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Inovalon Misses Q3 Earnings, Tops Revenues, Updates View

Inovalon Holdings Inc.INOV reported adjusted earnings of 8 cents per share (including stock-based compensation) in the third quarter of 2015 that missed the Zacks Consensus Estimate by a penny. Earnings also plunged 19.6% on a year-over-year basis primarily because of higher operating expenses.

Quarter Details

Revenues increased 22.6% year over year to $105.5 million, which beat the Zacks Consensus Estimate of $102 million. Avalere - acquired by Inovalon during the quarter - contributed revenues of $4.2 million.

Avalere Health provides data-driven advisory services and business intelligence solutions to the healthcare industry. The acquisition added more than 200 pharma/life sciences clients, thereby significantly expanding Inovalon's footprint in the broader healthcare marketplace.

As of Sep 30, 2015, the MORE2 Registry dataset contained more than 127 million unique patient counts and 10.3 billion medical event counts, increases of 7% and 14%, respectively, as compared with Sep 30, 2014.

Inovalon's trailing 12-month Patient Analytical Month (PAM) count grew to a record 20.4 billion as of Sep 30, 2015, which is an increase of 32% on a year-over-year basis.

During the quarter, Inovalon unveiled Data Diagnostics - a patient database that is capable of providing data to clinicians within a short span of time and without hampering clinicians' workflow. Data Diagnostics will be delivered in collaboration with Quest Diagnostic DGX . Inovalon will continue to invest in operations and the platform in the fourth quarter.

Meanwhile, Inovalon's investments supporting innovation in advanced, cloud-based data analytics and data-driven intervention platforms totaled $14 million, or 13% of revenues in the reported quarter.

Adjusted EBITDA increased 1.3% year over year to $29 million. However, EBITDA margin contracted 580 basis points (bps). The Avelere acquisition hurt adjusted EBITDA by 140 bps in the quarter.

Operating expenses jumped 37.7% to $86.6 million, primarily driven by higher general & administrative and sales & marketing expenses, which surged 49.9% and 63.7%, respectively.

Operating income, as a result, declined 18.4% to $18.9 million. Further, operating margin contracted 900 bps to 17.9% in the quarter.

Guidance

For full-year 2015, revenues are projected in the range of $435--$450 million. Adjusted EBITDA is likely to be in the range of $150--$161 million, while adjusted earnings are forecasted in the band of 49--54 cents per share for the full year.

The Avelere acquisition will impact adjusted EBITDA margins by approximately 200 bps in the fourth quarter as well.

Zacks Rank & Key Picks

Currently, Inovalon has a Zacks Rank #3 (Hold).

Better-ranked stocks in the same space include Computer Task Group CTG and MAM Software Group MAMS . Both the stocks sport a Zacks Rank #1 (Strong Buy).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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