Athenahealth Management Discusses Q2 2012 Results - Earnings Call Transcript

athenahealth (ATHN)

Q2 2012 Earnings Call

July 20, 2012 8:00 am ET

Executives

Dana Quattrochi - Director of Investor Relations

Jonathan Bush - Executive Chairman, Chief Executive Officer, President and Co-Founder

Timothy M. Adams - Chief Financial Officer, Principal Accounting Officer, Senior Vice President and Treasurer

Analysts

Sean W. Wieland - Piper Jaffray Companies, Research Division

Richard C. Close - Avondale Partners, LLC, Research Division

Ryan Daniels - William Blair & Company L.L.C., Research Division

Michael Cherny - ISI Group Inc., Research Division

Jamie Stockton - Wells Fargo Securities, LLC, Research Division

Atif A Rahim - JP Morgan Chase & Co, Research Division

David Larsen - Leerink Swann LLC, Research Division

George Hill - Citigroup Inc, Research Division

Steven P. Halper - Lazard Capital Markets LLC, Research Division

Bret D. Jones - Oppenheimer & Co. Inc., Research Division

Alexander Y. Draper - Raymond James & Associates, Inc., Research Division

Anthony V. Vendetti - Maxim Group LLC, Research Division

Leo F. Carpio - Caris & Company, Inc., Research Division

Stephen B. Shankman - UBS Investment Bank, Research Division

Ricky Goldwasser - Morgan Stanley, Research Division

Gregory T. Bolan - Sterne Agee & Leach Inc., Research Division

Presentation

Operator

Welcome to the athenahealth Q2 2012 Earnings Conference Call. My name is Donna. I will be your operator for today's call. [Operator Instructions] Please note that this conference is being recorded. I will now turn the call over to Dana Quattrochi. Please go ahead.

Dana Quattrochi

Good morning, and thank you for joining us. With me on the call today is Jonathan Bush, our Chairman and CEO; and Tim Adams, our Chief Financial Officer.

On today's call, management will share brief highlights from the prepared remarks we published yesterday and then take questions from the audience. We would like to remind everyone that certain statements contained in this conference call may be considered forward-looking and are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995, including statements reflecting our expectations for future and operational financial performance, including operating expenditures, growth rates and profitability; our integrated service strategy; selling and marketing efforts; service offering benefits and research and development plans and timelines; the client development potential of our Coordinate strategy; and our creation of an ecosystem of networked service providers. Forward-looking statements may be identified with words such as we expect, we anticipate, upcoming or similar indications of future expectations.

These statements are not promises or guarantees and are subject to various risks and uncertainties that could cause our actual results to differ materially from those expressed in such forward-looking statements, including the risks and uncertainties under the heading Risk Factors in our most recent Annual Report on Form 10-K and other periodic reports filed with the SEC, which are available on our website at investors.athenahealth.com and on the SEC's website at sec.gov. These statements speak only as of the date hereof, and the company undertakes no obligation to update or revise the information contained in this call.

Finally, please note that on today's call, we will refer to certain non-GAAP financial measures, in which we exclude certain noncash or nonrecurring item such as stock-based compensation from our GAAP financial results. We believe that in order to properly understand our short-term and long-term financial trends, investors may wish to consider the impact of these items as a supplement to financial performance measures determined in accordance with GAAP. Please refer to yesterday's press release announcing our second quarter fiscal year 2012 results available on our website for a reconciliation of these non-GAAP performance measures to our GAAP financial results.

With that, I'll turn the call over to Jonathan Bush.

Jonathan Bush

Thank you, Dana, and good morning, everyone. I am very pleased with our performance so far this year. 2012 is the year most heavily laden we have ever had with new initiatives, yet the athenahealth team continues to rise to the occasion across all 3 of our strategic initiatives: Jedi, Beautiful and Coordinate.

Our continuing success and the learning we gain from failing along the way is bringing us ever closer to this goal we have of becoming medical caregivers' most trusted service.

First, let's go through the strategy. Our Jedi strategy is moving forward through our service line expansions and transformative client training. First, we continue to redefine our "co-sourcing" model by shifting work from clients over to athenahealth as we get more sophisticated in our understanding of what that work is. This "co-sourcing" strategy reflects the shifting lines of comparative advantage of the company and the network. We're constantly adding new services, which give us life and provide incremental support to our clients.

This year, we added provider credentialing and the handling of eligibility-related denials, work that we used to let clients do. These expanded services are planned for general release in the next 6 to 12 months and aim to improve both client performance and client satisfaction. Our expectation is that over full rollout of this incremental work service set, we will reduce the work that clients have to do to be on our service by up to 60% over time. We continue to streamline the process of ramping physicians on to athenaClinicals with our new athenaCare support service.

Next, our Beautiful strategy focuses on constantly improving the visceral gratification provided to clients and employees when they interact with our company and our network. Currently, our core focus is the athenaClinicals user experience as experienced by physicians and on the gear that our employees use day-to-day. For our clients, athenaNet is now more beautiful, with the launch of our mobile application. We have 1,800 physicians on athenaClinicals for mobile, which is only just released in June. Our iPhone application provides physicians a chance to move through their inboxes while out of the office and keep their undone tasks under control. We started with out-of-office workflows for the iPhone and plan to release functionality for the iPad in Q3 2012, and then we plan to release workflows to move patients through the office on the iPad in 2013. In addition, we kicked off our cross-browser beta program in June, and we expect full support of the Safari browser app during 2013.

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