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Globus Medical (GMED) Reports Second Quarter 2017 Results



8/4/2017 8:11:29 AM

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Second Quarter 2017 Highlights

  • Second quarter revenue of $110.6 million
  • Second quarter net income of $5.5 million, resulting in diluted net income of $0.04 per share
  • Second quarter Non-GAAP net income of $11.8 million, resulting in Non-GAAP diluted net income of $0.08 per share
  • Second quarter Adjusted EBITDA of $27.7 million
  • MORE2 Registry® dataset unique patient count rises 67% to more than 230 million
  • Raising 2017 revenue guidance, expecting double-digit growth in second half

Please refer to our Second Quarter 2017 Earnings Presentation Supplement available at http://investors.inovalon.com for additional information, including slides that will be referenced during the Company’s conference call.

BOWIE, Md., Aug. 02, 2017 (GLOBE NEWSWIRE) -- Inovalon (Nasdaq:INOV), a leading technology company providing advanced, cloud-based platforms empowering a data-driven transformation from volume-based to value-based models across the healthcare ecosystem, today announced financial results for the second quarter of 2017.

“Inovalon continued to execute in the second quarter of 2017, again delivering financial results ahead of plan and successfully advancing its capabilities and differentiation in the healthcare marketplace,” said Keith Dunleavy, M.D., Inovalon’s Chief Executive Officer and Chairman of the Board. “Our continued investments in modularity, cloud native architecture, real-time transactional processing, data connectivity, and enhanced data visualization progressed to enable the recent introduction of the Inovalon ONE™ Platform and our engagement by multiple national health plans. These engagements, and the positive interest we are seeing in multiple sectors of the healthcare marketplace, provide us with increasing confidence regarding our leadership and growth going forward.”

Second Quarter 2017 Financial Results

  • Revenue for the second quarter of 2017 was $110.6 million, compared with $123.8 million for the second quarter of 2016. Revenue for the second quarter of 2017 increased 2.1% on a sequential basis from $108.3 million in the first quarter of 2017.
  • Cost of revenue for the second quarter of 2017 was $37.2 million, or 33.6% of revenue, compared with 34.9% of revenue for the second quarter of 2016. This translates into gross margin for the second quarter of 2017 of 66.4% compared with 65.1% for the second quarter of 2016, an increase of 130 basis points. Gross margin for the second quarter of 2017 also increased 170 basis points on a sequential basis from the first quarter of 2017.
  • Net income for the second quarter of 2017 was $5.5 million, resulting in diluted net income per share of $0.04, compared with $16.3 million and $0.11 per share, respectively, for the second quarter of 2016. On a sequential basis, net income for the second quarter of 2017 increased by $1.8 million, and diluted net income per share increased by $0.02 in comparison to the first quarter of 2017.
  • Adjusted EBITDA was $27.7 million for the second quarter of 2017, compared with $40.8 million for the second quarter of 2016. Adjusted EBITDA margin was 25.1% in the second quarter of 2017, compared with 32.9% for the second quarter of 2016. On a sequential basis, Adjusted EBITDA for the second quarter of 2017 increased by $2.8 million, and Adjusted EBITDA margin increased by 210 basis points in comparison to the first quarter of 2017.
  • Non-GAAP net income was $11.8 million for the second quarter of 2017, compared with $20.6 million for the second quarter of 2016. Non-GAAP diluted net income per share for the second quarter of 2017 was $0.08, compared with $0.14 per share for the second quarter of 2016. On a sequential basis, non-GAAP net income for the second quarter of 2017 increased by $2.1 million, and diluted net income per share increased by $0.01 in comparison to the first quarter of 2017.
  • Net cash provided by operating activities was $41.1 million for the first six months of 2017, an increase of 27% from $32.4 million in the year-ago period.

“We are again pleased with our execution in the quarter,” said Chris Greiner, Chief Financial Officer and Chief Operating Officer of Inovalon. “Inovalon delivered revenue ahead of expectations with sustained gross margin expansion on both a year-over-year and sequential basis, driven by our continued investments in technology-enabled efficiency initiatives as well as favorable offering mix. With the headwinds we have previously discussed largely behind us, our platform capabilities being well received within the marketplace, and multiple demonstrations of meaningful contract wins, we look forward to returning to double-digit revenue growth in the second half of 2017.”

Adjusted EBITDA, Adjusted EBITDA margin and Non-GAAP net income are non-GAAP measures. Net income is the GAAP financial measure most directly comparable to Adjusted EBITDA and Non-GAAP net income. Reconciliations of net income to Adjusted EBITDA and Non-GAAP net income, identifying the differences between net income and each of these non-GAAP financial measures, are included in this press release after the consolidated financial statements.

Key Highlights

  • Continued Sequential Improvement Ahead of Expectations. Second quarter 2017 revenue of $110.6 million was above the Company’s expected range, improving 2.1% on a sequential basis. Gross margin in the second quarter improved by 130 basis points over the prior year’s second quarter and 170 basis points on a sequential basis, representing continued operating leverage from both technology-enabled efficiency initiatives and higher-margin offering mix. The Company’s investments in new cloud-based offerings, connectivity, modularity and technology-enabled automation continue to generate strong returns on investment. The Company continued to increase its investment in Sales & Marketing and R&D, which combined were 14.6% of revenue in the second quarter of 2017 versus 11.2% in the prior year’s second quarter and 14.2% in the first quarter of 2017. Even with these investments, the increase in gross margin in the second quarter of 2017 resulted in Adjusted EBITDA above the Company’s expected range.
  • Continued Investments in Innovation Enable The Inovalon ONE™ Platform. Inovalon’s Investment in Innovation grew to $62.4 million in 2016 from $44.5 million in 2014, an increase of more than 40%. In the first half of 2017, Investment in Innovation of $39.6 million was up 41% on a year-over-year basis. As a result of these ongoing technology investments, particularly design initiatives focused on modularity, cloud native architecture, real-time transactional processing, and enhanced data visualization, Inovalon brought together more than 80 of its individual proprietary technology toolsets, referred to as Components, each supporting critical healthcare ecosystem functionality needs. Components have been configured into integrated sets identified as Modules, which together form one, cohesive, integrated technology platform – recently branded as the “Inovalon ONE™ Platform” – that yields dramatic increases in flexibility, performance and operational cost efficiency. The Inovalon ONE™ Platform leverages Inovalon’s highly differentiated scale of connectivity within the healthcare ecosystem, depth of real-world primary-source clinical datasets, sophisticated analytical capabilities, breadth of point-of-care impact capabilities and deep subject matter expertise, empowering organizations across the healthcare industry to design and implement complex, multi-party, value-based arrangements.
  • Multiple National Health Plans Select the Inovalon ONE™ Platform. The powerful combination of capabilities delivered by the Inovalon ONE™ Platform is proving increasingly valuable to a wide range of organizations and is witnessing strong interest from across the healthcare marketplace. Demonstrating this interest in the platform, Inovalon recently entered into multi-year engagements with two separate national health plans. Under these agreements, Inovalon is implementing the Inovalon ONE™ Platform to empower several value-based initiatives involving approximately 15 million health plan members spanning Medicare Advantage, managed Medicaid and commercial programs. In addition, Inovalon’s engagement for the Value-Based Provider Platform by a top-five national health plan, which the Company previously described in its earnings release on February 22, 2017, was the first engagement utilizing the Components and Modules of the Inovalon ONE™ Platform, and involves nearly 20 million patients. Demonstrating the extensibility of the Inovalon ONE™ Platform, since the announcement made by the Company on July 17, 2017, one of the two referenced national health plans has already entered into an additional five year agreement expanding the number of Components leveraged within the Inovalon ONE™ Platform to activate additional clinical quality improvement capabilities.
  • Inovalon Certified and Receiving Fee-For-Service Medicare Data under CMS Qualified Entity (QE) Program in all 50 States and the District of Columbia. During the second quarter of 2017, Inovalon began receiving data under the CMS Qualified Entity (QE) Program for all 50 states and the District of Columbia. The QE Program enables organizations meeting detailed requirements pertaining to performance measurement, data management, security, and existing data volume to receive identified fee-for-service Medicare Parts A, B, and D medical and pharmacy claims data for use in promoting value, health outcomes, and performance improvement in the healthcare system. Under the QE agreement with CMS, Inovalon is in the process of receiving data for all Medicare fee-for-service patients back to 2009 and, following the completion of the “bring current” process data feeds, will be maintained current for the U.S. fee-for-service Medicare data across all 50 states and the District of Columbia going forward. The addition of this data will further differentiate Inovalon’s advanced analytic capabilities, deepen the Company’s data pools used for machine learning model training, enhance the Company’s ability to support value-based initiatives through its Inovalon ONE™ Platform, and expand what is already one of the healthcare industry’s largest and deepest proprietary datasets. The QE Program data will be longitudinally-matched and incorporated into the Company’s de-identified MORE2 Registry®.
  • Continued Expansion of Proprietary Datasets and Connectivity. Inovalon’s expanding client base, breadth of offerings, connectivity, and influx of data from the QE Program in the second quarter of 2017 drove dramatic expansions in the Company’s proprietary datasets during the period. The scale and nature of the data influx is such that only preliminary estimates are being provided for the MORE2 Registry® dataset at this time. These estimates indicate that upon completion of the incorporation of the aforementioned dataset expansions, Inovalon’s MORE2 Registry® dataset will expand to more than 230 million unique patients and nearly 30 billion medical events, representing year-over-year increases of approximately 67% and 155%, respectively, if measured as of June 30, 2017. The Company expects to see continued strong expansion of its proprietary datasets through the remainder of 2017. In addition, at the end of the second quarter of 2017, Inovalon had direct electronic health record (EHR) connectivity with more than 108,000 providers, an increase of over 280% on a year-over-year basis. Inovalon’s proprietary datasets, along with the analytics and insights they power, and extensive connectivity represent significant differentiators for the Company in the healthcare marketplace.
  • Expect Approximately 17% Year-over-Year Revenue Growth in 2H 2017 at the Midpoint of Updated Guidance. The previously-discussed headwinds which impacted Inovalon’s performance during the second half of 2016 and the first half of 2017 have run their course as expected, materially diminishing as of the end of the second quarter of 2017. Now, with the passing of these headwinds, and with the Company’s platform capabilities being well received within the marketplace, the Company expects to see double-digit year-over-year revenue growth in the second half of 2017. Specifically, growth is expected to be approximately 17% on a reported basis and approximately 10% on an organic basis at the midpoint of updated guidance, with revenue growth accelerating from the third quarter to the fourth quarter of 2017. In addition, given the top-line growth, as well as continued benefit from favorable offering mix and technology-enabled efficiency initiatives, Inovalon expects to see further expansion of profitability in the second half of 2017, particularly on a year-over-year basis.

Other Financial Data and Key Metrics

The following constitute other financial and key metrics which are presented quarterly.



To read full press release, please click here.


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