Athenahealth Inc. (ATHN - Analyst Report) posted adjusted earnings per share of 7 cents for the third quarter of the year, which were halved from 14 cents in the same quarter of prior year. However, adjusted earnings per share beat the Zacks Consensus Estimate by a penny. Adjusted net earnings plummeted 47.2% to $2.8 million from $5.3 million in the third quarter of 2013.

Following the earnings announcement, shares of the company dipped 8.6% to $111.76 till the market closed yesterday.

On a reported basis, Athenahealth posted a loss of $1.6 million, or 4 cents per share in the quarter compared with earnings of $1.2 million, or 3 cents per share, in the third quarter of 2013.

Revenues

Revenues in the quarter rose 25.7% to $190.4 million, in line with the Zacks Consensus Estimate. Athenahealth added 3,420 physicians to athenaCollector, 2,786 physicians to athenaClinicals, and 3,846 physicians to athenaCommunicator during the quarter.

Revenues from athenahealth-branded services rose 31% to $175.6 million in the quarter. However, revenues from Epocrates-branded services slid 27% to $9.8 million. Third-party tenant and other non-core revenues went up 32% to $5.0 million.

On a segment-wise basis, revenues from Business Services rose 27.2% year over year to $179.7 million while Implementation and Other revenues grew 5.1% to $10.7 million in the third quarter of 2014.

Margins

Adjusted gross profits escalated 23.5% to $113.6 million while adjusted gross margin fell 100 basis points (bps) to 59.7% from 60.7% in the 2013-quarter.

Adjusted operating earnings declined 35.8% to $6.1 million or 3.2% of sales in the quarter from $9.5 million or 6.3% of sales in the prior-year quarter.

Financial Position

athenahealth had cash and cash equivalents of $59.5 million as of Sep 30, 2014, down 8.4% from $65.0 million as of Dec 31, 2013. Long-term debt stood at $177.5 million as of Sep 30, 2014, down 6.0% from $188.75 million as of Dec 31, 2013. With this, long term debt-to-capitalization ratio declined 370 bps to 28.8% from 32.5% as of Dec 31, 2013.

In the first nine months of 2014, cash flow from operating activities increased 85.3% to $104.1 million from $56.2 million in the same period of 2013. Capital expenditure more than doubled to $51.1 million from $21.4 million in the first nine months of 2013.
 

Guidance

For the full year 2014, athenahealth reiterated its revenues guidance of $725 to $755 million. The current Zacks Consensus Estimate of $745 million lies within the company’s projected band.

For the full year, athenahealth also retained its adjusted gross margin guidance in the range of 62.5–63.5%, adjusted operating earnings of    $70 to $80 million and adjusted net earnings per share of 98 cents to $1.10.

Zacks Rank

Currently, athenahealth carries a Zacks Rank #2 (Buy). Other stocks to consider in the medical information systems industry include Omnicell, Inc. (OMCL - Analyst Report) and in the medical products industry include GW Pharmaceuticals plc (GWPH - Snapshot Report) and ZELTIQ Aesthetics, Inc. (ZLTQ - Snapshot Report). All of these sport a Zacks Rank #1 (Strong Buy).