Company Reaffirms Fiscal Year 2018
Financial Outlook
athenahealth, Inc. (NASDAQ: ATHN) (“athenahealth”
or “we”), a leading provider of network-enabled services for
hospital and ambulatory clients nationwide, today announced
financial and operational results for the third quarter of fiscal
year 2018. We will hold a conference call on Monday,
November 12, 2018, at 5:00 p.m. Eastern Time to discuss
these results and management’s outlook for future financial and
operational performance.
“We delivered another quarter of solid financial results and
have reaffirmed our financial outlook for the year. During Q3, we
achieved stable top-line growth on a comparable basis and
significantly improved profitability and operating cash flow
year-over-year,” said Marc Levine, chief financial officer of
athenahealth. “We are confident in the opportunities available to
athenahealth. athenahealth maintains a differentiated position in
the market, and continues to drive positive change for our clients,
expand the value of our core offerings, and unlock value for our
shareholders.”
Q3 2018 Financial Results
We adopted a new revenue recognition standard on January 1,
2018. Please note that the financial results presented below
include both amounts “as presented,” which reflect implementation
of the new revenue recognition standard, as well as amounts prior
to the impact of the new revenue recognition standard to allow for
comparability against historical results. Starting in fiscal year
2019, we will no longer present our GAAP and Non-GAAP financial
results under the previous revenue recognition standard. For
additional information and reconciliations of our financial results
between the new and previous revenue recognition standard, see the
additional tables included in this press release and in the Form
10-Q filed with the Securities and Exchange Commission on November
9, 2018.
- Total Revenue as presented for the three months ended
September 30, 2018 was $329.5 million. Total Revenue prior to
the impact of the new revenue recognition standard for the three
months ended September 30, 2018 was $331.4 million, compared
to $304.6 million in the same period last year, an increase of
9%.
- GAAP Gross Margin as presented for the three months ended
September 30, 2018 was 53.1%. GAAP Gross Margin prior to the
impact of the new revenue recognition standard for the three months
ended September 30, 2018 was 52.3%, compared to 52.7% in the
same period last year.
- Non-GAAP Gross Margin as presented for the three months ended
September 30, 2018 was 54.9%. Non-GAAP Gross Margin prior to
the impact of the new revenue recognition standard for the three
months ended September 30, 2018 was 54.0%, compared to 54.4%
in the same period last year.
- GAAP Operating Income as presented for the three months ended
September 30, 2018 was $38.2 million, or 11.6% of total
revenue. GAAP Operating Income prior to the impact of the new
revenue recognition standard for the three months ended
September 30, 2018 was $31.8 million, or 9.6% of total
revenue, compared to $18.6 million, or 6.1% of total revenue, in
the same period last year.
- Non-GAAP Operating Income as presented for the three months
ended September 30, 2018 was $61.0 million, or 18.5% of
revenue. Non-GAAP Operating Income prior to the impact of the new
revenue recognition standard for the three months ended
September 30, 2018 was $54.6 million, or 16.5% of total
revenue, compared to $39.5 million, or 13.0% of total revenue, in
the same period last year.
- GAAP Net Income as presented for the three months ended
September 30, 2018 was $26.4 million, or $0.64 per diluted
share. GAAP Net Income prior to the impact of the new revenue
recognition standard for the three months ended September 30,
2018 was $21.5 million, or $0.52 per diluted share, compared to
$13.0 million, or $0.32 per diluted share, in the same period last
year.
- Non-GAAP Net Income as presented for the three months ended
September 30, 2018 was $44.5 million, or $1.08 per diluted
share. Non-GAAP Net Income prior to the impact of the new revenue
recognition standard for the three months ended September 30,
2018 was $39.7 million, or $0.96 per diluted share, compared to
$22.9 million, or $0.56 per diluted share, in the same period last
year.
- Total Bookings for the three months ended September 30,
2018 were $46.6 million, compared to $65.7 million for the three
months ended September 30, 2017. Total Bookings for the three
months ended September 30, 2018 included a large enterprise
client chargeback originally signed in 2016. Excluding this
chargeback, the decline in bookings year-over-year was consistent
with the prior quarter.
Network Growth
Network growth metrics for ambulatory (athenaOne), hospital
(athenaOne for Hospitals & Health Systems), and population
health (athenahealth Population Health) services from Q2 2018 to Q3
2018 were as follows:
|
athenaOne (Ambulatory) |
|
athenaOne (Hospital) |
|
Population Health |
|
Collector Providers |
Clinicals Providers |
Communicator Providers |
|
Discharge Bed Days |
|
Covered Lives |
Ending Balance
as of 6/30/18 |
115,724 |
|
64,317 |
|
74,333 |
|
|
33,352 |
|
|
3,329,133 |
|
Sequential Growth |
4,470 |
|
3,350 |
|
3,957 |
|
|
6,463 |
|
|
(241,124 |
) |
Ending Balance
as of 9/30/18 |
120,194 |
|
67,667 |
|
78,290 |
|
|
39,815 |
|
|
3,088,009 |
|
Sequential Growth % |
4 |
% |
5 |
% |
5 |
% |
|
19 |
% |
|
(7 |
)% |
Network growth metrics for ambulatory (athenaOne), hospital
(athenaOne for Hospitals & Health Systems), and population
health (athenahealth Population Health) services from Q3 2017 to Q3
2018 were as follows:
|
athenaOne (Ambulatory) |
|
athenaOne (Hospital) |
|
Population Health |
|
Collector Providers |
Clinicals Providers |
Communicator Providers |
|
Discharge Bed Days |
|
Covered Lives |
Ending Balance as of 9/30/17 |
106,482 |
|
57,936 |
|
67,590 |
|
|
19,790 |
|
|
3,242,628 |
|
Growth vs. Prior Year |
13,712 |
|
9,731 |
|
10,700 |
|
|
20,025 |
|
|
(154,619 |
) |
Ending Balance as of 9/30/18 |
120,194 |
|
67,667 |
|
78,290 |
|
|
39,815 |
|
|
3,088,009 |
|
Growth vs. Prior Year % |
13 |
% |
17 |
% |
16 |
% |
|
101 |
% |
|
(5 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year 2018 Outlook
We are reaffirming our fiscal year 2018 financial guidance to
reflect our year-to-date performance and our expectations for the
fourth quarter. Our fiscal year 2018 guidance is prior to the
impact of the new revenue recognition standard to allow for
comparability against historical results. Our updated fiscal year
2018 financial guidance under the previous revenue standard is
summarized in the following table:
Previous Revenue Standard |
For the Fiscal Year Ending December 31,
2018 |
Forward-Looking Guidance |
Financial Measures |
|
GAAP Total Revenue |
$1,330 million - $1,360 million |
GAAP Operating Income |
$128 million - $155 million |
GAAP Operating Margin |
9.6% - 11.4% |
Non-GAAP Operating Income |
$219 million - $238 million |
Non-GAAP Operating Margin |
16.5% - 17.5% |
We are also reaffirming our fiscal year 2018 guidance under the
new revenue recognition standard. Our fiscal year 2018 financial
guidance under the new revenue standard is summarized in the
following table:
New Revenue Standard |
For the Fiscal Year Ending December 31,
2018 |
Forward-Looking Guidance |
Financial Measures |
|
GAAP Total Revenue |
$1,335 million - $1,365 million |
GAAP Operating Income |
$153 million - $187 million |
GAAP Operating Margin |
11.5% - 13.7% |
Non-GAAP Operating Income |
$244 million - $270 million |
Non-GAAP Operating Margin |
18.3% - 19.8% |
|
|
Use of Non-GAAP Financial Measures
In our earnings press 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
Monday, November 12, 2018, at 5:00 p.m. Eastern Time, please dial
877-853-5645 (or 408-940-3868 for international calls) using
conference code no. 7667835, or visit the Investors section of our
website at www.athenahealth.com. A webcast replay will also be
archived on our website.
About athenahealth, Inc.
athenahealth partners with hospital and ambulatory customers 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
over 120,000 providers and approximately 117 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; statements
regarding our business focus; our fiscal year 2018 guidance; and
statements found under our “Reconciliation of Non-GAAP Financial
Measures to Comparable GAAP Measures for Fiscal Year 2018 Guidance”
section 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: the impact of
changes in our senior management team; the impact of our evaluation
of strategic alternatives and of our cost-reduction measures; 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 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.
Contact Info:Dana
Quattrochiathenahealth, Inc.
(Investors)investorrelations@athenahealth.com(617) 402-1329
John Foxathenahealth, Inc.
(Media)media@athenahealth.com(617) 402-8001
athenahealth,
Inc.CONDENSED CONSOLIDATED STATEMENTS OF
INCOME(Unaudited, in millions, except per share
amounts)
|
|
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
2018 |
|
2017 (1) |
|
2018 |
|
2017 (1) |
Revenue |
$ |
329.5 |
|
|
$ |
304.6 |
|
|
$ |
982.2 |
|
|
$ |
891.1 |
|
Cost of revenue |
154.4 |
|
|
144.0 |
|
|
460.4 |
|
|
432.2 |
|
Gross profit |
175.1 |
|
|
160.6 |
|
|
521.8 |
|
|
458.9 |
|
Other operating
expenses: |
|
|
|
|
|
|
|
Selling
and marketing |
47.6 |
|
|
61.8 |
|
|
146.2 |
|
|
192.5 |
|
Research
and development |
50.9 |
|
|
44.8 |
|
|
147.5 |
|
|
130.0 |
|
General
and administrative |
38.4 |
|
|
35.4 |
|
|
104.7 |
|
|
104.5 |
|
Total
other operating expenses |
136.9 |
|
|
142.0 |
|
|
398.4 |
|
|
427.0 |
|
Operating income |
38.2 |
|
|
18.6 |
|
|
123.4 |
|
|
31.9 |
|
Other expense |
(1.8 |
) |
|
(1.4 |
) |
|
(6.8 |
) |
|
(4.3 |
) |
Income before income
tax provision |
36.4 |
|
|
17.2 |
|
|
116.6 |
|
|
27.6 |
|
Income tax
provision |
10.0 |
|
|
4.2 |
|
|
22.7 |
|
|
6.1 |
|
Net income |
$ |
26.4 |
|
|
$ |
13.0 |
|
|
$ |
93.9 |
|
|
$ |
21.5 |
|
Net income per share –
Basic |
$ |
0.65 |
|
|
$ |
0.33 |
|
|
$ |
2.32 |
|
|
$ |
0.54 |
|
Net income per share –
Diluted |
$ |
0.64 |
|
|
$ |
0.32 |
|
|
$ |
2.28 |
|
|
$ |
0.53 |
|
Weighted average shares
used in computing net income per share: |
|
|
|
|
|
|
|
Basic |
40.5 |
|
|
39.9 |
|
|
40.4 |
|
|
39.8 |
|
Diluted |
41.2 |
|
|
40.7 |
|
|
41.2 |
|
|
40.6 |
|
(1) Amounts are not restated and represent the
amounts recognized under generally accepted accounting principles
in place during that period.
athenahealth,
Inc.CONDENSED CONSOLIDATED BALANCE
SHEETS(Unaudited, in millions, except per share
amounts)
|
|
|
|
|
September 30, 2018 |
|
December 31, 2017 (1) |
Assets |
|
|
|
Current assets: |
|
|
|
Cash and
cash equivalents |
$ |
303.4 |
|
|
$ |
165.1 |
|
Accounts
receivable, net |
167.4 |
|
|
169.5 |
|
Contract
assets |
79.9 |
|
|
— |
|
Prepaid
expenses and other current assets |
63.7 |
|
|
46.8 |
|
Total
current assets |
614.4 |
|
|
381.4 |
|
Property and equipment,
net |
337.0 |
|
|
355.1 |
|
Capitalized software
costs, net |
154.7 |
|
|
139.7 |
|
Purchased intangible
assets, net |
96.6 |
|
|
108.6 |
|
Goodwill |
281.3 |
|
|
274.4 |
|
Deferred tax assets,
net |
1.1 |
|
|
41.8 |
|
Other assets |
103.9 |
|
|
31.3 |
|
Total assets |
$ |
1,589.0 |
|
|
$ |
1,332.3 |
|
Liabilities &
Stockholders’ Equity |
|
|
|
Current
liabilities: |
|
|
|
Accounts
payable |
$ |
2.9 |
|
|
$ |
10.6 |
|
Accrued
compensation |
112.0 |
|
|
94.7 |
|
Accrued
expenses |
52.0 |
|
|
51.5 |
|
Current
portion of long-term debt |
25.8 |
|
|
20.2 |
|
Deferred
revenue |
31.3 |
|
|
30.7 |
|
Total
current liabilities |
224.0 |
|
|
207.7 |
|
Deferred rent, net of
current portion |
30.1 |
|
|
29.3 |
|
Long-term debt, net of
current portion |
232.3 |
|
|
252.6 |
|
Deferred tax liability,
net |
27.6 |
|
|
— |
|
Deferred revenue, net
of current portion |
0.8 |
|
|
46.5 |
|
Other long-term
liabilities |
6.3 |
|
|
4.7 |
|
Total liabilities |
521.1 |
|
|
540.8 |
|
Stockholders’
equity: |
|
|
|
Preferred
stock, $0.01 par value: 5.0 shares authorized; no shares issued and
outstanding at September 30, 2018 and December 31, 2017 |
— |
|
|
— |
|
Common
stock, $0.01 par value: 125.0 shares authorized; 40.6 shares issued
and outstanding at September 30, 2018; 40.1 shares issued and
outstanding at December 31, 2017 |
0.4 |
|
|
0.4 |
|
Additional paid-in capital |
687.2 |
|
|
646.7 |
|
Accumulated other comprehensive loss |
(1.9 |
) |
|
(0.4 |
) |
Retained
earnings |
382.2 |
|
|
144.8 |
|
Total stockholders’
equity |
1,067.9 |
|
|
791.5 |
|
Total liabilities and
stockholders’ equity |
$ |
1,589.0 |
|
|
$ |
1,332.3 |
|
(1) Amounts are not restated and represent the
amounts recognized under generally accepted accounting principles
in place during that period.
athenahealth,
Inc.CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS(Unaudited, in millions)
|
|
|
|
|
Nine Months Ended September 30, |
|
|
2018 |
|
2017 (1) |
CASH FLOWS FROM
OPERATING ACTIVITIES: |
|
|
|
|
Net
income |
|
$ |
93.9 |
|
|
$ |
21.5 |
|
Adjustments to reconcile net income to net cash provided by
operating activities: |
|
|
|
|
Depreciation and amortization of property, equipment, capitalized
software, and purchased intangible assets |
|
112.0 |
|
|
109.3 |
|
Amortization of deferred commissions and contract fulfillment
costs |
|
6.1 |
|
|
— |
|
Deferred
income tax |
|
20.0 |
|
|
4.2 |
|
Stock-based compensation expense |
|
38.5 |
|
|
42.5 |
|
Other
reconciling adjustments |
|
6.4 |
|
|
(0.1 |
) |
Changes
in operating assets and liabilities: |
|
|
|
|
Accounts
receivable, net |
|
2.5 |
|
|
(2.2 |
) |
Contract
assets |
|
(2.5 |
) |
|
— |
|
Prepaid
expenses and other current assets |
|
(16.9 |
) |
|
(8.6 |
) |
Deferred
commissions and contract fulfillment costs and other long-term
assets |
|
(23.9 |
) |
|
(6.8 |
) |
Accounts
payable |
|
(6.7 |
) |
|
0.6 |
|
Accrued
expenses, deferred rent, and other long-term liabilities |
|
9.2 |
|
|
2.0 |
|
Accrued
compensation |
|
12.0 |
|
|
(4.0 |
) |
Deferred
revenue |
|
7.7 |
|
|
2.4 |
|
Net cash
provided by operating activities |
|
258.3 |
|
|
160.8 |
|
CASH FLOWS FROM
INVESTING ACTIVITIES: |
|
|
|
|
Capitalized software costs |
|
(64.9 |
) |
|
(59.3 |
) |
Purchases
of property and equipment |
|
(31.9 |
) |
|
(66.8 |
) |
Payments
on acquisitions, net of cash acquired |
|
(10.1 |
) |
|
(41.1 |
) |
Other
investing activities |
|
3.5 |
|
|
— |
|
Net cash
used in investing activities |
|
(103.4 |
) |
|
(167.2 |
) |
CASH FLOWS FROM
FINANCING ACTIVITIES: |
|
|
|
|
Proceeds
from issuance of common stock under stock plans |
|
15.6 |
|
|
13.4 |
|
Taxes
paid related to net share settlement of stock awards |
|
(15.9 |
) |
|
(17.1 |
) |
Payments
on long-term debt |
|
(15.0 |
) |
|
(15.0 |
) |
Other
financing activities |
|
0.1 |
|
|
0.1 |
|
Net cash
used in financing activities |
|
(15.2 |
) |
|
(18.6 |
) |
Effect of exchange rate
changes on cash and cash equivalents |
|
(1.4 |
) |
|
0.3 |
|
Net increase (decrease)
in cash and cash equivalents |
|
138.3 |
|
|
(24.7 |
) |
Cash and
cash equivalents at beginning of period |
|
165.1 |
|
|
147.4 |
|
Cash and
cash equivalents at end of period |
|
$ |
303.4 |
|
|
$ |
122.7 |
|
(1) Amounts are not restated and
represent the amounts recognized under generally accepted
accounting principles in place during that period.
athenahealth,
Inc.RECONCILIATION OF CHANGES IN REVENUE
STANDARD(Unaudited, in millions, except per share
amounts)
|
|
|
|
|
Three Months Ended September 30, |
|
Change |
|
2018 |
|
2017 |
|
Amount |
|
Percent |
|
As Presented |
|
Impact of New Revenue Standard |
|
Previous Revenue Standard |
Revenue |
$ |
329.5 |
|
|
$ |
1.9 |
|
|
$ |
331.4 |
|
|
$ |
304.6 |
|
|
$ |
26.8 |
|
|
8.8 |
% |
Cost of revenue |
154.4 |
|
|
3.7 |
|
|
158.1 |
|
|
144.0 |
|
|
14.1 |
|
|
9.8 |
% |
Gross profit |
175.1 |
|
|
1.8 |
|
|
173.3 |
|
|
160.6 |
|
|
12.7 |
|
|
7.9 |
% |
Other operating
expenses: |
|
|
|
|
|
|
|
|
|
|
|
Selling
and marketing |
47.6 |
|
|
4.6 |
|
|
52.2 |
|
|
61.8 |
|
|
(9.6 |
) |
|
(15.5 |
)% |
Research
and development |
50.9 |
|
|
— |
|
|
50.9 |
|
|
44.8 |
|
|
6.1 |
|
|
13.6 |
% |
General
and administrative |
38.4 |
|
|
— |
|
|
38.4 |
|
|
35.4 |
|
|
3.0 |
|
|
8.5 |
% |
Total
other operating expenses |
136.9 |
|
|
4.6 |
|
|
141.5 |
|
|
142.0 |
|
|
(0.5 |
) |
|
(0.4 |
)% |
Operating income |
38.2 |
|
|
6.4 |
|
|
31.8 |
|
|
18.6 |
|
|
13.2 |
|
|
71.0 |
% |
Other expense |
(1.8 |
) |
|
— |
|
|
(1.8 |
) |
|
(1.4 |
) |
|
(0.4 |
) |
|
28.6 |
% |
Income before income
tax provision |
36.4 |
|
|
6.4 |
|
|
30.0 |
|
|
17.2 |
|
|
12.8 |
|
|
74.4 |
% |
Income tax
provision |
10.0 |
|
|
1.5 |
|
|
8.5 |
|
|
4.2 |
|
|
4.3 |
|
|
102.4 |
% |
Net income |
$ |
26.4 |
|
|
$ |
4.9 |
|
|
$ |
21.5 |
|
|
$ |
13.0 |
|
|
$ |
8.5 |
|
|
65.4 |
% |
Net income per share –
Basic |
$ |
0.65 |
|
|
$ |
0.12 |
|
|
$ |
0.53 |
|
|
$ |
0.33 |
|
|
$ |
0.20 |
|
|
60.6 |
% |
Net income per share –
Diluted |
$ |
0.64 |
|
|
$ |
0.12 |
|
|
$ |
0.52 |
|
|
$ |
0.32 |
|
|
$ |
0.20 |
|
|
62.5 |
% |
|
|
|
|
|
Nine Months Ended September 30, |
|
Change |
|
2018 |
|
2017 |
|
Amount |
|
Percent |
|
As Presented |
|
Impact of New Revenue Standard |
|
Previous Revenue Standard |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
$ |
982.2 |
|
|
$ |
1.4 |
|
|
$ |
983.6 |
|
|
$ |
891.1 |
|
|
$ |
92.5 |
|
|
10.4 |
% |
Cost of revenue |
460.4 |
|
|
11.8 |
|
|
472.2 |
|
|
432.2 |
|
|
40.0 |
|
|
9.3 |
% |
Gross profit |
521.8 |
|
|
10.4 |
|
|
511.4 |
|
|
458.9 |
|
|
52.5 |
|
|
11.4 |
% |
Other operating
expenses: |
|
|
|
|
|
|
|
|
|
|
|
Selling
and marketing |
146.2 |
|
|
12.4 |
|
|
158.6 |
|
|
192.5 |
|
|
(33.9 |
) |
|
(17.6 |
)% |
Research
and development |
147.5 |
|
|
— |
|
|
147.5 |
|
|
130.0 |
|
|
17.5 |
|
|
13.5 |
% |
General
and administrative |
104.7 |
|
|
— |
|
|
104.7 |
|
|
104.5 |
|
|
0.2 |
|
|
0.2 |
% |
Total
other operating expenses |
398.4 |
|
|
12.4 |
|
|
410.8 |
|
|
427.0 |
|
|
(16.2 |
) |
|
(3.8 |
)% |
Operating income |
123.4 |
|
|
22.8 |
|
|
100.6 |
|
|
31.9 |
|
|
68.7 |
|
|
215.4 |
% |
Other expense |
(6.8 |
) |
|
— |
|
|
(6.8 |
) |
|
(4.3 |
) |
|
(2.5 |
) |
|
58.1 |
% |
Income before income
tax provision |
116.6 |
|
|
22.8 |
|
|
93.8 |
|
|
27.6 |
|
|
66.2 |
|
|
239.9 |
% |
Income tax
provision |
22.7 |
|
|
5.6 |
|
|
17.1 |
|
|
6.1 |
|
|
11.0 |
|
|
180.3 |
% |
Net income |
$ |
93.9 |
|
|
$ |
17.2 |
|
|
$ |
76.7 |
|
|
$ |
21.5 |
|
|
$ |
55.2 |
|
|
256.7 |
% |
Net income per share –
Basic |
$ |
2.32 |
|
|
$ |
0.42 |
|
|
$ |
1.90 |
|
|
$ |
0.54 |
|
|
$ |
1.36 |
|
|
251.9 |
% |
Net income per share –
Diluted |
$ |
2.28 |
|
|
$ |
0.42 |
|
|
$ |
1.86 |
|
|
$ |
0.53 |
|
|
$ |
1.33 |
|
|
250.9 |
% |
athenahealth,
Inc.DISAGGREGATION OF REVENUE AS PREVIOUSLY
PRESENTED(Unaudited, in millions)
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
|
2018 |
|
2017 |
|
2018 |
|
2017 |
|
|
|
|
|
Previous Revenue Standard |
Business services |
|
$ |
322.7 |
|
|
$ |
295.8 |
|
|
$ |
959.6 |
|
|
$ |
867.1 |
|
Implementation and
other |
|
8.7 |
|
|
8.8 |
|
|
24.0 |
|
|
24.0 |
|
Total
revenue |
|
$ |
331.4 |
|
|
$ |
304.6 |
|
|
$ |
983.6 |
|
|
$ |
891.1 |
|
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 nine months ended September 30, 2018 and 2017:
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
2018 |
|
2017 |
|
2018 |
|
2017 |
Stock-based
compensation charged to Condensed Consolidated Statements of
Income: |
|
|
|
|
|
|
|
Cost of revenue |
$ |
3.6 |
|
|
$ |
2.7 |
|
|
$ |
10.8 |
|
|
$ |
10.5 |
|
Selling and
marketing |
3.2 |
|
|
4.3 |
|
|
9.4 |
|
|
13.2 |
|
Research and
development |
3.7 |
|
|
3.2 |
|
|
11.1 |
|
|
10.3 |
|
General and
administrative |
3.6 |
|
|
2.3 |
|
|
7.2 |
|
|
8.5 |
|
Total
stock-based compensation expense |
14.1 |
|
|
12.5 |
|
|
38.5 |
|
|
42.5 |
|
Amortization of
capitalized stock-based compensation related to software
development allocated to cost of revenue (1) |
0.4 |
|
|
0.5 |
|
|
1.4 |
|
|
2.1 |
|
Amortization of
capitalized stock-based compensation related to software
development allocated to research and development (1) |
0.2 |
|
|
— |
|
|
0.2 |
|
|
0.1 |
|
Total |
$ |
14.7 |
|
|
$ |
13.0 |
|
|
$ |
40.1 |
|
|
$ |
44.7 |
|
(1) In addition, for the three months ended
September 30, 2018 and 2017, $0.7 million and $0.6 million,
respectively, of stock-based compensation was capitalized in the
line item Capitalized software costs, net in the Condensed
Consolidated Balance Sheets. For the nine months ended
September 30, 2018 and 2017, $2.2 million and $1.9 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 nine months ended September 30,
2018 and 2017:
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
2018 |
|
2017 |
|
2018 |
|
2017 |
Amortization of
purchased intangible assets allocated to: |
|
|
|
|
|
|
|
Cost of revenue |
$ |
1.5 |
|
|
$ |
1.9 |
|
|
$ |
4.7 |
|
|
$ |
4.3 |
|
Selling and
marketing |
3.3 |
|
|
3.2 |
|
|
9.9 |
|
|
9.7 |
|
Total
amortization of purchased intangible assets |
$ |
4.8 |
|
|
$ |
5.1 |
|
|
$ |
14.6 |
|
|
$ |
14.0 |
|
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 Gross MarginSet forth below is a
presentation of our “Non-GAAP Gross Profit” and “Non-GAAP Gross
Margin,” which represents Non-GAAP Gross Profit as a percentage of
total revenue, for the three and nine months ended
September 30, 2018 and 2017:
(unaudited, in
millions) |
Three Months Ended September 30, |
|
Change |
|
2018 |
|
2017 |
|
Amount |
|
Percent |
|
As Presented |
|
Impact of New Revenue Standard |
|
Previous Revenue Standard |
Total revenue |
$ |
329.5 |
|
|
$ |
1.9 |
|
|
$ |
331.4 |
|
|
$ |
304.6 |
|
|
$ |
26.8 |
|
|
8.8 |
% |
Cost of revenue |
154.4 |
|
|
3.7 |
|
|
158.1 |
|
|
144.0 |
|
|
14.1 |
|
|
9.8 |
% |
GAAP Gross Profit |
175.1 |
|
|
1.8 |
|
|
173.3 |
|
|
160.6 |
|
|
12.7 |
|
|
7.9 |
% |
GAAP Gross Margin |
53.1 |
% |
|
|
|
52.3 |
% |
|
52.7 |
% |
|
(0.4 |
)% |
|
NM |
|
Add: Stock-based compensation allocated to cost of revenue |
3.6 |
|
|
— |
|
|
3.6 |
|
|
2.7 |
|
|
|
|
|
Add: Amortization of capitalized stock-based compensation related
to software development allocated to cost of revenue |
0.4 |
|
|
— |
|
|
0.4 |
|
|
0.5 |
|
|
|
|
|
Add: Amortization of purchased intangible assets allocated to cost
of revenue |
1.5 |
|
|
— |
|
|
1.5 |
|
|
1.9 |
|
|
|
|
|
Add: Integration and transaction costs allocated to cost of
revenue |
0.2 |
|
|
— |
|
|
0.2 |
|
|
0.1 |
|
|
|
|
|
Add: Exit costs, including restructuring costs allocated to cost of
revenue |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
|
Non-GAAP
Gross Profit |
$ |
180.8 |
|
|
$ |
1.8 |
|
|
$ |
179.0 |
|
|
$ |
165.8 |
|
|
$ |
13.2 |
|
|
8.0 |
% |
Non-GAAP
Gross Margin |
54.9 |
% |
|
|
|
54.0 |
% |
|
54.4 |
% |
|
(0.4 |
)% |
|
NM |
|
NM indicates percentage is not meaningful.
(unaudited, in
millions) |
Nine Months Ended September 30, |
|
Change |
|
2018 |
|
2017 |
|
Amount |
|
Percent |
|
As Presented |
|
Impact of New Revenue Standard |
|
Previous Revenue Standard |
Total revenue |
$ |
982.2 |
|
|
$ |
1.4 |
|
|
$ |
983.6 |
|
|
$ |
891.1 |
|
|
$ |
92.5 |
|
|
10.4 |
% |
Cost of revenue |
460.4 |
|
|
11.8 |
|
|
472.2 |
|
|
432.2 |
|
|
40.0 |
|
|
9.3 |
% |
GAAP Gross Profit |
521.8 |
|
|
10.4 |
|
|
511.4 |
|
|
458.9 |
|
|
52.5 |
|
|
11.4 |
% |
GAAP Gross Margin |
53.1 |
% |
|
|
|
52.0 |
% |
|
51.5 |
% |
|
0.5 |
% |
|
NM |
|
Add: Stock-based compensation allocated to cost of revenue |
10.8 |
|
|
— |
|
|
10.8 |
|
|
10.5 |
|
|
|
|
|
Add: Amortization of capitalized stock-based compensation related
to software development allocated to cost of revenue |
1.4 |
|
|
— |
|
|
1.4 |
|
|
2.1 |
|
|
|
|
|
Add: Amortization of purchased intangible assets allocated to cost
of revenue |
4.7 |
|
|
— |
|
|
4.7 |
|
|
4.3 |
|
|
|
|
|
Add: Integration and transaction costs allocated to cost of
revenue |
0.4 |
|
|
— |
|
|
0.4 |
|
|
0.2 |
|
|
|
|
|
Add: Exit costs, including restructuring costs allocated to cost of
revenue |
0.8 |
|
|
— |
|
|
0.8 |
|
|
— |
|
|
|
|
|
Non-GAAP Gross
Profit |
$ |
539.9 |
|
|
$ |
10.4 |
|
|
$ |
529.5 |
|
|
$ |
476.0 |
|
|
$ |
53.5 |
|
|
11.2 |
% |
Non-GAAP Gross
Margin |
55.0 |
% |
|
|
|
53.8 |
% |
|
53.4 |
% |
|
0.4 |
% |
|
NM |
|
NM indicates percentage is not meaningful.
Non-GAAP EBITDASet forth below is a
reconciliation of our “Non-GAAP EBITDA” and “Non-GAAP EBITDA
Margin,” which represents Non-GAAP EBITDA as a percentage of total
revenue, for the three and nine months ended September 30,
2018 and 2017:
NM indicates percentage is not meaningful.
(unaudited, in
millions) |
Three Months Ended September 30, |
|
Change |
|
2018 |
|
2017 |
|
Amount |
|
Percent |
|
As Presented |
|
Impact of New Revenue Standard |
|
Previous Revenue Standard |
Total revenue |
$ |
329.5 |
|
|
$ |
1.9 |
|
|
$ |
331.4 |
|
|
$ |
304.6 |
|
|
$ |
26.8 |
|
|
8.8 |
% |
GAAP net income |
26.4 |
|
|
4.9 |
|
|
21.5 |
|
|
13.0 |
|
|
8.5 |
|
|
65.4 |
% |
Add: Provision for income taxes |
10.0 |
|
|
1.5 |
|
|
8.5 |
|
|
4.2 |
|
|
|
|
|
Add: Total other expense |
1.8 |
|
|
— |
|
|
1.8 |
|
|
1.4 |
|
|
|
|
|
Add: Stock-based compensation expense |
14.1 |
|
|
— |
|
|
14.1 |
|
|
12.5 |
|
|
|
|
|
Add: Amortization of capitalized stock-based compensation related
to software development |
0.6 |
|
|
— |
|
|
0.6 |
|
|
0.5 |
|
|
|
|
|
Add: Depreciation and amortization |
33.1 |
|
|
— |
|
|
33.1 |
|
|
30.7 |
|
|
|
|
|
Add: Amortization of purchased intangible assets |
4.8 |
|
|
— |
|
|
4.8 |
|
|
5.1 |
|
|
|
|
|
Add: Amortization of deferred commissions and contract fulfillment
costs |
2.2 |
|
|
2.2 |
|
|
— |
|
|
— |
|
|
|
|
|
Add: Integration and transaction costs |
2.6 |
|
|
— |
|
|
2.6 |
|
|
2.8 |
|
|
|
|
|
Add: Exit costs, including restructuring costs |
0.7 |
|
|
— |
|
|
0.7 |
|
|
— |
|
|
|
|
|
Non-GAAP EBITDA |
$ |
96.3 |
|
|
$ |
8.6 |
|
|
$ |
87.7 |
|
|
$ |
70.2 |
|
|
$ |
17.5 |
|
|
24.9 |
% |
Non-GAAP EBITDA
Margin |
29.2 |
% |
|
|
|
26.5 |
% |
|
23.0 |
% |
|
3.5 |
% |
|
NM |
|
NM indicates percentage is not meaningful.
|
|
|
|
(unaudited, in
millions) |
Nine Months Ended September 30, |
|
Change |
|
2018 |
|
2017 |
|
Amount |
|
Percent |
|
As Presented |
|
Impact of New Revenue Standard |
|
Previous Revenue Standard |
Total revenue |
$ |
982.2 |
|
|
$ |
1.4 |
|
|
$ |
983.6 |
|
|
$ |
891.1 |
|
|
$ |
92.5 |
|
|
10.4 |
% |
GAAP net income |
93.9 |
|
|
17.2 |
|
|
76.7 |
|
|
21.5 |
|
|
55.2 |
|
|
256.7 |
% |
Add: Provision for income taxes |
22.7 |
|
|
5.6 |
|
|
17.1 |
|
|
6.1 |
|
|
|
|
|
Add: Total other expense |
6.8 |
|
|
— |
|
|
6.8 |
|
|
4.3 |
|
|
|
|
|
Add: Stock-based compensation expense |
38.5 |
|
|
— |
|
|
38.5 |
|
|
42.5 |
|
|
|
|
|
Add: Amortization of capitalized stock-based compensation related
to software development |
1.6 |
|
|
— |
|
|
1.6 |
|
|
2.2 |
|
|
|
|
|
Add: Depreciation and amortization |
95.4 |
|
|
— |
|
|
95.4 |
|
|
92.7 |
|
|
|
|
|
Add: Amortization of purchased intangible assets |
14.6 |
|
|
— |
|
|
14.6 |
|
|
14.0 |
|
|
|
|
|
Add: Amortization of deferred commissions and contract fulfillment
costs |
6.1 |
|
|
6.1 |
|
|
— |
|
|
— |
|
|
|
|
|
Add: Integration and transaction costs |
9.1 |
|
|
— |
|
|
9.1 |
|
|
6.8 |
|
|
|
|
|
Add: Exit costs, including restructuring costs |
5.3 |
|
|
— |
|
|
5.3 |
|
|
— |
|
|
|
|
|
Non-GAAP EBITDA |
$ |
294.0 |
|
|
$ |
28.9 |
|
|
$ |
265.1 |
|
|
$ |
190.1 |
|
|
$ |
75.0 |
|
|
39.5 |
% |
Non-GAAP EBITDA
Margin |
29.9 |
% |
|
|
|
27.0 |
% |
|
21.3 |
% |
|
5.7 |
% |
|
NM |
|
NM indicates percentage is not meaningful.
Non-GAAP Operating IncomeSet forth below is a
reconciliation of our “Non-GAAP Operating Income” and “Non-GAAP
Operating Margin,” which represents Non-GAAP Operating Income as a
percentage of total revenue, for the three and nine months ended
September 30, 2018 and 2017:
(unaudited, in
millions) |
Three Months Ended September 30, |
|
Change |
|
2018 |
|
2017 |
|
Amount |
|
Percent |
|
As Presented |
|
Impact of New Revenue Standard |
|
Previous Revenue Standard |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue |
$ |
329.5 |
|
|
$ |
1.9 |
|
|
$ |
331.4 |
|
|
$ |
304.6 |
|
|
$ |
26.8 |
|
|
8.8 |
% |
GAAP net income |
26.4 |
|
|
4.9 |
|
|
21.5 |
|
|
13.0 |
|
|
8.5 |
|
|
65.4 |
% |
Add: Provision for income taxes |
10.0 |
|
|
1.5 |
|
|
8.5 |
|
|
4.2 |
|
|
|
|
|
Add: Total other expense |
1.8 |
|
|
— |
|
|
1.8 |
|
|
1.4 |
|
|
|
|
|
GAAP operating
income |
$ |
38.2 |
|
|
$ |
6.4 |
|
|
$ |
31.8 |
|
|
$ |
18.6 |
|
|
$ |
13.2 |
|
|
71.0 |
% |
GAAP operating
margin |
11.6 |
% |
|
|
|
9.6 |
% |
|
6.1 |
% |
|
3.5 |
% |
|
NM |
|
Add: Stock-based compensation expense |
14.1 |
|
|
— |
|
|
14.1 |
|
|
12.5 |
|
|
|
|
|
Add: Amortization of capitalized stock-based compensation related
to software development |
0.6 |
|
|
— |
|
|
0.6 |
|
|
0.5 |
|
|
|
|
|
Add: Amortization of purchased intangible assets |
4.8 |
|
|
— |
|
|
4.8 |
|
|
5.1 |
|
|
|
|
|
Add: Integration and transaction costs |
2.6 |
|
|
— |
|
|
2.6 |
|
|
2.8 |
|
|
|
|
|
Add: Exit costs, including restructuring costs |
0.7 |
|
|
— |
|
|
0.7 |
|
|
— |
|
|
|
|
|
Non-GAAP Operating
Income |
$ |
61.0 |
|
|
$ |
6.4 |
|
|
$ |
54.6 |
|
|
$ |
39.5 |
|
|
$ |
15.1 |
|
|
38.2 |
% |
Non-GAAP Operating
Margin |
18.5 |
% |
|
|
|
16.5 |
% |
|
13.0 |
% |
|
3.5 |
% |
|
NM |
|
NM indicates percentage is not meaningful.
(unaudited, in
millions) |
Nine Months Ended September 30, |
|
Change |
|
2018 |
|
2017 |
|
Amount |
|
Percent |
|
As Presented |
|
Impact of New Revenue Standard |
|
Previous Revenue Standard |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue |
$ |
982.2 |
|
|
$ |
1.4 |
|
|
$ |
983.6 |
|
|
$ |
891.1 |
|
|
$ |
92.5 |
|
|
10.4 |
% |
GAAP net income |
93.9 |
|
|
17.2 |
|
|
76.7 |
|
|
21.5 |
|
|
55.2 |
|
|
256.7 |
% |
Add: Provision for income taxes |
22.7 |
|
|
5.6 |
|
|
17.1 |
|
|
6.1 |
|
|
|
|
|
Add: Total other expense |
6.8 |
|
|
— |
|
|
6.8 |
|
|
4.3 |
|
|
|
|
|
GAAP operating
income |
$ |
123.4 |
|
|
$ |
22.8 |
|
|
$ |
100.6 |
|
|
$ |
31.9 |
|
|
$ |
68.7 |
|
|
215.4 |
% |
GAAP operating
margin |
12.6 |
% |
|
|
|
10.2 |
% |
|
3.6 |
% |
|
6.6 |
% |
|
NM |
|
Add: Stock-based compensation expense |
38.5 |
|
|
— |
|
|
38.5 |
|
|
42.5 |
|
|
|
|
|
Add: Amortization of capitalized stock-based compensation related
to software development |
1.6 |
|
|
— |
|
|
1.6 |
|
|
2.2 |
|
|
|
|
|
Add: Amortization of purchased intangible assets |
14.6 |
|
|
— |
|
|
14.6 |
|
|
14.0 |
|
|
|
|
|
Add: Integration and transaction costs |
9.1 |
|
|
— |
|
|
9.1 |
|
|
6.8 |
|
|
|
|
|
Add: Exit costs, including restructuring costs |
5.3 |
|
|
— |
|
|
5.3 |
|
|
— |
|
|
|
|
|
Non-GAAP Operating
Income |
$ |
192.5 |
|
|
$ |
22.8 |
|
|
$ |
169.7 |
|
|
$ |
97.4 |
|
|
$ |
72.3 |
|
|
74.2 |
% |
Non-GAAP Operating
Margin |
19.6 |
% |
|
|
|
17.3 |
% |
|
10.9 |
% |
|
6.4 |
% |
|
NM |
|
NM indicates percentage is not meaningful.
Non-GAAP Net IncomeSet forth below is a
reconciliation of our “Non-GAAP Net Income” for the three and nine
months ended September 30, 2018 and 2017:
(unaudited, in
millions, except per share amounts) |
Three Months Ended September 30, |
|
Change |
|
2018 |
|
2017 |
|
Amount |
|
Percent |
|
As Presented |
|
Impact of New Revenue Standard |
|
Previous Revenue Standard |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP net income |
$ |
26.4 |
|
|
$ |
4.9 |
|
|
$ |
21.5 |
|
|
$ |
13.0 |
|
|
$ |
8.5 |
|
|
65.4 |
% |
Add: Stock-based
compensation expense |
14.1 |
|
|
— |
|
|
14.1 |
|
|
12.5 |
|
|
|
|
|
Add:
Amortization of capitalized stock-based compensation related to
software development |
0.6 |
|
|
— |
|
|
0.6 |
|
|
0.5 |
|
|
|
|
|
Add:
Amortization of purchased intangible assets |
4.8 |
|
|
— |
|
|
4.8 |
|
|
5.1 |
|
|
|
|
|
Add: Integration
and transaction costs |
2.6 |
|
|
— |
|
|
2.6 |
|
|
2.8 |
|
|
|
|
|
Add: Exit costs,
including restructuring costs |
0.7 |
|
|
— |
|
|
0.7 |
|
|
— |
|
|
|
|
|
Add: Loss on
investments, net |
0.1 |
|
|
— |
|
|
0.1 |
|
|
— |
|
|
|
|
|
Sub-total of
reconciling items |
22.9 |
|
|
— |
|
|
22.9 |
|
|
20.9 |
|
|
2.0 |
|
|
9.6 |
% |
Add: Tax impact
of reconciling items (1) |
(5.7 |
) |
|
— |
|
|
(5.7 |
) |
|
(8.4 |
) |
|
|
|
|
Add: Tax impact
resulting from applying non-GAAP tax rate (2) |
0.9 |
|
|
0.1 |
|
|
1.0 |
|
|
(2.6 |
) |
|
|
|
|
Non-GAAP Net
Income |
$ |
44.5 |
|
|
$ |
4.8 |
|
|
$ |
39.7 |
|
|
$ |
22.9 |
|
|
$ |
16.8 |
|
|
73.4 |
% |
Weighted average shares
- Diluted |
41.2 |
|
|
41.2 |
|
|
41.2 |
|
|
40.7 |
|
|
0.5 |
|
|
1.2 |
% |
Non-GAAP Net Income per
Share - Diluted |
$ |
1.08 |
|
|
$ |
0.12 |
|
|
$ |
0.96 |
|
|
$ |
0.56 |
|
|
$ |
0.40 |
|
|
71.4 |
% |
(1) Tax impact calculated using a statutory tax rate
of 25% for Q3 2018 and 40% for Q3 2017.
(2) Represents adjusting the GAAP net income (loss)
to a non-GAAP tax rate of 25% for Q3 2018 and 40% for Q3 2017.
(unaudited, in
millions, except per share amounts) |
Nine Months Ended September 30, |
|
Change |
|
2018 |
|
2017 |
|
Amount |
|
Percent |
|
As Presented |
|
Impact of New Revenue Standard |
|
Previous Revenue Standard |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP net income |
$ |
93.9 |
|
|
$ |
17.2 |
|
|
$ |
76.7 |
|
|
$ |
21.5 |
|
|
$ |
55.2 |
|
|
256.7 |
% |
Add: Stock-based
compensation expense |
38.5 |
|
|
— |
|
|
38.5 |
|
|
42.5 |
|
|
|
|
|
Add:
Amortization of capitalized stock-based compensation related to
software development |
1.6 |
|
|
— |
|
|
1.6 |
|
|
2.2 |
|
|
|
|
|
Add:
Amortization of purchased intangible assets |
14.6 |
|
|
— |
|
|
14.6 |
|
|
14.0 |
|
|
|
|
|
Add: Integration
and transaction costs |
9.1 |
|
|
— |
|
|
9.1 |
|
|
6.8 |
|
|
|
|
|
Add: Exit costs,
including restructuring costs |
5.3 |
|
|
— |
|
|
5.3 |
|
|
— |
|
|
|
|
|
Add: Loss on
investments, net |
1.6 |
|
|
— |
|
|
1.6 |
|
|
— |
|
|
|
|
|
Sub-total of
reconciling items |
70.7 |
|
|
— |
|
|
70.7 |
|
|
65.5 |
|
|
5.2 |
|
|
7.9 |
% |
Add: Tax impact
of reconciling items (1) |
(17.7 |
) |
|
— |
|
|
(17.7 |
) |
|
(26.2 |
) |
|
|
|
|
Add: Tax impact
resulting from applying non-GAAP tax rate (2) |
(6.4 |
) |
|
0.1 |
|
|
(6.3 |
) |
|
(4.9 |
) |
|
|
|
|
Non-GAAP Net
Income |
$ |
140.5 |
|
|
$ |
17.1 |
|
|
$ |
123.4 |
|
|
$ |
55.9 |
|
|
$ |
67.5 |
|
|
120.8 |
% |
Weighted average shares
- Diluted |
41.2 |
|
|
41.2 |
|
|
41.2 |
|
|
40.6 |
|
|
0.6 |
|
|
1.5 |
% |
Non-GAAP Net Income per
Share - Diluted |
$ |
3.41 |
|
|
$ |
0.42 |
|
|
$ |
3.00 |
|
|
$ |
1.38 |
|
|
$ |
1.62 |
|
|
117.4 |
% |
(1) Tax impact calculated using a statutory tax rate
of 25% for 2018 and 40% for 2017.
(2) Represents adjusting the GAAP net income (loss)
to a non-GAAP tax rate of 25% for 2018 and 40% for 2017.
Non-GAAP Net Income per Diluted ShareSet forth
below is a reconciliation of our “Non-GAAP Net Income per Diluted
Share” for the three and nine months ended September 30, 2018
and 2017:
(unaudited, in
millions, except per share amounts) |
Three Months Ended September 30, |
|
Change |
|
2018 |
|
2017 |
|
Amount |
|
Percent |
|
As Presented |
|
Impact of New Revenue Standard |
|
Previous Revenue Standard |
GAAP net income per
share - diluted |
$ |
0.64 |
|
|
$ |
0.12 |
|
|
$ |
0.52 |
|
|
$ |
0.32 |
|
|
$ |
0.20 |
|
|
62.5 |
% |
Add: Stock-based
compensation expense |
0.34 |
|
|
— |
|
|
0.34 |
|
|
0.31 |
|
|
|
|
|
Add:
Amortization of capitalized stock-based compensation related to
software development |
0.01 |
|
|
— |
|
|
0.01 |
|
|
0.01 |
|
|
|
|
|
Add:
Amortization of purchased intangible assets |
0.12 |
|
|
— |
|
|
0.12 |
|
|
0.13 |
|
|
|
|
|
Add: Integration
and transaction costs |
0.06 |
|
|
— |
|
|
0.06 |
|
|
0.07 |
|
|
|
|
|
Add: Exit costs,
including restructuring costs |
0.02 |
|
|
— |
|
|
0.02 |
|
|
— |
|
|
|
|
|
Add: Loss on
investments, net |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
|
Sub-total of tax
deductible items |
0.56 |
|
|
— |
|
|
0.56 |
|
|
0.51 |
|
|
0.05 |
|
|
9.8 |
% |
Add: Tax impact
of reconciling items (1) |
(0.14 |
) |
|
— |
|
|
(0.14 |
) |
|
(0.21 |
) |
|
|
|
|
Add: Tax impact
resulting from applying non-GAAP tax rate (2) |
0.02 |
|
|
— |
|
|
0.02 |
|
|
(0.06 |
) |
|
|
|
|
Non-GAAP Net Income per
Share - Diluted |
$ |
1.08 |
|
|
$ |
0.12 |
|
|
$ |
0.96 |
|
|
$ |
0.56 |
|
|
$ |
0.40 |
|
|
71.4 |
% |
Weighted average shares
- Diluted |
41.2 |
|
|
41.2 |
|
|
41.2 |
|
|
40.7 |
|
|
0.5 |
|
|
1.2 |
% |
(1) Tax impact calculated using a statutory tax rate
of 25% for Q3 2018 and 40% for Q3 2017.
(2) Represents adjusting the GAAP net income (loss)
to a non-GAAP tax rate of 25% for Q3 2018 and 40% for Q3 2017.
(unaudited, in
millions, except per share amounts) |
Nine Months Ended September 30, |
|
Change |
|
2018 |
|
2017 |
|
Amount |
|
Percent |
|
As Presented |
|
Impact of New Revenue Standard |
|
Previous Revenue Standard |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP net income per
share - diluted |
$ |
2.28 |
|
|
$ |
0.42 |
|
|
$ |
1.86 |
|
|
$ |
0.53 |
|
|
$ |
1.33 |
|
|
250.9 |
% |
Add: Stock-based
compensation expense |
0.93 |
|
|
— |
|
|
0.93 |
|
|
1.05 |
|
|
|
|
|
Add:
Amortization of capitalized stock-based compensation related to
software development |
0.04 |
|
|
— |
|
|
0.04 |
|
|
0.05 |
|
|
|
|
|
Add:
Amortization of purchased intangible assets |
0.35 |
|
|
— |
|
|
0.35 |
|
|
0.34 |
|
|
|
|
|
Add: Integration
and transaction costs |
0.22 |
|
|
— |
|
|
0.22 |
|
|
0.17 |
|
|
|
|
|
Add: Exit costs,
including restructuring costs |
0.13 |
|
|
— |
|
|
0.13 |
|
|
— |
|
|
|
|
|
Add: Loss on
investments, net |
0.04 |
|
|
— |
|
|
0.04 |
|
|
— |
|
|
|
|
|
Sub-total of tax
deductible items |
1.72 |
|
|
— |
|
|
1.72 |
|
|
1.61 |
|
|
0.11 |
|
|
6.8 |
% |
Add: Tax impact
of reconciling items (1) |
(0.43 |
) |
|
— |
|
|
(0.43 |
) |
|
(0.65 |
) |
|
|
|
|
Add: Tax impact
resulting from applying non-GAAP tax rate (2) |
(0.16 |
) |
|
— |
|
|
(0.15 |
) |
|
(0.12 |
) |
|
|
|
|
Non-GAAP Net Income per
Share - Diluted |
$ |
3.41 |
|
|
$ |
0.42 |
|
|
$ |
3.00 |
|
|
$ |
1.38 |
|
|
$ |
1.62 |
|
|
117.4 |
% |
Weighted average shares
- Diluted |
41.2 |
|
|
41.2 |
|
|
41.2 |
|
|
40.6 |
|
|
0.6 |
|
|
1.5 |
% |
(1) Tax impact calculated using a statutory tax rate
of 25% for 2018 and 40% for 2017.
(2) Represents adjusting the GAAP net income (loss)
to a non-GAAP tax rate of 25% for 2018 and 40% for 2017.
athenahealth,
Inc.RECONCILIATION OF NON-GAAP FINANCIAL
MEASURESTO COMPARABLE GAAP MEASURES FOR FISCAL
YEAR 2018 GUIDANCE(Unaudited, in
millions)
Please note that the figures presented below may not sum exactly
due to rounding.
Non-GAAP Operating Income Guidance - Previous Revenue
StandardSet forth below is a reconciliation of our
“Non-GAAP Operating Income” and “Non-GAAP Operating Margin”
guidance for fiscal year 2018, which represents Non-GAAP Operating
Income as a percentage of total revenue. Fiscal year 2018 guidance
is prior to the impact of the new revenue recognition standard to
allow for comparability against historical results. We will present
our Condensed Consolidated Statements of Net Income for our fiscal
year 2018 results including the impact of the new revenue
recognition standard and will provide a separate reconciliation to
results prior to the impacts resulting from the new revenue
recognition standard. Finally, the Non-GAAP adjusting line items
should not be relied upon individually, as we are not guiding on
individual line items, but upon the total operating income metrics,
as included within our guidance table below.
|
|
(unaudited, in
millions) |
Previous Revenue Standard |
|
LOW |
|
HIGH |
|
|
|
Fiscal Year Ending December 31,
2018 |
Total
revenue |
$ |
1,330 |
|
|
$ |
1,360 |
|
|
|
|
|
GAAP operating
income |
$ |
128 |
|
|
$ |
155 |
|
|
|
|
|
GAAP operating
margin |
9.6 |
% |
|
11.4 |
% |
|
|
|
|
Add: Stock-based
compensation expense |
53 |
|
|
47 |
|
Add:
Amortization of capitalized stock-based compensation related to
software development |
2 |
|
|
2 |
|
Add:
Amortization of purchased intangible assets |
19 |
|
|
19 |
|
Add: Integration
and transaction costs |
12 |
|
|
11 |
|
Add: Exit costs,
including restructuring |
5 |
|
|
4 |
|
|
|
|
|
Non-GAAP
Operating Income |
$ |
219 |
|
|
$ |
238 |
|
Non-GAAP
Operating Margin |
16.5 |
% |
|
17.5 |
% |
|
|
|
|
|
|
Non-GAAP Operating Income Guidance - New Revenue
StandardSet forth below is a reconciliation of our
“Non-GAAP Operating Income” and “Non-GAAP Operating Margin”
guidance for fiscal year 2018, which represents Non-GAAP Operating
Income as a percentage of total revenue. Please note that the
fiscal year 2018 guidance detailed below includes the impact of the
new revenue recognition standard. Finally, the Non-GAAP adjusting
line items should not be relied upon individually, as we are not
guiding on individual line items, but upon the total operating
income metrics, as included within our guidance table below.
|
|
(unaudited, in
millions) |
New Revenue Standard |
|
LOW |
|
HIGH |
|
|
|
Fiscal Year Ending December 31,
2018 |
Total
revenue |
$ |
1,335 |
|
|
$ |
1,365 |
|
|
|
|
|
GAAP operating
income |
$ |
153 |
|
|
$ |
187 |
|
|
|
|
|
GAAP operating
margin |
11.5 |
% |
|
13.7 |
% |
|
|
|
|
Add: Stock-based
compensation expense |
53 |
|
|
47 |
|
Add:
Amortization of capitalized stock-based compensation related to
software development |
2 |
|
|
2 |
|
Add:
Amortization of purchased intangible assets |
19 |
|
|
19 |
|
Add: Integration
and transaction costs |
12 |
|
|
11 |
|
Add: Exit costs,
including restructuring |
5 |
|
|
4 |
|
|
|
|
|
Non-GAAP
Operating Income |
$ |
244 |
|
|
$ |
270 |
|
Non-GAAP
Operating Margin |
18.3 |
% |
|
19.8 |
% |
|
|
|
|
|
|
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.
Management defines “Non-GAAP 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 Gross Margin” as Non-GAAP Gross 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 EBITDA” 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; depreciation and amortization; amortization of
purchased intangible assets; amortization of deferred commissions
and contract fulfillment costs; integration and transaction costs;
and exit costs, including restructuring costs; and “Non-GAAP EBITDA
Margin” as Non-GAAP EBITDA as a percentage of total revenue.
Management defines “Non-GAAP 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; and exit costs, including
restructuring costs; and “Non-GAAP Operating Margin” as Non-GAAP
Operating Income as a percentage of total revenue. Management
defines “Non-GAAP 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 Net Income
per Share - Diluted” as Non-GAAP 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 below 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 — represent costs
incurred as a result of strategic realignments including those
related to workforce reductions, termination of certain lease or
other agreements, and non-cash charges related to the write down of
certain assets. 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 unrecognized or
recognized gains or losses on the fair value, sales, or conversions
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. Upon the adoption of the new financial instruments
accounting standard effective for 2018, we present gains or losses
on investments in Other income (expense) on our Condensed
Consolidated Statement of Income which is not included in Operating
Income but is included in the subtotal Income before income tax
provision.
- Non-GAAP tax rate — our statutory tax rates of 25% for fiscal
year 2018 and 40% for fiscal year 2017 are applied to normalize the
tax impact to our Non-GAAP Net Income per Diluted Share based on
the fact that historically a relatively small change in pre-tax
GAAP income (loss) in any one period could result in a volatile
GAAP effective tax rate.
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