For the three months ended March 31, 2013, Non-GAAP Adjusted Gross Margin was 60.4%, down from 61.5% in the same period last year, as the Company continues to invest in its service offerings. Non-GAAP Adjusted EBITDA increased 3%, to $17.6 million, or 14.0% of total revenue, from Non-GAAP Adjusted EBITDA of $17.1 million, or 17.7% of total revenue, in the same period last year. For the three months ended March 31, 2013, GAAP net income was $0.7 million, or $0.02 per diluted share, compared to $2.4 million, or $0.07 per diluted share, in the same period last year. Non-GAAP Adjusted Net Income was $14.2 million, or $0.38 per diluted share, up from $6.3 million, or $0.17 per diluted share, in the same period last year. Non-GAAP Adjusted Net Income excludes $5.7 million of integration and transaction costs relating to the acquisition of Epocrates, Inc. which closed on March 12, 2013, and the pending purchase of the Arsenal on the Charles campus in Watertown, Massachusetts. See "Use of Non-GAAP Financial Measures" below.
"Q1 2013 has been a very exciting and productive quarter with the completion of the Epocrates acquisition and the great progress we have made in anticipation of closing the Arsenal transaction and our new debt financing," said Tim Adams, the Company's Chief Financial Officer. "In addition to these significant transactions, we remained focused on our core business and delivered strong financial results that were in line with our expectations. We are updating our fiscal year 2013 guidance to incorporate the Epocrates transaction and the anticipated closing of the Arsenal and debt financing transactions."
athenahealth's updated fiscal year 2013 guidance is presented below:
|For the Fiscal Year Ending December 31, 2013|
|Forward Looking Guidance|
|GAAP Total Revenue||$580 - $615 million|
|Non-GAAP Adjusted Gross Margin||63.0% - 64.0%|
|Non-GAAP Adjusted Operating Income||$68 - $80 million|
|Non-GAAP Adjusted Net Income per Diluted Share||$1.05 - $1.15|
Our updated GAAP revenue guidance of $580 million to $615 million includes approximately $55 million to $65 million of revenue contribution relating to the Epocrates transaction and the anticipated completion of the Arsenal transaction.
- The range for Epocrates revenue is $46 million to $55 million which includes an approximate $10 million reduction in revenue attributed to the purchase accounting treatment of Epocrates' deferred revenue, and an approximate $15 million reduction in revenue due to the changes made to our market research offerings.
- The Arsenal purchase, if completed, is expected to add approximately $10 million of revenue related to third-party tenants who currently occupy a portion of the Arsenal campus.
- The approximate $10 million reduction in revenue attributed to the purchase accounting treatment of Epocrates' deferred revenue results in a reduction in Non-GAAP Adjusted Net Income per Diluted Share.
- The updated guidance range also reflects an anticipated fiscal year 2013 GAAP effective tax rate of approximately 70% to 90%.
- The change in the anticipated fiscal year 2013 GAAP effective tax rate is driven by the purchase of Epocrates. Excluding the impact from Epocrates, the estimated fiscal year 2013 GAAP effective tax rate remains otherwise materially unchanged from our original guidance communicated in December 2012.
- Our 2013 consolidated GAAP pre-tax income forecast has been reduced from previous estimates due to the projected GAAP pre-tax loss for Epocrates that is primarily attributed to integration and transaction costs, stock compensation expense, and amortization of purchased intangibles for the remainder of 2013 post-acquisition. This projected lower GAAP pre-tax income results in an increase in the effective tax rate because permanent differences, which remained otherwise materially unchanged other than acquisition-related expenses, are a greater percentage of a lower estimated GAAP pre-tax income.
- Our estimated cash taxes are expected to be substantially lower than our previous estimates for fiscal year 2013.