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Analysis

Athenahealth Confirms $5.7B Buyout, Reports Solid Q3 Earnings

By Jack O'Brien  
   November 12, 2018

After delaying its earnings report by one week, the health technology servicer produced a decent bottom line and will be acquired for $5.7 billion in a joint bid from Veritas Capital and Elliott Management Corp.

Two New York-based financial firms have agreed to a multibillion deal to purchase athenahealth, the embattled healthcare technology servicer, after weeks of speculation surrounding a potential acquisition.

Athenahealth delivered a solid Q3 earnings report Friday afternoon but did not address rumors of a buyout from Veritas Capital and Elliott Management Corp.

However, Reuters and CNBC confirmed Monday that the two private equity firms cemented the $5.7 billion deal to acquire athenahealth over the weekend. Elliott, which held a 9% stake in the company, brought in Veritas to purchase athenahealth at $135 per share.

In September, the New York Post reported that Elliott Management founder Paul Singer backed off a bid to purchase athenahealth at $160 per share, citing a desire to secure a bid at a lower price.

Related: Athenahealth Pushes Back Q3 Earnings Amid Veritas-Elliott Talks

In light of the announcement, athenahealth's stock is up in early morning trading by nearly 10%. The company had spent the better part of 2018 listening to offers to take the company private once again, especially after CEO Jonathan Bush resigned in June due to domestic violence and misconduct allegations. 

Athenahealth is scheduled to hold its earnings press call on November 12 after markets close.

Solid Q3 serves as prelude to Veritas-Elliott deal
 

The Watertown, Mass.-based health technology servicer saw revenues, operating income, and net income rise in Q3 2018, compared to this time last year. 

Prior to the impact of new revenue recognition standard, total revenue was $331.4 million, up from $304.6 million in Q3 2017, non-GAAP operating income was $54.6 million compared to $39.5 million this time last year, and GAAP net income was $21.5 million, well above the $13 million posted this time last year.

C-Suite Perspective: 
 

“We delivered another quarter of solid financial results and have reaffirmed our financial outlook for the year. During Q3, we achieved stable top-line growth on a comparable basis and significantly improved profitability and operating cash flow year-over-year,” Marc Levine, CFO of athenahealth, said in a statement. “We are confident in the opportunities available to athenahealth. athenahealth maintains a differentiated position in the market, and continues to drive positive change for our clients, expand the value of our core offerings, and unlock value for our shareholders.”

Prior to the Q3 earnings report release, athenahealth's stock finished Friday trading down 3.63%.

Additional Athenahealth Q3 Earnings Report Highlights:
 

  • The company saw 7% growth in covered lives through its population health services year-over-year.

  • Discharge bed days increased for subsidiary athenaOne by 19% compared to Q3 2017.

  • Non-GAAP gross margin prior to the impact of the new revenue recognition standard slipped from 54.4% to 54% compared to Q3 2017, while GAAP gross margin dipped from 52.7% to 52.3% over the same period of time.

For complete financial information, review athenahealth's filing with the Securities and Exchange Commission.

This story has been updated to reflect the acquisition of athenahealth by Veritas Capital and Elliott Management Corp.

Jack O'Brien is the finance editor at HealthLeaders, a Simplify Compliance brand.


KEY TAKEAWAYS

The Watertown, Mass.-company saw revenues increase 9% year-over-year.

The health technology servicer also recorded a net income of $21.5 million in Q3, eclipsing $13 million in Q3 2017.

CFO Marc Levine said he remains "confident in the opportunities available" to athenahealth.


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