The number 13 stood out for athenahealth (NASDAQ:ATHN) CEO Jonathan Bush when discussing his company's earnings announced on Thursday. That's the number of consecutive years that athenahealth grew sales by 30% or more. There were other good numbers mentioned in the quarterly results also -- enough to send shares rising more than 4% in early trading on Friday. Let's take a look.
Up and up
Fourth-quarter revenue was up 26% year-over-year to $116.3 million. GAAP earnings came in at $5.9 million, or $0.16 per diluted share. That's up from $5.3 million, or $0.15 per diluted share, in the fourth quarter of 2011. Adjusted earnings increased to $0.29 per diluted share from $0.26 per diluted share in the prior year. The average analyst estimate was $0.28 per share.
Not everything was up for the full year. Revenue jumped 30% from 2011's total of $324.1 million to $422.3 million in 2012. However, GAAP earnings fell from $0.53 per diluted share in 2011 to $0.50 per share in 2012. On an adjusted basis, though, earnings were up -- from $0.88 per diluted share in 2011 to $1.00 per share in 2012. Stock-based compensation expenses made the key difference between the GAAP and adjusted figures.
Several other key product metrics shared by athenahealth showed strong year-over-year growth. The company's athenaCollector medical billing service had 39,752 active providers on board in 2012, compared to 32,740 in the previous year. Its electronic health record system, athenaClinicals, grew from 6,525 active users in 2011 to 10,926 in 2012. The number of medical providers using patient communications portal athenaCommunicator increased to 14,065 from 10,153 the prior year.
From Epocrates to "I love Judy"
Yet again, athenahealth's numbers looked good. And yet again, the more interesting stuff came from what Bush and his management team said on the conference call after the earnings results were announced.
Bush particularly noted the contrast between brand awareness between athenahealth and Epocrates (UNKNOWN:EPOC.DL), which it is in the process of buying. While seven out of 10 doctors don't know who athenahealth is, 90% of physicians recognize the Epocrates name. Bush sees great opportunities in getting more doctors to look at the cloud-based services offered by athenahealth with Epocrates under its wings.
When asked about getting providers to convert from legacy electronic medical record systems, Bush stated that his team "have to get better at explaining to people why their Flock of Seagulls EMR is going to go to the same place that their Flock of Seagulls vinyl albums went." He acknowledged the challenges of going up against scenarios where hospitals buy software from Allscripts (NASDAQ:MDRX) and give it to doctors as inexpensively as they legally can. Of course, he could have also noted (but didn't) that Allscripts' revenue and earnings declined last quarter.
It's always fun to listen to Jonathan Bush. Even the analysts on the call were asking if he'd be on CNBC, because they didn't want to miss him if he was. He's funny -- for example, professing his love for "girlfriend" Judy Faulkner, CEO of hospital software company Epic. But he's also a visionary, outlining goals for athenahealth to make implementation nearly instantaneous and free and to move all customers to transaction-based pricing.
Shares for athenahealth are up 17% year-to-date and more than 34% over the last year. With another good quarter, the momentum could continue. I'm still hesitant, though, about the lofty valuation of the stock. It has a forward P/E of 56. It's a great company, though, with a compelling business model. A string of 13 years in a row of 30% sales growth doesn't just happen by luck.