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Inovalon Reports First Quarter 2016 Results

Published: May 05, 2016

BOWIE, Md., May 4, 2016 /PRNewswire/ --

First Quarter 2016 Financial Highlights and Other Information

  • First quarter revenue of $102.7 million
  • First quarter Adjusted EBITDA of $18.5 million
  • First quarter Non-GAAP net income of $7.5 million, resulting in Non-GAAP diluted net income of $0.05 per share
  • $100 million share repurchase program announced

Inovalon (Nasdaq: INOV), a leading technology company providing advanced cloud-based data analytics and data-driven intervention platforms to the healthcare industry, today announced financial results for the first quarter of 2016.

"The results of the first quarter are reflective of the continued positive execution against our long-term strategic plan. We achieved strong revenue results, above our internal plan, and continued to drive our investments in people, technology, product rollouts, our combination with Avalere, and sales and marketing," said Keith Dunleavy, M.D., Inovalon's chief executive officer and chairman of the board. "Our vision regarding an increasingly value-oriented and data-driven healthcare ecosystem remains clear as we see demand for our innovative solutions continuing to build, further complemented by the progress we are seeing within significant opportunities that we are pursuing in the pharma, life sciences and post-acute care provider markets."

First Quarter 2016 Results

  • Revenue for the first quarter of 2016 was $102.7 million, an increase of approximately $9.0 million, or 10%, compared with $93.6 million for the first quarter of 2015.
  • Cost of revenue for the first quarter of 2016 was $41.9 million, or 41% of revenue, compared with 34% of revenue for the first quarter of 2015.
  • Income from operations for the first quarter of 2016 was $3.3 million, compared with $25.3 million for the first quarter of 2015.
  • Adjusted EBITDA was $18.5 million for the first quarter of 2016, compared with $32.0 million for the first quarter of 2015. Adjusted EBITDA margin was 18.1% in the first quarter of 2016, compared with 34.2% for the first quarter of 2015.
  • Non-GAAP net income for the first quarter of 2016 was $7.5 million, resulting in Non-GAAP diluted net income per share of $0.05, compared with $15.1 million and $0.11 per share, respectively, for the first quarter of 2015.

"We are pleased to have achieved revenue for the quarter which exceeded our internal plan while delivering profitability in accordance with our expectations. Our investments in growth, including product development, connectivity initiatives and expansion of our sales and marketing capabilities, as well as intervention mix, resulted in a higher expense structure as compared with the prior year period, but in-line with our internal projections. The Company's expectations for the full year financial results remain unchanged and in-line with our previously conveyed continuing evolution in seasonality," said Thomas Kloster, chief financial officer of Inovalon.

Adjusted EBITDA, Adjusted EBITDA margin and Non-GAAP net income are non-GAAP measures. The non-GAAP measures are described and reconciled to the most directly comparable GAAP measures at the end of this release.

Key Highlights

  • Strong Demand for Interconnectivity Solutions: During the quarter the Company significantly expanded its interconnectivity capabilities as well as the number of clinical facilities and associated providers with which Inovalon's platforms were connected. This is being achieved through the continued development and implementation of cloud-based connectivity (interoperating with several national EHR platforms) and direct-connect interoperations with many large hospital systems and provider groups. Altogether, as of the end of Q1, Inovalon has achieved a connectivity capability with approximately 20% of the U.S. provider base, a number that is expected to continue to expand. This connectivity provides Inovalon a greater speed, timeliness, and efficiency when seeking to access and deliver relevant healthcare data and analyses on behalf of its clients. These connections are being shown to deliver greater yields in quality score improvement and financial performance improvement efforts. As such, demand is rising for Inovalon to undertake prioritized connection initiatives on behalf of clients to accelerate the benefits being seen by such clients.
  • Progression on Pharma, Life Sciences and Post-Acute Care Provider Initiatives: Following the acquisition and integration of Avalere Health, Inc., the Company has constructed an integrated "stack" of capabilities consisting of the combination of Avalere's industry-leading subject matter expertise and Inovalon's technology and data platforms. The proprietary combination is being offered in a way that provides what is believed to be a unique set of capabilities: providing unmatched scale across capabilities critical to gaining insight and advantage in the transition from volume to value occurring in pharma, life sciences, and provider segments of the healthcare ecosystem. As a testament to the success of these efforts, during the first quarter the Company announced a multi-year agreement with Kindred Healthcare, Inc. which leverages this newly combined stack of capabilities. Kindred is the largest provider of Post-Acute Care services in the U.S., the fastest growing segment of healthcare in the United States. In addition to the Company's provider-focused initiatives, Inovalon's pharma and life sciences efforts have also been progressing strongly during the quarter.
  • Data Diagnostics, Industry-first Real-time Analytics at the Point of Care, in Collaboration with Quest Diagnostics: Also during the quarter, the Company saw strong progression in the technology and business development around the Data Diagnostics platform, an industry-first solution that enables clinicians to request patient-specific analyses on demand at the point of care within their existing workflow to receive results within seconds. Data Diagnostics analyses are designed to deliver patient-specific analyses that support the achievement of value-based care initiatives, quality improvement, cost reduction, risk score accuracy, and a host of additional goals during a patient encounter. More than 50 separate Data Diagnostics analyses are now available, with response times typically in the two to three seconds range, with nearly 600 EHR platforms now able to support the ordering capability in real time. A national business development initiative was launched by Quest Diagnostics during the quarter, with more than 1,500 Quest personnel involved with either sales or in-market support of the initiative.
  • Share Repurchase Program Initiated: Today the Company is announcing that the Board of Directors has authorized a program to repurchase up to $100 million of shares of Inovalon's Class A Common Stock during the remaining months of 2016. This authorization comes after the review of multiple factors, including the Company's significant liquidity and cash position, the strong cash flow characteristics of our business model and the ongoing evaluation and consideration of a robust pipeline of potential acquisition opportunities. Repurchases under the Company's share repurchase program will be made in open-market or privately negotiated transactions in compliance with Rule 10b-18 of the Securities Exchange Act of 1934, as amended, subject to market conditions, applicable legal requirements, and other relevant factors. The share repurchase program does not obligate the Company to acquire any particular amount of Class A Common Stock.

Other Financial Data and Key Metrics

The following constitute other financial and key metrics which are presented quarterly. Please see the Company's filings with the Securities and Exchange Commission (SEC) for further detail.

  • Growth of Datasets: At March 31, 2016, the MORE2 Registry® dataset contained more than 132 million unique patient counts and 11.3 billion medical event counts, increases of 9% and 17%, respectively, compared with March 31, 2015.
  • Investment in Innovation: For the quarter ended March 31, 2016, Inovalon's ongoing investment supporting innovations in advanced, cloudbased data analytics and datadriven intervention platforms was $11.6 million, or 11% of revenue, compared to $10.0 million, or 11% of revenue, in the quarter ended March 31, 2015.
  • Analytical Process Count Growth: Inovalon's trailing 12-month Patient Analytical Month (PAM) count, which the Company believes is indicative of the Company's overall level of analytical activity, grew to more than 22.1 billion as of March 31, 2016, an increase of 24% as compared with March 31, 2015.

2016 Financial Guidance

Inovalon is affirming the full-year 2016 guidance originally issued by the Company on February 25, 2016. As previously conveyed, full year guidance for 2016 is summarized as follows:

  • Revenue is expected to be between $510 million and $520 million
  • Adjusted EBITDA is expected to be between $182 million and $188 million
  • Non-GAAP net income is expected to be between $88 million and $92 million
  • Non-GAAP diluted net income per share is expected to be between $0.57and $0.60

While implementation of the share repurchase program or changes in the stock price could change the fully diluted share count, under the treasury stock method, the Company is assuming 152.8 million shares for the full year 2016.

Shares Outstanding

As of April 30, 2016, the Company had 66,905,308 million shares of Class A common stock outstanding and 85,437,106 million shares of Class B common stock outstanding.

Conference Call

Inovalon will host a conference call to discuss its first quarter 2016 results at 5:00 pm Eastern Standard Time today. To participate in Inovalon's conference call, please dial (855) 783-2604, conference ID 91276675; international callers should dial (631) 485-4882 using the same conference ID. A replay will be available on Inovalon's investor relations website (http://investors.inovalon.com).

About Inovalon

Inovalon is a leading technology company that combines advanced, cloud-based data analytics, and data-driven intervention platforms, to achieve meaningful insight and impact in clinical and quality outcomes, utilization, and financial performance across the healthcare landscape. Inovalon's unique achievement of value is delivered through the effective progression of Turning Data into Insight, and Insight into Action®. Large proprietary datasets, advanced integration technologies, sophisticated predictive analytics, data-driven intervention platforms, and deep subject matter expertise deliver a seamless, end-to-end capability that brings the benefits of big data and large-scale analytics to the point of care. Driven by data, Inovalon uniquely identifies gaps in care, quality, data integrity, and financial performance while bringing to bear the unique capabilities to resolve them. Providing technology that supports hundreds of healthcare organizations in 98.2% of U.S. counties and Puerto Rico, Inovalon's cloud-based analytical and data-driven intervention platforms are informed by data pertaining to more than 793,000 physicians, 277,000 clinical facilities, and more than 132 million Americans. Through these capabilities, and those of its subsidiary Avalere Health, Inc., which offers data-driven advisory services and business intelligence to more than 200 pharmaceutical and life sciences enterprises, Inovalon is able to drive high-value impact, improving quality and economics for health plans, ACOs, hospitals, physicians, consumers and pharma/life-sciences researchers. For more information, visit www.inovalon.com.

Forward Looking Statements

Certain statements contained in this press release constitute forward-looking statements within the meaning of, and are intended to be covered by the safe harbor provisions of, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements contained in this press release other than statements of historical fact, including but not limited to statements regarding the continuing roll-out of Data Diagnostics, the timing, performance characteristics and utility of Data Diagnostics, and the impact of Data Diagnostics on the healthcare industry, future results of operations and financial position, business strategy and plans, market growth, and objectives for future operations, are forward-looking statements. The words "believe," "may," "will," "estimate," "continue," "anticipate," "intend," "expect," and similar expressions are intended to identify forward-looking statements. Forward-looking statements in this press release include, but are not limited to, strategies and business plans, expectations regarding future results, plans to repurchase shares of Class A Common Stock, and earning's guidance for the full-year 2016. Inovalon has based these forward-looking statements largely on current expectations and projections about future events and trends that may affect financial condition, results of operations, business strategy, short-term and long-term business operations and objectives, and financial needs.

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