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Athenahealth (NASDAQ: ATHN) is accustomed to rapid sales growth. It's expected -- by the company and by investors. In the second quarter, the healthcare technology company delivered, with year-over-year sales growth of over 37%. Athenahealth reported its third-quarter results after the market closed on Thursday. Here are the highlights.
Athenahealth results: The raw numbers
Data source: Athenahealth. YOY = year over year.
What happened this quarter?
While revenue increased at a solid pace compared to the prior-year period, it wasn't as impressive as the improvement posted by Athenahealth in the second quarter of 2016. Earnings, on the other hand, soared. The tremendous year-over-year earnings growth stemmed primarily from two factors: controlling costs, and a tax hit in the prior-year period that weighed down net income.
Athenahealth posted solid numbers for its three major product lines:
- 3,829 net new additional physicians and 5,092 net new additional providers using athenaCollector.
- 2,090 net new additional physicians and 2,844 net new additional providersusing athenaClinicals.
- 3,416 net new additional physicians and 4,478 net new additional providersusing athenaCommunicator.
These figures reflected significant improvement across the board over net additions from the second quarter of 2016. However, the results were mixed compared to what Athenahealth posted in the prior-year period.
What management had to say
Athenahealth Chairman and CEO Jonathan Bush focused less on the third-quarter results and more on the big picture for the company -- and long-term investors should as well. Bush said:
The company didn't change the fiscal year 2016 guidance previously given in its investor conference held on Dec. 10, 2015. However, Athenahealth stated that it expects to come in near the midpoint of the previous guidance in all categories. That translates to roughly $1.1 billion in total revenue, and non-GAAP adjusted net income per diluted share of $1.75.
To meet its full-year revenue goal, Athenahealth will need to generate revenue next quarter of around $300 million. The company's product offerings for physicians will definitely be a primary source for hitting the mark. However, hospital sales should become increasingly more important to Athenahealth.
Bigger players like Cerner (NASDAQ: CERN) and Epic are going after those same hospitals that Athenahealth wants to get. Bush said last year that companies like Cerner and Epic are going to "collapse like big black swans." He has criticized the companies for not being truly interoperable with other systems.
Athenahealth recently received a confirmation of its own interoperability prowess. The 2016 KLAS Interoperability Report rated Athenahealth as the highest of 12 vendors reviewed for its ability to share data with other electronic health record systems. Look for Athenahealth to continue to tout interoperability as a key competitive advantage in its quest to gain market share from Cerner and Epic.
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Keith Speights has no position in any stocks mentioned. The Motley Fool recommends athenahealth and Cerner. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.