inov-20210331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q


(Mark One)
☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended	March 31, 2021
or
☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to

Commission File Number 001-36841

_________________________________________________________________________

Inovalon Holdings, Inc.

(Exact name of registrant as specified in its charter)

_________________________________________________________________________


Delaware		47-1830316
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
4321 Collington Road,
Bowie,	Maryland	20716
(Address of principal executive offices)		(Zip Code)

(301) 809-4000

Registrant’s telephone number, including area code

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class

Trading Symbol

Name Of Each Exchange On Which Registered

Class A Common Stock, $0.000005 par value per share

INOV

NASDAQ Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of April 16, 2021, the registrant had 77,812,168 shares of Class A common stock outstanding and 78,081,076 shares of Class B common stock outstanding.

Table of Contents

INOVALON HOLDINGS, INC.

FORM 10-Q

FOR THE THREE MONTHS ENDED MARCH 31, 2021

TABLE OF CONTENTS


		Page
PART I—FINANCIAL INFORMATION
Item 1.	Consolidated Financial Statements (unaudited)	1
	Consolidated Balance Sheets as of March 31, 2021 and December 31, 2020	1
	Consolidated Statements of Operations for the three months ended March 31, 2021 and 2020	2
	Consolidated Statements of Comprehensive Income (Loss) for the three months ended March 31, 2021 and 2020	3
	Consolidated Statements of Stockholders’ Equity for the three months ended March 31, 2021 and 2020	4
	Consolidated Statements of Cash Flows for the three months ended March 31, 2021 and 2020	5
	Notes to Consolidated Financial Statements	6
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	12
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	22
Item 4.	Controls and Procedures	22

PART II—OTHER INFORMATION
Item 1.	Legal Proceedings	23
Item 1A.	Risk Factors	23
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	23
Item 3.	Defaults Upon Senior Securities	23
Item 4.	Mine Safety Disclosures	23
Item 5.	Other Information	23
Item 6.	Exhibits	24

SIGNATURES		25

Table of Contents

PART I—FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

INOVALON HOLDINGS, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited, in thousands, except share and par value amounts)


	March 31, 2021		December 31, 2020
ASSETS
Current assets:
Cash and cash equivalents	$	128,630	$	123,880

Accounts receivable (net of allowances of $2,502 at March 31, 2021 and $2,700 at December 31, 2020)	144,764		148,003
Prepaid expenses and other current assets	29,977		26,529
Income tax receivable	26,847		24,664
Total current assets	330,218		323,076
Non-current assets:
Property, equipment and capitalized software, net	173,283		168,113
Operating lease right-of-use assets	34,279		35,355
Goodwill	955,881		955,881
Intangible assets, net	440,275		452,558
Other assets	32,060		36,415
Total assets	$	1,965,996	$	1,971,398
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued expenses	$	47,484	$	52,998
Accrued compensation	26,743		40,860
Other current liabilities	42,178		39,835
Deferred revenue	15,517		10,854
Credit facilities	9,800		9,800
Operating lease liabilities	6,547		5,968
Finance lease liabilities	4,021		3,963
Total current liabilities	152,290		164,278
Non-current liabilities:
Credit facilities, less current portion	876,241		877,574
Operating lease liabilities, less current portion	40,209		40,807
Finance lease liabilities, less current portion	24,582		25,759
Other liabilities	40,152		54,350
Deferred income taxes	102,801		99,916
Total liabilities	1,236,275		1,262,684
Commitments and contingencies (Note 7)
Stockholders’ equity:
Common stock, $0.000005 par value, 900,000,000 shares authorized, zero shares issued and outstanding at each of March 31, 2021 and December 31, 2020, respectively	—		—
Class A common stock, $0.000005 par value, 750,000,000 shares authorized; 92,242,152 shares issued and 77,621,977 shares outstanding at March 31, 2021; 91,617,450 shares issued and 76,997,275 shares outstanding at December 31, 2020	1		1
Class B common stock, $0.000005 par value, 150,000,000 shares authorized; 78,331,591 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively	—		—
Preferred stock, $0.0001 par value, 100,000,000 shares authorized, zero shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively	—		—
Additional paid-in-capital	657,852		655,444
Retained earnings	310,046		300,890
Treasury stock, at cost, 14,620,175 shares at March 31, 2021 and December 31, 2020, respectively	(199,817)		(199,817)
Other comprehensive loss	(38,361)		(47,804)
Total stockholders’ equity	729,721		708,714
Total liabilities and stockholders’ equity	$	1,965,996	$	1,971,398

See notes to consolidated financial statements.

Table of Contents

INOVALON HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited, in thousands, except per-share amounts)


	Three Months Ended March 31,
	2021		2020
Revenue	$	177,176	$	154,187
Expenses:
Cost of revenue(1)	44,397		41,043
Sales and marketing(1)	19,474		15,159
Research and development(1)	8,519		7,104
General and administrative(1)	53,025		53,883
Depreciation and amortization	28,431		27,934

Total operating expenses	153,846		145,123
Income from operations	23,330		9,064
Other income and (expenses):
Interest income	46		290
Interest expense	(13,128)		(14,560)
Other expense, net	(2)		(22)
Income (Loss) before taxes	10,246		(5,228)
Provision for (Benefit from) income taxes	1,090		(3,545)
Net income (loss)	$	9,156	$	(1,683)
Net income (loss) attributable to common stockholders, basic and diluted	$	8,910	$	(1,683)
Net income (loss) per share attributable to common stockholders, basic and diluted:
Basic net income (loss) per share	$	0.06	$	(0.01)
Diluted net income (loss) per share	$	0.06	$	(0.01)
Weighted average shares of common stock outstanding:
Basic	150,302		149,183
Diluted	150,454		149,183

________________________________________________


(1)	Includes stock-based compensation expense as follows:
	Cost of revenue	$	221	$	165
	Sales and marketing	938		620
	Research and development	320		453
	General and administrative	4,184		6,018
	Total stock-based compensation expense	$	5,663	$	7,256

See notes to consolidated financial statements.

Table of Contents

INOVALON HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited, in thousands)


	Three Months Ended March 31,
	2021		2020
Net income (loss)	$	9,156	$	(1,683)
Other comprehensive income (loss):
Realized losses on cash flow hedges reclassified from accumulated other comprehensive income, net of tax of $(1,501) and $(681), respectively	3,178		1,446
Net change in unrealized gains (losses) on cash flow hedges, net of tax of $(2,950) and $12,069, respectively	6,265		(25,646)



Comprehensive income (loss)	$	18,599	$	(25,883)

See notes to consolidated financial statements.

Table of Contents

INOVALON HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited, in thousands, except share amounts)


	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, 2021	91,617,450	$	1	78,331,591	$	—	(14,620,175)	$	(199,817)	$	655,444	$	300,890	$	(47,804)	$	708,714
Stock-based compensation expense	—	—		—	—		—	—		5,533		—		—		5,533
Exercise of stock options	165,311	—		—	—		—	—		1,110		—		—		1,110
Conversion of Class B to Class A common stock		—			—		—	—		—		—		—		—
Issuance of shares related to restricted stock units and awards, net of forfeitures	619,090	—		—	—		—	—		—		—		—		—
Shares withheld for employee taxes upon conversion of restricted stock	(159,699)	—		—	—		—	—		(4,235)		—		—		(4,235)
Other comprehensive loss	—	—		—	—		—	—		—		—		9,443		9,443
Net income	—	—		—	—		—	—		—		9,156		—		9,156
Balance—March 31, 2021	92,242,152	$	1	78,331,591	$	—	(14,620,175)	$	(199,817)	$	657,852	$	310,046	$	(38,361)	$	729,721

Issued Class A Common Stock

Issued Class B Common Stock

Treasury Stock

Additional Paid-in Capital

Retained Earnings

Accumulated Other Comprehensive (Loss) Income

Total Stockholders’ Equity

Amount

Balance—January 1, 2020

90,327,728

79,369,411

—

(

SEC Form 10-Q filed by Inovalon Holdings, Inc.