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athenahealth (ATHN) Tops Earnings & Revenue Estimates in Q4

Zacks Equity Research

Maintaining its streak of positive earnings surprises, athenahealth Inc. ATHN reported adjusted earnings of $1.11 per share in the fourth quarter of 2017, which beat the Zacks Consensus Estimate of 64 cents. Further, earnings increased a whopping 79% on a year-over-year basis.

The Watertown, MA-based maker of billing and medical practice management software posted revenues of $329 million, beating the Zacks Consensus Estimate of $323 million. Revenues increased 14.2% on a year-over-year basis.

athenahealth flaunts a Zacks Rank #1 (Strong Buy).

2017 at a Glance

In 2017, total revenues of $1,220.3 million rose 13% year over year. Consolidated bookings were $293 million, down from $348 million in 2016.

Business and Services segment registered revenues of $1,188.4 million (97.4% of net revenues). Implementation and Other segment reported revenues of $31.9 million (2.6% of net revenues).

athenahealth, Inc. Price, Consensus and EPS Surprise

 

athenahealth, Inc. Price, Consensus and EPS Surprise | athenahealth, Inc. Quote

 

Q4 Details

Segment Details

athenahealth reported Business and Services revenues of $321.3 million, up 15.2% from the year-ago quarter. However, the implementation and other segment reported revenues of $7.9 million, down 15.1% year over year.

Network Expansion

Per management, the company expanded its network across ambulatory, hospital and population health platforms. Recently, athenahealth surpassed the 100 million patient threshold and now serves more than 100,000 healthcare providers. The company’s network has 110,648 Collector Providers, 60342 Clinical Providers and 69,915 Communicator Providers, up 15%, 22% and 21% respectively on a year-over-year basis.

In the athenaOne (Hospital) platform, number of discharged beds increased a whopping 349% year over year.

In the Population Health platform, number of covered lives increased 48% year over year.

Buoyed by stellar network expansion, the company is expected to fortify its foothold in the Revenue Cycle Management (RCM) space and drive revenues and earnings over the long haul.

Margin Details

A strong client base has been a major growth driver for the company. Adjusted gross margin in the fourth quarter was 68%, compared with 66.2% in the year-ago quarter.

The company saw an operating margin of 14.3% of total revenues, up 210 basis points year over year. Notably, adjusted operating income in the reported quarter increased 83% year over year to $78 million.

Guidance

athenahealth is expected to introduce fiscal 2018 guidance at the 2018 Investor Summit, which is scheduled to be held on Feb 15.

Meanwhile, the Zacks Consensus estimate for 2018 earnings is pegged at $2.96, up 19.4% year over year. For 2018, the Zacks Consensus Estimate for revenues is pegged at $1.34 billion.

Bottom Line

athenahealth exited the fourth quarter of 2017 on a solid note, with earnings and revenues outpacing the Zacks Consensus Estimate. We believe applications like athenaClinicals, athenaClinicals-Streamlined, athenaInsight, athenaCommunicator, athenaOne, athenaCollector for Hospital and Health Systems and the brand promise of ‘Unbreak Healthcare’ are fortifying its market position in terms of exclusiveness of services provided in the respective markets. A strong client base has been a key catalyst.

Business and Services revenues witnessed year-over-year growth while the same in the implementation and other segment declined. Among major concerns, athenahealth’s EHR solution faces significant competition from the likes of Allscripts Healthcare Solutions and others. Further, athenahealth fell short of its bookings goals in 2017. Deteriorated client retention rates also add to the company’s woes.

Other Key Picks

A few top-ranked stocks that reported impressive earnings this season are PetMed Express PETS, PerkinElmer PKI and Accuray ARAY. While PetMed sports a Zacks Rank #1, PerkinElmer and Accuray carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

PetMed recently announced third-quarter fiscal 2018adjusted earnings per share of 44 cents. The bottom line soared 88.3% year over year. Revenues in the reported quarter rose 13.7% on a year-over-year basis to $60.1 million.

PerkinElmer reported fourth-quarter 2017 adjusted earnings per share of 97 cents. Adjusted revenues were approximately $641.6 million, up from $567 million in the year-ago quarter.

Accuray reported a loss of 6 cents per share in second-quarter fiscal 2018, narrower by 5 cents than the year-ago quarter’s figure. The top line improved 15% year over year to $100.3 million.

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