INOV - Earnings call transcript Q2 2019

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Operator

Good day, ladies and gentlemen and welcome to the Inovalon’s Second Quarter 2019 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. And now, I will turn the conference over to your host, Kim Collins. Please begin.

Kim Collins

Good afternoon. Senior of Collins, at Kim is Vice Communications President Inovalon. This here today am with I Dr. Chief and Executive Board Inovalon’s Dunleavy, Keith Officer Boldt, Chief and Chairman Inovalon’s Financial Officer. Jonathan the of second to you like earnings would I to our call. quarter welcome XXXX

website. results on The the was page the a of Investor second and be will Inovalon’s for today’s press Relations afternoon our call this available quarter announcing replay release financial distributed shortly, on posted

that the For and you you call, to we of rebroadcast as the will updated subsequent XXXX this made those to earnings of remarks today, this of listening be XX, are herein initial remind July call. not

I under statements could statements future growth results will future this forward-looking the during Private position, made of operations Securities operations. for to related Those to and Act number cause certain factors business actual market remind a including plans, you financial materially. strategy Litigation and statements XXXX, and as call that maybe differ our objectives of characterized Reform involve results our that of

concerning the Additional with company’s release the earnings is in contained filings factors and SEC. these information

In webcast accompanied of a an investors, which information additional IR presentation, the available is is on our by call conference website. effort section provide this to and to

a encouraged with our presentation You’re prepared download copy to to remarks. this of follow along

includes non-GAAP also financial certain presentation Our measures.

of the You release will the find definitions charts website. measures the company’s end earnings and of at these non-GAAP on company’s reconciliation and

the my call Keith turn to pleasure is to Now, it over Dunleavy. Dr.

Keith Dunleavy

thank everyone you, Thank call. Kim. afternoon, you for our and joining Good

and delivers seeing. connectivity, what pleased we for Demand the is impact are our analytics progresses, that XXXX are platform with strong. As data, we

robust are recognizing exciting retention meaningful nature rates. value differentiated capabilities. the into sales momentum continued Our clients strong and a These and of new the in dynamics realizing are client platform’s and increasingly are translating are

corner revenue of occurring our the building each one quarters but across our not in growth the this is only sales successive organic of build And As other, just business multiple units. well. is meaningful upon company, as

being of multiple new from quarter of of successive see sequential You With organic the continuing. in sequential growth were translating benefits this strong profitability. sequentially X%. sales clients, the of of value the profitable. point. this meaningful which realized first the We our securing together growth And the we’re sales, growth of into momentum at annual by resulting contract of is fueled and XXXX. expansion efficiency scale the further with profitability our and with revenue This preceding quarters this are see and up benefits value is growing sales strong XX% our platform, increases a notably Together, price in the this

headline As of lot the a show numbers the on. positive there’s behind the going momentum company, the scenes

a While initiatives I’ll numerous to are the number of mention convey few. here, too

are the great company. associates our talent a are tightening people perspective, we wonderful the people and and up and how meaningful people a Inovalon are excitement. snowballing of development all functions And industry client to we daily, and tracking KPI such The scale behind the efficiency our From today. and weekly we how nothing want, in and perspective, positive greater the across monthly and what our positive maturation. tremendous are valuable Together, and clients has success our connections. bench meaningful more is effectiveness raise we job, ERP helping deepening are in this focusing a of us deliver our and granularity strength the bar, been and expanded. widely doing adding procurement, From way, and maturity I’m process of of to retention, seeing and teams. even detail are on effect listening improving and need a we that as and recruitment, company is great motivation employees, short of run, CRM Inovalon is support housekeeping the forward. fellow as about they thrilled investing infrastructure The domino attracting experience backbone joining employee functions, move

the and backbone quarter of the advancements, space. witnessed continuation second been technology delivery in of the has innovations a which And our leadership and perspective, from our value

health We fall stay, tools, multiple treatment, disease and of introduced began identification the artificial care leveraging intelligence staffing post-acute such levels, offering a new name introduced chronic risks, capabilities. We matters, sociodemographic a our have patient predicting platform social ONE® incorporates few. combined and We disease of analysis of new determinant initiatives, predictive elements. high-value just Platform the Inovalon data population clinical, to configuration that outcome, as and length progression,

added and therapies. immuno-oncological areas our already. results driving are as of healthcare, testing and genetic to And such high-value analytics demand We biomarkers capabilities meaningful these forming

margins the we’re success accomplished expanding data-driven The of patients that and And our engagements the second it’s I’m cash pleased point I’m G&A million people, company, resulting flow increased X to investments of During down and this infrastructure and from lies financial and with leading our and during year. is tempo many important the plans of growth and in companies also processes, start quarter, deepening we healthcare investment in what and pharmaceutical across implementations technology, new driven out health for populations signed excited the by doing and ahead. quarter, we capabilities the our half accelerating. efficiency of new in while profitability. strengthening, the these second this significantly. of with nearly all what our we adjusted accelerating with have Concurrent to EBITDA

our to many shareholders and great conveying continued I’d interest the my our for associates our support to like Inovalon. of to clients, and my close truly amazing by to remarks appreciation

by positive has this humbled been. We how are

there We are is journey great great and a on momentum.

to quarter the and With over the that, the allow of call our the year. balance the turn please me to to results outlook of Jonathan for review Jonathan?

Jonathan Boldt

and highlighting everyone. comments. points afternoon Keith’s Keith key good you, begin on want by I few Thank to a building

above and our strong, revenue were flow growth of guidance cash with results continued. delivering our toward financial range, range, end high quarter second our guidance the strong First, profitability our

remain we of on and focused we the third, sales And cash our excited investing Second, our it innovation that associated profitability flow. are accelerates, are guidance. organic XXXX driving area as full the strong by building and updating we growth momentum continued and year in in

are revenue XXXX. our consecutive For we non-GAAP GAAP and quarter, revising earnings provided and we we initially adjusted the range, upward our our EBITDA second guidance November increasing on are range, narrowing are X, guidance

This renewal contract strong sequentially the client in compared months. platform value, yet ACV new the new another $XXX our revenue was second revenue increase of the growth second platform sales the or million, XX% The trailing million, basis, up to an quarter new as second sales grew second revenue Trailing XXXX our second when quarter compared revenue for by year-over-year XXXX revenue Turning continued robust. XX% annual demand $XXX.X increase second XX-month reported prior previously with in the up of ACV, sales strong Subscription-based XX% at was quarter $XXX.X growth trailing to contract retention. XX% quarter of in X% strong XX% quarter for an and compared of the sales platform to results, sequentially. second came XX XXXX. was and X% at million, driven million, of quarter quarter On a XXXX of trailing XX-month $XX.X period. to was quarter XX-month marks capabilities coming XX-month to total

profile Turning technology-enabled was and of at in to margin by adoption, sophisticated platform line which profitable connectivity higher-margin module more to platform our mix year-over-year. margin, and the increasing gross our position for gross gross strong company’s The growth. discussed. realization be margin Strong XXXX gross well automation, and XX.X%, continues quarter margin continued, efficiencies and driven and company was have second previously higher-value, technologically we scalable, offerings scale sequentially of

third-party percentage expenses a and in decrease quarter $XX.X of onetime in the by second XXXX quarter of normalized $X.X basis, second or XXXX. G&A a million, a the driven expense quarter XXXX compared quarter in sequentially. the integration of General of in XXXX XX.X% G&A cost million. was XX% a $XX of million, for a was $X.X as and year-over-year administrative the in second for revenue was XX.X% and million, On non-comparable to quarter in of $XX.X $X.X of million XXXX, year-over-year or reduction decrease $XX.X $X.X of the as million and was decrease cost Adjusting expenses second of the G&A consideration million. second transaction in contingent professional million reduction a

leverage XXXX $X.X tremendous Importantly, decreased expense, when compared second realized X.X%, the signifying normalized efficiencies. quarter second to expense quarter operating million G&A XXXX or by

the increase On of at details the line operating significant and XX-month year-over-year. efficiency revenue, adjusted income EBITDA provided a $XX.X XX was supplement drove profitability. quarter XX-month Adjusted year-over-year. came per strong of in compared gross Slide second EBITDA was Increased strong share deck. million, on $XXX XXXX quarter our $XXX QX Additional are preceding to was margins non-GAAP expense in which XX% million, basis, during $X.XX, in million consistent also an when second XXXX trailing period. net earnings

point Second second represents to quarter the XX.X%. alone for was when margin adjusted quarter basis EBITDA trailing XXXX increase Adjusted margin impressive XXX XX-month XX-month was XX.X%, a compared EBITDA preceding which period. an the

of per Finally, $X.XX, second an period. preceding the non-GAAP compared share to net trailing was XX% income XX-month XX-month during increase $X.XX quarter XXXX when

financial Turning to strong. position Inovalon’s the sheet, remains balance

all Bringing position approximately within company’s agreement the X. and was $XXX.X XX, and revolving our million, $XXX.X were $XXX the debt credit sheet net amount $XXX.X balance facility. net as million. As the issuance short-term million. of this And any $XXX.X ratio discounts as Total the defined equivalents investments had was second company debt deferred from net financing the cash, the not fees. together, was million of X.XX quarter, to and June cash debt outstanding debt of million, of XXXX, Reported drawn end debt was

service by cash of to to the of million, increased quarter Turning year-over-year is million. $XX.X cash net net of payments flow, our activities interest second XX% debt provided XXXX $XX.X in which operating

Compared the of Second or million $X.X X% quarter million second XX%. was down XXXX, $XX.X quarter was or of revenue. CapEx to CapEx

cash June this business free of For $X.X ended from positive for $XX.X XX the months XX, XXXX. the model. cash flow of trailing in was cash million very the free outflows negative incremental of in of million an generated increase strong months $XX.X million Inovalon cash after $XX.X XXXX, Notably, generation flow cash flow interest flow, ended June free trailing signifying XX, cash the million XX payments, the net

the full XX-month see after or same and million of year decreased a percentage to we the of over revenue trailing XXXX CapEx Platform. decrease basis, XX% as as the CapEx launch ONE $XX.X Additionally, continue Inovalon levels from

XX on deck. results and Slides XX and our details can be Additional of found on our CapEx trailing earnings XX-month supplement

the the forward, providing guidance. following company Looking is

organic and revenue are revenue XX% full provided range $XXX $XXX to million be to XXXX, revenue XXXX, million XX%. growth of initially the X, as growth we For of narrowing XX% November year XX% reported to year-over-year our on reflecting to

We and guidance reaffirming net adjusted for non-GAAP activities. our net guidance we and for are and our income, increasing EBITDA. ranges net share capital And prior expenditure GAAP and GAAP per are non-GAAP provided cash by operating income finally,

we be today’s earnings XXXX between million we For the of XXXX, and release net million our to third details second expect non-GAAP $XX million quarter deck we diluted million, of to $X.XX to earnings $X.XX. supplemental expect and our on in Please per expect quarter revenue, EBITDA income ranges. $XX share guidance to $XXX.X adjusted for $XXX.X to refer

over and for session Jason Chief is With success the implementation; back conduct let Inovalon’s myself. our that, our to Q&A who sales, turn and Capitel, to responsible client operator Officer, call Operator? Operating Keith; with me

Operator

first our with from question And Instructions] Sandy [Operator comes SunTrust. Draper

Sandy Draper

and much. I the very both Jason question Keith. first Thanks maybe for guess,

versus little could growth just don’t but some you versus qualitative talk you by segments, market the bit pharmacy commentary If market market. about provider know maybe payer about I revenue – a out break

are Just than in different, how if area another? are going That be sort helpful. of things one would they notably stronger

Jason Capitel

Sandy This is Jason. thanks for the question.

tell unit, can life we don’t is that we’re that strength sciences. seeing the you by payer, pharmacy really it across business provider, break So out segments, but and all I

really Keith, to We’re – have do we that comments. would anything excited with those be you that’s my have going and add? the momentum

Keith Dunleavy

No, agree. no, I

Sandy Draper

you you revenue of heard and in said Thanks was great. XX% I the follow-up. then I quarter. SaaS offering the Jonathan, right, platform think the If Okay,

Jonathan Boldt

Yes, Sandy, correct. that’s

Sandy Draper

Okay.

So a to just if of sequential it, what back I looks sequentially into services I do trying amount notable sort like increase revenue. and up the revenue. out it if the that actually back was understand drove that legacy fair I’m that in math revenue

Jonathan Boldt

the seasonality so still legacy it. Sandy, has into business

represented approximately revenue. So in the second it quarter XXXX, total of of X.X%

Sandy Draper

Okay.

the And still so about in you reiterated slides, is SaaS that assume, to XX%. going you be

back SaaS back would the a more year, up higher? to revenue way – potentially you the even little expect So of shift be up the mix bit back moving in or other towards half of the XX%

Jonathan Boldt

Sandy. Yes, that’s correct,

Sandy Draper

I to the back Thanks. will queue. Okay jump great.

Operator

mute from please comes question check next with Frank, First Analysis. Our your Frank Sparacino Instructions] [Operator button.

your is is [Operator Instructions] Your button. open. now Once open. Frank, line your check line now mute Please again,

Keith Dunleavy

questions we quarter that company, with. Daniel, ever But our this comments salient our high quarters efficiency data-driven rates remarks is provider had areas queue, two, call, Keith. call number a Seeing or the Inovalon I on leave the quite Number company’s just of as sale in you’re generation. significant multiple of resulting strong close to already the nicely. on building no profitability capabilities a across prepared of further the the and that value healthcare, is seen scale sales with and successive and the shortest the of the we’re the expanding few further of increasingly the delivery, double-digit before is amounting growth our that the business. cash in client revenue – of And leading want the one, points. flow that are powering pleased is Number quite organic effects platform we’ve a in seeing being retention and three,

momentum seeing performance our beyond. you, excited very and associates the want excited our we’re in moreover, clients, and expansion great thank as it to the our into and about and finally We’re XXXX comes shareholders. I implications we’re and for ‘XX, view

We for Inovalon. focused for delivering We We you for night. on continue interest this time your of to our in you constituents. thank be Good your value all evening. thank

Operator

in This concludes disconnect. conference. may participating all have program, day. for you wonderful today’s today’s a thank you gentlemen, and and Ladies Everyone,

Inovalon (INOV) 3 Aug 192019 Q2 Earnings call transcript