Athenahealth Cuts Jobs and Offices; Wall Street Cheers Profit Focus

Investors are rewarding Athenahealth’s cost-cutting plan to shore up its bottom line.

The Watertown, MA-based healthcare IT company’s stock (NASDAQ: ATHN) shot up more than 10 percent during Friday trading. (As of this writing Friday afternoon, it’s trading around $125, up about 8 percent from the previous day’s closing price.) On Thursday, Athenahealth said it is laying off 9 percent of its staff—which amounts to about 500 people, based on the employee count (5,528) listed on its website. The company also announced the closure of its offices in San Francisco and Princeton, NJ.

The layoffs aren’t surprising—Athenahealth announced in August it was reviewing its operations, strategy, and executive leadership structure, and that it had identified ways to shave at least $100 million in costs.

In a conference call with investor analysts, CEO Jonathan Bush cast the moves as more than just a way to limit expenses, but also to make the company more “nimble” by reducing layers between entry-level workers and executives, and giving managers more “authority and accountability.”

“We do not take the decisions to reduce our workforce lightly, but these decisions are necessary to enable us to succeed over the long term and produce a leaner and more efficient company,” Bush (pictured above) said on the call, according to a transcript posted by Seeking Alpha. “While we remain focused on growth, we are now focused on overall profitability of our growth as well.”

Interestingly, Bush credited the arrival of activist investor Elliott Associates—which bought a 9.2 percent stake in the company in May—with pushing everyone at Athenahealth to “look at the company through different eyes,” he said during the call.

Now, “the mindset around here is totally different,” he said, according to the Seeking Alpha transcript. “I feel grateful, oddly, for the role of the investor community in helping us find our way.”

Athenahealth’s third-quarter results were mixed. The company said its revenue grew 10 percent, to $304.6 million, versus the year-ago period. But investors were expecting $311.1 million in quarterly sales, according to a report by The Motley Fool. Quarterly net income was $13 million, down slightly from $13.9 million in the same period last year. The company also lowered its 2017 revenue projection to between $1.2 billion and $1.22 billion, down from the earlier projected range of $1.21 billion to $1.25 billion, according to The Motley Fool.

Athenahealth offers a variety of tech-enabled services to hospitals and outpatient care centers, including electronic health record software, patient engagement and care services, and mobile apps. The company is valued at more than $5 billion.

Jeff Engel is a senior editor at Xconomy. Email: jengel@xconomy.com Follow @JeffEngelXcon

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