Things looked somewhat gloomy the last time athenahealth, Inc. (ATHN) provided a quarterly update. In October, the cloud-based healthcare applications provider reported a deteriorating bottom line, cut its outlook for full-year 2017, and said that it was laying off 9% of its workforce.
There was a better story to tell, though, when Athenahealth announced its fourth-quarter and full-year 2017 results after the market closed on Thursday. The company improved on nearly every front. Here are the highlights from Athenahealth's fourth quarter.
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Athenahealth results: The raw numbers
| Metric |
Q4 2017 |
Q4 2016 |
Year-Over-Year Change |
|---|---|---|---|
|
Sales |
$329.2 million | $288.2 million |
14.2% |
|
Net income from continuing operations |
$31.6 million | $9.8 million |
222.4% |
|
Adjusted earnings per share (EPS) |
$1.11 | $0.62 |
79% |
Data source: Athenahealth.
What happened with Athenahealth this quarter?
Athenahealth's fourth-quarter performance on the top line was pretty good, even if sales growth didn't reach the 30% levels the company was accustomed to seeing in its earlier days. Business services revenue grew 15.2% year over year to $321.3 million. Although implementation and other revenue slipped by $1.4 million from the prior-year period to $7.9 million, the company still generated solid overall sales growth.
How did Athenahealth improve its bottom line so impressively? The company kept spending under control. Athenahealth's total operating expense increased by only 1.3% from the fourth quarter of 2016. While general and administrative spending increased significantly, research and development costs dropped slightly from the prior-year period. More important, the company slashed selling and marketing costs.
Perhaps the most encouraging news from Athenahealth's update related to nice upticks in its network growth metrics. The number of athenaOne Collector providers increased 15% year over year in the fourth quarter. The number of athenaOne Communicator providers jumped 21% from the prior-year period, while the number of Clinicals providers grew by 22%. Even more impressive, athenaOne Hospital system discharge bed days soared 349% year over year. Covered lives for the company's population health platform increased 48% from the prior-year period.
What management had to say
Athenahealth CEO Jonathan Bush highlighted efficiency efforts and growth:
Looking back on 2017, I am proud of all that we accomplished. It was an extraordinary year of network growth. We surpassed the 100 million patient threshold and now serve more than 100,000 healthcare providers. We also took action to create a more focused and efficient company and enhance the depth of talent on our Board and management team. As a result, Athenahealth is better positioned to drive increased levels of profitable growth and enhance shareholder value. In 2018, I look forward to continued progress on our journey to transform the healthcare industry.
Looking forward
There's quite a bit for investors to look forward to with Athenahealth. The company holds its Investor Summit on Feb. 15 and will present its guidance for fiscal year 2018 at the event. In addition, new CFO Marc Levine said that Athenahealth will provide an update on "plans to help healthcare organizations of all sizes reinvent workflows, advance connectedness, and achieve solid financial and clinical results."
On Tuesday, the company announced that it had been ranked No. 1 for the sixth consecutive year by healthcare analytics company KLAS for its practice management solution and satisfaction for practices with between 11 and 75 physicians. Athenahealth's athenaClinicals was also named the best ambulatory electronic medical record for the 11-to-75 physicians segment. These designations should continue to help Athenahealth in its efforts to win new customers.
It could also be interesting to see what happens with the recently announced initiative by Amazon.com, Berkshire Hathaway, and JPMorgan Chase to control healthcare costs. Athenahealth's technology could be useful in this effort, especially as the company incorporates more artificial intelligence to improve physician workflows. However, it will likely take at least a couple of years before any fruit is seen from the three giant companies' joint venture.
In the meantime, Athenahealth should continue to reap the benefits of its cost-cutting plan announced in October. Between $100 million and $115 million of gross pre-tax expense savings are expected, most of which will be realized by the end of 2018.
