Athenahealth Inc. (NSDQ:ATHN) paid dearly for its efforts to increase its market penetration during the first quarter, which saw profits plunge despite health top-line growth.
The Watertown, Mass.-based electronic medical records provider posted sales of $54.5 million during the three months ended March 31, up 32.8 percent compared with $41.0 million during the same period last year.
But net income plunged 82 percent to $277,000, or 1 cent per share, compared with $1.5 million, or 4 cents per share, during Q1 2009.
Athenahealth said its bottom line took a hit from its increased sales and marketing spend, which rose 72.3 percent to $12.1 million during the quarter, from $7.0 million during the first three months of 2009. Total expenses rose to $53.8 million, or 98.3 percent of total revenues, compared with $38.6 million during the year-ago quarter, amounting to 94 percent of total revenues.
CFO Tim Adams said the company expects sales and marketing expenses to be at least 20 percent of total revenues for the full year. Continued growth to adjusted gross margins — which were 58.5 percent during Q1 2010, up from 55.9 during Q1 2009 — and "general and administrative expense leverage will lead to bottom-line growth for the full year, compared with last year, Adams said in prepared remarks.
Athenahealth‘s stock price plunged 17.9 percent between April 29 and April 30, when it announced its Q1 results, dropping from $35.35 to $29.01. Shares were trading at $27.25 in early afternoon activity May 6.