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8-K - FORM 8-K - ATHENAHEALTH INC | b85064e8vk.htm |
EX-99.2 - EX-99.2 - ATHENAHEALTH INC | b85064exv99w2.htm |
Exhibit 99.1
athenahealth, Inc. Reports Fourth Quarter and Full Year 2010 Results
§ 27% Revenue Growth Over Fourth Quarter of 2009
§ GAAP Net Income of $7.3 Million, or $0.21 Per Diluted Share
§ Non-GAAP Adjusted Net Income of $9.8 Million, or $0.28 Per Diluted Share
WATERTOWN, MA February 17, 2011 athenahealth, Inc. (Nasdaq: ATHN), (the Company), a
leading provider of Internet-based business services for physician practices, today announced
financial and operational results for the fourth quarter and full year of 2010. The Company will
conduct a conference call tomorrow, Friday, February 18, 2011, at 8:00 a.m. Eastern Time to discuss
these results and managements outlook for future financial and operational performance.
Total revenue for the three months ended December 31, 2010, was $69.4 million, compared to $54.4
million in the same period last year, an increase of 27%. Full year 2010 revenue was $245.5
million, compared to full year 2009 revenue of $188.5 million, an increase of 30%.
We delivered strong top and bottom line performance during 2010, but I am most proud of the heavy
lifting we did at the same time, said Jonathan Bush, the Companys Chairman, President, and Chief
Executive Officer. We launched a new service offering, expanded our sales, marketing and
implementation capacity, achieved Meaningful Use certification, and piloted a new business model
for electronic health information exchange, all while delivering more value to our clients.
For the three months ended December 31, 2010, non-GAAP Adjusted EBITDA grew to $20.2 million, or
29% of revenue, from non-GAAP Adjusted EBITDA of $13.0 million, or 24% of revenue, in the same
period last year. GAAP net income for the fourth quarter of 2010 was $7.3 million, or $0.21 per
diluted share, and non-GAAP Adjusted Net Income was $9.8 million, or $0.28 per diluted share.
Our investments in growth and innovation during 2010 are a sign of our confidence in
athenahealths potential to become a multi-billion dollar company said Tim Adams, the Companys
Chief Financial Officer. We achieved annual revenue growth in excess of 30% for the
11th year in a row and our efforts to enhance operational efficiency yielded record
profitability levels.
For the year ended December 31, 2010, non-GAAP Adjusted EBITDA grew to $51.0 million, or 21% of
revenue, from non-GAAP Adjusted EBITDA for 2009 of $34.7 million, or 18% of revenue. For 2010, GAAP
net income was $12.7 million, or $0.36 per diluted share. Non-GAAP Adjusted Net Income for the year
was $22.6 million, or $0.64 per diluted share.
Key metrics and milestones in the fourth quarter and full year of 2010 included the following:
| $1.6 billion in collections posted to client accounts in the fourth quarter of 2010, compared to $1.4 billion in the same quarter of 2009 | ||
| $5.9 billion in collections posted to client accounts in all of 2010, compared to $4.9 billion in all of 2009 | ||
| 38.8 average Client Days in Accounts Receivable (DAR) in the fourth quarter of 2010, compared to 38.5 average Client DAR in the same quarter of 2009 | ||
| 27,114 active medical providers using athenaCollector® at December 31, 2010, 19,197 of which were physicians, compared to 23,366 providers and 15,719 physicians at December 31, 2009 | ||
| 3,348 active medical providers using athenaClinicals® at December 31, 2010, 2,383 of which were physicians, compared to 1,471 providers and 920 physicians at December 31, 2009 | ||
| 1,213 active medical providers using athenaCommunicator® at December 31, 2010, 736 of which were physicians |
As of December 31, 2010, the Company had cash, cash equivalents, short- and long-term investments
of $121.8 million and short- and long-term debt and capital lease obligations of $9.2 million.
Use of Non-GAAP Financial Measures
In the Companys earnings releases, conference calls, slide presentations, or webcasts, the Company
may use or discuss non-GAAP financial measures as defined by SEC Regulation G. The GAAP financial
measure most directly comparable to each non-GAAP financial measure used or discussed, and a
reconciliation of the differences between each non-GAAP financial measure and the comparable GAAP
financial measure, are included in this press release after the condensed consolidated financial
statements. The Companys earnings press releases containing such non-GAAP reconciliations can be
found on the Investors section of the Companys web site at http://www.athenahealth.com.
Conference Call Information
To participate in the Companys live conference call and webcast, please dial 800-435-1261
(617-614-4076 for international calls) using conference code No. 15398557 or visit the Investors
section of the Companys web site: www.athenahealth.com. A replay will be available for one week
following the conference call at 888-286-8010 (617-801-6888 for international calls) using
conference code No. 52965842. A webcast replay will also be archived on the Companys website.
2
About athenahealth
athenahealth, Inc. is a leading provider of web-based business services for medical groups.
athenahealths service offerings are based on proprietary web-native practice management and
electronic health record (EHR) software, a continuously updated payer knowledge-base, integrated
back-office service operations, and automated and live patient communication services. For more
information, please visit www.athenahealth.com or call (888) 652-8200.
Forward-Looking Statements
This press release contains forward-looking statements, which are made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995, including statements reflecting
managements expectations for future financial and operational performance and operating
expenditures, expected growth, including anticipated annual growth rates, profitability and
business outlook, the benefits of the Companys current service offerings, and statements found
under the Companys Reconciliation of Non-GAAP Financial Measures section of this release. The
forward-looking statements in this release do not constitute guarantees of future performance.
These statements are neither promises nor guarantees, and are subject to a variety of risks and
uncertainties, many of which are beyond the Companys control, which could cause actual results to
differ materially from those contemplated in these forward-looking statements. In particular, the
risks and uncertainties include, among other things: the Companys fluctuating operating results;
the Companys variable sales and implementation cycles, which may result in fluctuations in its
quarterly results; risks associated with its expectations regarding its ability to maintain
profitability; the impact of increased sales and marketing expenditures, including whether
increased expansion in revenues is attained and whether impact on margins and profitability is
longer term than expected; changes in tax rates or exposure to additional tax liabilities; the
highly competitive industry in which the Company operates and the relative immaturity of the market
for its service offerings; and the evolving and complex governmental and regulatory compliance
environment in which the Company and its clients operate. Existing and prospective investors are
cautioned not to place undue reliance on these forward-looking statements, which speak only as of
the date hereof. The Company undertakes no obligation to update or revise the information contained
in this press release, whether as a result of new information, future events or circumstances, or
otherwise. For additional disclosure regarding these and other risks faced by the Company, see the
disclosures contained in its public filings with the Securities and Exchange Commission, available
on the Investors section of the Companys website at http://www.athenahealth.com and on the SECs
website at http://www.sec.gov.
Contact:
Jennifer Heizer (Investors)
Director, Investor Relations
athenahealth, Inc.
(617) 402-1322
investorrelations@athenahealth.com
Jennifer Heizer (Investors)
Director, Investor Relations
athenahealth, Inc.
(617) 402-1322
investorrelations@athenahealth.com
3
John Hallock (Media)
Director, Corporate Communications
athenahealth, Inc.
(617) 402-1428
media@athenahealth.com
Director, Corporate Communications
athenahealth, Inc.
(617) 402-1428
media@athenahealth.com
4
athenahealth, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands, except per share amounts)
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands, except per share amounts)
December 31 | December 31 | |||||||
2010 | 2009 | |||||||
Assets |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 35,944 | $ | 30,526 | ||||
Short-term investments |
80,231 | 52,323 | ||||||
Accounts receivable net |
36,870 | 33,323 | ||||||
Deferred tax assets |
3,856 | 5,544 | ||||||
Prepaid expenses and other current assets |
6,749 | 4,663 | ||||||
Total current assets |
163,650 | 126,379 | ||||||
Property and equipment net |
31,899 | 24,871 | ||||||
Restricted cash |
8,691 | 9,216 | ||||||
Software development costs net |
3,642 | 2,324 | ||||||
Purchased intangibles net |
12,651 | 14,490 | ||||||
Goodwill |
22,450 | 22,120 | ||||||
Deferred tax assets |
10,959 | 10,284 | ||||||
Investments and other assets |
7,228 | 1,393 | ||||||
Total assets |
$ | 261,170 | $ | 211,077 | ||||
Liabilities and Stockholders Equity |
||||||||
Current liabilities: |
||||||||
Current portion of long-term debt and capital lease obligations |
$ | 2,909 | $ | 3,437 | ||||
Accounts payable |
559 | 1,880 | ||||||
Accrued compensation |
19,178 | 15,774 | ||||||
Accrued expenses |
10,981 | 10,781 | ||||||
Current portion of deferred revenue |
4,978 | 4,038 | ||||||
Interest rate derivative liability |
490 | 291 | ||||||
Current portion of deferred rent |
1,497 | 1,288 | ||||||
Total current liabilities |
40,592 | 37,489 | ||||||
Deferred rent, net of current portion |
5,960 | 7,444 | ||||||
Deferred revenue, net of current portion |
35,661 | 28,684 | ||||||
Other long-term liabilities |
1,897 | 1,191 | ||||||
Debt and capital lease obligations, net of current portion |
6,307 | 8,951 | ||||||
Total liabilities |
90,417 | 83,759 | ||||||
Preferred stock; $0.01 par value: 5,000 shares authorized and no shares issued
and outstanding at December 31, 2010 and 2009, respectively |
| | ||||||
Common stock; $0.01 par value per share; 125,000 shares authorized;
35,808 shares issued and 34,530 shares outstanding at December 31, 2010
35,166 shares issued and 33,888 shares outstanding at December 31, 2009 |
358 | 352 | ||||||
Additional paid-in capital |
200,339 | 169,715 | ||||||
Treasury stock, at cost, 1,278 shares |
(1,200 | ) | (1,200 | ) | ||||
Accumulated other comprehensive income (loss) |
28 | (73 | ) | |||||
Accumulated deficit |
(28,772 | ) | (41,476 | ) | ||||
Total stockholders equity |
170,753 | 127,318 | ||||||
Total liabilities and stockholders equity |
$ | 261,170 | $ | 211,077 | ||||
5
athenahealth, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in thousands, except per share amounts)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in thousands, except per share amounts)
Three Months Ended | Year Ended | |||||||||||||||
December 31 | December 31 | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Revenue: |
||||||||||||||||
Business services |
$ | 67,094 | $ | 53,297 | $ | 237,145 | $ | 183,230 | ||||||||
Implementation and other |
2,272 | 1,149 | 8,393 | 5,297 | ||||||||||||
Total revenue |
69,366 | 54,446 | 245,538 | 188,527 | ||||||||||||
Expenses: |
||||||||||||||||
Direct operating |
24,419 | 21,117 | 96,582 | 79,017 | ||||||||||||
Selling and marketing |
14,689 | 9,222 | 52,675 | 34,072 | ||||||||||||
Research and development |
4,905 | 3,980 | 18,448 | 14,348 | ||||||||||||
General and administrative |
9,649 | 9,784 | 43,119 | 36,111 | ||||||||||||
Depreciation and amortization |
3,171 | 2,232 | 11,117 | 7,767 | ||||||||||||
Total expenses |
56,833 | 46,335 | 221,941 | 171,315 | ||||||||||||
Operating income |
12,533 | 8,111 | 23,597 | 17,212 | ||||||||||||
Other income (expense): |
||||||||||||||||
Interest income |
90 | 78 | 309 | 1,016 | ||||||||||||
Interest expense |
(316 | ) | (241 | ) | (753 | ) | (968 | ) | ||||||||
(Loss) gain on interest rate
derivative contract |
276 | 215 | (199 | ) | 590 | |||||||||||
Other income |
50 | 44 | 146 | 255 | ||||||||||||
Total other (expense) income |
100 | 96 | (497 | ) | 893 | |||||||||||
Income before income taxes |
12,633 | 8,207 | 23,100 | 18,105 | ||||||||||||
Income tax provision |
(5,330 | ) | (3,879 | ) | (10,396 | ) | (8,829 | ) | ||||||||
Net income |
$ | 7,303 | $ | 4,328 | $ | 12,704 | $ | 9,276 | ||||||||
Net income per share Basic |
$ | 0.21 | $ | 0.13 | $ | 0.37 | $ | 0.28 | ||||||||
Net income per share Diluted |
$ | 0.21 | $ | 0.12 | $ | 0.36 | $ | 0.27 | ||||||||
Weighted average shares used in
computing net income per share: |
||||||||||||||||
Basic |
34,419 | 33,785 | 34,181 | 33,584 | ||||||||||||
Diluted |
35,278 | 35,133 | 35,204 | 34,917 |
6
athenahealth, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
Years Ended December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: |
||||||||||||
Net income |
$ | 12,704 | $ | 9,276 | $ | 31,602 | ||||||
Adjustments to reconcile net income to net cash provided by
operating activities: |
||||||||||||
Depreciation and amortization |
12,956 | 8,403 | 6,095 | |||||||||
Amortization of premiums (discounts) on investments |
1,152 | (113 | ) | (899 | ) | |||||||
Provision for uncollectible accounts |
1,772 | 999 | 405 | |||||||||
Decrease in fair value of contingent consideration |
(250 | ) | | | ||||||||
Loss (gain) on interest rate derivative contract |
199 | (590 | ) | 881 | ||||||||
Deferred income taxes |
1,013 | 5,918 | (23,833 | ) | ||||||||
Excess tax benefit from stock-based awards |
(9,245 | ) | (2,505 | ) | (526 | ) | ||||||
Stock-based compensation expense |
14,477 | 8,314 | 5,558 | |||||||||
Loss (gain) on disposal of property and equipment |
| 276 | (47 | ) | ||||||||
Changes in operating assets and liabilities: |
||||||||||||
Accounts receivable |
(5,319 | ) | (10,489 | ) | (9,254 | ) | ||||||
Prepaid expenses and other current assets |
5,461 | (887 | ) | (912 | ) | |||||||
Other assets |
(243 | ) | (173 | ) | 86 | |||||||
Accounts payable |
(1,024 | ) | 1,379 | (1,195 | ) | |||||||
Accrued expenses |
4,425 | 6,201 | 7,424 | |||||||||
Deferred revenue |
7,917 | 7,438 | 7,120 | |||||||||
Deferred rent |
(1,275 | ) | (1,118 | ) | (1,446 | ) | ||||||
Net cash provided by operating activities |
44,720 | 32,329 | 21,059 | |||||||||
CASH FLOWS FROM INVESTING ACTIVITIES: |
||||||||||||
Capitalized software development costs |
(3,881 | ) | (2,555 | ) | (1,393 | ) | ||||||
Purchases of property and equipment |
(15,932 | ) | (10,277 | ) | (13,452 | ) | ||||||
Proceeds from sales and disposals of property and equipment |
363 | 4,538 | 4,112 | |||||||||
Purchase in long-term investment in unconsolidated company |
| (550 | ) | (550 | ) | |||||||
Proceeds from sales and maturities of investments |
110,741 | 84,014 | 73,250 | |||||||||
Purchases of short-term and long-term investments |
(145,443 | ) | (78,588 | ) | (129,935 | ) | ||||||
Payments for acquisitions, net of cash acquired |
| (22,391 | ) | (6,680 | ) | |||||||
Decrease (increase) in restricted cash |
525 | (7,368 | ) | (136 | ) | |||||||
Net cash used in investing activities |
(53,627 | ) | (33,177 | ) | (74,784 | ) | ||||||
CASH FLOWS FROM FINANCING ACTIVITIES: |
||||||||||||
Proceeds from exercise of stock options |
8,606 | 2,676 | 5,235 | |||||||||
Debt issuance costs |
| | (177 | ) | ||||||||
Excess tax benefit from stock-based awards |
9,245 | 2,505 | 526 | |||||||||
Proceeds from long-term debt |
| | 6,000 | |||||||||
Payment of contingent consideration accrued at acquisition date |
(195 | ) | | | ||||||||
Payments on long-term debt and capital lease obligations |
(3,535 | ) | (2,514 | ) | (777 | ) | ||||||
Net cash provided by financing activities |
14,121 | 2,667 | 10,807 | |||||||||
Effects of exchange rate changes on cash and cash equivalents |
204 | (226 | ) | (40 | ) | |||||||
Net increase (decrease) in cash and cash equivalents |
5,418 | 1,593 | (42,958 | ) | ||||||||
Cash and cash equivalents at beginning of year |
30,526 | 28,933 | 71,891 | |||||||||
Cash and cash equivalents at end of year |
$ | 35,944 | $ | 30,526 | $ | 28,933 | ||||||
Supplemental disclosures of non-cash investing activities Property
and equipment recorded in accounts payable and accrued expenses |
$ | 214 | $ | 510 | $ | 998 | ||||||
Supplemental disclosure Cash paid for interest |
$ | 873 | $ | 836 | $ | 324 | ||||||
Supplemental disclosure Non-cash investing activities -
Contingent Consideration |
$ | | $ | 5,100 | $ | | ||||||
Supplemental disclosure Cash paid for taxes |
$ | 1,636 | $ | 514 | $ | 403 | ||||||
Property and equipment acquired under capital leases |
$ | 363 | $ | 4,538 | $ | 3,795 | ||||||
7
athenahealth, Inc.
STOCK-BASED COMPENSATION EXPENSE
(Unaudited, in thousands)
STOCK-BASED COMPENSATION EXPENSE
(Unaudited, in thousands)
Set forth below is a breakout of stock-based compensation expense for the three months
and year ended December 31, 2010 and 2009:
Three Months Ended | Year Ended | |||||||||||||||
December 31 | December 31 | |||||||||||||||
(unaudited, in thousands) | 2010 | 2009 | 2010 | 2009 | ||||||||||||
Stock-based compensation charged to: |
||||||||||||||||
Direct operating |
$ | 577 | $ | 414 | $ | 2,298 | $ | 1,589 | ||||||||
Selling and marketing |
969 | 548 | 3,509 | 2,126 | ||||||||||||
Research and development |
542 | 266 | 2,014 | 1,015 | ||||||||||||
General and administrative |
1,934 | 971 | 6,656 | 3,584 | ||||||||||||
Total |
$ | 4,022 | $ | 2,199 | $ | 14,477 | $ | 8,314 | ||||||||
athenahealth, Inc.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
TO COMPARABLE GAAP MEASURES
(Unaudited, in thousands, except per share amounts)
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
TO COMPARABLE GAAP MEASURES
(Unaudited, in thousands, except per share amounts)
The following is a reconciliation of the non-GAAP financial measures used by the Company to
describe the Companys financial results determined in accordance with United States generally
accepted accounting principles (GAAP). An explanation of these measures is also included below
under the heading Explanation of Non-GAAP Financial Measures.
While management believes that these non-GAAP financial measures provide useful supplemental
information to investors regarding the underlying performance of the Companys business operations,
investors are reminded to consider these non-GAAP measures in addition to, and not as a substitute
for, financial performance measures prepared in accordance with GAAP. In addition, it should be
noted that these non-GAAP financial measures may be different from non-GAAP measures used by other
companies, and management may utilize other measures to illustrate performance in the future.
Non-GAAP measures have limitations in that they do not reflect all of the amounts associated with
the Companys results of operations as determined in accordance with GAAP.
8
Non-GAAP Adjusted Gross Margin
Set forth below is a presentation of the Companys Non-GAAP Adjusted Gross Profit and
Non-GAAP Adjusted Gross Margin, which represents Non-GAAP Adjusted Gross Profit as a percentage
of total revenue.
Three Months Ended | Year Ended | |||||||||||||||
December 31 | December 31 | |||||||||||||||
(unaudited, in thousands) | 2010 | 2009 | 2010 | 2009 | ||||||||||||
Total revenue |
$ | 69,366 | $ | 54,446 | $ | 245,538 | $ | 188,527 | ||||||||
Direct operating expense |
24,419 | 21,117 | 96,582 | 79,017 | ||||||||||||
Total revenue less direct
operating expense |
44,947 | 33,329 | 148,956 | 109,510 | ||||||||||||
Add: Stock-based compensation expense
allocated to direct operating expense |
577 | 414 | 2,298 | 1,589 | ||||||||||||
Add: Amortization of purchased intangibles |
460 | 396 | 1,839 | 635 | ||||||||||||
Non-GAAP Adjusted Gross Profit |
$ | 45,984 | $ | 34,139 | $ | 153,093 | $ | 111,734 | ||||||||
Non-GAAP Adjusted Gross Margin |
66.3 | % | 62.7 | % | 62.4 | % | 59.3 | % |
Non-GAAP Adjusted EBITDA Margin
Set forth below is a reconciliation of the Companys Non-GAAP Adjusted EBITDA and Non-GAAP
Adjusted EBITDA Margin, which represents Non-GAAP Adjusted EBITDA as a percentage of total
revenue.
Three Months Ended | Year Ended | |||||||||||||||
December 31 | December 31 | |||||||||||||||
(unaudited, in thousands) | 2010 | 2009 | 2010 | 2009 | ||||||||||||
Total revenue |
$ | 69,366 | $ | 54,446 | $ | 245,538 | $ | 188,527 | ||||||||
GAAP net income |
7,303 | 4,328 | 12,704 | 9,276 | ||||||||||||
Add: Provision for income taxes |
5,330 | 3,879 | 10,396 | 8,829 | ||||||||||||
Add: Acquisition-related expenses |
| 100 | | 751 | ||||||||||||
Add (less): Total other (income) expense |
(100 | ) | (96 | ) | 497 | (893 | ) | |||||||||
Add: Stock-based compensation expense |
4,022 | 2,199 | 14,477 | 8,314 | ||||||||||||
Add: Depreciation and amortization |
3,171 | 2,232 | 11,117 | 7,767 | ||||||||||||
Add: Amortization of purchased intangibles |
460 | 396 | 1,839 | 635 | ||||||||||||
Non-GAAP Adjusted EBITDA |
$ | 20,186 | $ | 13,038 | $ | 51,030 | $ | 34,679 | ||||||||
Non-GAAP Adjusted EBITDA Margin |
29.1 | % | 23.9 | % | 20.8 | % | 18.4 | % |
9
Non-GAAP Adjusted Operating Income
Set forth below is a reconciliation of the Companys Non-GAAP Adjusted Operating Income and
Non-GAAP Adjusted Operating Income Margin. Non-GAAP Adjusted Operating Income Margin represents
Non-GAAP Adjusted Operating Income as a percentage of total revenue.
Three Months Ended | Year Ended | |||||||||||||||
December 31 | December 31 | |||||||||||||||
(unaudited, in thousands) | 2010 | 2009 | 2010 | 2009 | ||||||||||||
Total revenue |
$ | 69,366 | $ | 54,446 | $ | 245,538 | $ | 188,527 | ||||||||
GAAP net income |
7,303 | 4,328 | 12,704 | 9,276 | ||||||||||||
Add: Provision for income taxes |
5,330 | 3,879 | 10,396 | 8,829 | ||||||||||||
Add: Acquisition-related expenses |
| 100 | | 751 | ||||||||||||
Add (less): Total other (income) expense |
(100 | ) | (96 | ) | 497 | (893 | ) | |||||||||
Add: Stock-based compensation expense |
4,022 | 2,199 | 14,477 | 8,314 | ||||||||||||
Add: Amortization of purchased intangibles |
460 | 396 | 1,839 | 635 | ||||||||||||
Non-GAAP Adjusted Operating Income |
$ | 17,015 | $ | 10,806 | $ | 39,913 | $ | 26,912 | ||||||||
Non-GAAP Adjusted Operating Income Margin |
24.5 | % | 19.8 | % | 16.3 | % | 14.3 | % |
Non-GAAP Adjusted Net Income
Set forth below is a reconciliation of the Companys Non-GAAP Adjusted Net Income and
Non-GAAP Adjusted Net Income per Diluted Share.
Three Months Ended | Year Ended | |||||||||||||||
December 31 | December 31 | |||||||||||||||
(unaudited, in thousands except per share amounts) | 2010 | 2009 | 2010 | 2009 | ||||||||||||
GAAP net income |
$ | 7,303 | $ | 4,328 | $ | 12,704 | $ | 9,276 | ||||||||
(Less) Add:
(Gain) loss on interest rate derivative contract |
(276 | ) | (215 | ) | 199 | (590 | ) | |||||||||
Add: Stock-based compensation expense |
4,022 | 2,199 | 14,477 | 8,314 | ||||||||||||
Add: Amortization of purchased intangibles |
460 | 396 | 1,839 | 635 | ||||||||||||
Sub-total of tax deductible items |
4,206 | 2,380 | 16,515 | 8,359 | ||||||||||||
(Less): Tax impact of tax deductible items (1) |
(1,682 | ) | (952 | ) | (6,606 | ) | (3,344 | ) | ||||||||
Add: Acquisition-related expenses |
| 100 | | 751 | ||||||||||||
Non-GAAP Adjusted Net Income |
$ | 9,827 | $ | 5,856 | $ | 22,613 | $ | 15,042 | ||||||||
Weighted average shares diluted |
35,278 | 35,133 | 35,204 | 34,917 | ||||||||||||
Non-GAAP Adjusted Net Income per Diluted Share |
$ | 0.28 | $ | 0.17 | $ | 0.64 | $ | 0.43 |
(1) | - Tax impact calculated using federal statutory tax rate of 34% and a blended state tax rate of 6% |
10
Three Months Ended | Year Ended | |||||||||||||||
December 31 | December 31 | |||||||||||||||
(unaudited, in thousands except per share amounts) | 2010 | 2009 | 2010 | 2009 | ||||||||||||
GAAP net income per share diluted |
$ | 0.21 | $ | 0.12 | $ | 0.36 | $ | 0.27 | ||||||||
(Less) Add: (Gain) loss on interest rate derivative contract |
(0.01 | ) | (0.01 | ) | 0.01 | (0.02 | ) | |||||||||
Add: Stock-based compensation expense |
0.12 | 0.06 | 0.41 | 0.24 | ||||||||||||
Add: Amortization of purchased intangibles |
0.01 | 0.01 | 0.05 | 0.02 | ||||||||||||
Sub-total of tax deductible items |
0.12 | 0.06 | 0.47 | 0.24 | ||||||||||||
(Less): Tax impact of tax deductible items (1) |
(0.05 | ) | (0.02 | ) | (0.19 | ) | (0.10 | ) | ||||||||
Add: Acquisition-related expenses |
| 0.01 | | 0.02 | ||||||||||||
Non-GAAP Adjusted Net Income per Diluted Share |
$ | 0.28 | $ | 0.17 | $ | 0.64 | $ | 0.43 | ||||||||
Weighted average shares diluted |
35,278 | 35,133 | 35,204 | 34,917 |
(1) | - Tax impact calculated using federal statutory tax rate of 34% and a blended state tax rate of 6% |
Explanation of Non-GAAP Financial Measures
The Company reports its financial results in accordance with United States generally accepted
accounting principles, or GAAP. However, management believes that in order to properly understand
the Companys short-term and long-term financial and operational trends, investors may wish to
consider the impact of certain non-cash or non-recurring items, when used as a supplement to
financial performance measures in accordance with GAAP. These items result from facts and
circumstances that vary in frequency and/or impact on continuing operations. Management also uses
results of operations before such items to evaluate the operating performance of the Company and
compare it against past periods, make operating decisions, and serve as a basis for strategic
planning. These non-GAAP financial measures provide management with additional means to understand
and evaluate the operating results and trends in the Companys ongoing business by eliminating
certain non-cash expenses and other items that management believes might otherwise make comparisons
of the Companys ongoing business with prior periods more difficult, obscure trends in ongoing
operations, or reduce managements ability to make useful forecasts. Management believes that these
non-GAAP financial measures provide additional means of evaluating period-over-period operating
performance. In addition, management understands that some investors and financial analysts find
this information helpful in analyzing the Companys financial and operational performance and
comparing this performance to its peers and competitors.
Management defines Non-GAAP Adjusted Gross Profit as total revenue, less direct operating
expense, plus stock-based compensation expense allocated to direct operating expense and
amortization of purchased intangibles, and Non-GAAP Adjusted Gross Margin as Non-GAAP Adjusted
Gross Profit as a percentage of total revenue. Management considers these non-GAAP financial
measures to be important indicators of the Companys operational strength and performance of its
business and a good measure of its historical operating trends. Moreover, management believes that
these measures enable investors and financial analysts to closely
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monitor and understand changes in the Companys ability to generate income from ongoing business
operations.
Management defines Non-GAAP Adjusted EBITDA as the sum of GAAP net income before provision for
income taxes, acquisition-related expenses, total other (income) expense, stock-based compensation
expense, depreciation and amortization, and amortization of purchased intangibles and Non-GAAP
Adjusted EBITDA Margin as Non-GAAP Adjusted EBITDA as a percentage of total revenue. Management
defines Non-GAAP Adjusted Operating Income as the sum of GAAP net income before provision for
income taxes, amortization of purchased intangibles, acquisition-related expenses, total other
(income) expense, stock-based compensation expense, and Non-GAAP Adjusted Operating Income Margin
as Non-GAAP Adjusted Operating Income as a percentage of total revenue. Management defines
Non-GAAP Adjusted Net Income as the sum of GAAP net income before (gain) loss on interest rate
derivative contract, stock-based compensation expense, amortization of purchased intangibles,
acquisition-related expenses, , and any tax impact related to these items, and Non-GAAP Adjusted
Net Income per Diluted Share as Non-GAAP Adjusted Net Income divided by weighted average diluted
shares outstanding. Management considers these non-GAAP financial measures to be important
indicators of the Companys operational strength and performance of its business and a good measure
of its historical operating trends, in particular the extent to which ongoing operations impact the
Companys overall financial performance.
Management excludes each of the items identified below from the applicable non-GAAP financial
measure referenced above for the reasons set forth with respect to that excluded item:
| Stock-based compensation expense excluded because these are non-cash expenses that management does not consider part of ongoing operating results when assessing the performance of the Companys business, and also because the total amount of expense is partially outside of the Companys control because it is based on factors such as stock price volatility and interest rates, which may be unrelated to our performance during the period in which the expense is incurred. | ||
| Acquisition-related expenses and amortization of purchased intangibles acquisition-related expenses are reported at the time acquisition costs are incurred, and purchased intangibles are amortized over a period of several years after the acquisition and generally cannot be changed or influenced by management after the acquisition. Accordingly, these items are not considered by management in making operating decisions, and management believes that such expenses do not have a direct correlation to future business operations. Thus, including such charges does not accurately reflect the performance of the Companys ongoing operations for the period in which such charges are incurred. | ||
| Gains and losses on interest rate derivative contract excluded because until they are realized, to the extent these gains or losses impact a period presented, management does not believe that they reflect the underlying performance of ongoing business operations for such period. |
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