period last year.
- For the three months ended June 30, 2017, Non-GAAP
Adjusted Operating Income was $35.9 million, or 11.9% of total
revenue, compared to $23.9 million, or 9.1% of total revenue, in
the same period last year.
- For the three months ended June 30, 2017, GAAP Net Income
was $9.9 million, or $0.24 per diluted share, compared to GAAP Net
Loss of $1.9 million, or loss of $0.05 per diluted share, in the
same period last year.
- For the three months ended June 30, 2017, Non-GAAP
Adjusted Net Income was $20.5 million, or $0.51 per diluted share,
compared to $13.4 million, or $0.34 per diluted share, in the same
period last year.
Network Growth
We continued to expand our network across ambulatory
(athenaOne), hospital (athenaOne for Hospitals & Health
Systems) and population health (athenahealth Population Health).
Our network growth metrics for Q1 2017 to Q2 2017 are summarized in
the following table:
|
athenaOne (Ambulatory) |
|
athenaOne (Hospital) |
|
Population Health |
|
Collector Providers |
Clinicals Providers |
Communicator Providers |
|
Discharge Bed Days |
|
Covered Lives |
Ending Balance
as of 3/31/17 |
98,948 |
|
52,273 |
|
60,070 |
|
|
11,350 |
|
|
2,777,960 |
|
Sequential Growth |
1,358 |
|
2,636 |
|
2,858 |
|
|
2,757 |
|
|
3,675 |
|
Ending Balance
as of 6/30/17 |
100,306 |
|
54,909 |
|
62,928 |
|
|
14,107 |
|
|
2,781,635 |
|
Sequential Growth % |
1 |
% |
5 |
% |
5 |
% |
|
24 |
% |
|
— |
% |
Fiscal Year 2017 Outlook
We are reaffirming our fiscal year 2017 financial guidance we
communicated on April 27, 2017 with the release of our first
quarter fiscal year results. Our fiscal year 2017 financial
guidance is summarized in the following table:
For the Fiscal Year Ending December 31,
2017 |
Forward-Looking Guidance |
Financial Measures |
|
GAAP Total Revenue |
$1,210 million - $1,250 million |
GAAP Operating Income |
$36 million - $46 million |
Non-GAAP Adjusted Operating Income |
$120 million - $140 million |
Financial Metric |
|
Annual Bookings |
$350 million - $400 million |
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 on
Friday, July 21, 2017, at 8:00 a.m. Eastern Time, please dial
877-853-5645 (or 408-940-3868 for international calls) using
conference code no. 43730773, 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.
43730773. A webcast replay will also be archived on our
website.
About athenahealth, Inc.
athenahealth partners with hospital and ambulatory clients to
drive clinical and financial results. We offer medical record,
revenue cycle, patient engagement, care coordination, and
population health services. We combine insights from our network of
100,000 providers and 98 million patients with deep industry
knowledge and perform administrative work at scale. 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 our
revised fiscal 2017 guidance; statements regarding our positioning
in the market and our progress on building the healthcare internet;
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 2017 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 manage
changes in our management team; 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 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; changing
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 millions, except per share
amounts) |
|
|
|
June 30, 2017 |
|
December 31, 2016 |
Assets |
|
|
|
|
Current assets: |
|
|
|
|
Cash and
cash equivalents |
|
$ |
71.2 |
|
|
$ |
147.4 |
|
Accounts
receivable, net |
|
170.3 |
|
|
161.6 |
|
Prepaid
expenses and other current assets |
|
46.4 |
|
|
34.2 |
|
Total
current assets |
|
287.9 |
|
|
343.2 |
|
Property and equipment,
net |
|
362.7 |
|
|
347.7 |
|
Capitalized software
costs, net |
|
126.4 |
|
|
125.8 |
|
Purchased intangible
assets, net |
|
118.9 |
|
|
112.1 |
|
Goodwill |
|
274.1 |
|
|
240.7 |
|
Deferred tax
assets |
|
47.7 |
|
|
2.2 |
|
Investments and other
assets |
|
26.4 |
|
|
17.5 |
|
Total assets |
|
$ |
1,244.1 |
|
|
$ |
1,189.2 |
|
Liabilities &
Stockholders’ Equity |
|
|
|
|
Current
liabilities: |
|
|
|
|
Accounts
payable |
|
$ |
5.7 |
|
|
$ |
9.5 |
|
Accrued
compensation |
|
63.5 |
|
|
89.7 |
|
Accrued
expenses |
|
57.2 |
|
|
51.7 |
|
Current
portion of long-term debt |
|
16.4 |
|
|
18.3 |
|
Deferred
revenue |
|
34.4 |
|
|
28.7 |
|
Total
current liabilities |
|
177.2 |
|
|
197.9 |
|
Deferred rent, net of
current portion |
|
30.3 |
|
|
30.8 |
|
Long-term debt, net of
current portion |
|
263.6 |
|
|
272.8 |
|
Deferred revenue, net
of current portion |
|
49.0 |
|
|
48.4 |
|
Other long-term
liabilities |
|
7.0 |
|
|
6.0 |
|
Total liabilities |
|
527.1 |
|
|
555.9 |
|
Stockholders’
equity: |
|
|
|
|
Preferred
stock, $0.01 par value: 5.0 shares authorized; no shares issued and
outstanding at June 30, 2017 and December 31, 2016 |
|
— |
|
|
— |
|
Common
stock, $0.01 par value: 125.0 shares authorized; 41.2 shares issued
and 39.9 shares outstanding at June 30, 2017; 40.8 shares issued
and 39.5 shares outstanding at December 31, 2016 |
|
0.4 |
|
|
0.4 |
|
Additional paid-in capital |
|
618.1 |
|
|
591.5 |
|
Treasury
stock, at cost, 1.3 shares |
|
(1.2 |
) |
|
(1.2 |
) |
Accumulated other comprehensive loss |
|
(0.5 |
) |
|
(0.9 |
) |
Retained
earnings |
|
100.2 |
|
|
43.5 |
|
Total stockholders’
equity |
|
717.0 |
|
|
633.3 |
|
Total liabilities and
stockholders’ equity |
|
$ |
1,244.1 |
|
|
$ |
1,189.2 |
|
|
|
|
|
|
|
|
|
|
athenahealth, Inc. |
CONDENSED CONSOLIDATED STATEMENTS OF
INCOME |
(Unaudited, in millions, except per share
amounts) |
|
|
|
Three Months Ended June 30, |
|
|
2017 |
|
2016 |
Revenue: |
|
|
|
|
|
|
|
|
Business
services |
|
$ |
293.0 |
|
|
$ |
254.1 |
|
Implementation and other |
|
8.1 |
|
|
7.8 |
|
Total
revenue |
|
301.1 |
|
|
261.9 |
|
Cost of revenue |
|
143.8 |
|
|
132.9 |
|
Gross
profit |
|
157.3 |
|
|
129.0 |
|
Other operating
expenses: |
|
|
|
|
Selling
and marketing |
|
65.0 |
|
|
68.2 |
|
Research
and development |
|
42.4 |
|
|
28.8 |
|
General
and administrative |
|
37.7 |
|
|
33.3 |
|
Total
other operating expenses |
|
145.1 |
|
|
130.3 |
|
Operating income
(loss) |
|
12.2 |
|
|
(1.3 |
) |
Other expense |
|
(1.7 |
) |
|
(1.5 |
) |
Income (loss) before
income tax (provision) benefit |
|
10.5 |
|
|
(2.8 |
) |
Income tax (provision)
benefit |
|
(0.6 |
) |
|
0.9 |
|
Net income (loss) |
|
$ |
9.9 |
|
|
$ |
(1.9 |
) |
Net income (loss) per
share – Basic |
|
$ |
0.25 |
|
|
$ |
(0.05 |
) |
Net income (loss) per
share – Diluted |
|
$ |
0.24 |
|
|
$ |
(0.05 |
) |
Weighted average shares
used in computing net income (loss) per share: |
|
|
|
|
Basic |
|
39.9 |
|
|
39.3 |
|
Diluted |
|
40.5 |
|
|
39.3 |
|
|
|
|
|
|
|
|
athenahealth, Inc. |
CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS |
(Unaudited, in millions) |
|
|
|
Six Months Ended June 30, |
|
|
2017 |
|
2016 |
CASH FLOWS FROM
OPERATING ACTIVITIES: |
|
|
|
|
|
|
|
|
Net
income (loss) |
|
$ |
8.5 |
|
|
$ |
(2.7 |
) |
Adjustments to reconcile net income (loss) to net cash provided by
operating activities: |
|
|
|
|
Depreciation and amortization |
|
72.8 |
|
|
66.5 |
|
Deferred
income tax |
|
1.4 |
|
|
(2.0 |
) |
Stock-based compensation expense |
|
30.0 |
|
|
33.5 |
|
Changes
in operating assets and liabilities: |
|
|
|
|
Accounts
receivable, net |
|
(8.7 |
) |
|
8.3 |
|
Prepaid
expenses and other current assets |
|
(12.2 |
) |
|
(2.9 |
) |
Other
long-term assets |
|
(8.8 |
) |
|
(1.3 |
) |
Accounts
payable |
|
(1.1 |
) |
|
(6.0 |
) |
Accrued
expenses and other long-term liabilities |
|
6.3 |
|
|
1.2 |
|
Accrued
compensation |
|
(26.5 |
) |
|
(9.2 |
) |
Deferred
revenue |
|
6.3 |
|
|
(4.1 |
) |
Deferred
rent |
|
— |
|
|
0.7 |
|
Net cash
provided by operating activities |
|
68.0 |
|
|
82.0 |
|
CASH FLOWS FROM
INVESTING ACTIVITIES: |
|
|
|
|
Capitalized software costs |
|
(35.7 |
) |
|
(42.8 |
) |
Purchases
of property and equipment |
|
(51.0 |
) |
|
(34.0 |
) |
Payments
on acquisitions, net of cash acquired |
|
(40.8 |
) |
|
(1.7 |
) |
Other
investing activities |
|
— |
|
|
0.2 |
|
Net cash
used in investing activities |
|
(127.5 |
) |
|
(78.3 |
) |
CASH FLOWS FROM
FINANCING ACTIVITIES: |
|
|
|
|
Proceeds
from issuance of common stock under stock plans and warrants |
|
9.4 |
|
|
9.2 |
|
Taxes
paid related to net share settlement of stock awards |
|
(15.2 |
) |
|
(16.5 |
) |
Payments
on long-term debt |
|
(11.2 |
) |
|
(3.8 |
) |
Other
financing activities |
|
— |
|
|
(0.1 |
) |
Net cash
used in financing activities |
|
(17.0 |
) |
|
(11.2 |
) |
Effect of exchange rate
changes on cash and cash equivalents |
|
0.3 |
|
|
(0.1 |
) |
Net decrease in cash
and cash equivalents |
|
(76.2 |
) |
|
(7.6 |
) |
Cash and
cash equivalents at beginning of period |
|
147.4 |
|
|
141.9 |
|
Cash and
cash equivalents at end of period |
|
$ |
71.2 |
|
|
$ |
134.3 |
|
|
|
|
|
|
|
|
|
|
athenahealth,
Inc.STOCK-BASED
COMPENSATION(Unaudited, in millions)
Set forth below is a breakout of stock-based compensation
impacting the Condensed Consolidated Statements of Income for the
three and six months ended June 30, 2017, and 2016:
(unaudited, in
millions) |
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
2017 |
|
2016 |
|
2017 |
|
2016 |
Stock-based
compensation charged to Condensed Consolidated Statements of
Income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue |
$ |
4.1 |
|
|
$ |
4.4 |
|
|
$ |
7.8 |
|
|
$ |
9.3 |
|
Selling and
marketing |
4.5 |
|
|
5.1 |
|
|
8.9 |
|
|
9.2 |
|
Research and
development |
3.7 |
|
|
3.6 |
|
|
7.1 |
|
|
6.1 |
|
General and
administrative |
3.5 |
|
|
5.2 |
|
|
6.2 |
|
|
8.9 |
|
Total
stock-based compensation expense |
15.8 |
|
|
18.3 |
|
|
30.0 |
|
|
33.5 |
|
Amortization of
capitalized stock-based compensation related to software
development allocated to cost of revenue (1) |
0.6 |
|
|
1.3 |
|
|
1.6 |
|
|
2.5 |
|
Amortization of
capitalized stock-based compensation related to software
development allocated to research and development (1) |
— |
|
|
— |
|
|
0.1 |
|
|
— |
|
Total |
$ |
16.4 |
|
|
$ |
19.6 |
|
|
$ |
31.7 |
|
|
$ |
36.0 |
|
|
|
|
|
|
|
|
|
(1) In addition, for the three months ended June 30, 2017,
and 2016, $0.7 million and $0.9 million, respectively, of
stock-based compensation was capitalized in the line item
Capitalized software costs, net in the Condensed Consolidated
Balance Sheets. For the six months ended June 30, 2017, and
2016, $1.3 million and $1.2 million, respectively, of stock-based
compensation was capitalized in the line item Capitalized software
costs, net in the Condensed Consolidated Balance Sheets.
athenahealth,
Inc.AMORTIZATION OF PURCHASED INTANGIBLE
ASSETS(Unaudited, in millions)
Set forth below is a breakout of amortization of purchased
intangible assets impacting the Condensed Consolidated Statements
of Income for the three and six months ended June 30, 2017,
and 2016:
(unaudited, in
millions) |
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
|
2017 |
|
|
|
2016 |
|
|
|
2017 |
|
|
|
2016 |
|
Amortization of
purchased intangible assets allocated to: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue |
$ |
1.3 |
|
|
$ |
1.8 |
|
|
$ |
2.4 |
|
|
$ |
5.1 |
|
Selling and
marketing |
3.2 |
|
|
2.9 |
|
|
6.5 |
|
|
5.8 |
|
Total amortization of
purchased intangible assets |
$ |
4.5 |
|
|
$ |
4.7 |
|
|
$ |
8.9 |
|
|
$ |
10.9 |
|
|
|
|
|
|
|
|
|
athenahealth,
Inc.RECONCILIATION OF NON-GAAP FINANCIAL
MEASURESTO COMPARABLE GAAP
MEASURES(Unaudited, in millions, 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 Margin and Service Automation
RateSet 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 and our “Service Automation Profit” and “Service Automation
Rate,” which represents Service Automation Profit as a percentage
of total revenue.
(unaudited, in
millions) |
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
|
2017 |
|
|
|
2016 |
|
|
|
2017 |
|
|
|
2016 |
|
Total revenue |
$ |
301.1 |
|
|
$ |
261.9 |
|
|
$ |
586.5 |
|
|
$ |
518.0 |
|
Cost of revenue |
143.8 |
|
|
132.9 |
|
|
288.2 |
|
|
265.3 |
|
|
|
|
|
|
|
|
|
GAAP Gross Profit |
157.3 |
|
|
129.0 |
|
|
298.3 |
|
|
252.7 |
|
|
|
|
|
|
|
|
|
GAAP Gross Margin |
52.2 |
% |
|
49.3 |
% |
|
50.9 |
% |
|
48.8 |
% |
|
|
|
|
|
|
|
|
Add:
Stock-based compensation allocated to cost of revenue |
4.1 |
|
|
4.4 |
|
|
7.8 |
|
|
9.3 |
|
Add:
Amortization of capitalized stock-based compensation related
to software development allocated to cost of
revenue |
0.6 |
|
|
1.3 |
|
|
1.6 |
|
|
2.5 |
|
Add:
Amortization of purchased intangible assets allocated to
cost of revenue |
1.3 |
|
|
1.8 |
|
|
2.4 |
|
|
5.1 |
|
Add:
Integration and transaction costs allocated to cost of
revenue |
— |
|
|
— |
|
|
0.1 |
|
|
— |
|
Add: Exit
costs, including restructuring costs allocated to cost of
revenue |
— |
|
|
0.3 |
|
|
— |
|
|
0.3 |
|
|
|
|
|
|
|
|
|
Non-GAAP Adjusted Gross
Profit (as redefined) |
$ |
163.3 |
|
|
$ |
136.8 |
|
|
$ |
310.2 |
|
|
$ |
269.9 |
|
|
|
|
|
|
|
|
|
Non-GAAP Adjusted Gross
Margin (as redefined) |
54.2 |
% |
|
52.2 |
% |
|
52.9 |
% |
|
52.1 |
% |
|
|
|
|
|
|
|
|
Add:
Amortization and depreciation expense allocated to cost of
revenue |
24.9 |
|
|
23.1 |
|
|
49.7 |
|
|
44.9 |
|
Add:
Overhead expense allocated to cost of revenue |
5.0 |
|
|
4.6 |
|
|
9.4 |
|
|
8.7 |
|
|
|
|
|
|
|
|
|
Service Automation
Profit (1) |
$ |
193.2 |
|
|
$ |
164.5 |
|
|
$ |
369.3 |
|
|
$ |
323.5 |
|
Service Automation Rate
(1) |
64.2 |
% |
|
62.8 |
% |
|
63.0 |
% |
|
62.5 |
% |
(1) Service Automation Profit and Rate, formerly
referred to as Non-GAAP Adjusted Gross Profit and Margin, excludes
amortization, depreciation, and overhead costs.
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
millions) |
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
|
2017 |
|
|
|
2016 |
|
|
|
2017 |
|
|
|
2016 |
|
Total revenue |
$ |
301.1 |
|
|
$ |
261.9 |
|
|
$ |
586.5 |
|
|
$ |
518.0 |
|
|
|
|
|
|
|
|
|
GAAP net income
(loss) |
9.9 |
|
|
(1.9 |
) |
|
8.5 |
|
|
(2.7 |
) |
Add:
Provision for (benefit from) income taxes |
0.6 |
|
|
(0.9 |
) |
|
1.9 |
|
|
(1.6 |
) |
Add:
Total other expense |
1.7 |
|
|
1.5 |
|
|
2.9 |
|
|
3.3 |
|
GAAP operating income
(loss) |
$ |
12.2 |
|
|
$ |
(1.3 |
) |
|
$ |
13.3 |
|
|
$ |
(1.0 |
) |
|
|
|
|
|
|
|
|
GAAP operating
margin |
4.1 |
% |
|
(0.5 |
)% |
|
2.3 |
% |
|
(0.2 |
)% |
|
|
|
|
|
|
|
|
Add:
Stock-based compensation expense |
15.8 |
|
|
18.3 |
|
|
30.0 |
|
|
33.5 |
|
Add:
Amortization of capitalized stock-based compensation related to
software development |
0.6 |
|
|
1.3 |
|
|
1.7 |
|
|
2.5 |
|
Add:
Amortization of purchased intangible assets |
4.5 |
|
|
4.7 |
|
|
8.9 |
|
|
10.9 |
|
Add:
Integration and transaction costs |
2.8 |
|
|
0.1 |
|
|
4.0 |
|
|
0.4 |
|
Add: Exit
costs, including restructuring costs |
— |
|
|
0.8 |
|
|
— |
|
|
1.9 |
|
|
|
|
|
|
|
|
|
Non-GAAP Adjusted
Operating Income |
$ |
35.9 |
|
|
$ |
23.9 |
|
|
$ |
57.9 |
|
|
$ |
48.2 |
|
|
|
|
|
|
|
|
|
Non-GAAP Adjusted
Operating Income Margin |
11.9 |
% |
|
9.1 |
% |
|
9.9 |
% |
|
9.3 |
% |
Non-GAAP Adjusted Net IncomeSet forth below is
a reconciliation of our “Non-GAAP Adjusted Net Income.”
(unaudited, in
millions, except per share amounts) |
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
|
2017 |
|
|
|
2016 |
|
|
|
2017 |
|
|
|
2016 |
|
GAAP net income
(loss) |
$ |
9.9 |
|
|
$ |
(1.9 |
) |
|
$ |
8.5 |
|
|
$ |
(2.7 |
) |
Add:
Stock-based compensation expense |
15.8 |
|
|
18.3 |
|
|
30.0 |
|
|
33.5 |
|
Add:
Amortization of capitalized stock-based compensation related to
software development |
0.6 |
|
|
1.3 |
|
|
1.7 |
|
|
2.5 |
|
Add:
Amortization of purchased intangible assets |
4.5 |
|
|
4.7 |
|
|
8.9 |
|
|
10.9 |
|
Add:
Integration and transaction costs |
2.8 |
|
|
0.1 |
|
|
4.0 |
|
|
0.4 |
|
Add: Exit
costs, including restructuring costs |
— |
|
|
0.8 |
|
|
— |
|
|
1.9 |
|
|
|
|
|
|
|
|
|
Sub-total
of tax deductible items |
23.7 |
|
|
25.2 |
|
|
44.6 |
|
|
49.2 |
|
|
|
|
|
|
|
|
|
Add: Tax
impact of tax deductible items (1) |
(9.5 |
) |
|
(10.1 |
) |
|
(17.8 |
) |
|
(19.7 |
) |
Add: Tax
impact resulting from applying non-GAAP tax rate (2) |
(3.6 |
) |
|
0.2 |
|
|
(2.3 |
) |
|
0.1 |
|
|
|
|
|
|
|
|
|
Non-GAAP Adjusted Net
Income |
$ |
20.5 |
|
|
$ |
13.4 |
|
|
$ |
33.0 |
|
|
$ |
26.9 |
|
|
|
|
|
|
|
|
|
Weighted average shares
- diluted |
40.5 |
|
|
39.3 |
|
|
40.4 |
|
|
39.2 |
|
|
|
|
|
|
|
|
|
Non-GAAP Adjusted Net
Income per Diluted Share |
$ |
0.51 |
|
|
$ |
0.34 |
|
|
$ |
0.82 |
|
|
$ |
0.69 |
|
(1) Tax impact calculated using a statutory tax rate of 40%. (2)
Represents adjusting the GAAP net income (loss) 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.
Non-GAAP Adjusted Net Income per Diluted
ShareSet forth below is a reconciliation of our “Non-GAAP
Adjusted Net Income per Diluted Share.”
(unaudited, in
millions, except per share amounts) |
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
|
2017 |
|
|
|
2016 |
|
|
|
2017 |
|
|
|
2016 |
|
GAAP net income (loss)
per share - diluted |
$ |
0.24 |
|
|
$ |
(0.05 |
) |
|
$ |
0.21 |
|
|
$ |
(0.07 |
) |
Add:
Stock-based compensation expense |
0.39 |
|
|
0.47 |
|
|
0.74 |
|
|
0.86 |
|
Add:
Amortization of capitalized stock-based compensation related to
software development |
0.01 |
|
|
0.03 |
|
|
0.04 |
|
|
0.06 |
|
Add:
Amortization of purchased intangible assets |
0.11 |
|
|
0.12 |
|
|
0.22 |
|
|
0.28 |
|
Add:
Integration and transaction costs |
0.07 |
|
|
— |
|
|
0.10 |
|
|
0.01 |
|
Add: Exit
costs, including restructuring costs |
— |
|
|
0.02 |
|
|
— |
|
|
0.05 |
|
|
|
|
|
|
|
|
|
Sub-total
of tax deductible items |
0.59 |
|
|
0.64 |
|
|
1.10 |
|
|
1.26 |
|
|
|
|
|
|
|
|
|
Add: Tax
impact of tax deductible items (1) |
(0.23 |
) |
|
(0.26 |
) |
|
(0.44 |
) |
|
(0.50 |
) |
Add: Tax
impact resulting from applying non-GAAP tax rate (2) |
(0.09 |
) |
|
0.01 |
|
|
(0.06 |
) |
|
— |
|
|
|
|
|
|
|
|
|
Non-GAAP Adjusted Net
Income per Diluted Share |
$ |
0.51 |
|
|
$ |
0.34 |
|
|
$ |
0.82 |
|
|
$ |
0.69 |
|
|
|
|
|
|
|
|
|
Weighted average shares
- diluted |
40.5 |
|
|
39.3 |
|
|
40.4 |
|
|
39.2 |
|
(1) Tax impact calculated using a statutory tax rate of 40%. (2)
Represents adjusting the GAAP net income (loss) 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 2017 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 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 2017, which represents Non-GAAP Adjusted Operating
Income as a percentage of total revenue.
|
LOW |
|
HIGH |
|
|
|
|
|
Fiscal Year Ending December 31,
2017 |
Total revenue |
$ |
1,210 |
|
|
$ |
1,250 |
|
GAAP operating
income |
$ |
36 |
|
|
$ |
46 |
|
|
|
|
|
GAAP operating income
margin |
3.0 |
% |
|
3.7 |
% |
|
|
|
|
Add:
Stock-based compensation expense |
60 |
|
|
70 |
|
Add:
Amortization of capitalized stock-based compensation related to
software development |
2 |
|
|
2 |
|
Add:
Amortization of purchased intangible assets |
17 |
|
|
17 |
|
Add:
Integration and transaction costs |
5 |
|
|
5 |
|
Add: Exit
costs, including restructuring (1) |
— |
|
|
— |
|
Add: Gain
or loss on investments (1) |
— |
|
|
— |
|
|
|
|
|
Non-GAAP Adjusted
Operating Income |
$ |
120 |
|
|
$ |
140 |
|
|
|
|
|
Non-GAAP Adjusted
Operating Income Margin |
9.9 |
% |
|
11.2 |
% |
(1) We currently do not anticipate exit costs, including
restructuring or gain or loss on investments during fiscal year
2017. However, if these items occur in fiscal year 2017, we would
exclude these items from our Non-GAAP Adjusted Operating Income and
Non-GAAP Adjusted Operating Income Margin.
Explanation of Non-GAAP Financial Measures
We report our financial results in accordance with generally
accepted accounting principles 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.
In Q4 2016, management redefined “Non-GAAP Adjusted Gross
Profit” as total revenue, less cost of revenue, plus (1)
stock-based compensation expense allocated to cost of revenue, (2)
amortization of purchased intangible assets allocated to cost of
revenue, (3) integration and transactions costs allocated to cost
of revenue, and (4) exit costs, including restructuring costs
allocated to cost of revenue, and “Non-GAAP Adjusted Gross Margin”
as Non-GAAP Adjusted Gross Profit as a percentage of total revenue.
Management defines “Service Automation Profit,” formerly referred
to as Non-GAAP Adjusted Gross Profit, as total revenue, less cost
of revenue, plus (1) stock-based compensation expense allocated to
cost of revenue, (2) amortization of purchased intangible assets
allocated to cost of revenue, (3) integration and transaction costs
allocated to cost of revenue, (4) exit costs, including
restructuring costs allocated to cost of revenue, (5) amortization
and depreciation expense allocated to cost of revenue, and (6)
overhead expense allocated to cost of revenue, and “Service
Automation Rate,” formerly referred to as Non-GAAP Adjusted Gross
Margin, as Service Automation Profit as a percentage of total
revenue. Management considers these non-GAAP financial measures and
metrics 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
and metrics 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 (loss) before provision for (benefit from)
income taxes; total other expense; 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 (loss) 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 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 excludes or adjusts each of the items identified
below from the applicable non-GAAP financial measure or metric
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 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 gains or losses on the
sales, conversions, or impairments of our investments, such as
marketable securities and More Disruption Please 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
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