Raymond James

37th Annual Institutional Investors Conference

Karl Stubelis, Vice President, Finance
March 8, 2016

Safe Harbor Statement

This presentation contains forward-looking statements within the meaning of Section 27A of the Securities Act of
1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including statements
regarding managements expectations for future financial and operational performance and operating
expenditures, expected growth, and business outlook; statements regarding the benefits of and demand for our
service offerings; statements regarding the potential expansion and value of our network and progress towards
building the health care information backbone, as well as statements found under our reconciliation of NonGAAP financial measures included within this presentation. Forward-looking statements may be identified with
words such as will, may, expect, plan, anticipate, upcoming, believe, estimate or similar
terminology, and the negative of these terms. Forward-looking statements are not promises or guarantees of
future performance, and are subject to a variety of risks and uncertainties, many of which are beyond our control,
which could cause actual results to differ materially from those contemplated in these forward-looking
statements. These risks and uncertainties include: our highly competitive industry and our ability to compete
effectively and remain innovative; our ability to retain members of our Epocrates network and to realize the
anticipated benefits of the Epocrates and other acquisitions or investments; the development of the market for
cloud-based health care information technology services; changes in the health care industry and their impact
on the demand for our services; our ability to effectively manage our growth; our ability to protect our intellectual
property; current and future litigation, including for intellectual property infringement; our dependence on thirdparty providers; risks and costs associated with our worldwide operations; our ability to attract and retain highly
skilled employees; our fluctuating operating results; our ability to retain our clients and maintain client revenue; our
tax liability; our variable sales and implementation cycles; the timing at which we recognize certain revenue and
our ability to evaluate our prospects; defects and errors in our software or services, or interruptions or damages to
our systems or those of third parties on which we rely; a data security breach; limitations on our use of data; the
effect of payer and provider conduct; the failure of our services to provide accurate and timely information;
increasing government regulation and the costs and challenges of compliance; the potential for illegal behavior
by employees or subcontractors; and the price volatility of our common stock. Forward-looking statements speak
only as of the date hereof and, except as required by law, we undertake no obligation to update or revise these
forward-looking statements. For additional information regarding these and other risks faced by us, refer to our
public filings with the Securities and Exchange Commission (SEC), available on the Investors section of our
website at www.athenahealth.com and on the SECs website at www.sec.gov.

Use of Non-GAAP Financial Measures

In our earnings releases, conference calls, slide presentations, or

webcasts, we may use or discuss non-GAAP financial measures
as defined by 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, is available within this presentation and within
our public filings with the Securities and Exchange Commission,
available on the Investors section of our website at
http://www.athenahealth.com.

Health care needs its cloud-based

platform

Become the platform to support the network

We continue to follow the same principles

VISION

To build the national health information backbone.

MISSION

To be health care providers most trusted service,

helping them do well by doing the right thing.

CULTURE

We are teachers and learners; in it for the mission and

rewarded by team success.

We have a consistent track record of profitable

growth with significant opportunity ahead of us

1
2
3
6

Our strategies target massive, untapped

addressable market opportunities
Our success is aligned with our clients longterm success
Our focused investments fuel future growth
and profitability

Our total addressable market is

massive and growing
Road to Support Full Continuum of Care

$30-$35
Billion

Ambulatory
Market
$30-35 Billion1

$60-$85
Billion

Acute Care Ambulatory

Services
Market
$30-$50 Billion1 $30-35 Billion1

$70-$100
Billion

Post-Acute &
Home
$10-15 Billion2
Ambulatory
Market
$30-35 Billion1
Acute Care
Services
$30-50 Billion1

Calculated by multiplying athenahealths average billing rate of each service offering by ~$940B Hospital Expenditures and ~$590B Physician &
Clinical Services, Centers for Medicare & Medicaid Services, Office of the Actuary, National Health Statistics Group, 2013.
2 Calculated by multiplying athenahealths average billing rate of each service offering by ~$100B Post-Acute Market Expenditures, MEDPAC Report,
March 2015, athenahealth data.
2 Calculated by multiplying athenahealths average billing rate of each service offering by ~$200B Home Health Expenditures, Kaiser Family
Foundation Medicaid Data; IBISWorld Industry Report 62311, January 2015; IBISWorld Industry Report 62331, April 2015; athenaheath data.
1

WORK
19M eligibility checks
35M claims posted
13M patient messages
90K live operator calls
115K denials managed
5M faxes received and
posted

KNOWLEDGE

259M transactions

40M claims rules

1705 clinical rules

NETWORK
38M active patients
75K providers

103 quality programs

Drug drug interactions
Formulary checks

Service metrics shown

as a per month avg.

Our business model makes us an

evolution over SaaS
SaaS
Customer Acquisition Cost

Per dollar of recurring

revenue

>$1.00

Per dollar of recurring

revenue

64%

~80%

<1 Year

>1 Year

Annual Attrition (Churn Rate)

<5%

5% - 15%

Lifetime Value/
Customer Acquisition Cost1

~21x

~8x

Gross Margin %

Payback Period

~$0.60

2016 guidance

Based on 5% churn

Based on 10% churn

LTV (lifetime value of physician on athenaNet) = sum of the recurring revenue streams of a given customer over the lifetime of a
customer less cost to serve them (recurring gross profit).

Our fiscal year 2016 growth and

profitability expectations
Fiscal Year 2016 Expectations
GAAP Total Revenue

$1,085 - $1,115 million

Non-GAAP Adjusted Gross Margin1

63.5% - 64.5%

Non-GAAP Adjusted Operating Income1

$120 - $135 million

Non-GAAP Adjusted Net Income per Diluted Share1

$1.65 - $1.85

Note: These estimates reflect our current operating plan as of December 10, 2015, and are subject to change
as future events and opportunities arise.
1

10

See non-GAAP reconciliation tables in the 12/9/15 press release

2016 Guidance

Non-GAAP reconciliation
for fiscal year 2016 expectations
Non-GAAP Adjusted Gross Margin
LOW
HIGH
Fiscal Year Ending December 31, 2016

Total rev enue

Direct operating expense
Total rev enue less direct operating expense

$
$

Add: Stock-based compensation expense

allocated to direct operating expense
Add: Amortization of purchased intangible assets
allocated to direct operating expense
Non-GAAP Adjusted Gross Profit

Non-GAAP Adjusted Gross Margin

Please note that the figures presented above may not sum exactly due to rounding.
13

1,085.0 $
423.4
661.6 $

1,115.0
423.2
691.7

19.0

19.0

8.4

8.4

689.0 $

719.2

63.5%

64.5%

Non-GAAP reconciliation
for fiscal year 2016 expectations
Non-GAAP Adjusted Operating Income
LOW
HIGH
Fiscal Year Ending December 31, 2016

Total rev enue

GAAP net income

Add: Prov ision for income taxes
Add: Total other expense
Add: Stock-based compensation expense
Add: Amortization of capitalized stock-based compensation
related to softw are dev elopment
Add: Amortization of purchased intangible assets
Non-GAAP Adjusted Operating I ncome

Non-GAAP Adjusted Operating I ncome Margin

Please note that the figures presented above may not sum exactly due to rounding.
14

1,085.0

1,115.0

10.8
7.6
5.3
69.4

19.5
12.9
6.4
69.4

6.8
20.0

6.8
20.0

120.0
11.1%

135.0
12.1%

Non-GAAP reconciliation
for fiscal year 2016 expectations
Non-GAAP Adjusted Net Income and Non-GAAP Adjusted EPS
LOW
HIGH
Fiscal Year Ending December 31, 2016

GAAP net income

Add: Stock-based compensation expense
Add: Amortization of capitalized stock-based compensation
related to softw are dev elopment
Add: Amortization of purchased intangible assets
Sub-total of tax deductible items

(Less): Tax impact of tax deductible items (1)

Add: Tax impact resulting from applying a normalized
non-GAAP tax rate (2)
Non-GAAP Adjusted Net I ncome

Weighted av erage shares - diluted

Non-GAAP Adjusted Net I ncome per Diluted Share

10.8 $
69.4

19.5
69.4

6.8
20.0

6.8
20.0

96.2 $

96.2

(38.5)

(38.5)

0.2

(0.1)

68.8 $

77.2

41.7

41.7

1.65 $

1.85

(1) Tax impact calculated using a tax rate of 40%

(2) Represents adjusting the GAAP net income (loss) at a Non-GAAP tax rate of 40%. For 2016, we are using a
non-GAAP tax rate of 40% to normalize the tax impact to our non-GAAP Adjusted Net Income per Diluted Share
based on the fact that a relatively small change in pre-tax GAAP income (loss) in any one period could result in
a volatile GAAP effective tax rate.

Please note that the figures presented above may not sum exactly due to rounding.
15

Non-GAAP reconciliation
for fiscal year 2016 expectations
Non-GAAP Adjusted EPS
LOW
HIGH
Fiscal Year Ending December 31, 2016

GAAP net income per share - diluted

Add: Stock-based compensation expense
Add: Amortization of capitalized stock-based compensation
related to softw are dev elopment
Add: Amortization of purchased intangible assets
Sub-total of tax deductible items

(Less): Tax impact of tax deductible items (1)

Add: Tax impact resulting from applying a normalized
non-GAAP tax rate (2)
Non-GAAP Adjusted Net I ncome per Diluted Share

Weighted av erage shares - diluted

0.26 $
1.66

0.47
1.66

0.16
0.48

0.16
0.48

2.31 $

2.31

(0.92)

(0.92)

0.01

(0.00)

1.65 $

1.85

41.7

41.7

(1) Tax impact calculated using a tax rate of 40%

(2) Represents adjusting the GAAP net income (loss) at a Non-GAAP tax rate of 40%. For 2016, we are using a
non-GAAP tax rate of 40% to normalize the tax impact to our non-GAAP Adjusted Net Income per Diluted Share
based on the fact that a relatively small change in pre-tax GAAP income (loss) in any one period could result in
a volatile GAAP effective tax rate.

Please note that the figures presented above may not sum exactly due to rounding.
16