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|Inovalon Expects Fourth Quarter Revenue Growth of 18% to 20% and Adjusted EBITDA Growth of 78% Assuming the Midpoint, Consistent with Prior Guidance|
Company Issues Preliminary Fourth Quarter and Full Year 2017 Expectations
Preliminary Fourth Quarter 2017 Expectations
Preliminary Full Year 2017 Expectations
Please see Inovalon’s new Investor Brochure available at http://investors.inovalon.com, as well as the Company’s 2018
“We are pleased with our execution in 2017 and are excited about the adoption that we are seeing of the Inovalon ONE™ Platform,” said
“Our expected fourth quarter results continue to demonstrate the increased operating leverage we are seeing in our business,” said
In addition, as a result of the Tax Cuts and Jobs Act of 2017 enacted on
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
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.
The Company is scheduled to present at the
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
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
1 Organic revenue growth is defined as growth excluding revenue from businesses acquired within the last 12 months.
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
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.