Cotiviti Announces Second Quarter 2016 Results

Revenue of $158.3 million, up 19% over prior year period

Net Income of $10.9 million, up 40% over prior year period

Net Income per diluted share of $0.13

Non-GAAP Adjusted Net Income per diluted share of $0.37

Non-GAAP Adjusted EBITDA of $63.0 million, up 20% over prior year period

Atlanta, GA, August 9, 2016. (BUSINESSWIRE) Cotiviti Holdings Inc. (NYSE:COTV), a leading provider of analytics-driven payment accuracy solutions primarily focused on the healthcare industry, today announced financial results for the three and six months ended June 30, 2016.  The Company will host a conference call on August 10, 2016 at 8:30 a.m. Eastern Time to discuss second quarter and year-to-date results.

“We delivered strong financial and operating performance as we continue to execute against the business plan we articulated throughout the IPO process.  Our second quarter results demonstrate the strength of our business and the value delivered to clients, with total revenue growth of 19% compared to the prior year period driven by 22% revenue growth in our Healthcare segment,” said Doug Williams, Chief Executive Officer. “Cotiviti’s financial model is tightly aligned with our clients and our success depends on the results we deliver. Our robust performance, as demonstrated by the 20% growth in non-GAAP Adjusted EBITDA in the second quarter, is a result of the payment solutions we provide our clients through our proprietary technology platform, advanced analytics capabilities and the unique expertise collected from decades of experience across the payment continuum.  As healthcare and retail continue to experience industry-wide disruption through demographic shifts and increasing payment complexities, we believe that Cotiviti remains well-positioned to deliver tangible value through actionable information and proprietary solutions to new clients while expanding our relationships with existing clients.”

  • With the proceeds from the IPO and cash from operations, we were able to significantly reduce our net leverage ratio to 3.5 times at June 30, 2016, which is down a full turn from 4.5 times at December 31, 2015,” said Steve Senneff, Chief Financial Officer.  “In addition to reducing debt, our strong cash flow from operations allows us to further innovate by investing in analytics and technology to continuously evolve our payment accuracy solutions in order to bring value to clients.”

Second Quarter 2016 Financial Results

  • Total revenue for the quarter increased 19% to $158.3 million, compared to $133.3 million a year ago. Revenue growth was driven by a 22% increase in the Healthcare segment to $141.0 million, with the Global Retail and Other segment contributing $17.3 million, a 4% decline from a year ago.  Healthcare revenue was favorably impacted during both the quarter and first six months by an increase in volume and expanding adoption of our solutions within existing healthcare clients.  In addition, we experienced certain one-time, special projects in the second quarter totaling approximately $5 million that are not anticipated to reoccur in the second half of 2016.  Retail revenue decreased due to timing and the nature of claims reviewed, along with foreign currency fluctuations due to the strengthening U.S. dollar.
  • Net income increased 40% to $10.9 million, or $0.13 per diluted share for the quarter, compared to $7.8 million in the prior year quarter, or $0.10 per diluted share.  Cotiviti used proceeds from the IPO and cash from operations to pay down $236.1 million of the Company’s Second Lien Credit Facility.  This early payment of debt resulted in a $7.1 million loss on extinguishment of debt and a reduction in interest expense of approximately $1.3 million for the second quarter.  As a result of the IPO, certain stock options were accelerated resulting in an additional $2.3 million of stock compensation expense during the second quarter. 
  • Non-GAAP Adjusted EBITDA for the quarter was $63.0 million, compared to $52.6 million a year ago, or a 20% increase.
  • Non-GAAP Adjusted Net Income for the quarter was $31.1 million, or $0.37 per diluted share, compared to $24.1 million, or $0.31 per diluted share a year ago.

Adjusted EBITDA, Adjusted Net Income, and Adjusted Net Income per Share are non-GAAP financial measures.  For an explanation of these as measures of the Company’s operating performance, refer to the reconciliation in “Non-GAAP Financial Measures.”

 

Initial Public Offering (IPO)

On May 26, 2016, Cotiviti Holdings, Inc. began trading on the New York Stock Exchange after completing its IPO, issuing 12,936,038 shares (including the partial exercise of the underwriter overallotment of 436,038 shares).The offering price of the shares sold in the IPO was $19.00 per share, resulting in net proceeds to the Company of approximately $226.9 million after the underwriters’ discounts and commissions and other expenses payable by the Company.

 

Guidance

Cotiviti is providing the following full year 2016 guidance:

  • Total revenue in a range of $610 - $615 million; and
  • Adjusted EBITDA in a range of $233 - $235 million.

 

Conference Call Information

To participate in the conference call, domestic callers can dial (877) 883-0383 and international callers can dial (412) 902-6506 and provide the following conference passcode: 7893080.The call will also be webcast and be accessible on the Investor page of Cotiviti’s website at http://investors.cotiviti.com. 

Supplemental Financial Information

Supplemental financial information including detailed historical financial statements that are not part of this press release is available on the Investor page of Cotiviti’s website at http://investors.cotiviti.com.

 

About Cotiviti

Cotiviti is a leading payment accuracy provider that helps healthcare payers and retailers achieve their business objectives by unlocking value from the incongruities the company discovers in the complex interactions customers have with stakeholders. Cotiviti helps clients capture over $3 billion annually through improved payment accuracy. Cotiviti provides services to eight of the top ten U.S. healthcare payers and eight of the top ten U.S. retailers.

 

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995.  These statements are subject to risks and uncertainties. All statements other than statements of historical fact or relating to present facts or current conditions included in this press release are forward-looking statements. Forward-looking statements give our current expectations and projections relating to our financial condition, results of operations, plans, objectives, future performance and business. You can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. These statements may include words such as “anticipate,” “estimate,” “expect,” “project,” “seek,” “plan,” “intend,” “believe,” “will,” “may,” “could,” “continue,” “likely,” “should,” and other words.

 

The forward-looking statements contained in this press release are based on assumptions that we have made in light of our industry experience and our perceptions of historical trends, current conditions, expected future developments and other factors that we believe are appropriate under the circumstances. These statements are not guarantees of performance or results. These assumptions and our future performance or results involve risks and uncertainties (many of which are beyond our control). Important factors that could cause actual results to differ materially from those in the forward-looking statements include regional, national or global political, economic, business, competitive, market and regulatory conditions and the following: our inability to successfully leverage our existing client base by expanding the volume of claims reviewed and cross-selling additional solutions; improvements to healthcare claims and retail billing processes reducing the demand for our solutions or rendering our solutions unnecessary; healthcare spending fluctuations; our clients declining to renew their agreements with us or renewing at lower performance fee levels; inability to develop new client relationships; delays in implementing our solutions; system interruptions or failures, including cyber-security breaches, identity theft or other disruptions that could compromise our information; our failure to innovate and develop new solutions for our clients; our failure to comply with applicable privacy, security and data laws, regulations and standards; changes in regulations governing healthcare administration and policies, including governmental restrictions on the outsourcing of functions such as those that we provide; loss of a large client; consolidation among healthcare payers or retailers; slow development of the healthcare payment accuracy market; negative publicity concerning the healthcare payment industry or patient confidentiality and privacy; significant competition for our solutions; our inability to protect our intellectual property rights, proprietary technology, information, processes and know-how; compliance with current and future regulatory requirements; declines in contracts awarded through competitive bidding or our inability to re-procure contracts through the competitive bidding process; our failure to accurately estimate the factors upon which we base our contract pricing; our inability to manage our growth; our inability to successfully integrate and realize synergies from the merger of Connolly Superholdings, Inc. and iHealth Technologies, Inc. in May 2014 or any future acquisitions or strategic partnerships; our failure to maintain or upgrade our operational platforms; our failure to reprocure our Medicare Recovery Audit Contractor program contract; litigation, regulatory or dispute resolution proceedings, including claims or proceedings related to intellectual property infringements; our inability to expand our retail business; our inability to manage our relationships with information suppliers, software vendors or utility providers; fluctuation in our results of operations; changes in tax rates; risks associated with international operations; our inability to realize the book value of intangible assets; our success in attracting and retaining qualified employees and key personnel; and general economic, political and market forces and dislocations beyond our control. Additional factors or events that could cause our actual performance to differ from these forward-looking statements may emerge from time to time, and it is not possible for us to predict all of them. Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, our actual financial condition, results of operations, future performance and business may vary in material respects from the performance projected in these forward-looking statements.

 

Any forward-looking statement made by us in this press release speaks only as of the date on which it is made. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law.

 

Non-GAAP Financial Measures

The Company defines Adjusted EBITDA as net income before depreciation and amortization, interest expense, other non-operating (income) expense such as foreign currency translation, income tax expense (benefit), gain on discontinued operations, transaction-related expenses and other, stock-based compensation and loss on extinguishment of debt.  The Company defines Adjusted Net Income as net income adjusted for non-cash and other non-recurring items. 

Management believes Adjusted EBITDA is useful because it provides meaningful supplemental information about our operating performance and facilitates period-to-period comparisons without regard to our financing methods, capital structure or other items that we believe are not indicative of our ongoing operating performance.  Management believes Adjusted Net Income is useful because it provides meaningful supplemental information about our operating performance and facilitates period-to-period comparisons without regard to non-cash expenses and other items that are one-time in nature.  In order to assure that all investors have access to similar data the Company has determined that it is appropriate to provide these non-GAAP financial measures.  Management believes we are enhancing investors’ understanding of our business and our results of operations, as well as assisting them in evaluating how well we are executing our strategic initiatives.  Adjusted EBITDA and Adjusted Net Income are intended as supplemental measures of our performance that is not required by, or presented in accordance with U.S. generally accepted accounting principles, or GAAP.  Adjusted EBITDA and Adjusted Net Income are not determined in accordance with U.S. GAAP, and should not be considered in isolation or as an alternative to net income, income from operations, net cash provided by operating, investing or financing activities or other financial statement data presented as indicators of financial performance or liquidity, each as presented in accordance with GAAP.

 

Cotiviti Holdings, Inc.

Consolidated Balance Sheets 

Cotiviti Holdings Inc Consolidated Balance Sheet

Cotiviti Holdings, Inc.

Consolidated Statements of Comprehensive Income

Cotiviti Holdings Inc Consolidated Statement of Comprehensive

Cotiviti Holdings, Inc.

Consolidated Statements of Cash Flows

Cotiviti Holdings Inc Consolidated Statements of Cash Flows

Cotiviti Holdings Inc Reconciliation of Net Income to Adjusted EBITDA

Cotiviti Holdings Inc Reconciliation of Net Income to Adjusted Net Income

 

Cotiviti Holdings Inc Adjusted EBITDA 2016 Guidance Reconciliation

 

Investor and Media Contact:

Jennifer W. DiBerardino
Vice President, Investor Relations
203-642-0718
Investors.Relations@Cotiviti.com