Athenahealth (ATHN) Q2 2018 Earnings Conference Call Transcript

Athenahealth (ATHN)
Q2 2018 Earnings Conference Call
Jul. 30, 2018 5:00 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Welcome to Athena Health's second-quarter fiscal year 2018 earnings conference call. As a reminder, today's call is being recorded. At this time, I would like to turn the call over to Dana Quattrochi, head of investor relations for Athena Health. Please go ahead, Ms. Quattrochi.

Dana Quattrochi -- Head of Investor Relations

Good morning and thank you for joining us. With me on the call today is Jeffrey Immelt, executive chairman of our board of directors, and Marc Levine, our chief financial officer. On today's call, Marc and Jeff will share brief highlights from the prepared remarks we've published this afternoon, and then we will take questions.

We would like to remind everyone that certain statements made during this conference call are 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. All statements other than statements of historical fact made during this conference call are forward-looking statements, including statements regarding management's expectations for future financial and operational performance and operating expenditures, our market environment, our efforts to add new features and improve the customer experience and create client value, our exploration of strategic alternatives, and our position for the future. 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 those under the heading Risk Factors in our most recent annual report on Form 10-K and other periodic reports filed with the Securities and Exchange Commission, which are available on the Investors section of our website at www.AthenaHealth.com and on the SEC's website at www.sec.gov. 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.

Please note that on today's call, we will refer to certain non-GAAP financial measures in which we exclude certain noncash or non-recurring items, such as stock-based compensation, from our GAAP financial results. We believe that in order to properly understand our short-term and long-term financial trends, investors may wish to consider the impact of these items as a supplement to financial performance measures determined in accordance with GAAP. Please refer to today's press release announcing our second quarter 2018 results available on our website, www.Athena Health.com, for a reconciliation of these non-GAAP performance measures to our GAAP financial results.

Finally, please note that we adopted a new revenue-recognition standard on January 1, 2018. On today's call, we will discuss our financial results, both as presented based on this new revenue-recognition standard as well as prior to the impact of the new standard to allow for comparability against historical results. Again, please refer to today's press release announcing our second-quarter 2018 results available on our website, www.Athena Health.com, for additional information and reconciliation of our financial results between the new and previous revenue-recognition standard.

With that, I'll now turn the call over to Marc.

Marc Levine -- Chief Financial Officer

Thank you, Dana. Good afternoon, everyone, and thanks for joining us today. I'd like to start by acknowledging the entire Athena Health team for remaining focused on the business and delivering solid results during what was quite an eventful quarter that included leadership changes and the launch of the process to explore strategic alternatives. It would have been easy to make excuses had there been a slip in performance this quarter but in the midst of uncertainty, the leadership team and the entire organization has stepped up, provided clear direction, renewed focus, and executed well on our critical business priorities.

As a result, we remain on track with our plans this year to deliver on our financial commitments, improve the customer experience, and build on the most positive aspects of our unique culture.

On today's call, we will discuss our second-quarter performance, our outlook for the year as well as our intense focus as a company to fix healthcare. Additionally, Jeff will share some comments about our board of directors' focus on overseeing an effective and efficient process to explore strategic alternatives that minimize disruption to our business.

First, let me begin with a review of our second-quarter results. We achieved solid top-line growth that was in line with our internal plans. Total revenue, as presented under the new revenue-recognition standard, was $323 million. For year-over-year comparative purposes, total company revenue prior to the impact of new revenue standard grew 10% to $332 million versus Q2 of last year.

We also made continued progress in our efforts to improve profitability. GAAP operating income, as presented, was $43 million. Prior to the impact of the new revenue standard, GAAP operating income increased to $43 million, compared to $12 million in Q2 of last year, and non-GAAP operating income increased 70% year over year to $61 million during the second quarter.

During the second quarter, we drove solid growth on our network. Compared to Q2 of last year, the number of providers on AthenaCollector increased 15%. As we continued to focus on delivering great customer experience, we saw our Net Promoter Score increase again during the second quarter. The actions we have taken to improve issue resolutions, stabilize service delivery and drive higher internal accountability for the success of our clients are beginning to pay off.

With the improvement in the Net Promoter Score, we saw client retention in line with our Q2 expectations. We recognize we have more to do to ensure consistent outstanding customer experience, and our teams are focused on making this happen.

Again, with the company announcements mid-quarter, the sequential improvement in bookings demonstrated good execution by the sales team. During the second quarter, we recognized $75 million of bookings, $67 million of which was recurring business and $8 million nonrecurring. This compares to total bookings of $79 million in Q2 of last year, in which $71 million was recurring and $8 million nonrecurring.

We report quarterly bookings to provide visibility to one indicator of future top-line revenue. As discussed last quarter, bookings can be lumpy in any given quarter due to the mix of large deals in the period. Reading too much into one strong or soft booking quarter can be misleading.

Consequently, we also focus on the trend. While this quarter showed solid sequential improvement, the recent downward trend requires us to continue to focus on executing the field and on expanding the value of our core offerings. Let me give you a little more color on the Q2 booking results. We saw relative strength in core ambulatory services.

Independent medical group bookings were down slightly versus the prior year. And while enterprise bookings were up over 300% sequentially, they declined approximately 8% year over year as we continued to see fewer large deals in the market.

In the hospital segment, the overall numbers remained relatively small. Hospital bookings were down year over year as we maintain our strategy of focusing on those hospitals where the customer experience will be positive before we target the broader segment and move up the market. While we're pleased with the sequential improvement in bookings this quarter, looking ahead to the second half of 2018, we remain focused on continuing to work on our execution and continuing to add new service features that improve customer experience and the value proposition. As part of that effort, we made progress during the second quarter on our product and technology roadmap.

We continue to build momentum with our service and interoperability initiatives like patient record sharing, authorization management, and real-time benefit checks. Initiatives like these free people to do what matters and further distinguish Athena Health as the most connected network in healthcare.

More than ever, we're committed to executing on our plans to meet our customers' needs, deepen our services, and continue to grow our network. We strive to help our clients run their businesses more efficiently by eliminating administrative waste and enabling doctors to spend more time seeing and caring for their patients. Today, there are nearly 116,000 providers on AthenaNet, approximately 114 million patient records in our platform, and nearly $30 billion of client collections were managed on our network in the past year alone. And we're driving double-digit growth year over year in all of these areas.

Throughout 2018, we're committed to taking more work off clients' plates and delivering additional capabilities that deepen our service, strengthen client retention and drive growth across our network.

I'll now review our financial results in more detail, and I'll begin with our results as presented based on the new revenue recognition standard. During the second quarter, total revenue was $323 million. GAAP gross profit was $171 million, or 53% of total revenue. GAAP operating income was $43 million, or 13.3% of total revenue, and GAAP net income was $36 million, or $0.89 per diluted share.

I'll now discuss our results prior to the impact of the new revenue recognition standard to enable comparability against historical results. Our second-quarter revenue was $332 million, an increase of 10% year over year. Recurring revenue grew 13%, driven by a 15% year-over-year increase in the number of AthenaCollector providers. Nonrecurring revenue declined, mainly due to a decrease in Epocrates bookings during 2017.

GAAP gross margin for the second quarter was 53%, up 80 basis points from 52.2% in the same quarter of last year.

Looking at our expense line items, GAAP sales and marketing expense decreased $11 million year over year to $54 million due to lower compensation and commissions as well as sales and marketing efficiencies related to the cost reduction initiatives we launched in the second half of 2017. GAAP research and development expenses increased $6 million year over year to $48 million during Q2, driven primarily by our investments in our core services, platform development, and network services.

On a cash basis, research and development spend, as a percentage of revenue, came in at 17.4% in Q2 2018, compared to 15.4% in the second quarter of last year. Lastly, our GAAP general administrative expenses declined $7 million year over year to $31 million. This decrease was primarily driven by lower consulting spend.

Moving to earnings. We generated GAAP operating income of $43 million during the second quarter, reflecting continued improvement in operational execution, a 250% increases versus the $12 million recorded during the second quarter of last year. And we generated GAAP net income of $36 million, or $0.88 per diluted share, which compares to a GAAP net income of $10 million, or $0.24 per diluted share, in Q2 of the prior year.

To enable year-over-year comparisons, I'll now provide our non-GAAP results prior to the impact of the new revenue recognition standard. Our non-GAAP gross margin was 54.5% during the second quarter, as compared to 54.2% in Q2 of last year. Non-GAAP operating income increased 70% year over year to $61 million, driven by top-line growth and expense-savings initiatives. And our Q2 non-GAAP operating margin improved 650 basis points year over year to 18.4%.

Looking at earnings before interest, taxes, depreciation, and amortization. Our Q2 non-GAAP EBITDA of $91 million in the quarter was up 38% year over year, and our non-GAAP EBITDA margin expanded 550 basis points to 27.4%. And we generated non-GAAP net income of $44 million, or $1.08 per diluted share, during the second quarter, up from $21 million, or $0.51 per diluted share, in the same period last year.

We continue to seek an appropriate balance between revenue growth, operating margin and free cash flow. Year to date, we generated $148 million of operating cash flow and invested $46 million in capitalized software and $25 million in capital expenditures. Our free cash flow, defined as operating cash flow less capital purchases, was an inflow of $77 million during the six months ended June 30, 2018. This was an improvement of $96 million of free cash flow generation compared to a net outflow of $19 million in the first six months of last year.

Turning now to our financial outlook. Based on our year-to-date performance and our expectations for the second half of the year, we're updating our fiscal year 2018 financial guidance. As you'll recall, we gave a very wide range of revenue guidance as we began this year. With six months behind us and consistently tracking to the midpoint of that guidance, we're now narrowing our guidance range for revenue and continuing to affirm the midpoint.

And we're raising our operating margin guidance, as our investments midway through the year are ramping slower than anticipated. While we are continuing to invest in research and development to support our platform work as well as in direct costs to continue to deepen our services and improve the customer experience, we do expect to fall slightly behind our original full-year investment plan. Please keep in mind that the following guidance is prior to the impact of the new revenue-recognition standard to allow for comparability against our prior-year results.

For the full year, we expect revenue to be within the range of $1,330,000,000 to $1,360,000,000, GAAP operating income to be within the range of $128 million to $155 million, or 9.6% to 11.4% of revenue, and non-GAAP operating income to be within the range of $219 million to $238 million, or 16.5% to 17.5% of revenue. We're also introducing the fiscal year 2018 financial guidance under the new revenue recognition standard. For the full year, we expect revenue to be within the range of $1,335,000,000 to $1,365,000,000, GAAP operating income to be within the range of $153 million to $187 million, or 11.5% to 13.7% of revenue. And non-GAAP operating income to be within the range of $244 million to $270 million, or 18.3% to 19.8% of revenue.

Starting in the fiscal year 2019, our financial results and guidance will only be presented under the new revenue-recognition standard.

With that, I'd like to turn the call over to Jeff for some comments on the business as well as a brief update on our ongoing process to explore strategic alternatives.

Jeffrey Immelt -- Executive Chairman

Thanks, Marc. I'll begin by saying that I'm thrilled to be here as Executive Chairman and working closely with the Athena Health management team. Advancing and improving healthcare and related technology has been a passion of mine for more than 20 years, and I believe that Athena Health has a great opportunity to lead the next wave of disruptive change across the industry.

Since taking on the role of Executive Chairman, I've spent time engaging with employees and clients. Any company that undergoes the type of changes we're making at Athena Health experiences a certain degree of uncertainty. However, the overwhelming sentiment with our employees and clients has been one of optimism and confidence about the strength of Athena Health and where we're headed. I've been working closely with Marc and the rest of the leadership team to align on our most important priorities, improve our execution and hold each other more accountable.

We know we have opportunities to do things better, innovate faster and win in the market, and I'm proud of how the entire Athena Health team has rallied together during a very busy time for the company. Our strong second-quarter performance demonstrates this resilience and ability to deliver on our commitments.

I also want to speak briefly about the plans we announced last month to explore strategic alternatives. The board and I believe there's significant value embedded in the company, notwithstanding the positive actions that have been taken to enhance growth and profitability. As announced on our June 6 press release, we're fully engaged in a thorough evaluation of strategic alternatives to enhance shareholder value. While we have not yet set a definitive timeline for the completion of this process, we're moving with purpose as we consider a number of options, including a sale, merger or other transaction involving the company as well as continuing as an independent company.

This strategic exploration process is focused on unlocking value and positioning Athena Health to realize the full potential of its premier healthcare technology platform. As we do this, I'm confident our work to unlock value in the company will continue. In the meantime, we remain focused on aggressively executing our 2018 commitments to drive positive change for Athena Health's clients and shareholders.

With that, I'll turn it back over to our conference call moderator for Q&A.

Questions and Answers:

Operator

[Operator instructions]. Our first question comes from the line of Ross Muken of Evercore ISI.

Analyst -- Evercore ISI

This is Susie on for Ross. So the last few months have been pretty eventful with multiple management and strategic changes. How has the organization responded to these announcements? And then a follow-up on the bookings. It's good to see a nice sequential uptick and appreciate the color given around the first half results but is there anything you can share in regards to the second half in terms of expectations other than the typical seasonality that'll help us model better the balance of the year?

Jeffrey Immelt -- Executive Chairman

So why don't I do the first one, Marc, and I'll give you the second one. Susie, I would say the team has really rallied very substantially here. You can see that in the quality of the second-quarter results. Clearly, there's a lot of change but I think the senior leadership team and the management at Athena Health are really purpose-driven.

They love the company and the industry. And I think we've seen the team really rally. And so we've seen good stability and great response, and again, that shows up on the results.

Marc Levine -- Chief Financial Officer

Yes. This is Marc. I would echo that. As you said, given all of the events in the second quarter, I think we delivered a solid Q2 and showed, as you pointed out, good sequential improvement in bookings.

Regarding the second part of your question with respect to second half bookings, we didn't offer any guidance for the full year for bookings. We're not going to offer any guidance for the second half.

Operator

Our next question comes from the line of Jamie Stockton of Wells Fargo.

Jamie Stockton -- Wells Fargo Securities -- Analyst

Just another one on bookings here. I guess, it sounds like, Marc, the enterprise piece of bookings picked up a lot sequentially. I know you said it was still down year over year. Could you touch on was that pickup largely from existing customers? I caught the comment that there still aren't a lot of large deals that are happening but maybe you guys are expanding with existing customers.

And then the channel partner relationships that you guys talked about on the Q1 call that might have been undermined by some of the headcount reductions that happened late last year, what's the status of fixing those issues?

Marc Levine -- Chief Financial Officer

Yes. Jamie, first on the large deals, the large deals were mainly new customers. So that was a good signal for us. There was some volume this quarter.

We didn't see any real large deals last quarter as you'll recall. So it was good to see that pickup this quarter. Regarding the channel partners, I would describe it as what I talked about last quarter, is whenever you make a change to your sales model in any direction, it takes a little bit of time for the sales team, the go-to-market team to recalibrate and get their operations running smoothly. And I think in the second quarter, we saw that start to move in the right direction.

The relationship between the channel partner reps and our own reps, I think people are making those necessary connections to get the business done, and I think it's positive momentum. I wouldn't describe it as where, I think, we want to see it ultimately but it's certainly moving in the right direction.

Operator

Our next question comes from the line of Michael Cherny of Bank of America.

Michael Cherny -- Bank of America Merrill Lynch -- Analyst

Can you talk a little bit across the market? You talk about activity, talk about the bookings there, a price pickup. What's going on in your same-store book of business? What do you see from a client trend in terms of how your customers are growing and what else they're doing from a volume perspective? As you think about the core, you're still growing at a pretty healthy clip but clearly below previous years. And as you think about the go-forward basis, how should you think about what type of growth you're going to be getting from your base book of business that you've always had?

Marc Levine -- Chief Financial Officer

Yes. Look, I think the base business is remaining healthy. We talked about the fact that the Collector activity was solid for the quarter. Recurring revenue was up 13% for the quarter, and that certainly is a good signal.

And the provider base, Collector provider base was up 15% with a 14% increase in collections. So that's the kind of stability, I think, we've seen over the past several quarters in those numbers, and we'd expect that to continue. It's up to us to continue to grow the bookings and maintain a healthy retention rate. And I think as we indicated in the prepared remarks, really, the retention is in line with where we expected it to be.

So all of those things for me signal some stability in the base.

Operator

Our next question comes from the line of Ricky Goldwasser of Morgan Stanley.

Ricky Goldwasser -- Morgan Stanley -- Analyst

So the cost-cutting continues to exceed our expectations. How should we think about the sustainable operating margins for the business? And what were the biggest sources of savings?

Marc Levine -- Chief Financial Officer

So, Ricky, the savings really were driven from the actions that we took at the end of last year and carry forward into early this year. Most of the actions related to the process that we ran really are passives at this point reflected in the cost structure that you see in the business. So you wouldn't be expecting to see any more significant material reductions as a result of actions related to that initial program. They're baked into the financials.

From an R&D perspective, we talked about, at the beginning of the year, that we were going to be reinvesting some of our savings into product development. We think that's the right way to grow the business going forward, and we continue to do that. We've ramped up the R&D. You can see that in the results.

It's the one area in the P&L that is showing some growth. We're going to continue to see that increase as we continue to make those investments that we think are necessary for the platform, rearchitecture work that's going on as well as just rolling out new products that the sales team can bring to market.

Operator

Our next question comes from the line of Sean Wieland of Piper Jaffray.

Sean Wieland -- Piper Jaffray -- Analyst

So in the hospital segment, you said bed days were down and you said you're focusing on where customer experience will be positive. So just wanted to get an update on your latest thinking on how the hospital segment fits into the broader strategy.

Marc Levine -- Chief Financial Officer

Yes, Sean. So bed days were actually flat on a sequential basis. They were up 136% year over year. So we brought eight new hospitals live during the quarter.

As we talked about before, the hospital segment is still a segment that we're committed to but we want to make sure that we can do it well and make sure that our customers have a great customer experience. So we have certainly focused on just the market that we're in, relatively smaller hospital segment that we're in. And we're not going to move upstream until we feel that we can do it successfully and really give the customers good experience and then take some good market share.

Operator

Our next question comes from the line of George Hill of RBC.

George Hill -- RBC Capital Markets -- Analyst

I guess, Marc, can you provide any comments on whether or not there was any change in client churn during the quarter? And I guess, can you talk about how has the process impacted the go-to-market strategy kind of retention and success rates?

Marc Levine -- Chief Financial Officer

Yes, George. The churn, as I mentioned, the churn rate is actually right in line with where we expect it to be. We think we're tracking in the right direction. We saw another good quarter of movement in our NPS scores from our customers.

So that's several quarters now moving in the right direction for us, and it's probably one of our best leading indicators of improvement in retention going forward. So yes, that's kind of how things look from a retention perspective. And then the go-to-market organization, we actually are having a really good response from the sales team and go-to-market team. I think they are pretty energized.

The concern, obviously, with the events that happened in the middle of the quarter but the whole company got behind them and supported them. And I think they felt that they finished very strong, and I think whenever the sales team finishes strong in a quarter, it's a good tailwind behind them going forward. So the go-to-market team, we have a lot of confidence in what they're doing, and it seems to be showing up in the results, at least for Q2.

Jeffrey Immelt -- Executive Chairman

I'd echo what Marc said. I've had the chance to speak with probably 20 or 25 clients. These are mainly people that are well known to me. There's tremendous goodwill for the company, tremendous support for Athena Health.

And I think to Marc's point, I think our commercial team has great confidence in the market right now and great support from our clients.

Operator

Our next question is from the line of Sean Dodge of Jefferies.

Sean Dodge -- Jefferies -- Analyst

Maybe one on margins longer term. Marc, you talked about savings from the cost initiatives being fully reflected now and reinvestment in R&D still to come ramping over the coming quarters. I guess, I mean, you've got a couple of quarters under your belt. Do you have any thoughts on longer term what margin trajectory or margin targets could or should be?

Marc Levine -- Chief Financial Officer

So yes, when you think about the margin picture of the business right now, clearly, moving in the right direction, Sean but we really haven't signaled where we want to end this thing up. Look, I think the business has a potential for increased value creation, and that's something that we're going to continue to work on here and figure out what those opportunities are. What I want to make sure of is that anything that we do going forward from the value-creation perspective, margin expansion that we're doing it in places that are not going to interrupt go-to-market activity, not going to interrupt the client experience and not going to interrupt our ability to roll out the products and new platform that we've talked about for a while. Those are our most important priorities to make sure we get it right.

So we'll continue to look at it. We're always going to look at ways we can continue to expand that margin but we're not ready to call kind of where that's going to land at this point.

Operator

Our next question is from the line of Donald Hooker of KeyBanc.

Donald Hooker -- KeyBanc Capital Markets -- Analyst

So it looks like you made maybe a small acquisition around contract management in May. Did that add anything financially to the P&L? And can you maybe elaborate on kind of what gap that filled in your service offering?

Marc Levine -- Chief Financial Officer

Yes, sure. As you said, it was a very small acquisition, Don, in May. It was focused on contract management. It's really just a tuck-in functionality, a capability that we added.

And I would just describe it as a pretty immaterial action that we took but it did feel a little functionality that we wanted to bring forward in the market. We think it fits in strategically with what we say we're going to deliver from the value perspective to our customers but it's not really a material impact to the financials of the company right now.

Operator

Our next question comes from the line of Mohan Naidu of Oppenheimer.

Mohan Naidu -- Oppenheimer & Company -- Analyst

Marc, one more quick follow-up on the small hospital segment. It looks like you had eight new hospitals in the quarter but seeing flat bed days or just attrition. What is causing this attrition right now? And what are you guys doing to change that?

Marc Levine -- Chief Financial Officer

Yes. Look, we haven't talked about attrition in the hospital space. The bed days, as you said, were flat sequentially and I mentioned up on a year-over-year basis. The business is growing off that pretty small base.

Right now we're still bringing these accounts live, and it's a relatively small base in the numbers, Mohan. So I think you can have small movements of activity even within the installed base right now that can cause swings in discharge bed days. These are really small hospitals that we're in, and they don't have big census numbers. So it will still take a lot for a small base with small census numbers in these hospitals to result in a move in discharge bed days on a sequential basis.

So I don't think I would read more into it than that at this point in time.

Operator

Our next question comes from the line of David Larsen of Leerink.

David Larsen -- Leerink Partners -- Analyst

Can you talk a little bit about the sales force? Following the reduction in cost late last year, I think that you mentioned that you're adding some sales guys back. How far along are you in that process? Are you fully staffed there or not? And then can you also touch on some of the new products like functionality that you may be adding or enhancing like the Coordinator product, the pop health solution, some real-time benefit checks?

Marc Levine -- Chief Financial Officer

Yes, sure. So from a staffing perspective, we're in a pretty good spot right now with the sales team. As I mentioned, we've had good stability. The actual tenure of our sales force is actually up.

So we got stability and an experienced team out there in the market right now. So we're feeling pretty good about that. I think what I've touched on last quarter and I mentioned a little bit earlier on this call, the fact that some of the changes that we made in the go-to-market model, particularly in the partnership between our sales team and our channel sales team, we disrupted a little bit for all the right reasons. And we still believe in the changes that we made but when you make that disruption, it just forces new connection points to be made between individuals out in the market, and that just takes a little time to rebuild that activity.

So that's really what we're still looking for, and we've seen some improvement. As I said, it's getting much better but I think it continued to strengthen. From a product perspective, yes, we had a major rollout, an update and released the products early, let's say, late in March. We also just completed our latest update just this month to get more product out there.

I think so far the products are being well received and they continuously enhance the value proposition that we put in the market. So my perspective is that we will continue to roll out these products. The R&D team that we've been making some investment in is doing a great job getting these out, and I think customers are responding. And I think we saw some of that in the second quarter, and we look forward to seeing some strengths from that as we go forward in the rest of the year.

Jeffrey Immelt -- Executive Chairman

I would add to what Marc said. Win rates remain high and the small group segment, which was probably the most impacted from the change last year, I think really showed some traction during the second quarter. So all those things, I think, make us feel like the commercial team is really engaged in driving hard.

Operator

Our next question is from the line of Eric Percher of Nephron Research.

Eric Percher -- Nephron Research -- Analyst

Jeff, a question regarding your comment on unlocking the value of the platform. I'd like to hear your and the board's view of opportunities as a stand-alone and today. And then what is the key to leveraging Athena's platform? Are you thinking about alternatives that accelerate the mission? Or do you see this as an opportunity to obtain a value that's not reflected in the public market?

Jeffrey Immelt -- Executive Chairman

Look, I would say, Eric, I'm limited to what I can say. Look, we've initiated a process that will consider really all potential outcomes for the company, whether it's a sale or remaining an independent company. There's a strong interest in Athena Health, and we feel good about that. I think a lot of people can see the value in the platform.

What I would say is, look, one of the things that appeal to me is, really, the footprint that Athena Health has in what I call the front door of healthcare, which is really the doctors that are essential in terms of how healthcare gets delivered, we have a unique and extremely valuable asset there that very few can match. And I think as we go through this process in a very deliberate way, we'll assess really how we think we can best unlock value for our investors and for our clients and for the team. And that process is really being approached in a very deliberate way.

Operator

Our next question comes from the line of Matthew Gillmor of Robert Baird.

Matthew Gillmor -- Robert W. Baird & Company -- Analyst

Similar question to that. Jeff had mentioned that you've met with a lot of clients as part of the review process. I was hoping you could provide some details in terms of what have been their questions or concerns for Athena and what's been their feedback on the review process.

Jeffrey Immelt -- Executive Chairman

Look, again, I think they've all read the newspapers. And they've all known Jonathan for a long time, and they know the Athena Health team. I think they have an initial curiosity about how we see the company going forward and the support we have for the platform. And then they very quickly get into their own specific needs of how we can make them more productive, how we can do a better job of supporting their strategies and things like that.

Look, you guys are all healthcare analysts. You know the amount of change that's going on in the industry and the amount of kind of just big seismic changes that are under way. So all of our clients are going through their own thought process about the best business model they have going forward. And so they you look at changes like this as being very much a part of the healthcare industry but I would just echo what I said earlier on, which is they have tremendous support for the Athena Health platform, the Athena Health team, and I think our clients understand the valuable role we play in the industry.

Operator

And our next question comes from the line of Robert Jones of Goldman Sachs.

Nathan Rich -- Goldman Sachs -- Analyst

This is Nathan Rich on for Bob. Marc, could you maybe just talk about what drove the decline in the population health lives in the quarter? And maybe more high level, just talk about the overall level of demand you're seeing for this product line and what you think you need to do kind of in the future to kind of better position this offering in the market.

Marc Levine -- Chief Financial Officer

Yes. So look, population health for us is still a pretty small piece of business so we can get some movement up or down off a pretty small base just with one customer, two customers signing up or departing. I wouldn't tell you that we're seeing anything material in terms of a trend that right now either up or down in that space. We clearly think it's a space that we need to be in.

We're working to execute there. We do need to make sure that we're investing in the product and capabilities, and that's part of what we're working one to make sure that we can deliver a good solution to our customers that adds some value but right now I wouldn't read a lot into the movement. It's just too small a piece of business for us to jump to conclusion that it's moving one way or the other. We're not committed to it.

That's not the case.

Operator

[Operator instructions]. Our next question comes from the line of Stephanie Demko of Citi.

Stephanie Demko -- Citi -- Analyst

A follow-up to the prior headcount one but can you give us an update on the developer attrition and maybe how it's progressed in the past few quarters? And as a follow-up to that one, how much hiring is left? And then what verticals would you need to get your workforce fully to where you'd like it to be?

Marc Levine -- Chief Financial Officer

Yes. Look, I mean, the hiring for the most part, as we've talked about, the one place where we're really trying to make investments and continue to make investments is in the R&D space. So that will be where we continue to work. Yes, we've had a good response in the market to the openings that we've had out there.

We had one of our biggest classes to start just in the past months of new hires. So there's certainly interest in Athena, and that's good to see, especially given all the news that we generated over the past couple of months. So look, we're going to continue to grow in the R&D space and bring people on. From an attrition perspective, I would tell you, we haven't seen a materially significant move in attrition, and that, you could say, it's a bit surprising given what kind of news we generated over the past couple of months but I think it comes back to the team doing a really nice job of communicating with the employees, letting them know what we're focused on, demonstrating that we know what we're doing and that we've got a set of priorities that aren't changing quite frankly.

We're still running the business, and we have got a lot of work to do. And there's a lot of opportunities as Jeff touched on. And I think when people pause and see that they feel good about kind of what the company's doing, the mission of the company, and that's why a lot of people here at Athena have signed on and continue to stay here.

Jeffrey Immelt -- Executive Chairman

I would echo what Marc said. I've had the chance to visit Austin and Atlanta in addition to Boston. I also know our CTO, Prakash, has really done a great job of standing up sites in India as well. So I've been impressed by the technical talent that we've recruited, and I think it bodes well for the technical execution going forward.

Operator

And at this time, I'm showing no further questions. I'd like to turn the conference back over to Jeff Immelt, executive chairman, for closing remarks.

Jeffrey Immelt -- Executive Chairman

Great. Thanks very much. Again, you've seen the press release. Good questions today.

Strong second quarter for the team. The board is being deliberate about the process to really drive shareholder value, really continue to increase the great position Athena Health has in the marketplace with our clients and support the Athena Health team.

Before we depart, I'd like to again just do a shout out to the great team here at Athena Health who has done a fantastic job during this time of disruption. I want to say thanks to all of them for their great efforts. So thanks very much, and see you next time. Right, Dana?

Dana Quattrochi -- Head of Investor Relations

That's right.

Jeffrey Immelt -- Executive Chairman

Good.

Operator

[Operator signoff]

Duration: 48 minutes

Call Participants:

Dana Quattrochi -- Head of Investor Relations

Marc Levine -- Chief Financial Officer

Jeffrey Immelt -- Executive Chairman

Analyst -- Evercore ISI

Jamie Stockton -- Wells Fargo Securities -- Analyst

Michael Cherny -- Bank of America Merrill Lynch -- Analyst

Ricky Goldwasser -- Morgan Stanley -- Analyst

Sean Wieland -- Piper Jaffray -- Analyst

George Hill -- RBC Capital Markets -- Analyst

Sean Dodge -- Jefferies -- Analyst

Donald Hooker -- KeyBanc Capital Markets -- Analyst

Mohan Naidu -- Oppenheimer & Company -- Analyst

David Larsen -- Leerink Partners -- Analyst

Eric Percher -- Nephron Research -- Analyst

Matthew Gillmor -- Robert W. Baird & Company -- Analyst

Nathan Rich -- Goldman Sachs -- Analyst

Stephanie Demko -- Citi -- Analyst

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