Athenahealth beats Q2 earnings expectations amid acquisition rumors
- Athenahealth reported 15% revenue growth in 2017 Q2, compared to the same time period in 2016, with a GAAP operating income of $12.2 million.
- Net income for Q2 was $9.9 million, compared to a net income loss of $1.9 million in Q2 2016.
- The quarter is an improvement over Q1, when the company reported a net loss of $1.4 million. CEO and President Jonathan Bush attributed the losses to declining visits per physician and declining payments per visit.
The health IT industry had been anticipating athena's Q2 results as rumors and speculations abound for an acquisition.
The Watertown, Massachusetts-based company's Q2 is the first earnings quarters for the company since activist investor Elliott Management disclosed a 9.2% economic interest in the company.
Since that disclosure, athena's stock has steadily risen. On May 17, athena's common stock was at $106.28 per share. Last Friday after the earnings release, the stock was trading at $155.93 at the close of business. In addition to the revenue growth, the company projected $1.21 to $1.25 billion in revenue for fiscal year 2017.
On an earnings call, Bush noted CMS designated the company as a Qualified Entity during the quarter. "This is a significant designation as it gives us unique access to the adjudicated claims for millions of Medicare beneficiaries," Bush said. "Our continued focus on building a scalable hospital service that will grow upmarket from a position of strength is bearing fruit."
Bush noted the company entered the year focused on deepening services, executing in the small hospital market, building out network connectivity and investing in their platform. The company continues to build a hospital business line, though Bush noted it's too early for profitability and the hospital market is where athena's services are shallowest. "There is more that we’re learning to do, to scoop more work out of the clients workflow and that’s good news for us in a way, it means that we can ease into the expense as we grow the revenue base," Bush said on the call.
The industry is closely watching athenahealth to see how Elliott Management's stake may affect the company. Since May, the company purchased Praxify Technologies in June for $63 million to help accelerate research and development initiatives and saw the departure of Chief Financial Officer Karl Stubelis to Arcadia Healthcare Solutions.
Healthcare media has sent up reports and rumors that bigger tech firms are eyeing or should consider athenahealth for an acquisition. One game of telephone involved the idea of Apple buying athena. Bush dismissed this proposal in mid-June, telling Healthcare IT News, "I know of utterly no basis for this rumor. Not sure who got the ball rolling but it must be a really slow news day."
Last week, Axios' Bob Herman compared the company to Whole Foods, which was recently acquired by Amazon, laying out why a larger technology firm like Google, Apple or IBM could be interested in athenahealth. The idea: Athenahealth is already a mature company with a cloud-based healthcare product with many data points touching the care continuum.
While the latest developments are what they are — rumors and speculations — the health IT industry is interested. More news will likely develop as the company looks to move toward networking and piece together practices via technology, an approach that Bush told Healthcare Dive in February would require a new architecture and style of business.
Bush ended the call highlighting his excitement about the company's work on its platform, electronic data interchange as well as the hospital market. "This stuff is good for us. It is hard and it is exciting," he said.
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