NextGen (QSII) just reported bad numbers. This exemplifies what is happening in the field.
ATHN just laid off 36 people in their Birmingham office with no announcement and no comment. It was discovered by the local newspaper. A company that is growing does not indulge in Reductions in Force. That is a move reserved for stock engineering. There are not 36 souls in one office that deserve to be fired. A CFO does that when he decides to improve the margin. This is such a tell.
NextGen's product is clumsy, pricey, and produces less than accurate reporting. If they are slipping it is because their are more competitors with superior and more dependable products.
As for ATHN lay-offs out of Birmingham, AL, these posistion are probably being relocated to their processing center in Belfast, ME to reduce labor costs and overhead. No doubt this issue will be addressed on the upcoming call.
I see NG system quotes frequently. They are less pricey on software than ever before but still pricey on implementation. They have extraordinarily competent implementation processes and infrastructure. I do not know about the imp processes of ATHN. IT is not something they emphasize or talk much about and I have had no interaction with their clients other than to find out that the clients do not get a billing service and thus cannot reduce back office staff. Although they thought they were going to be able to RIF staff.
That is the rub for me. The clients are paying a rate that is less than a billing service, expecting those services, but paying more than they should for hosted software perhaps confused by the lofty term cloud services.
I would not buy QSII stock. I will probably short ATHN again once the short squeeze is over. It is nearly back to where it was when I shorted it. Unless something has dramatically changed it should go down further this time. Short squeezes have little to do with company fundamentals. They are transitory. And as self reinforcing as major moves to the downside. A little begets more. Until capitulation.
The sector is in deep weeds. ATHN stock price/fundamentals is totally out of line with those of every other company in the sector. Everyone.
As for the layoffs. What you say is sensible. What is not sensible is the lack of a PR that says that in order to allay sensible investor fears. Dumb investors might not be alarmed by layoffs, thinking every employee is just a pesky expense. But if you plot firings in service business against success it is not encouraging.
ATHN does not seem to have positive economies of scale processes. But even if it did if one were experiencing growth and expecting more one would not net fire. One might freeze but not net fire. The answer will be in the total head count.
The very hardest and most expensive asset to acquire is good people who then have to be trained. Which takes six months to one year.