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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Inovalon Holdings Inc | NASDAQ:INOV | NASDAQ | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 41.06 | 41.01 | 41.50 | 0 | 01:00:00 |
|
(Mark One)
|
|
x
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
For the quarterly period ended March 31, 2019
|
|
or
|
|
o
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
For the transition period from to
|
Delaware
(State or other jurisdiction of
incorporation or organization)
|
47-1830316
(I.R.S. Employer
Identification No.)
|
4321 Collington Road,
Bowie, Maryland
(Address of principal executive offices)
|
20716
(Zip Code)
|
Title of Each Class
|
|
Name Of Each Exchange On Which Registered
|
|
Ticker Symbol
|
Class A Common Stock, $0.000005 par value per share
|
|
NASDAQ Global Select Market
|
|
INOV
|
Large accelerated filer
x
|
|
Accelerated filer
o
|
|
Non-accelerated filer
o
|
|
Smaller reporting company
o
Emerging growth company
o
|
|
|
|
Page
|
|
||
|
||
|
||
|
||
|
||
|
||
|
|
|
|
|
|
|
March 31,
2019 |
|
December 31,
2018 |
||||
ASSETS
|
|
|
|
|
|
||
Current assets:
|
|
|
|
|
|
||
Cash and cash equivalents
|
$
|
119,880
|
|
|
$
|
115,591
|
|
Short-term investments
|
1,810
|
|
|
7,000
|
|
||
Accounts receivable (net of allowances of $4,296 and $3,350 at March 31, 2019 and December 31, 2018, respectively)
|
117,353
|
|
|
104,405
|
|
||
Prepaid expenses and other current assets
|
20,442
|
|
|
34,801
|
|
||
Income tax receivable
|
7,637
|
|
|
10,330
|
|
||
Total current assets
|
267,122
|
|
|
272,127
|
|
||
Non-current assets:
|
|
|
|
|
|
||
Property, equipment and capitalized software, net
|
138,282
|
|
|
141,758
|
|
||
Operating lease right-of-use assets
|
32,331
|
|
|
—
|
|
||
Goodwill
|
955,881
|
|
|
956,029
|
|
||
Intangible assets, net
|
522,227
|
|
|
535,343
|
|
||
Other assets
|
16,019
|
|
|
16,158
|
|
||
Total assets
|
$
|
1,931,862
|
|
|
$
|
1,921,415
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
||
Current liabilities:
|
|
|
|
|
|
||
Accounts payable and accrued expenses
|
$
|
30,163
|
|
|
$
|
31,295
|
|
Accrued compensation
|
22,455
|
|
|
25,298
|
|
||
Other current liabilities
|
37,420
|
|
|
51,384
|
|
||
Deferred revenue
|
28,833
|
|
|
20,628
|
|
||
Credit facilities
|
9,800
|
|
|
9,800
|
|
||
Operating lease liabilities
|
9,982
|
|
|
—
|
|
||
Finance lease liabilities
|
2,347
|
|
|
2,905
|
|
||
Total current liabilities
|
141,000
|
|
|
141,310
|
|
||
Non-current liabilities:
|
|
|
|
|
|
||
Credit facilities, less current portion
|
938,043
|
|
|
939,514
|
|
||
Operating lease liabilities, less current portion
|
27,357
|
|
|
—
|
|
||
Finance lease liabilities, less current portion
|
14,154
|
|
|
13,927
|
|
||
Other liabilities
|
37,145
|
|
|
33,406
|
|
||
Deferred income taxes
|
103,874
|
|
|
110,669
|
|
||
Total liabilities
|
1,261,573
|
|
|
1,238,826
|
|
||
Commitments and contingencies (Note 8)
|
|
|
|
|
|
||
Stockholders’ equity:
|
|
|
|
|
|
||
Common stock, $0.000005 par value, 900,000,000 shares authorized, zero shares issued and outstanding at each of March 31, 2019 and December 31, 2018, respectively
|
—
|
|
|
—
|
|
||
Class A common stock, $0.000005 par value, 750,000,000 shares authorized; 87,816,006 shares issued and 73,195,831 shares outstanding at March 31, 2019; 86,679,575 shares issued and 72,059,400 shares outstanding at December 31, 2018
|
—
|
|
|
—
|
|
||
Class B common stock, $0.000005 par value, 150,000,000 shares authorized; 80,148,685 shares issued and outstanding at March 31, 2019; 80,608,685 shares issued and outstanding at December 31, 2018
|
1
|
|
|
1
|
|
||
Preferred stock, $0.0001 par value, 100,000,000 shares authorized, zero shares issued and outstanding at March 31, 2019 and December 31, 2018, respectively
|
—
|
|
|
—
|
|
||
Additional paid-in-capital
|
622,751
|
|
|
618,674
|
|
||
Retained earnings
|
262,148
|
|
|
270,471
|
|
||
Treasury stock, at cost, 14,620,175 shares at March 31, 2019 and December 31, 2018, respectively
|
(199,817
|
)
|
|
(199,817
|
)
|
||
Other comprehensive loss
|
(14,794
|
)
|
|
(6,740
|
)
|
||
Total stockholders’ equity
|
670,289
|
|
|
682,589
|
|
||
Total liabilities and stockholders’ equity
|
$
|
1,931,862
|
|
|
$
|
1,921,415
|
|
|
Three Months Ended
March 31, |
||||||
|
2019
|
|
2018
|
||||
Revenue
|
$
|
145,491
|
|
|
$
|
92,755
|
|
Expenses:
|
|
|
|
||||
Cost of revenue
(1)
|
37,203
|
|
|
33,491
|
|
||
Sales and marketing
(1)
|
13,526
|
|
|
7,902
|
|
||
Research and development
(1)
|
8,201
|
|
|
6,421
|
|
||
General and administrative
(1)
|
53,623
|
|
|
49,396
|
|
||
Depreciation and amortization
|
27,047
|
|
|
16,380
|
|
||
Total operating expenses
|
139,600
|
|
|
113,590
|
|
||
Income (Loss) from operations
|
5,891
|
|
|
(20,835
|
)
|
||
Other income and (expenses):
|
|
|
|
||||
Interest income
|
610
|
|
|
1,395
|
|
||
Interest expense
|
(16,542
|
)
|
|
(1,882
|
)
|
||
Other expense, net
|
(11
|
)
|
|
(1,120
|
)
|
||
Loss before taxes
|
(10,052
|
)
|
|
(22,442
|
)
|
||
Benefit from income taxes
|
(1,729
|
)
|
|
(5,608
|
)
|
||
Net loss
|
$
|
(8,323
|
)
|
|
$
|
(16,834
|
)
|
Net loss attributable to common stockholders, basic and diluted
|
$
|
(8,323
|
)
|
|
$
|
(16,272
|
)
|
Net loss per share attributable to common stockholders, basic and diluted:
|
|
|
|
||||
Basic net loss per share
|
$
|
(0.06
|
)
|
|
$
|
(0.12
|
)
|
Diluted net loss per share
|
$
|
(0.06
|
)
|
|
$
|
(0.12
|
)
|
Weighted average shares of common stock outstanding:
|
|
|
|
||||
Basic
|
147,774
|
|
|
139,378
|
|
||
Diluted
|
147,774
|
|
|
139,378
|
|
(1)
|
Includes stock-based compensation expense as follows:
|
|
|
|
|
|||
|
Cost of revenue
|
$
|
77
|
|
|
$
|
140
|
|
|
Sales and marketing
|
300
|
|
|
469
|
|
||
|
Research and development
|
370
|
|
|
628
|
|
||
|
General and administrative
|
4,492
|
|
|
2,511
|
|
||
|
Total stock-based compensation expense
|
$
|
5,239
|
|
|
$
|
3,748
|
|
|
Three Months Ended
March 31, |
||||||
|
2019
|
|
2018
|
||||
Net loss
|
$
|
(8,323
|
)
|
|
$
|
(16,834
|
)
|
Other comprehensive loss:
|
|
|
|
||||
Realized losses on cash flow hedges reclassified from accumulated other comprehensive income, net of tax of $(170) and $0, respectively
|
359
|
|
|
—
|
|
||
Net change in unrealized losses on cash flow hedges, net of tax of $3,984 and $0, respectively
|
(8,424
|
)
|
|
—
|
|
||
Realized losses on short-term investments reclassified from accumulated other comprehensive income, net of tax of $0 and $(319), respectively
|
—
|
|
|
716
|
|
||
Net change in unrealized gains and (losses) on available-for-sale investments, net of tax of $(5) and $105, respectively
|
11
|
|
|
(235
|
)
|
||
Reclassification of income tax effects of the Tax Cuts and Jobs Act of 2017
|
—
|
|
|
(102
|
)
|
||
Comprehensive loss
|
$
|
(16,377
|
)
|
|
$
|
(16,455
|
)
|
|
Issued Class A Common Stock
|
|
Issued Class B Common Stock
|
|
Treasury Stock
|
|
Additional Paid-in Capital
|
|
Retained Earnings
|
|
Accumulated Other Comprehensive Loss
|
|
Total Stockholders’ Equity
|
|||||||||||||||||||||||
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
|
|
|
|||||||||||||||||||||
Balance—January 1, 2018
|
77,588,018
|
|
|
$
|
—
|
|
|
80,957,495
|
|
|
$
|
1
|
|
|
(14,620,175
|
)
|
|
$
|
(199,817
|
)
|
|
$
|
534,159
|
|
|
$
|
308,905
|
|
|
$
|
(476
|
)
|
|
$
|
642,772
|
|
Stock-based compensation expense
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,723
|
|
|
—
|
|
|
—
|
|
|
3,723
|
|
|||||||
Exercise of stock options
|
211,002
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,450
|
|
|
—
|
|
|
—
|
|
|
1,450
|
|
|||||||
Conversion Class B to Class A common stock
|
348,810
|
|
|
—
|
|
|
(348,810
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Issuance of shares related to restricted stock units and awards
|
452,657
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Shares withheld for employee taxes upon conversion of restricted stock
|
(33,980
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(459
|
)
|
|
—
|
|
|
—
|
|
|
(459
|
)
|
|||||||
Other comprehensive loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
379
|
|
|
379
|
|
|||||||
Adjustment to retained earnings for adoption of ASC 606
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
628
|
|
|
—
|
|
|
628
|
|
|||||||
Adjustment to retained earnings for adoption of ASU 2018-02
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
102
|
|
|
—
|
|
|
102
|
|
|||||||
Net (loss)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(16,834
|
)
|
|
—
|
|
|
(16,834
|
)
|
|||||||
Balance—March 31, 2018
|
78,566,507
|
|
|
$
|
—
|
|
|
80,608,685
|
|
|
$
|
1
|
|
|
(14,620,175
|
)
|
|
$
|
(199,817
|
)
|
|
$
|
538,873
|
|
|
$
|
292,801
|
|
|
$
|
(97
|
)
|
|
$
|
631,761
|
|
Balance—January 1, 2019
|
86,679,575
|
|
|
$
|
—
|
|
|
80,608,685
|
|
|
$
|
1
|
|
|
(14,620,175
|
)
|
|
$
|
(199,817
|
)
|
|
$
|
618,674
|
|
|
$
|
270,471
|
|
|
$
|
(6,740
|
)
|
|
$
|
682,589
|
|
Stock-based compensation expense
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5,163
|
|
|
—
|
|
|
—
|
|
|
5,163
|
|
|||||||
Conversion Class B to Class A common stock
|
460,000
|
|
|
—
|
|
|
(460,000
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Issuance of shares related to restricted stock units and awards
|
759,409
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Shares withheld for employee taxes upon conversion of restricted stock
|
(82,978
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,086
|
)
|
|
—
|
|
|
—
|
|
|
(1,086
|
)
|
|||||||
Other comprehensive loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(8,054
|
)
|
|
(8,054
|
)
|
|||||||
Net (loss)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(8,323
|
)
|
|
—
|
|
|
(8,323
|
)
|
|||||||
Balance—March 31, 2019
|
87,816,006
|
|
|
$
|
—
|
|
|
80,148,685
|
|
|
$
|
1
|
|
|
(14,620,175
|
)
|
|
$
|
(199,817
|
)
|
|
$
|
622,751
|
|
|
$
|
262,148
|
|
|
$
|
(14,794
|
)
|
|
$
|
670,289
|
|
|
Three Months Ended
March 31, |
||||||
|
2019
|
|
2018
|
||||
Cash flows from operating activities:
|
|
|
|
|
|
||
Net loss
|
$
|
(8,323
|
)
|
|
$
|
(16,834
|
)
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
||
Stock-based compensation expense
|
5,239
|
|
|
3,748
|
|
||
Depreciation
|
13,931
|
|
|
12,529
|
|
||
Amortization of intangibles
|
13,116
|
|
|
3,851
|
|
||
Amortization of debt issuance costs and debt discount
|
1,072
|
|
|
—
|
|
||
Deferred income taxes
|
(2,671
|
)
|
|
(5,922
|
)
|
||
Change in fair value of contingent consideration
|
379
|
|
|
200
|
|
||
Other
|
1,129
|
|
|
1,352
|
|
||
Changes in assets and liabilities:
|
|
|
|
|
|
||
Accounts receivable
|
(13,893
|
)
|
|
11,669
|
|
||
Prepaid expenses and other current assets
|
(802
|
)
|
|
(2,560
|
)
|
||
Income taxes receivable
|
2,830
|
|
|
177
|
|
||
Other assets
|
19
|
|
|
(3,264
|
)
|
||
Accounts payable and accrued expenses
|
182
|
|
|
(1,669
|
)
|
||
Accrued compensation
|
(3,602
|
)
|
|
(4,017
|
)
|
||
Other current and non-current liabilities
|
(2,056
|
)
|
|
2,499
|
|
||
Deferred revenue
|
8,205
|
|
|
5,115
|
|
||
Net cash provided by operating activities
|
14,755
|
|
|
6,874
|
|
||
Cash flows from investing activities:
|
|
|
|
|
|
||
Maturities of short-term investments
|
5,164
|
|
|
63,470
|
|
||
Sales of short-term investments
|
—
|
|
|
161,772
|
|
||
Purchases of property and equipment
|
(3,796
|
)
|
|
(9,645
|
)
|
||
Investment in capitalized software
|
(7,626
|
)
|
|
(11,125
|
)
|
||
Net cash (used in) provided by investing activities
|
(6,258
|
)
|
|
204,472
|
|
||
Cash flows from financing activities:
|
|
|
|
|
|
||
Repayment of credit facility borrowings
|
(2,450
|
)
|
|
(11,250
|
)
|
||
Proceeds from exercise of stock options
|
—
|
|
|
1,450
|
|
||
Finance lease liabilities paid
|
(672
|
)
|
|
(31
|
)
|
||
Tax payments for equity award issuances
|
(1,086
|
)
|
|
(459
|
)
|
||
Net cash used in financing activities
|
(4,208
|
)
|
|
(10,290
|
)
|
||
Increase in cash and cash equivalents
|
4,289
|
|
|
201,056
|
|
||
Cash and cash equivalents, beginning of period
|
115,591
|
|
|
208,944
|
|
||
Cash and cash equivalents, end of period
|
$
|
119,880
|
|
|
$
|
410,000
|
|
Supplementary cash flow disclosure:
|
|
|
|
|
|
||
Income taxes (received) paid, net
|
$
|
(1,931
|
)
|
|
$
|
205
|
|
Interest paid
|
15,602
|
|
|
1,759
|
|
||
Non-cash transactions:
|
|
|
|
|
|
||
Operating lease obligations incurred
|
2,990
|
|
|
—
|
|
||
Finance lease obligations incurred
|
—
|
|
|
4,536
|
|
||
Accruals for purchases of property, equipment
|
1,590
|
|
|
6,675
|
|
||
Accruals for investment in capitalized software
|
1,776
|
|
|
1,882
|
|
|
Three Months Ended
March 31, |
||||||
|
2019
|
|
2018
|
||||
Platform solutions
(1)
|
$
|
129,952
|
|
|
$
|
78,966
|
|
Services
(2)
|
15,539
|
|
|
13,789
|
|
||
Total revenue
|
$
|
145,491
|
|
|
$
|
92,755
|
|
(1)
|
Platform solutions include arrangements for technology-based offerings representing subscription-based cloud-based platform offerings and legacy platform solutions that are not cloud-based and not billed under a subscription-based contract structure.
|
(2)
|
Services include advisory, implementation, and support services under time and materials, fixed price, or retainer-based contracts.
|
|
Three Months Ended
March 31, |
||||||
|
2019
|
|
2018
|
||||
Basic
|
|
|
|
|
|
||
Numerator:
|
|
|
|
|
|
||
Net loss
|
$
|
(8,323
|
)
|
|
$
|
(16,834
|
)
|
Undistributed earnings allocated to participating securities
|
—
|
|
|
562
|
|
||
Net loss attributable to common stockholders—basic
|
$
|
(8,323
|
)
|
|
$
|
(16,272
|
)
|
Denominator:
|
|
|
|
|
|
||
Weighted average shares used in computing net income per share attributable to common stockholders—basic
|
147,774
|
|
|
139,378
|
|
||
Net loss per share attributable to common stockholders—basic
|
$
|
(0.06
|
)
|
|
$
|
(0.12
|
)
|
Diluted
|
|
|
|
|
|
||
Numerator:
|
|
|
|
|
|
||
Net loss attributable to common stockholders—diluted
|
$
|
(8,323
|
)
|
|
$
|
(16,272
|
)
|
Denominator:
|
|
|
|
|
|
||
Number of shares used for basic EPS computation
|
147,774
|
|
|
139,378
|
|
||
Effect of dilutive securities
|
—
|
|
|
—
|
|
||
Weighted average shares used in computing net loss per share attributable to common stockholders—diluted
|
147,774
|
|
|
139,378
|
|
||
Net loss per share attributable to common stockholders—diluted
|
$
|
(0.06
|
)
|
|
$
|
(0.12
|
)
|
|
Three Months Ended
March 31, |
||||
|
2019
|
|
2018
|
||
Awards excluded from the computation of diluted net loss per share because their inclusion would have been anti-dilutive
|
10
|
|
|
118
|
|
|
Amortized
Cost
|
|
Gross Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
|
Estimated Fair
Value
|
||||||||
Available-for-sale securities:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Corporate notes and bonds
|
$
|
1,813
|
|
|
$
|
—
|
|
|
$
|
(3
|
)
|
|
$
|
1,810
|
|
Total available-for-sale securities
|
$
|
1,813
|
|
|
$
|
—
|
|
|
$
|
(3
|
)
|
|
$
|
1,810
|
|
|
Amortized
Cost
|
|
Gross Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
|
Estimated Fair
Value
|
||||||||
Available-for-sale securities:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Corporate notes and bonds
|
$
|
7,018
|
|
|
$
|
—
|
|
|
$
|
(18
|
)
|
|
$
|
7,000
|
|
Total available-for-sale securities
|
$
|
7,018
|
|
|
$
|
—
|
|
|
$
|
(18
|
)
|
|
$
|
7,000
|
|
|
March 31,
2019 |
|
December 31,
2018 |
||||
Due in one year or less
|
$
|
1,810
|
|
|
$
|
7,000
|
|
|
Estimated
Fair Value
|
|
Gross
Unrealized
Losses
|
||||
Corporate notes and bonds
|
$
|
1,810
|
|
|
$
|
(3
|
)
|
Finance lease cost
|
|
|
||
Amortization of right-of-use assets
|
|
$
|
550
|
|
Interest on lease liabilities
|
|
134
|
|
|
Operating lease cost
|
|
2,111
|
|
|
Variable lease cost
|
|
494
|
|
|
Sublease income
|
|
(317
|
)
|
|
Total lease cost
|
|
$
|
2,972
|
|
|
Operating
Leases
|
|
Finance
Leases
|
||||
2019
|
$
|
9,190
|
|
|
$
|
2,078
|
|
2020
|
3,960
|
|
|
2,931
|
|
||
2021
|
7,311
|
|
|
2,375
|
|
||
2022
|
5,351
|
|
|
1,181
|
|
||
2023
|
3,825
|
|
|
1,275
|
|
||
Thereafter
|
15,599
|
|
|
8,816
|
|
||
Total future minimum lease payments
|
45,236
|
|
|
18,656
|
|
||
Less: Interest
|
(7,897
|
)
|
|
(2,155
|
)
|
||
Total
|
$
|
37,339
|
|
|
$
|
16,501
|
|
|
Operating
Leases
|
|
Finance
Leases
|
||||
Year ending December 31,
|
|
|
|
|
|||
2019
|
$
|
11,250
|
|
|
$
|
3,509
|
|
2020
|
7,059
|
|
|
2,567
|
|
||
2021
|
5,898
|
|
|
2,017
|
|
||
2022
|
5,303
|
|
|
1,181
|
|
||
2023
|
3,821
|
|
|
1,275
|
|
||
Thereafter
|
15,599
|
|
|
8,831
|
|
||
Total future minimum lease payments
|
48,930
|
|
|
19,380
|
|
||
Less: Interest
|
—
|
|
|
(2,548
|
)
|
||
Total
|
$
|
48,930
|
|
|
$
|
16,832
|
|
|
March 31,
2019 |
|
December 31,
2018 |
||||
2018 Term Facility
(1)
|
$
|
947,843
|
|
|
$
|
949,314
|
|
Less: current portion
|
9,800
|
|
|
9,800
|
|
||
Non-current Credit Facilities
|
$
|
938,043
|
|
|
$
|
939,514
|
|
(1)
|
The 2018 Term Facility is presented net of unamortized deferred financing fees and original issue discount (“OID”) of
$27.3 million
and
$28.2 million
as of
March 31, 2019
and
December 31, 2018
, respectively.
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||
Cash equivalents:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Money market funds
|
$
|
39,494
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
39,494
|
|
Short-term investments:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Corporate notes and bonds
|
—
|
|
|
1,810
|
|
|
—
|
|
|
1,810
|
|
||||
Other current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest rate swaps
|
—
|
|
|
(2,821
|
)
|
|
—
|
|
|
(2,821
|
)
|
||||
Contingent consideration
|
—
|
|
|
—
|
|
|
(15,149
|
)
|
|
(15,149
|
)
|
||||
Other liabilities
|
|
|
|
|
|
|
|
||||||||
Interest rate swaps
|
—
|
|
|
(18,987
|
)
|
|
—
|
|
|
(18,987
|
)
|
||||
Contingent consideration
|
—
|
|
|
—
|
|
|
(17,054
|
)
|
|
(17,054
|
)
|
||||
Total
|
$
|
39,494
|
|
|
$
|
(19,998
|
)
|
|
$
|
(32,203
|
)
|
|
$
|
(12,707
|
)
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||
Cash equivalents:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Money market funds
|
$
|
34,064
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
34,064
|
|
Short-term investments:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Corporate notes and bonds
|
—
|
|
|
7,000
|
|
|
—
|
|
|
7,000
|
|
||||
Other current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest rate swaps
|
—
|
|
|
(1,778
|
)
|
|
—
|
|
|
(1,778
|
)
|
||||
Contingent consideration
|
—
|
|
|
—
|
|
|
(15,182
|
)
|
|
(15,182
|
)
|
||||
Other liabilities:
|
|
|
|
|
|
|
|
||||||||
Interest rate swaps
|
—
|
|
|
(8,151
|
)
|
|
—
|
|
|
(8,151
|
)
|
||||
Contingent consideration
|
—
|
|
|
—
|
|
|
(16,642
|
)
|
|
(16,642
|
)
|
||||
Total
|
$
|
34,064
|
|
|
$
|
(2,929
|
)
|
|
$
|
(31,824
|
)
|
|
$
|
(689
|
)
|
|
Fair Value Measurements Using
Unobservable Inputs
(Level 3)
|
||||||
|
March 31,
2019 |
|
December 31,
2018 |
||||
Balance, beginning of period
|
$
|
(31,824
|
)
|
|
$
|
(7,400
|
)
|
Fair value adjustment
(1)(2)
|
(196
|
)
|
|
(6,159
|
)
|
||
Accretion expense (recognized in general and administrative expenses)
|
(183
|
)
|
|
(1,053
|
)
|
||
Contingent consideration attributable to and assumed from ABILITY Acquisition
|
—
|
|
|
(17,212
|
)
|
||
Total
|
$
|
(32,203
|
)
|
|
$
|
(31,824
|
)
|
(1)
|
During 2019, the Company recognized an adjustment of
$0.3 million
recognized in goodwill, which was a purchase accounting adjustment attributable to the ABILITY Acquisition, partially offset by an adjustment of
$0.1 million
recognized in general and administrative expenses related to the change in fair value of contingent consideration.
|
(2)
|
During 2018, the Company recognized an adjustment of
$5.6 million
in general and administrative expenses related to the change in fair value of contingent consideration, and an adjustment of
$0.6 million
recognized in goodwill, which was a purchase accounting adjustment attributable to the ABILITY Acquisition.
|
|
March 31,
2019 |
||
Carrying value
|
$
|
947,843
|
|
Fair value
|
$
|
944,289
|
|
|
Liability Derivative
|
||||
|
Balance Sheet Location
|
|
Fair Value
|
||
Interest rate swap contract
|
Other current liabilities
|
|
$
|
(1,778
|
)
|
Interest rate swap contract
|
Other liabilities
|
|
$
|
(8,151
|
)
|
|
|
Gain (Loss) recognized in OCI
|
|
Statement of Operations Location
|
|
(Gain) Loss reclassified from OCI
|
||||
Interest rate swap contract
|
|
$
|
(12,408
|
)
|
|
Interest expense
|
|
$
|
529
|
|
Balance as of December 31, 2018
|
$
|
589
|
|
Severance payments
|
(14
|
)
|
|
Lease termination accretion
|
(575
|
)
|
|
Balance as of March 31, 2019
|
$
|
—
|
|
Purchase Price
|
$
|
1,220,800
|
|
Working capital adjustment
|
(630
|
)
|
|
Shareholder payable adjustment
|
880
|
|
|
Subtotal
|
1,221,050
|
|
|
Fair value adjustments:
|
|
|
|
Restricted stock marketability discount
|
(30,000
|
)
|
|
Total fair value purchase price
|
$
|
1,191,050
|
|
Cash
|
$
|
1,107,220
|
|
Issuance of Class A common stock
|
70,000
|
|
|
Contingent consideration
|
14,460
|
|
|
Working capital adjustment
|
(630
|
)
|
|
Total fair value purchase price
|
$
|
1,191,050
|
|
|
Fair Value
|
||
Cash and cash equivalents
|
$
|
23,850
|
|
Accounts receivable
|
16,739
|
|
|
Income tax receivable
(2)
|
688
|
|
|
Prepaid expenses and other current assets
|
3,025
|
|
|
Property and equipment
|
3,095
|
|
|
Goodwill
(1)(2)
|
770,949
|
|
|
Intangible assets
(1)
|
490,000
|
|
|
Other assets
|
1,252
|
|
|
Accounts payable and accrued expenses
|
(6,863
|
)
|
|
Deferred revenue
|
(7,000
|
)
|
|
Other current liabilities
|
(507
|
)
|
|
Other liabilities
|
(5,291
|
)
|
|
Deferred tax liabilities
(2)
|
(98,887
|
)
|
|
Total consideration transferred
|
$
|
1,191,050
|
|
(1)
|
The Company allocated a portion of the goodwill associated with the ABILITY Acquisition to the Inovalon reporting unit based on expected revenue synergies. As a result, the fair value of the customer relationships intangible asset was adjusted by
$23.0 million
during the third quarter of 2018.
|
(2)
|
The Company recognized a net purchase accounting adjustment of
$1.8 million
resulting in a decrease to goodwill. This adjustment was driven by a
$7.5 million
decrease to deferred tax liabilities primarily attributable to the tax impact related to
|
|
Estimated
Useful Life |
|
Fair Value
|
|
Measurement
Period
Adjustments
|
|
Adjusted Fair
Value
|
||||||
Customer relationships
|
12-14 years
|
|
$
|
408,000
|
|
|
$
|
(23,000
|
)
|
|
$
|
385,000
|
|
Technology
|
12-14 years
|
|
86,000
|
|
|
—
|
|
|
86,000
|
|
|||
Trade names
|
16-18 years
|
|
19,000
|
|
|
—
|
|
|
19,000
|
|
|||
Total intangible assets
|
|
|
$
|
513,000
|
|
|
$
|
(23,000
|
)
|
|
$
|
490,000
|
|
|
Three Months Ended
March 31, 2019 |
||
Revenue
|
$
|
39,829
|
|
Loss before taxes
|
$
|
(48
|
)
|
|
Three Months Ended
March 31, 2018 |
||
Revenue
|
$
|
130,119
|
|
Loss before taxes
|
$
|
(26,655
|
)
|
•
|
our future financial performance, including our ability to continue and manage our growth;
|
•
|
our ability to retain our client base and sell additional services to them;
|
•
|
the effect of the concentration of our revenue among our top clients;
|
•
|
our ability to innovate and adapt our platforms and toolsets;
|
•
|
the effects of regulations applicable to us, including regulations relating to data protection and data privacy;
|
•
|
the effects of consolidation in the healthcare industry;
|
•
|
the ability to successfully integrate our acquisitions, including ABILITY, and the ability of the acquired business to perform as expected;
|
•
|
the ability to enter into new agreements with existing or new platforms, products, and solutions in the timeframes expected, or at all;
|
•
|
the successful implementation and adoption of new platforms, products and solutions;
|
•
|
the effects of changes in tax legislation for jurisdictions within which we operate, including recent changes in U.S. tax laws;
|
•
|
the ability to protect the privacy of our clients’ data and prevent security breaches;
|
•
|
the effect of current or future litigation;
|
•
|
the ability to secure final court approval of existing class action lawsuits related to our initial public offering;
|
•
|
the effect of competition on our business;
|
•
|
the efficacy of our platforms and toolsets; and
|
•
|
the timing and size of business realignment and restructuring charges.
|
(1)
|
MORE
2
Registry
®
dataset metrics and Trailing 12 month PAM, each of which is presented in the table, are key operating metrics that management uses to assess our level of operational activity. While we believe that each of these metrics is indicative of our overall level of analytical activity and the underlying growth in our business, increases or decreases in these metrics do not necessarily correlate to proportional increases or decreases in revenue, or net income. For instance, although increased levels of analytical activity historically have corresponded to increases in revenue over the long term, differences in fees charged for different analytical packages exist and differences in how analytics trigger the applicability of our data-driven intervention platforms may result in increases in analytical activity that do not result in proportional increases in revenue, or net income (and vice versa). Accordingly, while we believe the presentation of these operating metrics is helpful to investors in understanding our business, these metrics have limitations and should not be considered as substitutes for analysis of our financial results reported under generally accepted accounting principles (“GAAP”). In addition, we believe that other companies, including companies in our industry, do not present similar operating metrics and that there is no commonly accepted method of calculating these metrics, which may reduce their usefulness as comparative measures.
|
(2)
|
Unique patient count is defined as each unique, longitudinally matched, de-identified natural person represented in our MORE
2
Registry
®
as of the end of the period presented.
|
(3)
|
Medical event count is defined as the total number of discrete medical events as of the end of the period presented (for example, a discrete medical event typically results from the presentation of a patient to a physician for the diagnosis of diabetes and congestive heart failure in a single visit, the presentation of a patient to an emergency department for chest pain, etc.).
|
(4)
|
PAM is defined as the sum of the analytical processes performed on each respective patient within patient populations covered by clients under contract. As used in the metric, an “analytical process” is a distinct set of data calculations undertaken by us which is initiated and completed within our platform solutions to examine a specific question such as whether a patient is believed to have a condition such as diabetes, or worsening of the disease, during a specific time period.
|
|
Three Months Ended
March 31, |
||||||
|
2019
|
|
2018
|
||||
Investment in Innovation:
|
|
|
|
|
|
||
Research and development
(1)
|
$
|
8,201
|
|
|
$
|
6,421
|
|
Capitalized software development
(2)
|
7,907
|
|
|
10,296
|
|
||
Research and development infrastructure investments
(3)
|
1,170
|
|
|
8,765
|
|
||
Total investment in innovation
|
$
|
17,278
|
|
|
$
|
25,482
|
|
As a percentage of revenue
|
|
|
|
|
|
||
Research and development
(1)
|
6
|
%
|
|
7
|
%
|
||
Capitalized software development
(2)
|
5
|
%
|
|
11
|
%
|
||
Research and development infrastructure investments
(3)
|
1
|
%
|
|
9
|
%
|
||
Total investment in innovation
|
12
|
%
|
|
27
|
%
|
(1)
|
Research and development primarily includes employee costs related to the development and enhancement of our service offerings.
|
(2)
|
Capitalized software development includes capitalized costs incurred to develop and enhance functionality for our platform solutions.
|
(3)
|
Research and development infrastructure investments include strategic capital expenditures related to hardware and software platforms under development or enhancement.
|
|
Three Months Ended
March 31, |
|
Change from
2018 to 2019 |
|||||||||||
|
2019
|
|
2018
|
|
$
|
|
%
|
|||||||
Revenue
|
$
|
145,491
|
|
|
$
|
92,755
|
|
|
$
|
52,736
|
|
|
57
|
%
|
Expenses:
|
|
|
|
|
|
|
|
|||||||
Cost of revenue
(1)
|
37,203
|
|
|
33,491
|
|
|
3,712
|
|
|
11
|
%
|
|||
Sales and marketing
(1)
|
13,526
|
|
|
7,902
|
|
|
5,624
|
|
|
71
|
%
|
|||
Research and development
(1)
|
8,201
|
|
|
6,421
|
|
|
1,780
|
|
|
28
|
%
|
|||
General and administrative
(1)
|
53,623
|
|
|
49,396
|
|
|
4,227
|
|
|
9
|
%
|
|||
Depreciation and amortization
|
27,047
|
|
|
16,380
|
|
|
10,667
|
|
|
65
|
%
|
|||
Total operating expenses
|
139,600
|
|
|
113,590
|
|
|
26,010
|
|
|
23
|
%
|
|||
Income (Loss) from operations
|
5,891
|
|
|
(20,835
|
)
|
|
26,726
|
|
|
*%
|
|
|||
Other income and (expenses):
|
|
|
|
|
|
|
|
|
|
|
|
|||
Interest income
|
610
|
|
|
1,395
|
|
|
(785
|
)
|
|
(56
|
)%
|
|||
Interest expense
|
(16,542
|
)
|
|
(1,882
|
)
|
|
(14,660
|
)
|
|
(779
|
)%
|
|||
Other expense, net
|
(11
|
)
|
|
(1,120
|
)
|
|
*
|
|
|
*%
|
|
|||
Loss before taxes
|
(10,052
|
)
|
|
(22,442
|
)
|
|
12,390
|
|
|
55
|
%
|
|||
Benefit from income taxes
|
(1,729
|
)
|
|
(5,608
|
)
|
|
3,879
|
|
|
69
|
%
|
|||
Net loss
|
$
|
(8,323
|
)
|
|
$
|
(16,834
|
)
|
|
$
|
8,511
|
|
|
51
|
%
|
(1)
|
Includes stock-based compensation expense as follows:
|
||||||||||||||
|
Cost of revenue
|
$
|
77
|
|
|
$
|
140
|
|
|
$
|
(63
|
)
|
|
(45
|
)%
|
|
Sales and marketing
|
300
|
|
|
469
|
|
|
(169
|
)
|
|
(36
|
)%
|
|||
|
Research and development
|
370
|
|
|
628
|
|
|
(258
|
)
|
|
(41
|
)%
|
|||
|
General and administrative
|
4,492
|
|
|
2,511
|
|
|
1,981
|
|
|
79
|
%
|
|||
|
Total stock-based compensation expense
|
$
|
5,239
|
|
|
$
|
3,748
|
|
|
$
|
1,491
|
|
|
40
|
%
|
|
Three Months Ended
March 31, |
||||
|
2019
|
|
2018
|
||
Revenue
|
100
|
%
|
|
100
|
%
|
Expenses:
|
|
|
|
||
Cost of revenue
|
26
|
%
|
|
36
|
%
|
Sales and marketing
|
9
|
%
|
|
9
|
%
|
Research and development
|
6
|
%
|
|
7
|
%
|
General and administrative
|
37
|
%
|
|
53
|
%
|
Depreciation and amortization
|
19
|
%
|
|
18
|
%
|
Total operating expenses
|
97
|
%
|
|
123
|
%
|
Income (Loss) from operations
|
3
|
%
|
|
(23
|
)%
|
Other income and (expenses):
|
|
|
|
||
Interest income
|
*%
|
|
|
2
|
%
|
Interest expense
|
(11
|
)%
|
|
(2
|
)%
|
Other expense, net
|
*%
|
|
|
(1
|
)%
|
Loss before taxes
|
(8
|
)%
|
|
(24
|
)%
|
Benefit from income taxes
|
(1
|
)%
|
|
(6
|
)%
|
Net loss
|
(7
|
)%
|
|
(18
|
)%
|
Period
|
Total Number of
Shares Purchased |
|
Average Price
Paid per Share |
|
Total Number of Shares
Purchased as Part of Publicly Announced Plans or Programs |
|
Maximum Number of Shares (or
approximate dollar value) that May Yet be Purchased under the Plans or Programs |
||||||
January 1 – January 31
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
—
|
|
February 1 – February 28
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||
March 1 – March 31
(1)
|
50,354
|
|
|
12.90
|
|
|
50,354
|
|
|
—
|
|
||
Total
|
50,354
|
|
|
$
|
12.90
|
|
|
50,354
|
|
|
$
|
—
|
|
(1)
|
On March 5, 2019, we directed the administrator of the Company's Employee Stock Purchase Plan (“ESPP”) to purchase 50,354 shares of Class A common stock in the open market for a total of approximately $0.6 million, for issuance to the ESPP participants at a discounted price of $11.17 per share. The Company may, in its discretion, based on market conditions, relative transaction costs and the Company's need for additional capital, continue to instruct the plan administrator to make semi-annual open market purchases of Class A common stock for ESPP participants to coincide with the ESPP's designated semi-annual purchase dates.
|
Exhibit
Number
|
|
Description of Document
|
|
3.1
|
|
|
|
|
|
|
|
3.2
|
|
|
|
|
|
|
|
31.1
|
|
*
|
|
|
|
|
|
31.2
|
|
*
|
|
|
|
|
|
32.1
|
|
**
|
|
|
|
|
|
32.2
|
|
**
|
|
|
|
|
|
101.INS
|
|
*
|
XBRL Instance Document
|
|
|
|
|
101.SCH
|
|
*
|
XBRL Taxonomy Extension Schema
|
|
|
|
|
101.CAL
|
|
*
|
XBRL Taxonomy Extension Calculation Linkbase
|
|
|
|
|
101.DEF
|
|
*
|
XBRL Taxonomy Extension Definition Linkbase
|
|
|
|
|
101.LAB
|
|
*
|
XBRL Taxonomy Extension Label Linkbase
|
|
|
|
|
101.PRE
|
|
*
|
XBRL Taxonomy Extension Presentation Linkbase
|
*
|
Filed herewith.
|
**
|
This certification is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (Exchange Act), or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended (Securities Act), or the Exchange Act.
|
|
|
|
|
Date: May 1, 2019
|
INOVALON HOLDINGS, INC.
|
||
|
By:
|
|
/s/ KEITH R. DUNLEAVY, M.D.
|
|
|
|
Keith R. Dunleavy, M.D.
Chief Executive Officer & Chairman
(Principal Executive Officer)
|
|
|
|
|
|
By:
|
|
/s/ JONATHAN R. BOLDT
|
|
|
|
Jonathan R. Boldt
Chief Financial Officer
(Principal Financial Officer)
|
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