Company Announces Record Provider Additions; Management Reaffirms Fiscal Year 2016
Guidance
Q3 2016 Financial Results
- 17% Revenue Growth Over Third Quarter of 2015
- GAAP Operating Income of $15.2 million
- Non-GAAP Adjusted Operating Income of $41.5 million
- GAAP Net Income of $13.9 million, or $0.35 Per Diluted Share
- Non-GAAP Adjusted Net Income of $24.1 million, or $0.60 Per Diluted Share
WATERTOWN, Mass., Oct. 20, 2016 (GLOBE NEWSWIRE) -- 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 MEASURES
TO 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 Margin
Set 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 Income
Set 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 Income
Set 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 MEASURES
TO 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 Guidance
Set 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
Guidance
Set 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 Guidance
Set 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
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