Company Issues Preliminary Fourth Quarter and
Full Year 2017 ExpectationsIn Conjunction with J.P. Morgan
Healthcare Conference Participation
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 preliminary unaudited
expected results for the fourth quarter and full year 2017, in
conjunction with its participation at the J.P. Morgan Healthcare
Conference.
“We are pleased with our execution in 2017 and
are excited about the adoption that we are seeing of the Inovalon
ONE™ Platform,” said Keith Dunleavy, M.D., Inovalon’s chief
executive officer and chairman of the board. “Our differentiated
cloud-native capabilities, ecosystem connectivity, and expanding
datasets are enabling new opportunities, driving market demand, and
are resulting in positive financial performance. Reflecting this,
we experienced double-digit organic revenue growth and strong
year-over-year margin expansion in the fourth quarter, within our
previously-conveyed guidance.”
“Our expected fourth quarter results continue to
demonstrate the increased operating leverage we are seeing in our
business,” said Chris Greiner, chief financial officer and chief
operating officer of Inovalon. “Favorable offering mix and pricing,
as well as technology-enabled efficiencies, have led to expanded
gross margin, allowing us to continue to invest in innovation and
sales, while still delivering year-over-year Adjusted EBITDA margin
expansion, in line with our prior guidance.”
In addition, as a result of the Tax Cuts and
Jobs Act of 2017 enacted on December 22, 2017, the Company will
remeasure its deferred tax assets and liabilities. While the
Company is still evaluating the impact of the changes to the tax
code, the Company expects the changes to result in a significant
decrease in provision for income taxes and corresponding material
increase in net income and Non-GAAP net income for the fourth
quarter and full year 2017. The Company will provide a further
update on the impact of this adjustment in its fourth quarter and
full year 2017 earnings release on February 20, 2018.
All full-year and fourth quarter 2017 estimated
financial information contained herein, including performance and
results, are preliminary estimates determined in good faith based
on Inovalon’s internal reporting for the fourth quarter and fiscal
year 2017 and remain subject to the completion of the Company's
customary quarterly close and review procedures related to its
year-end financial statement closing process and review and audit
by the Company’s independent public accounting firm. Where a range
of potential results has been provided herein, a midpoint of such
range is assumed for illustrative purposes only, and such midpoint
should not be viewed as an indication of management’s expectations
or actual results. Material adjustments may arise between the date
of this press release and the dates on which the Company announces
its full fourth quarter and fiscal year 2017 results and files its
Form 10-K for the fiscal year 2017 with the SEC.
Adjusted EBITDA and Adjusted EBITDA margin are
Non-GAAP measures. Explanations of why the Company finds Adjusted
EBITDA and Adjusted EBITDA margin useful and a reconciliation of
Adjusted EBITDA to GAAP are included later in this press
release.
J.P. Morgan Healthcare
Conference
The Company is scheduled to present at the J.P.
Morgan Healthcare Conference at 3:00 p.m. (PT) on Wednesday,
January 10, 2018. Investors may access a live audio webcast of the
presentation on the Investor Relations section of Inovalon’s
website at http://investors.inovalon.com. An archived version of
this presentation will remain posted for a limited time. In
addition, the Company has posted on the Investor Relations section
of its website an Investor Brochure with additional information, as
well as the Company’s presentation deck for the J.P. Morgan
Healthcare Conference.
About Inovalon
Inovalon is a leading technology company
providing cloud-based platforms empowering a data-driven
transformation from volume-based to value-based models throughout
the healthcare industry. Through the Inovalon ONE™ Platform,
Inovalon brings to the marketplace a national-scale capability to
interconnect with the healthcare ecosystem on massive scale,
aggregate and analyze data in petabyte volumes to arrive at
sophisticated insights in real-time, drive impact wherever it is
analytically identified best to intervene, and intuitively
visualize data and information to inform business strategy and
execution. Leveraging its platform, unparalleled proprietary data
sets, and industry-leading subject matter expertise, Inovalon
enables the assessment and improvement of clinical and quality
outcomes and financial performance across the healthcare ecosystem.
From health plans and provider organizations, to pharmaceutical,
medical device, and diagnostics companies, Inovalon's unique
achievement of value is delivered through the effective progression
of “Turning Data into Insight, and Insight into Action®.” Providing
technology that supports a client base approaching 500 healthcare
organizations, Inovalon's platforms are informed by data pertaining
to more than 903,000 physicians, more than 385,000 clinical
facilities, and 231 million Americans. 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 our estimated results of operations and
financial position for the fourth quarter and full year 2017, the
roll-out of any product or capability, the timing, performance
characteristics and utility of any such product or capability, and
the impact of any such product or capability 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,” “see,” “will,” “estimate,” “continue,”
“anticipate,” “assume,” “intend,” “expect,” “project,” “look
forward,” “preliminary,” and similar expressions are intended to
identify forward-looking statements. Forward-looking statements in
this press release include, but are not limited to, our estimated
results of operations and financial position for the fourth quarter
and full year 2017, strategies and business plans, expectations
regarding future results, expectations regarding the size of our
datasets, and plans to repurchase shares of Class A common
stock. Inovalon has based these forward-looking statements largely
on its preliminary estimates of its financial results and its
current expectations and projections about future events and trends
that it believes may affect financial condition, results of
operations, business strategy, short-term and long-term business
operations and objectives, and financial needs as of the date of
this press release. These forward-looking statements are subject to
a number of risks, uncertainties, and assumptions, which could
cause the future events and trends discussed in this press release
not to occur and could cause actual results to differ materially
and adversely from those anticipated or implied in the
forward-looking statements. Forward-looking statements include
statements regarding the estimated effects of the Tax Cuts and Jobs
Act of 2017 enacted on December 22, 2017 (the “Tax Legislation”) on
the Company’s preliminary estimates for the fourth quarter and year
ending December 31, 2017. The Tax Legislation made numerous changes
to federal corporate tax law. Inovalon is in the process of
analyzing these changes and cannot determine at this time the full
effects of the Tax Legislation on its business and financial
results. These forward-looking statements consist of preliminary
estimates, are based on currently available information, as well as
the Company’s current interpretations, assumptions and expectations
relating to the Tax Legislation, and are subject to change,
possibly materially, as the Company completes its analysis of the
Tax Legislation.
These risks, uncertainties, and assumptions
include, among others: the Company’s ability to continue and manage
growth; ability to grow the client base, retain and renew the
existing client base and maintain or increase the fees and activity
with existing clients; the effect of the concentration of revenue
among top clients; the ability to innovate new services and adapt
platforms and toolsets; the ability to successfully implement
growth strategies, including the ability to expand into adjacent
verticals, such as direct to consumer, growing channel
partnerships, expanding internationally and successfully pursuing
acquisitions; the ability to successfully integrate our
acquisitions and the ability of the acquired business to perform as
expected; the successful implementation and adoption of new
platforms and solutions, including the Inovalon ONE™
Platform, Data Diagnostics® and INDICES® Value-Based
Provider Platform; the possibility of technical, logistical or
planning issues in connection with the Company’s investment in and
successful deployment of the Company’s products, services and
technological advancements; the ability to enter into new
agreements with existing or new platforms, products and solutions
in the timeframes expected, or at all; the impact of pending
M&A activity in the managed care industry, including potential
positive or negative impact on existing contracts or the demand for
new contracts; the effects of and costs associated with compliance
with regulations applicable to the Company, including regulations
relating to data protection and data privacy; the ability to
protect the privacy of clients’ data and prevent security breaches;
the effect of competition on the business; and the efficacy of the
Company’s platforms and toolsets. Additional information is also
set forth in the Company’s Annual Report on Form 10-K for the
year ended December 31, 2016, filed with the SEC on
February 23, 2017, included under the heading Item 1A, “Risk
Factors” and in subsequent reports filed with the SEC. The Company
is under no duty to, and disclaims any obligation to, update any of
these forward-looking statements after the date of this press
release or conform these statements to actual results or revised
expectations, except as required by law.
1 Organic revenue growth is defined as growth
excluding revenue from businesses acquired within the last 12
months.
Inovalon
Holdings, Inc.Preliminary Adjusted EBITDA
Expectations (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preliminary Range Expectations |
|
|
Three Months Ended |
|
Twelve Months Ended |
|
December 31, 2017 |
|
December 31, 2017 |
(In
millions) |
|
Low |
|
High |
|
Low |
|
High |
Reconciliation
of Income Before Taxes to Adjusted EBITDA: |
|
|
|
|
|
|
|
|
Income Before
Taxes |
|
$ |
3 |
|
|
|
$ |
6 |
|
|
|
$ |
31 |
|
|
|
$ |
34 |
|
|
Depreciation and amortization |
|
13 |
|
|
|
14 |
|
|
|
52 |
|
|
|
53 |
|
|
Interest
expense |
|
2 |
|
|
|
2 |
|
|
|
6 |
|
|
|
6 |
|
|
Interest
income |
|
(1 |
) |
|
|
(1 |
) |
|
|
(5 |
) |
|
|
(5 |
) |
|
EBITDA |
|
17 |
|
|
|
21 |
|
|
|
84 |
|
|
|
88 |
|
|
Stock-based compensation |
|
5 |
|
|
|
5 |
|
|
|
17 |
|
|
|
17 |
|
|
Acquisition costs: |
|
|
|
|
|
|
|
|
Transaction costs |
|
— |
|
|
|
— |
|
|
|
1 |
|
|
|
1 |
|
|
Integration costs |
|
— |
|
|
|
— |
|
|
|
2 |
|
|
|
2 |
|
|
Contingent consideration accretion |
|
(2 |
) |
|
|
(2 |
) |
|
|
(5 |
) |
|
|
(5 |
) |
|
Compensatory contingent consideration |
|
1 |
|
|
|
1 |
|
|
|
2 |
|
|
|
2 |
|
|
Other
non-comparable items(1) |
|
3 |
|
|
|
3 |
|
|
|
6 |
|
|
|
6 |
|
|
Adjusted EBITDA |
|
$ |
24 |
|
|
|
$ |
28 |
|
|
|
$ |
107 |
|
|
|
$ |
111 |
|
|
|
|
|
20.7 |
|
% |
|
|
23.9 |
|
% |
|
|
23.9 |
|
% |
|
|
24.7 |
|
% |
|
|
|
|
|
_______________________________________________________(1)
Other “non-comparable items” include items that are not comparable
across reporting periods or items that do not otherwise relate to
the Company’s ongoing financial results, such as certain employee
related expenses attributable to advancements in automation and
operational efficiencies. Non-comparable items are excluded from
Adjusted EBITDA in order to more effectively assess the Company’s
period over period and ongoing operating performance.
Non-GAAP Financial Measures
Inovalon provides the measures Adjusted EBITDA
and Adjusted EBITDA margin as additional information for evaluating
the Company’s operating results. These measures are not prepared in
accordance with, or as an alternative for, GAAP accounting and may
be different from non-GAAP measures used by other companies.
Investors frequently have requested information
from management regarding depreciation, amortization and other
non-cash charges, such as stock-based compensation, as well as the
impact of non-comparable items and management believes, based on
discussions with investors, that these non-GAAP measures enhance
investors’ ability to assess Inovalon’s historical and projected
future financial performance. While management believes these
non-GAAP financial measures provide useful supplemental information
to investors, there are limitations associated with the use of
non-GAAP financial measures. For example, one limitation of
Adjusted EBITDA is that it excludes depreciation and amortization,
which represents the periodic costs of certain capitalized tangible
and intangible assets used in generating revenues in our business.
Inovalon compensates for these limitations by using these non-GAAP
financial measures as supplements to GAAP financial measures and by
reconciling the non-GAAP financial measures to their most
comparable GAAP financial measures. Investors are encouraged to
review the reconciliations of these non-GAAP financial measures to
the comparable GAAP measures that are provided above.
These non-GAAP measures include financial
information that is prepared in accordance with GAAP and presented
in our consolidated financial statements and are used to evaluate
our business, measure our performance, develop financial forecasts
and make strategic decisions and are an important factor in
determining variable compensation.
Adjusted EBITDA and Adjusted EBITDA
Margin
The Company defines Adjusted EBITDA as income
before taxes calculated in accordance with GAAP, adjusted for the
impact of depreciation and amortization, realized losses on
short-term investments, loss or gain on disposal of equipment,
interest income, interest expense, stock-based compensation,
acquisition costs (including transaction costs, integration costs,
costs related to contingent consideration accretion and
compensatory contingent consideration), tax on equity exercises,
and other non-comparable items. Due to the uncertainty related to
the impact of the Tax Legislation, as discussed above, the Company
is still evaluating the impact of the Tax Legislation on its fourth
quarter and full year 2017 results and will provide a further
update on the impact of this adjustment in its fourth quarter and
full year 2017 earnings release on February 20, 2018. As a result,
the Company has provided a reconciliation of Adjusted EBITDA to
income before taxes above. The only adjustment from income before
taxes to net income not reflected in the reconciliation above is
provision for taxes. As described above, the Company currently
expects the impact of the Tax Legislation to be materially
positive.
Adjusted EBITDA margin is the Company’s
calculation of Adjusted EBITDA, divided by revenue calculated in
accordance with GAAP.
The Company uses Adjusted EBITDA and Adjusted
EBITDA margin as supplemental measures of performance to gain
insight into operating effectiveness. The Company uses Adjusted
EBITDA and Adjusted EBITDA margin as key metrics to assess its
ability to increase revenues while controlling expense growth and
the scalability of the Company’s business model. The Company
believes that the exclusion of the expenses eliminated in
calculating Adjusted EBITDA and Adjusted EBITDA margin provides
management and investors a useful measure for period-to-period
comparisons of the Company’s core business and operating results by
excluding items that are not comparable across reporting periods or
that do not otherwise relate to the Company’s ongoing operating
results. Accordingly, the Company believes that Adjusted EBITDA and
Adjusted EBITDA margin provide useful information to investors and
others in understanding and evaluating the Company’s operating
results. However, use of Adjusted EBITDA and Adjusted EBITDA margin
as analytical tools has limitations, and investors and others
should not consider them in isolation or as substitutes for
analysis of our financial results as reported under GAAP. In
addition, other companies, including companies in Inovalon’s
industry, might calculate Adjusted EBITDA and Adjusted EBITDA
margin or similarly titled measures differently, which may reduce
their usefulness as comparative measures.
Contacts:
InovalonGeorge Price (Investors)Phone:
301-809-4000 x1190gprice@inovalon.com
InovalonKim E. Collins (Communications)Phone:
301-809-4000 x1473kcollins@inovalon.com
Inovalon (NASDAQ:INOV)
Historical Stock Chart
From Apr 2024 to May 2024
Inovalon (NASDAQ:INOV)
Historical Stock Chart
From May 2023 to May 2024