Athena's Mixed 4Q; Profit Up - Analyst Blog
February 08 2013 - 9:40AM
Zacks
Leading vendor of cloud-based
services for physician practices Athenahealth
(ATHN) reported fourth quarter 2012 adjusted (excluding one-time
items other than stock-based compensation expense) earnings per
share of 18 cents beating the Zacks Consensus Estimate of 16 cents
per share.
Reported net income in the fourth
quarter increased 11.5% year over year to $5.9 million (or 16 cents
per share).
For 2012, adjusted earnings per
share of 56 cents missed the Zacks Consensus Estimate of 57
cents.
Revenues
Revenues climbed 26% year over year
to $116.3 million in the quarter missing the Zacks Consensus
Estimate of $117 million. The company posted collections of $2.5
billion in the fourth quarter, up 25%.
For 2012, sales were $422.3
million, up 30%, missing the Zacks Consensus Estimate of $423
million. The company recorded collections of $9.2 billion in 2012,
up 26%.
On a segment-wise basis, revenues
from Business Services surged 26.1% year over year to $112.6
million while Implementation and Other revenues improved 15.7% to
$3.7 million.
Utilization of athenaCollector by
medical providers and physicians grew 21.4% and 20.7% respectively,
year over year in the fourth quarter. Furthermore, the use of
athenaClinicals by medical providers and physicians jumped 67.4%
and 70.5% respectively, year over year. The utilization of
athenaCommunicator increased almost two and a half times to 14,065
medical providers (of whom 10,153 were physicians) from 5,830
medical providers (of whom 4,098 were physicians) in the year-ago
period.
Margins
Adjusted gross margin decreased 80
basis points year over year to 63.4% whereas adjusted operating
margin dropped 30 basis points to 16.9% in the quarter. Adjusted
EBITDA margin improved to 23.3% from 22.4% a year ago.
Balance Sheet
Athenahealth ended the fourth
quarter with cash and cash equivalents and short-term investments
of $193.1 million, up 61.1% year over year.
Our Take
Athenahealth’s web-based deployment
provides a low-cost scalable service while its flexible rules
engine leads to higher efficiency in claims settlement. The
Software-as-a-Service (SaaS)-based approach allows for a more
flexible delivery mechanism that helps Athenahealth win deals. The
company has traditionally enjoyed high customer satisfaction rates,
which facilitates a larger number of referrals.
Athenahealth’s unique business
model makes it a strong provider of RCM services (athenaCollector)
designed for small physician practices. Its EHR product
(athenaClinical) is a key player in ambulatory settings.
We believe that sales of
athenaClinical are likely to remain robust. In addition, the
company will harness its newer products, namely athenaCommunicator
and athenaCoordinator.
Athenahealth should benefit from
its extensive athenaCollector client base, as only a minority of
its subscriber base also utilizes athenaClinicals. Cross selling
represents a real growth opportunity in the near term. In this
regard, Athenahealth has made rapid strides in capturing the EHR
business of physician practices. However, this segment is
shrinking, as hospitals increasingly absorb physician’s medical
practices.
Athenahealth is geared to enter the
enterprise segment through its strategic alliance with
Microsoft (MSFT) and the acquisition of Proxsys,
both completed in 2011. The company has recently signed on, and
executed several enterprise-sized deals, which provide it with a
credible and referenceable client base. In early Jan 2013,
Athenahealth signed a definitive agreement to take over
Epocrates (EPOC), a provider of point-of-care
digital solutions in the healthcare industry. The acquisition will
enable Athenahealth to increase its user network and improve its
brand awareness.
Though the federal stimulus is
winding down, the replacement market has been growing. Competition
is fierce and larger competitors may benefit from the incumbency
factor. Industry stalwarts such as Cerner
Corporation (CERN) offer long-standing seamless products
which integrate inpatient and ambulatory-care systems.
Allscripts Healthcare Solutions, Inc. (MDRX) is
another competitor in a crowded field.
Athenahealth carries a Zacks Rank
#3 (Hold).
ATHENAHEALTH IN (ATHN): Free Stock Analysis Report
CERNER CORP (CERN): Free Stock Analysis Report
EPOCRATES INC (EPOC): Free Stock Analysis Report
ALLSCRIPTS HLTH (MDRX): Free Stock Analysis Report
MICROSOFT CORP (MSFT): Free Stock Analysis Report
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