High valuations come with high expectations, and with healthcare technology provider athenahealth's (NASDAQ:ATHN) current earnings multiple of 657, it certainly sports a high valuation. The company announced its third quarter earnings on Thursday. Were those high expectations met?
Athenahealth results: The raw numbers
|Q3 2015 Actuals||Q3 2014 Actuals||Growth (YOY)|
|Sales||$236.1 million||$190.4 million||24%|
|Net Income From Continuing Operations||$5.8 million||($1.6 million)||N/A|
|Earnings Per Share||$0.15||($0.04)||N/A|
What happened with athenahealth this quarter?
The past three months were productive for the provider of cloud-based services and mobile applications for medical groups and health systems. Among its key achievements:
- Athenahealth added 4,784 providers to its network. Its athenaCollector, athenaClinicals, and athenaCommunicator products all saw solid growth in the numbers of new active physician users.
- The company racked up an impressive 37.5% increase in adjusted quarterly earnings, which came in at $14.3 million, or $0.36 per diluted share, compared to $10.4 million, or $0.27 per diluted share, for the same quarter last year. Key factors adjusted from GAAP earnings for these figures included stock-based compensation and amortization related to acquisitions, and sale of marketable securities.
- Even services that don't carry the athenahealth brand, particularly Epocrates, showed improvement. Revenue for the quarter from these services was $18.3 million, compared to $14.8 million a year ago. While these services only make up a small fraction of the company's total revenue, year-over-year improvement hasn't always been a given.
Athenahealth executives offered a positive outlook on the rest of 2015. The company expects revenue for the full year to come in at or above the midpoint of the $905 million to $925 million guidance range previously provided. Non-GAAP adjusted earnings are also anticipated to beat the prior guidance of $1.10 to $1.20 per diluted share.
What management had to say
Ever-colorful athenahealth CEO Jonathan Bush maintained his customary enthusiasm. "While we are still in the early days of bringing the full power of the Internet to healthcare, we are gaining nice momentum as we innovate to improve the way patients are managed and advance connectedness across our network and the care continuum at large," Bush said.
Kristi Matus, chief financial and administrative officer, added that the company is "headed into the home stretch of 2015 and feel good about this year's accomplishments and the investments made to drive forward progress." Matus noted that athenahealth is on track to hit many of its goals, both financially and operationally.
The third quarter looked pretty good for athenahealth, and the company seems likely to continue its winning ways in the fourth quarter and into the new year.
Perhaps the biggest obstacle for athenahealth's success comes from rival Cerner (NASDAQ:CERN) which pulls in more revenue and earnings. In a recent KLAS interoperability report, Cerner won high marks for its ability to handle complex connections.
However, athenahealth beat Cerner when it came to which system is the easiest to connect to. An added bonus for customers is that athenahealth doesn't tack on lots of extra integration costs. Those are great selling points and should bode well for the company's ability to win customers in the days ahead.
Keith Speights has no position in any stocks mentioned. The Motley Fool recommends Athenahealth and Cerner. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.