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Athenahealth (ATHN) Tops Q3 EPS by 6c, to Cut Workforce 9%

October 19, 2017 4:03 PM EDT

Athenahealth (NASDAQ: ATHN) reported Q3 EPS of $0.56, $0.06 better than the analyst estimate of $0.50. Revenue for the quarter came in at $304.6 million versus the consensus estimate of $310.52 million.

Update on Strategic Initiatives to Drive Increased Levels of Profitable Growth and Enhance Shareholder Value

As previously announced on August 1, 2017, the Board of Directors and management team have been conducting a strategic review of our operational and financial strategy, leadership and governance. As a result of this review, today we are announcing an increase to our previously identified cost savings target. On October 13, 2017, the Board approved a comprehensive strategic plan to generate $100 million to $115 million of gross pre-tax expense savings. We expect to realize substantially all of these savings by the end of 2018. We expect to achieve these savings through a new organizational design, marketing program rationalization, real estate optimization, including the closure of offices in San Francisco and Princeton, and other reduced overhead.

The organizational redesign will result in a leaner, more simplified structure that is more responsive to client needs and is expected to improve employee engagement by increasing efficiencies, streamlining workflow, and enhancing accountability. As a result of the redesign, we expect to reduce our workforce by approximately 9%. We expect to incur total pre-tax charges of approximately $15 million to $25 million, the majority of which will be recognized in the fourth quarter of 2017, primarily related to these workforce reductions.

While we plan to reinvest a portion of the $100 million to $115 million of savings to drive innovation and fund our highest priority initiatives, we expect the majority of the savings to flow to the bottom line and drive margin improvement, consistent with our commitment to sustainable profitable growth and value creation. athenahealth remains committed to significantly increasing operating margins in 2018.

Fiscal Year 2017 Outlook

We continue to face weaker utilization trends and a more challenging demand environment. In addition, some of our non-athenaOne revenue initiatives are not ramping as quickly as planned. We also expect a negative impact of approximately $4 million on our 2017 revenue from hurricanes Harvey and Irma. Despite these growth headwinds, we are making progress on our initiatives to run the business more efficiently while continuing to focus on growth in 2018 and beyond. Based on our third quarter performance and current expectations for the fourth quarter of 2017, we have revised our fiscal year 2017 guidance as of October 19, 2017. Our revised fiscal year 2017 financial guidance is summarized in the following table:

For the Fiscal Year Ending December 31, 2017
Forward-Looking Guidance
Financial Measures
GAAP Total Revenue$1,200 million - $1,220 million
GAAP Operating Income$29 million - $53 million
Non-GAAP Adjusted Operating Income$135 million - $150 million
Financial Metric
Annual Bookings$300 million - $350 million

For earnings history and earnings-related data on Athenahealth (ATHN) click here.



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