First Quarter 2017 Highlights
- First quarter revenue of $108.3 million
- First quarter net income of $3.6 million, resulting in diluted net income of $0.02 per share
- First quarter Non-GAAP net income of $9.7 million, resulting in Non-GAAP diluted net income of $0.07 per share
- First quarter Adjusted EBITDA of $25.0 million
- MORE2 Registry® dataset medical event count expanded to more than 14 billion, unique patient count expanded to more than 158 million
Please refer to our First 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., May 03, 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 first quarter of 2017.
“During the first quarter of 2017, we delivered financial results ahead of plan and continued to see a number of positive forces building in our business,” said Keith Dunleavy, M.D., Inovalon’s Chief Executive Officer and Chairman of the Board. “We continue to achieve meaningful expansion of our platform capabilities, analytical sophistication, compute scale, connectivity, and proprietary datasets. This combination is increasingly strengthening and differentiating the Company. Together with our investments in sales and marketing, this is supporting an ongoing expansion of our client base and new contract wins across a widening range of market adjacencies. Altogether, this is providing us an increasing level of confidence in our 2017 outlook.”
First Quarter 2017 Financial Results
- Revenue for the first quarter of 2017 was $108.3 million, compared with $102.7 million for the first quarter of 2016.
- Cost of revenue for the first quarter of 2017 was $38.3 million, or 35.3% of revenue, compared with 40.8% of revenue for the first quarter of 2016. This translates into gross margin for the first quarter of 2017 of 64.7% compared with 59.2% for the first quarter of 2016, an increase of 550 basis points.
- Net income for the first quarter of 2017 was $3.6 million resulting in diluted net income per share of $0.02, compared with $2.4 million and $0.02 per share, respectively, for the first quarter of 2016.
- Adjusted EBITDA was $25.0 million for the first quarter of 2017, compared with $18.5 million for the first quarter of 2016, an increase of 35%. Adjusted EBITDA margin was 23.0% in the first quarter of 2017, compared with 18.1% for the first quarter of 2016, an increase of 490 basis points.
- Non-GAAP net income was $9.7 million for the first quarter of 2017, compared with $7.5 million for the first quarter of 2016, an increase of 29%. Non-GAAP diluted net income per share for the first quarter of 2017 was $0.07, compared with $0.05 per share for the first quarter of 2016.
“Overall, we are very pleased with the Company’s execution in the first quarter,” said Chris Greiner, Chief Financial and Operating Officer of Inovalon. “Inovalon delivered revenue ahead of expectations with notable margin expansion driven by our continued investments in technology-enabled efficiency initiatives, as well as favorable platform product mix. We continue to see the factors in our business that we have previously discussed materialize as expected, and with our positive first quarter performance we remain optimistic about 2017 and our return to double-digit organic growth in the second half of the year.”
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
- Better Than Expected First Quarter Performance. First quarter 2017 revenue of $108.3 million was above the Company’s expected range. Approximately $2 million of the higher revenue came from work originally expected to occur in the second quarter 2017. Gross margin in the first quarter improved by 550 basis points over the prior year’s first quarter, representing operating leverage from both technology-enabled efficiency initiatives and higher-margin platform product mix. As planned, the Company’s investments in new cloud-based platforms, connectivity, product modularity, and expanding technology-enabled automation and efficiencies are generating strong returns on invested capital. Together with the 250 basis point year-over-year improvement in General & Administrative expense as a percentage of revenue (despite the addition of incremental General & Administrative expense from the acquisition of Creehan Holding Co., Inc. on October 1, 2016), the increase in gross margin in the first quarter supported significantly higher levels of investment in innovation and sales & marketing versus the prior year, while still enabling a material year-over-year Adjusted EBITDA margin expansion of 490 basis points.
- Continuing Investments. Inovalon’s ongoing investments in innovation, product development, and sales and marketing are driving differentiation and momentum in the business. Reflecting the significant number of opportunities that the Company sees in empowering the transformation to value-based healthcare, during the first quarter of 2017, Inovalon increased its investment in innovation to $17.7 million, a 52% increase from the year ago period. These continued investments in cloud-based platform technologies, on-demand real-time transactional analytics, connectivity, data model architecture, natural language processing, machine learning, and product modularity are resulting in expanding capability differentiation, new product offerings, and increasing margin improvement. Also during the first quarter of 2017, the Company further increased its investment in sales & marketing expense to $7.6 million, a 16% increase compared to the year ago period, and a 310% increase compared to the first quarter of 2015. This significant and sustained increase in investment has dramatically expanded the sales and marketing organization resources, specifically increasing the number of FTEs performing sales from 15 in the first quarter of 2015 to 79 in the first quarter of 2017. Combined with the new capabilities enabled through the Company’s ongoing innovation and product development initiatives, the expanded sales and marketing capacity and capability was evident during the quarter in material year-over-year increases in new client count, annualized revenue associated with new statements of work, the pace of progression of opportunities through the Company’s sales pipeline, and speed to opportunity closure.
