Once upon a time, athenahealth, Inc. (NASDAQ:ATHN) could do no wrong in the eyes of investors. The provider of cloud-based healthcare applications routinely announced year-over-year sales growth of 30%. Some of the company's previous success, though, was fueled by federal financial incentives to healthcare providers that are no longer available.

Athenahealth's first-quarter results announced in May underscored the new reality that the company faces. Revenue was up, but by only a little more than 11% -- a fraction of Athenahealth's growth in its heyday. All eyes were on the company on Thursday when it reported its second-quarter 2017 results. Here are the highlights. 

Doctor holding stethescope up to medical icons

Image source: Getty Images.

Athenahealth results: The raw numbers

Metric 

Q2 2017 

Q2 2016 

Year-Over-Year Change

Sales

$301.1 million $261.9 million

15%

Net income (loss) from continuing operations

$9.9 million ($1.9 million)

N/A

Adjusted EPS

$0.51 $0.34

50%

Data source: Athenahealth. 

What happened with Athenahealth this quarter?

Revenue growth of 15% isn't nearly the level investors used to expect. However, the result was in line with Athenahealth's expectations -- and clearly an acceleration over the company's first-quarter results.

Athenahealth's bottom line improved significantly compared to the prior-year period. A higher gross profit margin helped considerably. The company also controlled its expenses more effectively in the second quarter of 2017 compared to the same period last year. In particular, Athenahealth's selling and marketing costs dropped 4.7% year over year.

While the company's sales and earnings improved, however, its cash flow deteriorated. In the second quarter of 2016, Athenahealth generated operating cash flow of $82 million. The company reported operating cash flow of $68 million in its latest quarter. This decline stemmed primarily from higher pre-paid expenses and accrued compensation.

Other key developments during the second quarter for Athenahealth included the announcement of a guarantee for hospitals that offsets any reduction in payment from Medicare Part A after using its athenaOne system. The company also entered into an agreement to acquire Praxify Technologies, which makes software that helps speed up physicians' workflows. 

What management had to say

Athenahealth CEO Jonathan Bush said, "Over the past 20 years, we've made great progress on our vision to build the healthcare internet. Today, our network has grown to over 100,000 providers, 98 million unique patient records, and 2.8 million covered lives." He added, "Our second quarter results were in line with our expectations, and we remain focused on delivering against our 2017 objectives to deepen our services, execute in the small hospital market, invest in our platform, and build out nationwide connectivity for the network."

Looking forward

Athenahealth reaffirmed its full-year 2017 financial guidance. The company continues to project revenue between $1.21 billion and $1.25 billion for the year. GAAP operating income is expected to come in between $36 million and $46 million, with non-GAAP adjusted operating income of $120 million to $140 million.

One thing that investors will certainly want to watch closely is the potential impact of a major new shareholder. In May, hedge fund Elliott Management disclosed that it had bought a 9.2% stake in Athenahealth. In its press release announcing results from the second quarter, Athenahealth stated that "it has received significant shareholder feedback over the past several months." The company added that its "board of directors, in consultation with its advisors, is fully evaluating this feedback and will provide an update in due course."

Activist investors can sometimes shake things up in positive ways and benefit other shareholders. It remains to be seen, however, what changes could be on the way for Athenahealth. Stay tuned.

Keith Speights has no position in any stocks mentioned. The Motley Fool recommends Athenahealth. The Motley Fool has a disclosure policy.