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Athenahealth, Inc. (ATHN) Message Board

  • georgespelvin May 13, 2013 12:59 PM Flag

    True GAAP Relative Performance Q12013 over Q42012 and Q12013 over Q12012

    It demonstrates what I have been saying. An adverse economy of scale. Their revenue goes up but their costs go up higher. This is precisely the wrong way. It proves they have a lot of hype around marketing and no super sauce at all. If they had a positively scalable invention there they would be having higher percentages of profit gains, not smaller. Unfortunately when you have adverse scalability as you grow it gets worse and worse, just as if you had positive scalability as you grew it would get larger and larger.

    What they have attempted to do is cloud the issue by going into different lines of business, through the acquisitions. Also the dumb big money loves to see revenue. They believe that where there is revenue there is potential profits. that is what they tell their clients. Who lose money year in and year out but keep coming back for more.

    Here are the figures:

    Q12013 GAAP (true) Net Income before taxes loss of $12 million
    Q42012 GAAP (true) Net Income before taxes profit of $12 million
    Q12012 GAAP (true) Net Income before taxes profit of $5 million

    If you look at just the revenues and the operating costs and do not take into account income tax benefits it is better but not good. The fact is that last quarter their SG&A increased by nearly 50% over the previous quarter. How does that happen? It can happen two ways. They can either go out and double their staff or they can cheat and buy the new business with kickbacks so that they get to count it as revenue on the way in and an expense on the way out. In either case a positive situation would be that their service is so good that they have to spend less money selling because their referral processes kick in. There are several very profitable companies that exist almost entirely on referrals. How much money do you think Epic spends on sales? A shocking small percentage is my guess, although there are no published figures because she is not a public company.

    Sentiment: Strong Sell

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