Document and Entity Information
Document and Entity Information | 6 Months Ended |
Jun. 30, 2017shares | |
Document and Entity Information | |
Entity Registrant Name | Cotiviti Holdings, Inc. |
Entity Central Index Key | 1,657,197 |
Document Type | 10-Q |
Document Period End Date | Jun. 30, 2017 |
Amendment Flag | false |
Current Fiscal Year End Date | --12-31 |
Entity Current Reporting Status | Yes |
Entity Filer Category | Non-accelerated Filer |
Entity Common Stock, Shares Outstanding | 92,168,017 |
Document Fiscal Year Focus | 2,017 |
Document Fiscal Period Focus | Q2 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) $ in Thousands | Jun. 30, 2017 | Dec. 31, 2016 |
Current assets | ||
Cash and cash equivalents | $ 137,426 | $ 110,635 |
Restricted cash | 8,548 | 9,103 |
Accounts receivable, net of allowance for doubtful accounts of $275 and $851 at June 30, 2017 and December 31, 2016, respectively; and net of estimated allowance for refunds and appeals of $32,648 and $41,020 at June 30, 2017 and December 31, 2016, respectively | 87,215 | 67,735 |
Prepaid expenses and other current assets | 29,860 | 14,957 |
Total current assets | 263,049 | 202,430 |
Property and equipment, net | 73,928 | 67,640 |
Goodwill | 1,196,389 | 1,196,024 |
Intangible assets, net | 502,997 | 533,305 |
Other long-term assets | 2,415 | 2,864 |
TOTAL ASSETS | 2,038,778 | 2,002,263 |
Current liabilities: | ||
Current maturities of long-term debt | 18,000 | 18,000 |
Customer deposits | 8,548 | 9,103 |
Accounts payable and accrued other expenses | 27,370 | 23,162 |
Accrued compensation costs | 37,967 | 58,589 |
Estimated liability for refunds and appeals | 57,635 | 62,539 |
Total current liabilities | 149,520 | 171,393 |
Long-term liabilities: | ||
Long-term debt | 757,218 | 762,202 |
Other long-term liabilities | 5,758 | 8,799 |
Deferred tax liabilities | 123,178 | 120,533 |
Total long-term liabilities | 886,154 | 891,534 |
Total liabilities | 1,035,674 | 1,062,927 |
Commitments and contingencies (Note 6) | ||
Stockholders' equity: | ||
Common stock ($0.001 par value; 600,000,000 shares authorized, 92,168,017 and 90,748,740 issued, and 92,168,017 and 90,741,340 outstanding at June 30, 2017 and December 31, 2016, respectively) | 92 | 91 |
Additional paid-in capital | 926,548 | 911,582 |
Retained earnings | 81,980 | 33,917 |
Accumulated other comprehensive loss | (5,516) | (6,156) |
Treasury stock, at cost (7,400 shares at December 31, 2016) | (98) | |
Total stockholders' equity | 1,003,104 | 939,336 |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ 2,038,778 | $ 2,002,263 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parentheticals) - USD ($) $ in Thousands | Jun. 30, 2017 | Dec. 31, 2016 |
Consolidated Balance Sheets | ||
Allowance for doubtful accounts | $ 275 | $ 851 |
Estimated allowance for refunds and appeals | $ 32,648 | $ 41,020 |
Common stock, par value per share | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 600,000,000 | 600,000,000 |
Common stock, shares issued | 92,168,017 | 90,748,740 |
Common stock, shares outstanding | 92,168,017 | 90,741,340 |
Treasury stock, shares | 7,400 |
Consolidated Statements of Comp
Consolidated Statements of Comprehensive Income (Loss) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
Consolidated Statements of Comprehensive Income (Loss) | ||||
Net revenue | $ 167,611 | $ 158,291 | $ 327,744 | $ 301,009 |
Cost of revenue (exclusive of depreciation and amortization, stated separately below): | ||||
Compensation | 58,870 | 55,285 | 115,158 | 108,746 |
Other costs of revenue | 6,123 | 5,275 | 12,809 | 10,673 |
Total cost of revenue | 64,993 | 60,560 | 127,967 | 119,419 |
Selling, general and administrative expenses (exclusive of depreciation and amortization, stated separately below): | ||||
Compensation | 25,564 | 23,176 | 50,257 | 42,286 |
Other selling, general and administrative expenses | 15,300 | 14,945 | 32,179 | 30,174 |
Total selling, general and administrative expenses | 40,864 | 38,121 | 82,436 | 72,460 |
Depreciation and amortization of property and equipment | 5,896 | 4,811 | 11,471 | 9,646 |
Amortization of intangible assets | 15,201 | 15,208 | 30,400 | 30,415 |
Transaction-related expenses | 661 | 653 | 1,392 | 893 |
Total operating expenses | 127,615 | 119,353 | 253,666 | 232,833 |
Operating income | 39,996 | 38,938 | 74,078 | 68,176 |
Other expense (income): | ||||
Interest expense | 8,538 | 14,660 | 16,959 | 30,720 |
Loss on extinguishment of debt | 3,183 | 7,068 | 3,183 | 7,068 |
Other non-operating (income) expense | (556) | (359) | (1,009) | (658) |
Total other expense (income) | 11,165 | 21,369 | 19,133 | 37,130 |
Income before income taxes | 28,831 | 17,569 | 54,945 | 31,046 |
Income tax expense | 7,743 | 6,676 | 6,882 | 12,069 |
Net income | 21,088 | 10,893 | 48,063 | 18,977 |
Other comprehensive (loss) income, net of tax: | ||||
Foreign currency translation adjustments | 452 | (645) | 509 | (671) |
Change in fair value of derivative instruments | 193 | (84) | 131 | (566) |
Total other comprehensive (loss) income | 645 | (729) | 640 | (1,237) |
Comprehensive income | $ 21,733 | $ 10,164 | $ 48,703 | $ 17,740 |
Earnings per share | ||||
Basic (in dollars per share) | $ 0.23 | $ 0.13 | $ 0.52 | $ 0.24 |
Diluted (in dollars per share) | $ 0.22 | $ 0.13 | $ 0.51 | $ 0.24 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 6 Months Ended | |
Jun. 30, 2017 | Jun. 30, 2016 | |
Cash flows from operating activities: | ||
Net income | $ 48,063 | $ 18,977 |
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||
Deferred income taxes | 2,588 | (9,797) |
Depreciation and amortization of property and equipment | 41,871 | 40,061 |
Stock-based compensation expense | 4,538 | 4,502 |
Amortization of debt issuance costs | 1,494 | 2,675 |
Accretion of asset retirement obligations | 98 | 92 |
Loss on extinguishment of debt | 3,183 | 7,068 |
Changes in operating assets and liabilities: | ||
Restricted cash | 555 | 3,176 |
Accounts receivable | (19,480) | 4,182 |
Other assets | (14,471) | 8,937 |
Customer deposits | (555) | (3,176) |
Accrued compensation | (20,622) | (5,127) |
Accounts payable and accrued other expenses | (194) | (1,295) |
Estimated liability for refunds and appeals | (4,904) | 2,799 |
Other long-term liabilities | 372 | 98 |
Other | (236) | (598) |
Net cash provided by operating activities | 42,300 | 72,574 |
Cash flows from investing activities: | ||
Expenditures for property and equipment | (16,593) | (14,019) |
Other investing activities | 1,181 | |
Net cash used in investing activities | (16,593) | (12,838) |
Cash flows from financing activities: | ||
Net proceeds from issuance of common stock | 226,929 | |
Proceeds from exercise of stock options | 10,546 | 56 |
Dividends paid | (150,000) | |
Payment of debt issuance costs | (661) | |
Repayment of debt | (9,000) | (240,150) |
Net cash provided by (used in) financing activities | 885 | (163,165) |
Effect of foreign exchanges on cash and cash equivalents | 199 | (233) |
Net increase (decrease) in cash and cash equivalents | 26,791 | (103,662) |
Cash and cash equivalents at beginning of period | 110,635 | 149,365 |
Cash and cash equivalents at end of the period | 137,426 | 45,703 |
Supplemental disclosures of cash flow information: | ||
Cash paid for income taxes | 16,977 | 11,268 |
Cash paid for interest | 14,343 | 27,795 |
Noncash investing activities (accrued property and equipment purchases) | $ 9,340 | $ 11,779 |
Description of Business
Description of Business | 6 Months Ended |
Jun. 30, 2017 | |
Description of Business | |
Description of Business | Note 1. Description of Business Cotiviti Holdings, Inc. (collectively with its subsidiaries, “we,” “our,” “Cotiviti” or the “Company”) is a leading provider of payment accuracy and analytics‑driven solutions that help risk-bearing healthcare organizations and retailers achieve their business objectives. Through a combination of analytics, technology and deep industry experience, our solutions create insights that unlock value from the complex interactions between clients’ and their stakeholders. We work with over 60 healthcare organizations, including more than 20 of the 25 largest U.S. commercial, Medicare and Medicaid managed health plans, as well as CMS. We are also a leading provider of payment accuracy solutions to approximately 35 retail clients, including eight of the ten largest retailers in the United States. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 6 Months Ended |
Jun. 30, 2017 | |
Summary of Significant Accounting Policies | |
Summary of Significant Accounting Policies | Note 2. Summary of Significant Accounting Policies Basis of Presentation Our accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”). All significant intercompany balances and transactions have been eliminated in consolidation. These consolidated financial statements are unaudited and have been prepared by us following the rules and regulations of the SEC. In our opinion they reflect all adjustments, including normal recurring items, that are necessary to present fairly the results of interim periods. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted as permitted by such rules and regulations; however, we believe that the disclosures are adequate to make the information presented not misleading. Operating results for the periods presented herein are not necessarily indicative of the results that may be expected for other interim periods or the entire fiscal year. Certain prior year amounts have been reclassified to conform to the current year presentation. Estimated Liability for Refunds and Appeals and Unbilled Receivables The estimated liability for refunds and appeals representing our estimate of claims that may be overturned related to revenue which had already been received was $57,635 and $62,539 at June 30, 2017 and December 31, 2016, respectively. The estimated allowance for refunds and appeals representing our estimate of claims that may be overturned related to amounts in accounts receivable was $32,648 and $41,020 at June 30, 2017 and December 31, 2016, respectively. Unbilled receivables represent revenue recognized related to claims for which clients have received economic value that were not invoiced at the balance sheet date. Unbilled receivables of approximately $57,340 and $51,643 as of June 30, 2017 and December 31, 2016, respectively, are included in accounts receivable on our Consolidated Balance Sheets. Certain unbilled receivables arise when a portion of our earned fee is deferred at the time of the initial invoice. At a later date (which can be up to a year after original invoice, and at other times during the year after completion of the audit period based on contractual terms or as agreed with our client), we invoice the unbilled receivable amount. Notwithstanding the deferred due date, our clients acknowledge we have earned this unbilled receivable at the time of the original invoice, but we have agreed to defer billing the client for the related services. Unbilled receivables of this nature were approximately $5,732 and $6,137 as of June 30, 2017 and December 31, 2016, respectively, and are included in accounts receivable on our Consolidated Balance Sheets. We record periodic changes in unbilled receivables and refund liabilities as adjustments to revenue. Recently Issued Accounting Standards In April 2017, the FASB issued ASU 2017-09, Scope of Modification Accounting (“ASU 2017-09”), which addresses what constitutes a modification when applying the guidance in ASC 718 Compensation- Stock Compensation in order to reduce diversity in practice. The guidance is effective for public companies with annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. Early adoption is permitted. We are evaluating this new guidance and its impact on our consolidated financial statements and related disclosures. In January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment (“ASU 2017-04”), which is intended to simplify how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. Step 2 measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of the goodwill. Instead, an entity should compare the fair value of a reporting unit with its carrying amount and recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. The loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. The guidance is effective for public companies with annual reporting periods beginning after December 15, 2019, including interim periods within those annual periods. We have early adopted the provisions of ASU 2017-04 as of April 1, 2017. As the fair values of our reporting units exceed their carrying values, there has been no impact on our consolidated financial statements. In November 2016, the FASB issued ASU 2016-18, Restricted Cash (“ASU 2016-18”), which requires that restricted cash be included with cash and cash equivalents when reconciling the beginning and end of period total amounts shown on the statement of cash flows. The guidance is effective for public companies with annual reporting periods beginning after December 15, 2017, including interim periods within those annual periods. Early adoption is permitted. We are evaluating this guidance and its impact on our consolidated financial statements and related disclosures and expect the adoption of this ASU could impact the disclosure of our cash flows from operations. In August 2016, the FASB issued ASU 2016-15, Classification of Certain Cash Receipts and Cash Payments (“ASU 2016-15”) which addresses eight specific cash flow issues in order to reduce diversity in practice. The guidance is effective for public companies with annual reporting periods beginning after December 15, 2017, including interim periods within those annual periods. Early adoption is permitted. We are evaluating this guidance and its impact on our consolidated financial statements and related disclosures. In February 2016, the FASB issued ASU 2016-02, Leases (“ASU 2016-02”) which changes the accounting recognition, measurement and disclosure for leases in order to increase transparency. ASU 2016-02 requires lease assets and liabilities to be recognized on the balance sheet and key information about leasing arrangements to be disclosed. The guidance is effective for public companies with annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period. Early adoption is permitted. We are evaluating this new guidance and its impact on our consolidated financial statements and related disclosures. In January 2016, the FASB issued ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-01”) which changes the current financial instruments model primarily impacting the accounting for equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. The guidance is effective for public companies with annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. We are evaluating this new guidance and do not believe it will have a material impact on our consolidated financial statements and related disclosures. In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”), which supersedes existing revenue recognition guidance and provides clarification of principles for recognizing revenue from contracts with customers. ASU 2014-09 sets forth a five-step model for determining when and how revenue is recognized. The core principle of the new standard is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. Additional disclosures will be required to describe the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts. The two permitted transition methods under ASU 2014-09 are the full retrospective method, in which case the new guidance would be applied to each prior reporting period presented and the cumulative effect of applying the standard would be recognized at the earliest period shown, or the modified retrospective method, in which case the cumulative effect of applying the standard would be recognized at the date of the initial application. The guidance is effective for public companies with annual periods beginning after December 15, 2017, including interim periods within that reporting period. The FASB will permit companies to adopt the new standard early, but not before the original effective date of annual reporting periods beginning after December 15, 2016. In 2016, we formed an internal team to evaluate and quantify the potential impact of this new revenue guidance. As of the date of this filing, we have completed our contract review and policy drafting. Based on our review, we believe the timing of revenue recognition will not change from current practice. We are in the process of completing a contract review and evaluating the impact of this new guidance as it relates to the RowdMap, Inc. acquisition as discussed in Note 15. We plan to adopt as of January 1, 2018 using the modified retrospective method. Adoption of this standard will require changes to our business processes, systems and controls to support the additional required disclosures. We are in the process of identifying and designing such changes to ensure our readiness. We will provide additional information about the impact of this new guidance, including enhanced disclosure requirements, in future filings. |
Property and Equipment
Property and Equipment | 6 Months Ended |
Jun. 30, 2017 | |
Property and Equipment | |
Property and Equipment | Note 3. Property and Equipment Property and equipment by major asset class for the periods presented consisted of the following: June 30, December 31, 2017 2016 Computer equipment $ 43,371 $ 40,349 Software 60,991 42,614 Furniture and fixtures 8,969 8,652 Leasehold improvements 5,104 4,392 Projects in progress 6,897 12,001 Property and equipment, gross $ 125,332 $ 108,008 Less: accumulated depreciation and amortization 51,404 40,368 Property and equipment, net $ 73,928 $ 67,640 In December 2015, we purchased a perpetual software license, which is included in the software total above. We are paying for this software over a two year period ending in January 2018. As such, there is approximately $3,287 and $3,351 included in accounts payable and accrued other expenses on our Consolidated Balance Sheets as of June 30, 2017 and December 31, 2016, respectively, and $3,225 included in other long-term liabilities on our Consolidated Balance Sheets as of December 31, 2016. Total depreciation and amortization expense related to property and equipment, including capitalized software costs, was $5,896 and $4,811 for the three months ended June 30, 2017 and 2016, respectively, and $11,471 and $9,646 for the six months ended June 30, 2017 and 2016, respectively. |
Intangible Assets
Intangible Assets | 6 Months Ended |
Jun. 30, 2017 | |
Intangible Assets | |
Intangible Assets | Note 4. Intangible Assets Intangible asset balances by major asset class for the periods presented were as follows: Weighted Gross Net Average Carrying Accumulated Carrying Amortization Amount Amortization Amount Period June 30, 2017: Customer relationships $ 640,214 $ 168,366 $ 471,848 years Acquired software 82,400 55,451 26,949 years Connolly trademark 4,200 — 4,200 indefinite-lived Total $ 726,814 $ 223,817 $ 502,997 years December 31, 2016: Customer relationships $ 640,052 $ 144,768 $ 495,284 years Acquired software 82,400 48,579 33,821 years Connolly trademark 4,200 — 4,200 indefinite-lived Total $ 726,652 $ 193,347 $ 533,305 years Amortization expense was $15,201 and $15,208 for the three months ended June 30, 2017 and 2016, respectively, and $30,400 and $30,415 for the six months ended June 30, 2017 and 2016, respectively. As of June 30, 2017 amortization expense for the next 5 years is expected to be: Remainder of 2017 $ 27,434 2018 53,909 2019 53,909 2020 53,909 2021 49,586 |
Goodwill
Goodwill | 6 Months Ended |
Jun. 30, 2017 | |
Goodwill | |
Goodwill | Note 5. Goodwill Total goodwill in our Consolidated Balance Sheets was $1,196,389 and $1,196,024 as of June 30, 2017 and December 31, 2016, respectively. Changes in the carrying amount of goodwill by our Healthcare and Global Retail and Other segments for the six months ended June 30, 2017 were as follows: Global Retail Healthcare and Other December 31, 2016 $ $ 48,253 Foreign currency translation — 365 June 30, 2017 $ $ 48,618 There was no impairment related to goodwill for any period presented. |
Commitments and Contingencies
Commitments and Contingencies | 6 Months Ended |
Jun. 30, 2017 | |
Commitments and Contingencies | |
Commitments and Contingencies | Note 6. Commitments and Contingencies We may be involved in various legal proceedings and litigation arising in the ordinary course of business. While any legal proceeding or litigation has an element of uncertainty, management believes the ultimate disposition of these matters will not have a material adverse effect on our consolidated financial position, results of operations, or liquidity. Medicare RAC Contract Contingency In August 2014, CMS announced it would allow providers to remove all eligible claims currently pending in the appeals process by offering to pay hospitals 68% of the original claim amount. This settlement was offered to the providers and it was unknown what, if any, impact there would be for the Medicare RACs. On July 1, 2015, CMS issued a Technical Direction Letter to the Medicare RACs, including ourselves, indicating that Medicare RACs will only be entitled to the contract contingency fee on the settled amounts of the claims, or 32% of the original inpatient claim amounts. Based on the initial lists of finalized settlements provided by CMS, we would be required to refund CMS approximately $22,308 due to the related adjustments in Medicare RAC contingency fees. CMS further advised that as the hospital settlement project continues, additional settlement lists will be matched to Medicare RAC claims which may result in updated refund amounts to those initially provided. While there are uncertainties in any dispute resolution and results are uncertain, we have disputed CMS’s findings based on our interpretation of the terms of the Medicare RAC contract and our belief that the backup data provided by CMS is inaccurate and/or incomplete. Our liability for estimated refunds and appeals includes amounts for these settled claims based on our best estimates of the amount we believe will be ultimately payable to CMS based on our interpretation of the terms of the Medicare RAC contract. We believe that it is possible that we could be required to pay an additional amount up to approximately $13,000 in excess of the amount we accrued as of June 30, 2017 based on the claims data we have received from CMS to date. As CMS completes its settlement process with the providers and updated files are provided to us, the potential amount owed by us may change. On September 28, 2016, CMS announced a second settlement process to allow eligible providers to settle their inpatient claims currently under appeal beginning December 1, 2016. This second settlement process could result in additional amounts owed to CMS. CMS has not yet provided us with any information and accordingly the amount of any such additional claims cannot presently be determined. |
Long-term Debt
Long-term Debt | 6 Months Ended |
Jun. 30, 2017 | |
Long-term Debt | |
Long-term Debt | Note 7. Long‑term Debt In April 2017, we entered into and executed the First Amendment Agreement to the then outstanding Restated Credit Agreement, which, among other things, provided for a 25 basis point reduction in applicable interest rate spread over LIBOR associated with the First Lien Term B Loan. As a result, we recognized a loss on extinguishment of $3,183 during the three and six months ended June 30, 2017, which consists of fees paid and write-offs of unamortized debt issuance costs and original issue discount. Long‑term debt for the periods presented was as follows: June 30, December 31, 2017 2016 First Lien Term A Loan $ 240,466 $ 246,694 First Lien Term B Loan 542,982 544,345 Revolver — — Total debt 783,448 791,039 Less: debt issuance costs 8,230 10,837 Less: current portion 18,000 18,000 Total long-term debt $ 757,218 $ 762,202 The Restated Credit Agreement includes certain binding affirmative and negative covenants, including delivery of financial statements and other reports, maintenance of existence and transactions with affiliates. The negative covenants restrict our ability, among other things, to incur indebtedness, grant liens, make investments, sell or otherwise dispose of assets or enter into a merger, pay dividends or repurchase stock. There is a required financial covenant applicable only to the Revolver and the Term A Loan, pursuant to which we agree not to permit our Secured Leverage Ratio to exceed 5.50:1.00 through September 2018, 5.25:1.00 through September 2019 and 5.00:1.00 through June 2021. In addition, the Restated Credit Agreement includes certain events of default including payment defaults, failure to perform affirmative covenants, failure to refrain from actions or omissions prohibited by negative covenants, the inaccuracy of representations or warranties, bankruptcy and insolvency related defaults and a change of control default. We were in compliance with all such covenants as of June 30, 2017 and December 31, 2016, respectively. The Restated Credit Agreement requires mandatory prepayments based upon our leverage ratio at the time payment is required and an annual excess cash flow calculation commencing with the year ended December 31, 2017. The mandatory prepayment is contingently payable in the second quarter of each year based on an annual excess cash flow calculation for the preceding year as defined within the Restated Credit Agreement. As of June 30, 2017, the aggregate maturities of long‑term debt (excluding any amounts that may become payable with respect to the aforementioned mandatory prepayment provision for annual excess cash flows) for each of the next five years are expected to be $9,000 for the remainder of 2017, $18,000 in 2018, $24,250 in 2019, $30,500 in 2020 and $183,625 in 2021. |
Derivative Instruments
Derivative Instruments | 6 Months Ended |
Jun. 30, 2017 | |
Derivative Instruments | |
Derivative Instruments | Note 8. Derivative Instruments We are exposed to fluctuations in interest rates on our long‑term debt. We manage our exposure to fluctuations in the 3‑month LIBOR through the use of interest rate cap agreements designated as cash flow hedges. We are meeting our objective by hedging the risk of changes in cash flows related to changes in LIBOR by capping the interest on our floating rate debt linked to LIBOR to approximately 3%. We do not utilize derivatives for speculative or trading purposes. As of June 30, 2017 and December 31, 2016, we had $540,000 in notional debt outstanding related to these interest rate caps, which cover quarterly interest payments through September 2019. The notional amount decreases over time. All of our outstanding interest rate cap contracts qualify for cash flow hedge accounting treatment in accordance with ASC 815, Derivatives and Hedging . Cash flow hedge accounting treatment allows for gains and losses on the effective portion of qualifying hedges to be deferred in accumulated other comprehensive (loss) income until the underlying transaction occurs, rather than recognizing the gains and losses on these instruments in earnings during each period they are outstanding. When the actual interest payments are made on our variable rate debt and the related derivative contract settles, any effective portion of realized interest rate hedging derivative gains and losses previously recorded in accumulated other comprehensive (loss) income is recognized in interest expense. We recognized interest expense of $398 and $62 related to interest rate caps during the three months ended June 30, 2017 and 2016, respectively, and $599 and $144 during the six months ended June 30, 2017 and 2016, respectively. Ineffectiveness results, in certain circumstances, when the change in total fair value of the derivative instrument differs from the change in the fair value of our expected future cash outlays for the related interest payment and is recognized immediately in interest expense. There was no ineffectiveness recorded during the three and six months ended June 30, 2017 and 2016, respectively. Likewise, if the hedge does not qualify for hedge accounting, the periodic changes in its fair value are recognized in the period of the change in interest expense. All cash flows related to our interest rate cap agreements are classified as operating cash flows. Any outstanding derivative instruments expose us to credit loss in the event of nonperformance by the counterparties to the agreements, but we do not expect that the counterparty will fail to meet their obligations. The amount of such credit exposure is generally the positive fair value of our outstanding contracts. To manage credit risks, we select counterparties based on credit assessments, limit our overall exposure to any single counterparty and monitor the market position of any counterparty. The table below reflects quantitative information related to the fair value of our derivative instruments and where these amounts are recorded in our consolidated financial statements as of the period presented: June 30, December 31, 2017 2016 Liability fair value recorded in other long-term liabilities $ 1,507 $ 1,729 Liability fair value recorded in accounts payable and accrued other expenses 1,019 1,065 Estimated amount of existing losses expected to be reclassified into earnings in the next 12 months (2,446) (1,783) We record deferred hedge premiums which are being paid over the life of the hedge in accumulated other comprehensive (loss) income until the related hedge ultimately settles and interest payments are made on the underlying debt. As of June 30, 2017, we have made payments of $3,301 related to these deferred premiums. We expect to pay an additional $3,093 in deferred premiums through 2019 related to our outstanding interest rate cap agreements which is reflected in the fair value of these derivatives in the table above. Comprehensive income includes changes in the fair value of our interest rate cap agreements which qualify for hedge accounting. Changes in other comprehensive income for the periods presented related to derivative instruments classified as cash flow hedges were as follows: Three Months Ended June 30, 2017 2016 Balance at beginning of period, April 1 $ (3,396) $ (3,450) Reclassifications in earnings, net of tax of $150 and $24, respectively 249 38 Change in fair value of derivative instrument, net of tax of $35 and $184, respectively (56) (122) Balance at end of period, June 30 $ (3,203) $ (3,534) Six Months Ended June 30, 2017 2016 Balance at beginning of period, January 1 $ (3,334) $ (2,968) Reclassifications in earnings, net of tax of $225 and $56, respectively 374 88 Change in fair value of derivative instrument, net of tax of $150 and $509, respectively (243) (654) Balance at end of period, June 30 $ (3,203) $ (3,534) |
Fair Value Measurements
Fair Value Measurements | 6 Months Ended |
Jun. 30, 2017 | |
Fair Value Measurements | |
Fair Value Measurements | Note 9. Fair Value Measurements We measure assets and liabilities at fair value based on assumptions market participants would use in pricing an asset or liability in the principal or most advantageous market. Authoritative guidance on fair value measurements establishes a consistent framework for measuring fair value whereby inputs are assigned a hierarchical level. The hierarchical levels are: Level 1: Unadjusted quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at the measurement date. Level 2: Observable prices, other than quoted prices included in Level 1 inputs for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability. Level 3: Unobservable inputs for the asset or liability used to measure fair value to the extent observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at measurement date. The following table summarizes our financial instruments measured at fair value within the Consolidated Balance Sheets: June 30, 2017 December 31, 2016 Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 Liabilities: Long-term debt $ — $ — $ 783,448 $ — $ — $ 791,039 Interest rate cap agreements — 2,526 — — 2,794 — Total $ — $ 2,526 $ 783,448 $ — $ 2,794 $ 791,039 The fair value of our private debt is determined based on fluctuations in current interest rates, the trends in market yields of debt instruments with similar credit ratings, general economic conditions and other quantitative and qualitative factors. The carrying value of our debt approximates its fair value. Refer to Note 7 for more information on our long-term debt. The fair value of the interest rate cap agreements is determined using the market standard methodology of discounting the future expected variable cash receipts that would occur if interest rates rose above the strike rate of the caps. The analysis reflects the contractual terms of the derivatives, including period to maturity and remaining deferred premium payments, and uses observable market‑based inputs, including interest rates and implied volatilities. The variable cash receipts are based on an expectation of future interest rates (forward curves) derived from observable market interest rates. As such, the estimated fair values of these liabilities are classified as Level 2 in the fair value hierarchy. Refer to Note 8 for more information on our interest rate cap agreements. |
Income Taxes
Income Taxes | 6 Months Ended |
Jun. 30, 2017 | |
Income Taxes | |
Income Taxes | Note 10. Income Taxes The following table presents our income tax provision and effective income tax rate: Three Months Ended Six Months Ended June 30, June 30, 2017 2016 2017 2016 Income tax expense $ 7,743 $ 6,676 $ 6,882 $ 12,069 Effective income tax rate 26.9 % 38.0 % 12.5 % 38.9 % Our effective income tax rate was 26.9% and 38.0% for the three months ended June 30, 2017 and 2016, respectively. The decrease in the effective tax rate is primarily due to a $2,619 tax benefit related to stock option exercises during the quarter. Additionally, we realized a tax benefit of $660 related to the filing of amended state tax returns as a result of certain tax planning during the three months ended June 30, 2017. Our effective income tax rate was 12.5% and 38.9% for the six months ended June 30, 2017 and 2016 respectively. The decrease in the effective tax rate is primarily due to a $13,041 tax benefit related to stock option exercises, a tax benefit of $337 related to the settlement of an uncertain tax position due to the closure of our audit with the Internal Revenue Service as well as a tax benefit of $660 related to the filing of amended state tax returns as a result of certain tax planning. The decrease in income tax expense during the six months ended June 30, 2017 as compared to 2016 was primarily driven by these same tax benefits. We file income taxes with the U.S. federal government and various states and foreign jurisdictions. We operate in a number of state and local jurisdictions and as such are subject to state and local income tax examinations based upon various statutes of limitations in each jurisdiction. We are currently under audit by the State of New York for the tax year ended December 31, 2014 and for iHealth Technologies for the tax years ended December 31, 2012, December 31, 2013, May 13, 2014 and December 31, 2014. |
Stockholders' Equity
Stockholders' Equity | 6 Months Ended |
Jun. 30, 2017 | |
Stockholders' Equity | |
Stockholders' Equity | Note 11. Stockholders’ Equity Secondary Offering On March 7, 2017 we completed a secondary offering of 9,683,000 shares of our common stock by certain of our stockholders, including 1,263,000 shares sold to the underwriters pursuant to their option to purchase additional shares, at an offering price of $36.00 per share. All of the shares offered were sold by selling stockholders. Accordingly, we did not receive any proceeds from the sale of the shares. In connection with this offering, we incurred approximately $600 in professional services expenses, which are included in transaction-related expenses on our Consolidated Statements of Comprehensive Income for the six months ended June 30, 2017. |
Earnings per Share
Earnings per Share | 6 Months Ended |
Jun. 30, 2017 | |
Earnings per Share | |
Earnings per Share | Note 12. Earnings per Share Basic earnings per share (“EPS”) is computed based on the weighted average number of shares of common stock outstanding during the period. Diluted EPS is computed based on the weighted average number of shares of common stock plus the effect of dilutive potential common shares outstanding during the period. For all periods presented, potentially dilutive outstanding shares consisted solely of equity incentive awards. Our potential common shares consist of the incremental common shares issuable upon the exercise of stock options or vesting of restricted stock units (“RSUs”). The dilutive effect of outstanding equity incentive awards is reflected in diluted earnings per share by application of the treasury stock method. For all periods presented, all outstanding common stock consisted of a single class. Basic and diluted earnings per share are computed as follows: Three Months Ended Six Months Ended June 30, June 30, 2017 2016 2017 2016 Net income available to common stockholders $ 21,088 $ 10,893 $ 48,063 $ 18,977 Weighted average outstanding shares of common stock 92,017,662 82,348,189 91,580,438 79,789,693 Dilutive effect of stock-based awards 3,237,257 764,846 3,510,428 729,249 Adjusted weighted average outstanding and assumed conversions for diluted EPS 95,254,919 83,113,035 95,090,866 80,518,942 Earnings per share: Basic $ 0.23 $ 0.13 $ 0.52 $ 0.24 Diluted 0.22 0.13 0.51 0.24 Employee stock options and RSUs that were excluded from the calculation of diluted earnings per share because their effect is anti‑dilutive for the periods presented were as follows: Three Months Ended Six Months Ended June 30, June 30, 2017 2016 2017 2016 Employee stock-based awards 572,623 1,598,231 467,677 1,598,231 The criteria associated with all of our outstanding performance-based stock options as defined in the terms of the applicable award agreements, were satisfied as of September 30, 2016 and, as a result, outstanding performance-based stock options were included in the calculation of diluted earnings per share for the three and six months ended June 30, 2017. Performance-based stock options of 2,788,817 were not included in the calculation of diluted earnings per share for the three and six months ended June 30, 2016 as the vesting conditions had not yet been satisfied. |
Stock-Based Compensation
Stock-Based Compensation | 6 Months Ended |
Jun. 30, 2017 | |
Stock-Based Compensation | |
Stock-Based Compensation | Note 13. Stock‑Based Compensation Stock Options The following is a summary of stock option activity under the Plans: Weighted Weighted average average remaining Aggregate Outstanding exercise price contractual life Intrinsic Value Options per share (Years) (in thousands) Outstanding at December 31, 2016 5,997,372 $ 10.18 7.30 $ 145,270 Granted 573,601 34.76 — Forfeited (60,017) 14.22 — Exercised (1,362,367) 7.09 — Expired (2,893) 13.79 — Outstanding at June 30, 2017 5,145,696 $ 13.69 7.35 $ 120,792 Vested, exercisable, expected to vest at June 30, 2017 5,145,696 $ 13.69 7.35 $ 120,792 Exercisable at June 30, 2017 3,010,862 $ 10.30 6.90 $ 80,809 Aggregate intrinsic value represents the difference between our estimated fair value of common stock and the exercise price of outstanding in‑the‑money options. The fair value per share of common stock was $37.14 as of June 30, 2017 based upon the closing price of our common stock on the NYSE. The total intrinsic value of stock options exercised was $8,409 and $41,891 for the three and six months ended June 30, 2017, respectively, and insignificant for each of the three and six months ended June 30, 2016. Restricted Stock Units The following is a summary of RSU activity under the 2016 Plan: Weighted average grant date fair value Number of Awards per share Outstanding at December 31, 2016 67,295 $ 25.88 Granted 271,637 34.96 Forfeited (7,191) 29.17 Vested and converted to shares (37,655) 29.96 Outstanding at June 30, 2017 294,086 $ 33.66 Expected to vest at June 30, 2017 294,086 $ 33.66 Employee Stock Purchase Plan We have an ESPP, which became effective January 1, 2017, for US and non-US employees (collectively, “ESPP”), both of which have a series of six month offering periods, with a new offering period beginning on the first day of January and July each year. The ESPP was adopted by our Board of Directors in May 2016 and approved by shareholders in May 2017. Employees may contribute up to 10% of their pay towards the purchase of common stock via payroll deductions to a maximum of $10 per year, or $5 per offering period. Purchase dates occur on the last business day of June and December of each year and shares are purchased at a 10% discount off the closing price on the NYSE on the date of purchase. On June 30, 2017, 29,668 shares were purchased at a price of $33.43. Employees must hold the shares purchased for a minimum of 90 days. Stock Compensation Expense We used the following weighted average assumptions to estimate the fair value of stock options granted for the periods presented as follows: Six Months Ended June 30, 2017 2016 Expected term (years) 6.25 6.25 Expected volatility 40.00 % 50.00 % Expected dividend yield 0.00 % 0.00 % Weighted average risk-free interest rate 1.92 % 1.35 % Weighted average grant date fair value $ 14.60 $ 9.32 We recorded total stock‑based compensation expense of $2,455 and $3,428 for the three months ended June 30, 2017 and 2016, respectively, and $4,538 and $4,502 for the six months ended June 30, 2017 and 2016, respectively. Stock-based compensation expense for the three and six months ended June 30, 2016 includes $2,257 related to the accelerated vesting of certain stock options as a result of our IPO. As of June 30, 2017, we had total unrecognized compensation cost related to 2,428,920 unvested stock options and RSUs under the Plans of $24,338 which we expect to recognize over the next 2.7 years. |
Segment Information
Segment Information | 6 Months Ended |
Jun. 30, 2017 | |
Segment Information | |
Segment Information | Note 14. Segment Information We conduct our business through two reportable business segments: Healthcare and Global Retail and Other. Through our Healthcare segment, we offer prospective and retrospective claims accuracy solutions to healthcare payers in the United States. We also provide analytics-based solutions unrelated to our healthcare payment accuracy solutions, on a limited basis in the United States. Through our Global Retail and Other segment, we provide retrospective claims accuracy solutions to retailers primarily in the United States, Canada and the United Kingdom, as well as solutions that improve efficiency and effectiveness of payment networks for a limited number of clients. We evaluate the performance of each segment based on segment net revenue and segment operating income. Operating income is calculated as net revenue less operating expenses and is not affected by other expense (income) or by income taxes. Indirect costs are generally allocated to the segments based on the segments’ proportionate share of revenue and expenses directly related to the operation of the segment. We do not allocate interest expense, other non-operating (income) expense or the provision for income taxes, since these items are not considered in evaluating the segment’s overall operating performance. Our Chief Operating Decision Maker does not receive or utilize asset information to evaluate performance of operating segments. Accordingly, asset-related information has not been presented. Our operating segment results for the periods presented were as follows: Three Months Ended Six Months Ended June 30, June 30, 2017 2016 2017 2016 (unaudited) (unaudited) Net Revenue Healthcare $ 151,559 $ 141,043 $ 291,362 $ 265,173 Global Retail and Other 16,052 17,248 36,382 35,836 Consolidated net revenue $ 167,611 $ 158,291 $ 327,744 $ 301,009 Operating Income Healthcare $ 38,689 $ 36,713 $ 69,850 $ 63,335 Global Retail and Other 1,307 2,225 4,228 4,841 Consolidated operating income $ 39,996 $ 38,938 $ 74,078 $ 68,176 Operating segment net revenue by product type for the periods presented was as follows: Three Months Ended June 30, Six Months Ended June 30, 2017 % 2016 % 2017 % 2016 % (unaudited) (unaudited) Healthcare Retrospective claims accuracy $ 86,627 51.7 $ 80,932 51.1 $ 164,143 50.1 $ 146,202 48.6 Prospective claims accuracy 62,020 37.0 56,989 36.0 121,737 37.1 112,399 37.3 Transaction services 2,912 1.7 3,122 2.0 5,482 1.7 6,572 2.2 Total Healthcare 151,559 90.4 141,043 89.1 291,362 88.9 265,173 88.1 Global Retail and Other Retrospective claims accuracy 15,385 9.2 16,701 10.6 35,059 10.7 34,691 11.5 Other 667 0.4 547 0.3 1,323 0.4 1,145 0.4 Total Global Retail and Other 16,052 9.6 17,248 10.9 36,382 11.1 35,836 11.9 Consolidated net revenue $ 167,611 100.0 $ 158,291 100.0 $ 327,744 100.0 $ 301,009 100.0 |
Subsequent Event
Subsequent Event | 6 Months Ended |
Jun. 30, 2017 | |
Subsequent Event | |
Subsequent Event | Note 15. Subsequent Event Effective July 14, 2017, we completed the acquisition of RowdMap, Inc. (“RowdMap”). Based in Louisville, Kentucky, RowdMap is a payer-provider, value-based analytics company that helps health plans and providers identify and reduce low-value care from inefficient and unnecessary services. We paid approximately $70,000 in cash, subject to certain adjustments and funded entirely with available liquidity. We also issued an aggregate of 768,021 shares of restricted common stock to certain employees of RowdMap as a material inducement to their employment with us. Half of these shares are subject to performance-based vesting requirements. The other half are subject to continued employment with us, with one-third vesting on each of the first three anniversaries of the closing of the acquisition. We are in the process of completing the accounting for business combinations and will provide additional disclosures in future filings. |
Summary of Significant Accoun21
Summary of Significant Accounting Policies (Policies) | 6 Months Ended |
Jun. 30, 2017 | |
Summary of Significant Accounting Policies | |
Basis of Presentation | Basis of Presentation Our accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”). All significant intercompany balances and transactions have been eliminated in consolidation. These consolidated financial statements are unaudited and have been prepared by us following the rules and regulations of the SEC. In our opinion they reflect all adjustments, including normal recurring items, that are necessary to present fairly the results of interim periods. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted as permitted by such rules and regulations; however, we believe that the disclosures are adequate to make the information presented not misleading. Operating results for the periods presented herein are not necessarily indicative of the results that may be expected for other interim periods or the entire fiscal year. Certain prior year amounts have been reclassified to conform to the current year presentation. |
Estimated Liability for Refunds and Appeals and Unbilled Receivables | Estimated Liability for Refunds and Appeals and Unbilled Receivables The estimated liability for refunds and appeals representing our estimate of claims that may be overturned related to revenue which had already been received was $57,635 and $62,539 at June 30, 2017 and December 31, 2016, respectively. The estimated allowance for refunds and appeals representing our estimate of claims that may be overturned related to amounts in accounts receivable was $32,648 and $41,020 at June 30, 2017 and December 31, 2016, respectively. Unbilled receivables represent revenue recognized related to claims for which clients have received economic value that were not invoiced at the balance sheet date. Unbilled receivables of approximately $57,340 and $51,643 as of June 30, 2017 and December 31, 2016, respectively, are included in accounts receivable on our Consolidated Balance Sheets. Certain unbilled receivables arise when a portion of our earned fee is deferred at the time of the initial invoice. At a later date (which can be up to a year after original invoice, and at other times during the year after completion of the audit period based on contractual terms or as agreed with our client), we invoice the unbilled receivable amount. Notwithstanding the deferred due date, our clients acknowledge we have earned this unbilled receivable at the time of the original invoice, but we have agreed to defer billing the client for the related services. Unbilled receivables of this nature were approximately $5,732 and $6,137 as of June 30, 2017 and December 31, 2016, respectively, and are included in accounts receivable on our Consolidated Balance Sheets. We record periodic changes in unbilled receivables and refund liabilities as adjustments to revenue. |
Recently Issued Accounting Standards | Recently Issued Accounting Standards In April 2017, the FASB issued ASU 2017-09, Scope of Modification Accounting (“ASU 2017-09”), which addresses what constitutes a modification when applying the guidance in ASC 718 Compensation- Stock Compensation in order to reduce diversity in practice. The guidance is effective for public companies with annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. Early adoption is permitted. We are evaluating this new guidance and its impact on our consolidated financial statements and related disclosures. In January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment (“ASU 2017-04”), which is intended to simplify how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. Step 2 measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of the goodwill. Instead, an entity should compare the fair value of a reporting unit with its carrying amount and recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. The loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. The guidance is effective for public companies with annual reporting periods beginning after December 15, 2019, including interim periods within those annual periods. We have early adopted the provisions of ASU 2017-04 as of April 1, 2017. As the fair values of our reporting units exceed their carrying values, there has been no impact on our consolidated financial statements. In November 2016, the FASB issued ASU 2016-18, Restricted Cash (“ASU 2016-18”), which requires that restricted cash be included with cash and cash equivalents when reconciling the beginning and end of period total amounts shown on the statement of cash flows. The guidance is effective for public companies with annual reporting periods beginning after December 15, 2017, including interim periods within those annual periods. Early adoption is permitted. We are evaluating this guidance and its impact on our consolidated financial statements and related disclosures and expect the adoption of this ASU could impact the disclosure of our cash flows from operations. In August 2016, the FASB issued ASU 2016-15, Classification of Certain Cash Receipts and Cash Payments (“ASU 2016-15”) which addresses eight specific cash flow issues in order to reduce diversity in practice. The guidance is effective for public companies with annual reporting periods beginning after December 15, 2017, including interim periods within those annual periods. Early adoption is permitted. We are evaluating this guidance and its impact on our consolidated financial statements and related disclosures. In February 2016, the FASB issued ASU 2016-02, Leases (“ASU 2016-02”) which changes the accounting recognition, measurement and disclosure for leases in order to increase transparency. ASU 2016-02 requires lease assets and liabilities to be recognized on the balance sheet and key information about leasing arrangements to be disclosed. The guidance is effective for public companies with annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period. Early adoption is permitted. We are evaluating this new guidance and its impact on our consolidated financial statements and related disclosures. In January 2016, the FASB issued ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-01”) which changes the current financial instruments model primarily impacting the accounting for equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. The guidance is effective for public companies with annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. We are evaluating this new guidance and do not believe it will have a material impact on our consolidated financial statements and related disclosures. In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”), which supersedes existing revenue recognition guidance and provides clarification of principles for recognizing revenue from contracts with customers. ASU 2014-09 sets forth a five-step model for determining when and how revenue is recognized. The core principle of the new standard is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. Additional disclosures will be required to describe the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts. The two permitted transition methods under ASU 2014-09 are the full retrospective method, in which case the new guidance would be applied to each prior reporting period presented and the cumulative effect of applying the standard would be recognized at the earliest period shown, or the modified retrospective method, in which case the cumulative effect of applying the standard would be recognized at the date of the initial application. The guidance is effective for public companies with annual periods beginning after December 15, 2017, including interim periods within that reporting period. The FASB will permit companies to adopt the new standard early, but not before the original effective date of annual reporting periods beginning after December 15, 2016. In 2016, we formed an internal team to evaluate and quantify the potential impact of this new revenue guidance. As of the date of this filing, we have completed our contract review and policy drafting. Based on our review, we believe the timing of revenue recognition will not change from current practice. We are in the process of completing a contract review and evaluating the impact of this new guidance as it relates to the RowdMap, Inc. acquisition as discussed in Note 15. We plan to adopt as of January 1, 2018 using the modified retrospective method. Adoption of this standard will require changes to our business processes, systems and controls to support the additional required disclosures. We are in the process of identifying and designing such changes to ensure our readiness. We will provide additional information about the impact of this new guidance, including enhanced disclosure requirements, in future filings. |
Property and Equipment (Tables)
Property and Equipment (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Property and Equipment | |
Schedule of property and equipment by major asset class | June 30, December 31, 2017 2016 Computer equipment $ 43,371 $ 40,349 Software 60,991 42,614 Furniture and fixtures 8,969 8,652 Leasehold improvements 5,104 4,392 Projects in progress 6,897 12,001 Property and equipment, gross $ 125,332 $ 108,008 Less: accumulated depreciation and amortization 51,404 40,368 Property and equipment, net $ 73,928 $ 67,640 |
Intangible Assets (Tables)
Intangible Assets (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Intangible Assets | |
Schedule of intangible asset balances by major asset class | Weighted Gross Net Average Carrying Accumulated Carrying Amortization Amount Amortization Amount Period June 30, 2017: Customer relationships $ 640,214 $ 168,366 $ 471,848 years Acquired software 82,400 55,451 26,949 years Connolly trademark 4,200 — 4,200 indefinite-lived Total $ 726,814 $ 223,817 $ 502,997 years December 31, 2016: Customer relationships $ 640,052 $ 144,768 $ 495,284 years Acquired software 82,400 48,579 33,821 years Connolly trademark 4,200 — 4,200 indefinite-lived Total $ 726,652 $ 193,347 $ 533,305 years |
Schedule of intangible asset amortization expense | Remainder of 2017 $ 27,434 2018 53,909 2019 53,909 2020 53,909 2021 49,586 |
Goodwill (Tables)
Goodwill (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Goodwill | |
Schedule of changes in the carrying amount of goodwill by segment | Global Retail Healthcare and Other December 31, 2016 $ $ 48,253 Foreign currency translation — 365 June 30, 2017 $ $ 48,618 |
Long-term Debt (Tables)
Long-term Debt (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Long-term Debt | |
Schedule of long-term debt | June 30, December 31, 2017 2016 First Lien Term A Loan $ 240,466 $ 246,694 First Lien Term B Loan 542,982 544,345 Revolver — — Total debt 783,448 791,039 Less: debt issuance costs 8,230 10,837 Less: current portion 18,000 18,000 Total long-term debt $ 757,218 $ 762,202 |
Derivative Instruments (Tables)
Derivative Instruments (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Derivative Instruments | |
Schedule of fair value and location of derivative instruments | June 30, December 31, 2017 2016 Liability fair value recorded in other long-term liabilities $ 1,507 $ 1,729 Liability fair value recorded in accounts payable and accrued other expenses 1,019 1,065 Estimated amount of existing losses expected to be reclassified into earnings in the next 12 months (2,446) (1,783) |
Schedule of changes in other comprehensive income related to derivative instruments classified as cash flow hedges | Three Months Ended June 30, 2017 2016 Balance at beginning of period, April 1 $ (3,396) $ (3,450) Reclassifications in earnings, net of tax of $150 and $24, respectively 249 38 Change in fair value of derivative instrument, net of tax of $35 and $184, respectively (56) (122) Balance at end of period, June 30 $ (3,203) $ (3,534) Six Months Ended June 30, 2017 2016 Balance at beginning of period, January 1 $ (3,334) $ (2,968) Reclassifications in earnings, net of tax of $225 and $56, respectively 374 88 Change in fair value of derivative instrument, net of tax of $150 and $509, respectively (243) (654) Balance at end of period, June 30 $ (3,203) $ (3,534) |
Fair Value Measurements (Tables
Fair Value Measurements (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Fair Value Measurements | |
Summary of financial instruments measured at fair value | June 30, 2017 December 31, 2016 Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 Liabilities: Long-term debt $ — $ — $ 783,448 $ — $ — $ 791,039 Interest rate cap agreements — 2,526 — — 2,794 — Total $ — $ 2,526 $ 783,448 $ — $ 2,794 $ 791,039 |
Income Taxes (Tables)
Income Taxes (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Income Taxes | |
Schedule of income tax provision and effective income tax rate | Three Months Ended Six Months Ended June 30, June 30, 2017 2016 2017 2016 Income tax expense $ 7,743 $ 6,676 $ 6,882 $ 12,069 Effective income tax rate 26.9 % 38.0 % 12.5 % 38.9 % |
Earnings per Share (Tables)
Earnings per Share (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Earnings per Share | |
Schedule of computation of basic and diluted earnings per share | Three Months Ended Six Months Ended June 30, June 30, 2017 2016 2017 2016 Net income available to common stockholders $ 21,088 $ 10,893 $ 48,063 $ 18,977 Weighted average outstanding shares of common stock 92,017,662 82,348,189 91,580,438 79,789,693 Dilutive effect of stock-based awards 3,237,257 764,846 3,510,428 729,249 Adjusted weighted average outstanding and assumed conversions for diluted EPS 95,254,919 83,113,035 95,090,866 80,518,942 Earnings per share: Basic $ 0.23 $ 0.13 $ 0.52 $ 0.24 Diluted 0.22 0.13 0.51 0.24 |
Schedule of antidilutive securities excluded from earnings per share | Three Months Ended Six Months Ended June 30, June 30, 2017 2016 2017 2016 Employee stock-based awards 572,623 1,598,231 467,677 1,598,231 |
Stock-Based Compensation (Table
Stock-Based Compensation (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Stock-Based Compensation | |
Summary of stock options outstanding, vested and exercisable | Weighted Weighted average average remaining Aggregate Outstanding exercise price contractual life Intrinsic Value Options per share (Years) (in thousands) Outstanding at December 31, 2016 5,997,372 $ 10.18 7.30 $ 145,270 Granted 573,601 34.76 — Forfeited (60,017) 14.22 — Exercised (1,362,367) 7.09 — Expired (2,893) 13.79 — Outstanding at June 30, 2017 5,145,696 $ 13.69 7.35 $ 120,792 Vested, exercisable, expected to vest at June 30, 2017 5,145,696 $ 13.69 7.35 $ 120,792 Exercisable at June 30, 2017 3,010,862 $ 10.30 6.90 $ 80,809 |
Summary of restricted stock units activity | Weighted average grant date fair value Number of Awards per share Outstanding at December 31, 2016 67,295 $ 25.88 Granted 271,637 34.96 Forfeited (7,191) 29.17 Vested and converted to shares (37,655) 29.96 Outstanding at June 30, 2017 294,086 $ 33.66 Expected to vest at June 30, 2017 294,086 $ 33.66 |
Schedule of weighted average assumptions to estimate the fair value of stock options granted | Six Months Ended June 30, 2017 2016 Expected term (years) 6.25 6.25 Expected volatility 40.00 % 50.00 % Expected dividend yield 0.00 % 0.00 % Weighted average risk-free interest rate 1.92 % 1.35 % Weighted average grant date fair value $ 14.60 $ 9.32 |
Segment Information (Tables)
Segment Information (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Segment Information | |
Schedule of operating segment results | Three Months Ended Six Months Ended June 30, June 30, 2017 2016 2017 2016 (unaudited) (unaudited) Net Revenue Healthcare $ 151,559 $ 141,043 $ 291,362 $ 265,173 Global Retail and Other 16,052 17,248 36,382 35,836 Consolidated net revenue $ 167,611 $ 158,291 $ 327,744 $ 301,009 Operating Income Healthcare $ 38,689 $ 36,713 $ 69,850 $ 63,335 Global Retail and Other 1,307 2,225 4,228 4,841 Consolidated operating income $ 39,996 $ 38,938 $ 74,078 $ 68,176 |
Schedule of operating segment net revenue by product type | Three Months Ended June 30, Six Months Ended June 30, 2017 % 2016 % 2017 % 2016 % (unaudited) (unaudited) Healthcare Retrospective claims accuracy $ 86,627 51.7 $ 80,932 51.1 $ 164,143 50.1 $ 146,202 48.6 Prospective claims accuracy 62,020 37.0 56,989 36.0 121,737 37.1 112,399 37.3 Transaction services 2,912 1.7 3,122 2.0 5,482 1.7 6,572 2.2 Total Healthcare 151,559 90.4 141,043 89.1 291,362 88.9 265,173 88.1 Global Retail and Other Retrospective claims accuracy 15,385 9.2 16,701 10.6 35,059 10.7 34,691 11.5 Other 667 0.4 547 0.3 1,323 0.4 1,145 0.4 Total Global Retail and Other 16,052 9.6 17,248 10.9 36,382 11.1 35,836 11.9 Consolidated net revenue $ 167,611 100.0 $ 158,291 100.0 $ 327,744 100.0 $ 301,009 100.0 |
Description of Business (Detail
Description of Business (Details) | Jun. 30, 2017customercompany |
Healthcare | Minimum | |
Description of business | |
Number of clients | 60 |
Commercial, Medicaid and Medicare managed health plans | United States | |
Description of business | |
Number of largest companies in the industry sector | company | 25 |
Commercial, Medicaid and Medicare managed health plans | United States | Minimum | |
Description of business | |
Number of largest companies in the industry sector that are customers | 20 |
Retail | |
Description of business | |
Number of clients | 35 |
Retail | United States | |
Description of business | |
Number of largest companies in the industry sector that are customers | 8 |
Number of largest companies in the industry sector | company | 10 |
Summary of Significant Accoun33
Summary of Significant Accounting Policies - Revenue Recognition, Unbilled Receivables, and Estimated Liability for Refunds and Appeals (Details) - USD ($) $ in Thousands | Jun. 30, 2017 | Dec. 31, 2016 |
Summary of Significant Accounting Policies | ||
Estimated liability for refunds and appeals | $ 57,635 | $ 62,539 |
Estimated allowance for refunds and appeals | 32,648 | 41,020 |
Accounts receivable | ||
Summary of Significant Accounting Policies | ||
Unbilled receivables | 57,340 | 51,643 |
Unbilled receivables arising from deferred billing | $ 5,732 | $ 6,137 |
Summary of Significant Accoun34
Summary of Significant Accounting Policies - Recently Issued Accounting Standards (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | |
Jun. 30, 2017 | Jun. 30, 2017 | Dec. 31, 2016 | |
Summary of Significant Accounting Policies | |||
Excess tax benefit related to stock option exercises | $ 2,619 | $ 13,041 | |
Long-term deferred tax liabilities | 123,178 | 123,178 | $ 120,533 |
Debt issuance costs, net | $ 8,230 | $ 8,230 | $ 10,837 |
Property and Equipment - Balanc
Property and Equipment - Balances by Major Asset Class (Details) - USD ($) $ in Thousands | Jun. 30, 2017 | Dec. 31, 2016 |
Property and equipment | ||
Property and equipment, gross | $ 125,332 | $ 108,008 |
Less: Accumulated depreciation and amortization | 51,404 | 40,368 |
Property and equipment, net | 73,928 | 67,640 |
Computer equipment | ||
Property and equipment | ||
Property and equipment, gross | 43,371 | 40,349 |
Software | ||
Property and equipment | ||
Property and equipment, gross | 60,991 | 42,614 |
Furniture and fixtures | ||
Property and equipment | ||
Property and equipment, gross | 8,969 | 8,652 |
Leasehold improvements | ||
Property and equipment | ||
Property and equipment, gross | 5,104 | 4,392 |
Projects in progress | ||
Property and equipment | ||
Property and equipment, gross | $ 6,897 | $ 12,001 |
Property and Equipment - Perpet
Property and Equipment - Perpetual Software License (Details) - Perpetual software license - USD ($) $ in Thousands | 1 Months Ended | ||
Dec. 31, 2015 | Jun. 30, 2017 | Dec. 31, 2016 | |
Recorded obligation | |||
Remaining payment period | 2 years | ||
Accounts payable and accrued other expenses | |||
Recorded obligation | |||
License obligation | $ 3,287 | $ 3,351 | |
Other long-term liabilities | |||
Recorded obligation | |||
License obligation | $ 3,225 |
Property and Equipment - Deprec
Property and Equipment - Depreciation and Amortization Expense (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
Property and Equipment | ||||
Depreciation and amortization expense related to property and equipment | $ 5,896 | $ 4,811 | $ 11,471 | $ 9,646 |
Intangible Assets - Balances by
Intangible Assets - Balances by Major Asset Class and Amortization Expense (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | Dec. 31, 2016 | |
Intangible assets with definite lives | |||||
Accumulated Amortization | $ 223,817 | $ 223,817 | $ 193,347 | ||
Amortization expense | 15,201 | $ 15,208 | 30,400 | $ 30,415 | |
Intangible assets | |||||
Gross Carrying Amount | 726,814 | 726,814 | 726,652 | ||
Net Carrying Amount | 502,997 | $ 502,997 | $ 533,305 | ||
Weighted average | |||||
Intangible assets with definite lives | |||||
Amortization period | 12 years 9 months 18 days | 12 years 9 months 18 days | |||
Connolly Trademark | |||||
Intangible assets with indefinite lives | |||||
Gross Carrying Amount | 4,200 | $ 4,200 | $ 4,200 | ||
Net Carrying Amount | 4,200 | 4,200 | 4,200 | ||
Customer relationships | |||||
Intangible assets with definite lives | |||||
Gross Carrying Amount | 640,214 | 640,214 | 640,052 | ||
Accumulated Amortization | 168,366 | 168,366 | 144,768 | ||
Net Carrying Amount | 471,848 | $ 471,848 | $ 495,284 | ||
Customer relationships | Weighted average | |||||
Intangible assets with definite lives | |||||
Amortization period | 13 years 8 months 12 days | 13 years 8 months 12 days | |||
Acquired software | |||||
Intangible assets with definite lives | |||||
Gross Carrying Amount | 82,400 | $ 82,400 | $ 82,400 | ||
Accumulated Amortization | 55,451 | 55,451 | 48,579 | ||
Net Carrying Amount | $ 26,949 | $ 26,949 | $ 33,821 | ||
Acquired software | Weighted average | |||||
Intangible assets with definite lives | |||||
Amortization period | 6 years 2 months 12 days | 6 years 2 months 12 days |
Intangible Assets - Balances 39
Intangible Assets - Balances by Major Asset Class - Future Amortization Expense (Details) $ in Thousands | Jun. 30, 2017USD ($) |
Amortization expense for the next 5 years | |
Remainder of 2017 | $ 27,434 |
2,018 | 53,909 |
2,019 | 53,909 |
2,020 | 53,909 |
2,021 | $ 49,586 |
Goodwill (Details)
Goodwill (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
Changes in the carrying amount of goodwill | ||||
Balance | $ 1,196,024 | |||
Balance | $ 1,196,389 | 1,196,389 | ||
Impairment related to goodwill | 0 | $ 0 | 0 | $ 0 |
Healthcare | ||||
Changes in the carrying amount of goodwill | ||||
Balance | 1,147,771 | |||
Foreign currency translation and other | ||||
Balance | 1,147,771 | 1,147,771 | ||
Global Retail and Other | ||||
Changes in the carrying amount of goodwill | ||||
Balance | 48,253 | |||
Foreign currency translation and other | 365 | |||
Balance | $ 48,618 | $ 48,618 |
Commitments and Contingencies -
Commitments and Contingencies - Legal and Other Matters (Details) - Unfavorable action - Centers for Medicare and Medicaid Services (CMS) - USD ($) $ in Thousands | Jul. 01, 2015 | Aug. 31, 2014 | Jun. 30, 2017 |
Loss contingency | |||
Settlement on original claim amount offered by CMS to allow providers to remove eligible claims pending in appeals process (as a percent) | 68.00% | ||
RAC contract contingency fee on original amount of settled claims under CMS July 1, 2015 Technical Direction Letter (as a percent) | 32.00% | ||
Maximum possible additional amount of refund payable in excess of amount accrued | $ 13,000 | ||
Estimated liability for refunds and appeals | |||
Loss contingency | |||
Estimated refund liability on settled claims | $ 22,308 |
Long-term Debt - First Amendmen
Long-term Debt - First Amendment Agreement (Details) - USD ($) $ in Thousands | 1 Months Ended | 3 Months Ended | 6 Months Ended | ||
Apr. 30, 2017 | Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
Extinguishment of debt | |||||
Loss on extinguishment of debt | $ 3,183 | $ 7,068 | $ 3,183 | $ 7,068 | |
Term Loan B | First Amendment Agreement | |||||
Extinguishment of debt | |||||
Loss on extinguishment of debt | $ 3,183 | $ 3,183 | |||
Term Loan B | First Amendment Agreement | LIBOR | |||||
Extinguishment of debt | |||||
Decrease in interest rate (as a percent) | 0.25% |
Long-term Debt - Summary of Com
Long-term Debt - Summary of Components (Details) - USD ($) $ in Thousands | Jun. 30, 2017 | Dec. 31, 2016 |
Long-term debt components | ||
Total debt | $ 783,448 | $ 791,039 |
Less: debt issuance costs | 8,230 | 10,837 |
Less: current portion | 18,000 | 18,000 |
Total long-term debt | 757,218 | 762,202 |
Term Loan A | Restated Credit Agreement | ||
Long-term debt components | ||
Total debt | 240,466 | 246,694 |
Term Loan B | Restated Credit Agreement | ||
Long-term debt components | ||
Total debt | $ 542,982 | $ 544,345 |
Long-term Debt - Other Covenant
Long-term Debt - Other Covenant Terms (Details) - Restated Credit Agreement - Maximum | 6 Months Ended | 12 Months Ended |
Jun. 30, 2017 | Dec. 31, 2016 | |
Term Loan A | ||
Ratio requirements | ||
Secured Leverage Ratio covenant, through September 2018 | 5.50 | 5.50 |
Secured Leverage Ratio covenant, through September 2019 | 5.25 | 5.25 |
Secured Leverage Ratio covenant, through June 2021 | 5 | 5 |
Revolver | ||
Ratio requirements | ||
Secured Leverage Ratio covenant, through September 2018 | 5.50 | 5.50 |
Secured Leverage Ratio covenant, through September 2019 | 5.25 | 5.25 |
Secured Leverage Ratio covenant, through June 2021 | 5 | 5 |
Long-term Debt - Aggregate Matu
Long-term Debt - Aggregate Maturities (Details) $ in Thousands | Jun. 30, 2017USD ($) |
Aggregate maturities of long term debt | |
Remainder of 2017 | $ 9,000 |
2,018 | 18,000 |
2,019 | 24,250 |
2,020 | 30,500 |
2,021 | $ 183,625 |
Derivative Instruments - Intere
Derivative Instruments - Interest Rate Cap Contracts (Details) - Interest rate cap agreements - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | Dec. 31, 2016 | |
LIBOR | |||||
Interest rate derivatives | |||||
Interest rate cap on floating rate debt (as a percent) | 3.00% | 3.00% | |||
Cash flow hedge | |||||
Cash flow hedge activity | |||||
Ineffectiveness recorded | $ 0 | $ 0 | $ 0 | $ 0 | |
Cash flow hedge | Interest expense | |||||
Cash flow hedge activity | |||||
Expense recognized | 398 | $ 62 | 599 | $ 144 | |
Designated as Hedge | |||||
Interest rate derivatives | |||||
Notional amount | $ 540,000 | $ 540,000 | $ 540,000 |
Derivative Instruments - Quanti
Derivative Instruments - Quantitative Information Related to Fair Value (Details) - USD ($) $ in Thousands | Jun. 30, 2017 | Dec. 31, 2016 |
Interest rate cash flow hedges | ||
Estimated amount of existing losses expected to be reclassified into earnings in the next 12 months | $ (2,446) | $ (1,783) |
Interest rate cap agreements | ||
Interest rate cash flow hedges | ||
Deferred hedge premiums paid and recorded in accumulated other comprehensive (loss) income | 3,301 | |
Expected additional payments of deferred premiums | 3,093 | |
Designated as Hedge | Interest rate cap agreements | Other long-term liabilities | ||
Interest rate cash flow hedges | ||
Derivative liability | 1,507 | 1,729 |
Designated as Hedge | Interest rate cap agreements | Accounts payable and accrued other expenses | ||
Interest rate cash flow hedges | ||
Derivative liability | $ 1,019 | $ 1,065 |
Derivative Instruments - Change
Derivative Instruments - Changes in Other Comprehensive Income Related to Cash Flow Hedges (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
Changes in other comprehensive income related to derivative instruments classified as cash flow hedges | ||||
Balance at beginning of period | $ (3,396) | $ (3,450) | $ (3,334) | $ (2,968) |
Reclassifications in earnings, net of tax of $150 and $24 for the three months ended June 30, 2017 and 2016, and $225 and $56 for the six months ended June 30, 2017 and 2016, respectively | 249 | 38 | 374 | 88 |
Change in fair value of derivative instrument, net of tax of $35 and $184 for the three months ended June 30, 2017 and 2016, and $150 and $509 for the six months ended June 30, 2017 and 2016, respectively | (56) | (122) | (243) | (654) |
Balance at end of period | (3,203) | (3,534) | (3,203) | (3,534) |
Other comprehensive income, tax effect | ||||
Reclassifications in earnings, tax benefit | 150 | 24 | 225 | 56 |
Change in fair value of derivative instrument, tax benefit | $ 35 | $ 184 | $ 150 | $ 509 |
Fair Value Measurements (Detail
Fair Value Measurements (Details) - Recurring - USD ($) $ in Thousands | Jun. 30, 2017 | Dec. 31, 2016 |
Level 2 | ||
Liabilities | ||
Interest rate cap agreements | $ 2,526 | $ 2,794 |
Total | 2,526 | 2,794 |
Level 3 | ||
Liabilities | ||
Long-term debt | 783,448 | 791,039 |
Total | $ 783,448 | $ 791,039 |
Income Taxes (Details)
Income Taxes (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
Income Taxes | ||||
Income tax provision | $ 7,743 | $ 6,676 | $ 6,882 | $ 12,069 |
Effective income tax rate (as a percent) | 26.90% | 38.00% | 12.50% | 38.90% |
Excess tax benefit related to stock option exercises | $ 2,619 | $ 13,041 | ||
Decrease related to settlement with IRS | 337 | |||
Decrease in effective tax rate due to amended state tax returns | $ 660 | $ 660 |
Stockholders' Equity - Issuance
Stockholders' Equity - Issuance of Common Stock (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | Mar. 07, 2017 | Mar. 31, 2017 | Jun. 30, 2017 | Jun. 30, 2016 |
Issuance of stock | ||||
Net proceeds from issuance of common stock | $ 226,929 | |||
Secondary Offering | ||||
Issuance of stock | ||||
Net proceeds from issuance of common stock | $ 0 | |||
Offering expenses | $ 600 | |||
Secondary Offering | Selling Stockholders | ||||
Issuance of stock | ||||
Shares sold in secondary offering | 9,683 | |||
Offering price (in dollars per share) | $ 36 | |||
Underwriters option | ||||
Issuance of stock | ||||
Shares sold in secondary offering | 1,263 |
Earnings per Share - Basic and
Earnings per Share - Basic and Diluted Computation (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
Basic and diluted earnings per share computation | ||||
Net income available to common stockholders | $ 21,088 | $ 10,893 | $ 48,063 | $ 18,977 |
Weighted average outstanding shares of common stock | 92,017,662 | 82,348,189 | 91,580,438 | 79,789,693 |
Dilutive effect of stock-based awards | 3,237,257 | 764,846 | 3,510,428 | 729,249 |
Adjusted weighted average outstanding and assumed conversions for diluted EPS | 95,254,919 | 83,113,035 | 95,090,866 | 80,518,942 |
Earnings per share | ||||
Basic (in dollars per share) | $ 0.23 | $ 0.13 | $ 0.52 | $ 0.24 |
Diluted (in dollars per share) | $ 0.22 | $ 0.13 | $ 0.51 | $ 0.24 |
Earnings per Share - Awards Exc
Earnings per Share - Awards Excluded from Diluted Calculation (Details) - shares | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
Performance-based stock options | ||||
Anti-dilutive securities and other information | ||||
Share-based awards excluded because vesting conditions not satisfied | 2,788,817 | 2,788,817 | ||
Service based stock options and RSUs | ||||
Anti-dilutive securities and other information | ||||
Stock-based awards excluded from calculation of diluted earnings per share (in shares) | 572,623 | 1,598,231 | 467,677 | 1,598,231 |
Stock-Based Compensation - Stoc
Stock-Based Compensation - Stock Option Activity (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 6 Months Ended | 12 Months Ended |
Jun. 30, 2017 | Jun. 30, 2017 | Dec. 31, 2016 | |
Shares | |||
Outstanding at beginning of period (in shares) | 5,997,372 | ||
Granted (in shares) | 573,601 | ||
Forfeited (in shares) | (60,017) | ||
Exercised (in shares) | (1,362,367) | ||
Expired (in shares) | (2,893) | ||
Outstanding at end of period (in shares) | 5,145,696 | 5,145,696 | 5,997,372 |
Vested, exercisable, expected to vest (in shares) | 5,145,696 | 5,145,696 | |
Exercisable (in shares) | 3,010,862 | 3,010,862 | |
Weighted average exercise price | |||
Outstanding at beginning of period (in dollars per share) | $ 10.18 | ||
Granted (in dollars per share) | 34.76 | ||
Forfeited (in dollars per share) | 14.22 | ||
Exercised (in dollars per share) | 7.09 | ||
Expired (in dollars per share) | 13.79 | ||
Outstanding at end of period (in dollars per share) | $ 13.69 | 13.69 | $ 10.18 |
Vested, exercisable, expected to vest (in dollars per share) | 13.69 | 13.69 | |
Exercisable (in dollars per share) | $ 10.30 | $ 10.30 | |
Weighted Average Remaining Contractual Term | |||
Outstanding | 7 years 4 months 6 days | 7 years 3 months 18 days | |
Vested, exercisable, expected to vest | 7 years 4 months 6 days | ||
Exercisable (in years) | 6 years 10 months 24 days | ||
Aggregate Intrinsic Value | |||
Outstanding | $ 120,792 | $ 120,792 | $ 145,270 |
Vested, exercisable, expected to vest | 120,792 | 120,792 | |
Exercisable | 80,809 | 80,809 | |
Total intrinsic value of options exercised | $ 8,409 | $ 41,891 | |
Common stock | |||
Aggregate Intrinsic Value | |||
Fair value of stock (in dollars per share) | $ 37.14 | $ 37.14 |
Stock-Based Compensation - Rest
Stock-Based Compensation - Restricted Stock Units Vesting and Activity (Details) - 2016 Plan - Restricted stock units | 6 Months Ended |
Jun. 30, 2017$ / sharesshares | |
Shares | |
Outstanding at beginning of period | shares | 67,295 |
Granted (in shares) | shares | 271,637 |
Forfeited (in shares) | shares | (7,191) |
Vested (in shares) | shares | (37,655) |
Outstanding at end of period | shares | 294,086 |
Expected to vest at end of period | shares | 294,086 |
Weighted average grant date fair value | |
Outstanding at beginning of period (in dollars per share) | $ / shares | $ 25.88 |
Granted (in dollars per share) | $ / shares | 34.96 |
Forfeited (in dollars per share) | $ / shares | 29.17 |
Vested (in dollars per share) | $ / shares | 29.96 |
Outstanding at end of period (in dollars per share) | $ / shares | 33.66 |
Expected to vest at end of period | $ / shares | $ 33.66 |
Stock-Based Compensation - Empl
Stock-Based Compensation - Employee Stock Purchase Plan (Details) - Employee Stock Purchase Plan $ / shares in Units, $ in Thousands | Jun. 30, 2017$ / sharesshares | Jun. 30, 2017USD ($)$ / shares |
Employee Stock Purchase Plan | ||
Offering period | 6 months | |
Contribution maximum percentage of pay | 10.00% | |
Contribution maximum amount per year | $ 10 | |
Contribution maximum amount per offering period | $ 5 | |
Discount applied to closing price, percentage | 10.00% | |
Shares purchased under Employee Stock Purchase Plan | shares | 29,668 | |
Price per share (in dollars per share) | $ / shares | $ 33.43 | $ 33.43 |
Holding period (in days) | 90 days |
Stock-Based Compensation - Weig
Stock-Based Compensation - Weighted Average Assumptions to Estimate Fair Value of Stock Options (Details) - Stock options - Weighted average - $ / shares | 6 Months Ended | |
Jun. 30, 2017 | Jun. 30, 2016 | |
Assumptions used to estimate fair value of stock options granted | ||
Expected term | 6 years 3 months | 6 years 3 months |
Expected volatility (as a percent) | 40.00% | 50.00% |
Expected dividend yield (as a percent) | 0.00% | 0.00% |
Risk-free interest rate (as a percent) | 1.92% | 1.35% |
Weighted average grant date fair value (in dollars per share) | $ 14.60 | $ 9.32 |
Stock-Based Compensation - Expe
Stock-Based Compensation - Expense Recorded (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
Stock-based compensation expense | ||||
Stock-based compensation expense | $ 2,455 | $ 3,428 | $ 4,538 | $ 4,502 |
Stock-based compensation expense related to accelerated vesting | $ 2,257 | $ 2,257 | ||
Service based stock options and RSUs | ||||
Stock-based compensation expense | ||||
Unvested service-based stock options and RSU awards (in shares) | 2,428,920 | 2,428,920 | ||
Unrecognized compensation cost | $ 24,338 | $ 24,338 | ||
Period of recognition of unrecognized compensation cost | 2 years 8 months 12 days |
Segment Information - Operating
Segment Information - Operating Segment Results (Details) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2017USD ($) | Jun. 30, 2016USD ($) | Jun. 30, 2017USD ($)segment | Jun. 30, 2016USD ($) | |
Segment information | ||||
Number of reportable segments | segment | 2 | |||
Net Revenue | $ 167,611 | $ 158,291 | $ 327,744 | $ 301,009 |
Operating Income | 39,996 | 38,938 | 74,078 | 68,176 |
Healthcare | ||||
Segment information | ||||
Net Revenue | 151,559 | 141,043 | 291,362 | 265,173 |
Operating Income | 38,689 | 36,713 | 69,850 | 63,335 |
Global Retail and Other | ||||
Segment information | ||||
Net Revenue | 16,052 | 17,248 | 36,382 | 35,836 |
Operating Income | $ 1,307 | $ 2,225 | $ 4,228 | $ 4,841 |
Segment Information - Operati60
Segment Information - Operating Segment Net Revenue by Product Type (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
Net revenue by product type | ||||
Net revenue | $ 167,611 | $ 158,291 | $ 327,744 | $ 301,009 |
Product | Total net revenue | ||||
Net revenue by product type | ||||
Net revenue | $ 167,611 | $ 158,291 | $ 327,744 | $ 301,009 |
Proportionate share of total (as a percent) | 100.00% | 100.00% | 100.00% | 100.00% |
Healthcare | ||||
Net revenue by product type | ||||
Net revenue | $ 151,559 | $ 141,043 | $ 291,362 | $ 265,173 |
Healthcare | Product | Total net revenue | ||||
Net revenue by product type | ||||
Net revenue | $ 151,559 | $ 141,043 | $ 291,362 | $ 265,173 |
Proportionate share of total (as a percent) | 90.40% | 89.10% | 88.90% | 88.10% |
Healthcare | Retrospective claims accuracy | Product | Total net revenue | ||||
Net revenue by product type | ||||
Net revenue | $ 86,627 | $ 80,932 | $ 164,143 | $ 146,202 |
Proportionate share of total (as a percent) | 51.70% | 51.10% | 50.10% | 48.60% |
Healthcare | Prospective claims accuracy | Product | Total net revenue | ||||
Net revenue by product type | ||||
Net revenue | $ 62,020 | $ 56,989 | $ 121,737 | $ 112,399 |
Proportionate share of total (as a percent) | 37.00% | 36.00% | 37.10% | 37.30% |
Healthcare | Transaction services | Product | Total net revenue | ||||
Net revenue by product type | ||||
Net revenue | $ 2,912 | $ 3,122 | $ 5,482 | $ 6,572 |
Proportionate share of total (as a percent) | 1.70% | 2.00% | 1.70% | 2.20% |
Global Retail and Other | ||||
Net revenue by product type | ||||
Net revenue | $ 16,052 | $ 17,248 | $ 36,382 | $ 35,836 |
Global Retail and Other | Product | Total net revenue | ||||
Net revenue by product type | ||||
Net revenue | $ 16,052 | $ 17,248 | $ 36,382 | $ 35,836 |
Proportionate share of total (as a percent) | 9.60% | 10.90% | 11.10% | 11.90% |
Global Retail and Other | Retrospective claims accuracy | Product | Total net revenue | ||||
Net revenue by product type | ||||
Net revenue | $ 15,385 | $ 16,701 | $ 35,059 | $ 34,691 |
Proportionate share of total (as a percent) | 9.20% | 10.60% | 10.70% | 11.50% |
Global Retail and Other | Other | Product | Total net revenue | ||||
Net revenue by product type | ||||
Net revenue | $ 667 | $ 547 | $ 1,323 | $ 1,145 |
Proportionate share of total (as a percent) | 0.40% | 0.30% | 0.40% | 0.40% |
Subsequent Event (Details)
Subsequent Event (Details) - RowdMap - Subsequent Events $ in Thousands | Jul. 14, 2017USD ($)shares |
Acquisition | |
Cash paid | $ | $ 70,000 |
Restricted Stock | |
Acquisition | |
Shares issued (in shares) | shares | 768,021 |
Performance-based vesting | |
Acquisition | |
Percentage of total award | 50.00% |
Time-based service awards | |
Acquisition | |
Percentage of total award | 50.00% |
Vesting period | 3 years |
Time-based service awards | First anniversary | |
Acquisition | |
Percentage vesting each anniversary | 33.00% |
Time-based service awards | Second anniversary | |
Acquisition | |
Percentage vesting each anniversary | 33.00% |
Time-based service awards | Third anniversary | |
Acquisition | |
Percentage vesting each anniversary | 33.00% |