The Macro Show Replay | July 15, 2015



INVITE (ATHN) | BEST IDEA UPDATE CALL - 2015 07 14 Best Idea Update

athenahealth (athn) best idea update call 

We added athenahealth (ATHN) to the Hedgeye Best Idea List as a Long in August 2014.  Since then, we have heard push back and praise from investors on both sides of the debate.  We've continuously reevaluated our thesis and added depth to our research along the way, and at each turn found ourselves arriving at the same conclusion with more confidence than before.  We remain long ATHN and believe the stock will reclaim $200 as our long thesis plays out.




In the presentation, we will review much of the incremental work completed over the last year, challenge the bear case using market share data from SK&A, and evaluate the company's ability to succeed in the inpatient space, which we see as much improved from where they were a year ago.  We will also unveil at least one new tracker (with others in development) that will give us visibility into share gain/losses by other vendors on weekly basis and review the results of our EHR/RCM pricing survey.


This call will be held on Thursday, July 23rd at 11:00am ET.


Please contact  for further information.  An invite with dial-in instructions will be sent to subscribers ahead of the conference call.


INVITE (ATHN) | BEST IDEA UPDATE CALL - 2015 07 15 Practice Management Share

presentation outline

  • Company and financial snapshot
  • Business model overview
  • Regulatory backdrop
    • Meaningful Use
    • PQRS / ACOs / FQHCs
    • Fee for Value
  • Practice Management & EHR Market Share Analysis 
    • Epic, Cerner, eClinicalWorks, Allscripts and more
    • Independent vs. Health System
    • Share by specialty and size
    • How big of a threat are Epic and Cerner?
  • Inpatient Opportunity
    • Market share analysis
    • Pricing and modelling adoption
  • Key Drivers
    • ATHN Tracker Update… Q2 Doc Add Preview
    • NEW tracker introduction
    • Results of RCM/EHR Pricing Survey
  • Field Notes
    • Former CPSI Sales Rep
    • Current Healthland Sales Rep
    • CEO of RazorInsights Hospital
    • Former Sales Manager eClinicalWorks
  • Valuation and sentiment
  • Risks and timing

Please call or e-mail with any questions.


Thomas Tobin
Managing Director 



Andrew Freedman





KATE - At This Price, LBO Math Matters

Takeaway: No one wants to touch KATE. But with a 29% IRR plus $788mm in NOLs, other buyers might be interested.

The Equity market wants nothing but to sell KATE, and all the work we do on the brand's three-year roadmap won't change that dynamic over the near-term leading up to earnings next month (which look fine, by the way). But at a price, someone's gotta care about this name. Our LBO analysis arrives at a 29% IRR assuming a 50% take-out premium at current levels, and margin levels more than 1,000bp below other brands in the so-called 'handbag space'.  And that's not even giving KATE credit for its $788mm in NOLs (equal to 29% of its equity value -- which is massive -- ie NOL is very high, or equity value low).


We've gotten so many calls from people saying 'I want to buy it, but I'm afraid of it.' Quite frankly, so are we given how irrationally it trades. But our numbers haven't changed. We think the business looks solid, and that ultimately the stock will follow the numbers.  If its traditional shareholder list won't buy the name, perhaps a different one will emerge.  The model makes a lot of sense from where we sit.

KATE - At This Price, LBO Math Matters - KATE LBO chart1B


Key Assumptions

-The stock closed at $21.63 -- let's conservatively use a 50% discount to the current price.

-A capital structure of 50% Equity and 50% Debt gets us leverage of 7.0x on 2016 EBITDA of $304mm.  This leverage is above current regulatory guidelines, but we think a bank would be willing to stretch for this deal due to its relatively small size and the 50% stake being taken by the equity holder. Additionally, the deal remains attractive even at lower leverage levels.

-We have revenue going from $1.7bn in 2016 to $3.3bn in 2020 and the EBITDA margin moving from 18% to 25%.

-With a 10x take out EBITDA multiple on our estimated take out EBITDA of $886mm we get an IRR of 29%.

-Importantly, there's also $788mm in NOLs that don't expire until 2028.

KATE - At This Price, LBO Math Matters - KATE LBO chart2B

Hedgeye Statistics

The total percentage of successful long and short trading signals since the inception of Real-Time Alerts in August of 2008.

  • LONG SIGNALS 80.52%
  • SHORT SIGNALS 78.68%

VIDEO: Tom Tobin Previews Best Idea Call on Athenahealth | $ATHN


Earlier today, Hedgeye Healthcare Sector Head Tom Tobin and Analyst Andrew Freedman gave an overview of their upcoming Best Idea Call on Athenahealth. Tom and Andrew offer a brief history of their long idea before outlining the current bull case.


The call will take place Thursday, July 23 at 11:00AM ET. If you would like access to this institutional presentation, please contact


Arnold Donald, CEO of CCL - commentary on China

  • Absorbs capacity from Caribbean

Alan B. Buckelew, COO of CCL

  • 90% of trips are to Asian destinations, most of them reachable by sea
    • Out of 98 million outbound trips, 88 million are in Asia.
  • Affluent Chinese growing at ~20% (>US$34K), Upper middle class growth ~22% (US$16-34K) CAGR (2012-2022)
  • Lower Passport Application fee $135 (before 2013); $32 (after 2013)
  • Japan: visa-free entry for Chinese cruisers, started March 2015
  • Korea: Visa-free entry to Jeju for Chinese cruisers started in last 3 years
  • Chinese Govt expects tourism to be 5% of GDP by 2020
  • Ministry of transport of PRC provided a detailed map of available Chinese ports
  • Chinese passenger projected to increase: +34% CAGR by 2020
  • Carnival entered Chinese market in 2006 with Costa. Costa reached profitability in 2013 and Princess reached profitability in 2014.
  • Costa: has 20 offices in China
  • 26,000 travel agents in China
  • 2,700 have outbound travel licenses and can sell cruises. Only Chinese companies can secure an outbound travel license.
  • Carnival strategic partnerships: CSSC, CMG
  • Princess target segment: age 30-40; affluent young adults with previous international travel experience, +150k RMB
  • Costa target segment: age 25-45; +120k RMB
  • Chinese prefer shorter cruises (3-6 nights)
  • Revised casino with baccarat 
  • Market share: Carnival has 43% market share; RCL: 32%; Star: 12%; local Chinese 14% (e.g Skysea)

Q & A


  • Would consider selling older ships... to Ctrip for example
    • Again, this would make a lot of sense for CCL
  • Constantly evaluating taking other brands to China
  • JV MOU - will be a domestic, Chinese brand
    • Very close on finalizing agreement. Hope partnership will be done in 2015. Ship won't be in the water 'for a couple of years'.
  • Will be a while before you get true competition within China
  • "Demand already exceeds supply"
  • Most Chinese cruisers are new cruisers
  • Carnival sell a lot of their Chinese inventory through distribution charters 
    • Do not see that system changing any time soon
    • Pricing integrity: charters pay Carnival and then go market the cruise
  • New Princess ship in China: expect higher double digit ROIC (above fleet average)
  • Carnival's inventory goes through a wholesale/charter model
    • Lots of charters. No one charter has a significant portion of CCL's bookings.
  • Working with Fincantieri on ship-building capacity in China. Could possibly build a ship from China in next 5-7 yrs.
  • China is a margin driver
  • New onboard initiatives: taking discounted cabins and targeting them towards gamblers.  
  • Cuba: still waiting for green light from Cuba govt regarding lifting the ban on leisure travel
  • Japan market: not going to have same growth as China because culture is quite 'cautious regarding travel'
  • Drydock days in 2015: used to put in more efficient fuel technology
  • Trends in Europe: economic malaise and geopolitical tensions pressuring results. Cruise demand concern as well because of popularity of European beaches. Germany is doing well. Europe doing better in 2015 vs 2014. 

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