Q2 Provider Gains Make Athenahealth Inc. Optimistic About Rest of the Year

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"Unbreak healthcare." That's what athenahealth Inc. (ATHN) states as its goal. And the healthcare technology company maintains that its products are the way to make it happen.

Athenahealth reported its second-quarter financial results after the market closed on Thursday. While those results might not show whether healthcare is being "unbroken" or not, they do show that more providers than ever are using the company's cloud-based software. Here are the highlights of the quarterly report.

Athenahealth results: The raw numbers

YOY = year over year. Data source: Athenahealth.

What happened this quarter?

That strong year-over-year sales increase posted in the second quarter owed to new users of Athenahealth's products. The company reported gains across all of its major product lines:

• 1,528 net new additional physicians and 2,215 net new addtional providers using athenaCollector
• 1,180 additional physicians and 1,632 net new additional providers using athenaClinicals
• 1,489 additional physicians and 2,132 net new additional providers using athenaCommunicator

However, while Athenahealth added customers, the growth of athenaCollector and athenaCommunicator slowed from the prior-year period and from the first quarter of this year. AthenaClinicals' growth, on the other hand, picked up slightly from the same quarter of last year.

While the company reported a GAAP loss from continuing operations -- largely due to stock-based compensation -- adjusted net income for the second quarter was $13.5 million, or $0.34 per share. That reflected a small increase from the $12.4 million, or $0.32 per share, in adjusted net income posted in the prior-year period.

Athenahealth also announced that chief operating officer Ed Park will transition out of his role by the end of this year. Park is expected to be elected to the company's board of directors.

What management had to say

Athenahealth chairman and CEO Jonathan Bush said:

Healthcare is broken; we've all experienced it at some level, and athenahealth is committed to unbreaking it with the power of our network and through our steadfast commitment to our mission, and to delivering results for our clients. ... Through our continuously evolving services and highly competent and impassioned team, we are on the right path to developing a unique public resource: the healthcare internet.

Looking forward

Athenahealth expressed optimism about the rest of 2016 based on the numbers from the second quarter. While the company didn't revise its fiscal 2016 guidance, Athenahealth now expects GAAP revenue and non-GAAP adjusted net income per diluted share to be at or above the midpoints of the guidance ranges.

The company's core products for physicians should continue to be the primary driver of Athenahealth's financial performance. However, the company is focused on battling for market share against bigger rivals Epic and Cerner (CERN).

As of the second quarter, Athenahealth had nearly 80 hospitals under contract. That's far behind Cerner, which added over 200 acute facilities in 2015 alone. There are plenty of opportunities for Athenahealth to go head to head with the larger healthcare technology providers. Cerner's CFO Marc Naughton told participants at the Jefferies Healthcare Conference in June that his company has identified over 3,000 hospitals on "vulnerable systems."

Athenahealth made a couple of moves during the second quarter that should help in its quest to compete against the big players, like Cerner, in the future. It bought Arsenal Health in April. Arsenal provides schedule-optimization software to healthcare providers.

Athenahealth also announced a partnership with Intacct in April. Intacct provides cloud-based enterprise resource-planning software for hospitals.