COTIVITI ANNOUNCES FOURTH QUARTER AND FULL YEAR 2016 RESULTS


From the prior year period:
  • Fourth quarter revenue up 11% to $167.9 million; full-year revenue up 15% to $625.2 million
  • Fourth quarter net income up 175% to $25.3 million; full-year net income up 252% to $48.9 million
  • Fourth quarter net income per diluted share of $0.27; full-year net income per diluted share of $0.55
  • Fourth quarter non-GAAP adjusted net income1 per diluted share of $0.39; full-year non-GAAP adjusted net income1 per diluted share of $1.40
  • Fourth quarter non-GAAP adjusted EBITDA1 up 14% to $64.4 million; full-year non-GAAP adjusted EBITDA1 up 18% to $239.7 million

ATLANTA--(BUSINESS WIRE)-- Cotiviti Holdings Inc. (NYSE:COTV) (“Cotiviti”), a leading provider of analytics-driven payment accuracy solutions primarily focused on the healthcare industry, today announced financial results for the three months and year ended December 31, 2016. The Company will host a conference call on February 23, 2017 at 8:30 a.m. Eastern Time to discuss results.

“2016 was a milestone year for Cotiviti and we are extremely pleased with our continued demonstrated ability to deliver significant value to our clients and generate strong financial results,” said Doug Williams, Chief Executive Officer. “Specifically this year, we delivered a record $3.7 billion in savings to our commercial healthcare and retail clients. In turn, we grew our total revenue 15% to $625.2 million and adjusted EBITDA 18% to $239.7 million.”

“The strategic investments we made to enhance our technology and analytics capabilities resulted in strengthened client relationships and an increase in the value we delivered to them,” continued Williams. “We also expanded the number of clients we serve to include 20 of the 25 largest health plans. Our demonstrated ability to expand client engagements through cross-selling and broadening adoption of our solutions, and to add new clients to our roster is a key part of Cotiviti’s success in generating predictable, ongoing revenue growth. Cotiviti is well-positioned to adapt, innovate and succeed. ”

“As a result of our strong EBITDA growth, cash flow generation, and the successful debt refinancing we completed in the third quarter of 2016, we were able to further reduce our net debt leverage ratio to 2.9 times as of December 31, 2016 from 3.3 times as of September 30 creating additional flexibility and strength to our balance sheet,” said Steve Senneff, Chief Financial Officer. “As we continue to grow our top line and expand margins, we expect to continue to de-lever naturally. We plan to deploy excess capital to invest in innovation and new solutions to fuel organic growth, as well as to consider any potential strategic additions to strengthen our portfolio.”

Fourth Quarter 2016 Financial Results

  • Total revenue for the quarter increased 11% to $167.9 million, compared to $151.5 million in the fourth quarter a year ago. Revenue growth was driven by a 14% increase to $148.4 million in the Healthcare segment, with the Global Retail and Other segment contributing $19.5 million, a decrease of 8% compared to the same period a year ago. Healthcare revenue was favorably impacted in the quarter by an increase in volume and expanded adoption of our solutions within existing healthcare clients. The decline in retail was primarily driven by a difficult comparison to the year ago quarter in which we experienced the highest, single claim savings amount for a client in the history of the company.
  • Net income increased 175% to $25.3 million, or $0.27 per diluted share for the fourth quarter, compared to a $9.2 million in the prior year quarter, or $0.12 per diluted share. The increase was driven by revenue growth and lower interest expense.
  • Non-GAAP Adjusted EBITDA for the quarter increased 14% to $64.4 million, compared to $56.4 million for the quarter a year ago.
  • Non-GAAP Adjusted Net Income for the quarter increased 51% to $37.2 million, or $0.39 per diluted share, compared to $24.7 million, or $0.32 per diluted share a year ago.

Full-Year 2016 Financial Results

  • Total revenue for the full-year 2016 increased 15% to $625.2 million, compared to $541.3 million for the full-year 2015. Revenue growth was driven by an 18% increase in the Healthcare segment to $552.0 million, with the Global Retail and Other segment contributing $73.1 million, essentially flat from year ended 2015 excluding the foreign exchange impact.
  • Net income increased 252% to $48.9 million, or $0.55 per diluted share for the year-ended 2016, compared to a $13.9 million in the prior year, or $0.18 per diluted share.
  • Non-GAAP Adjusted EBITDA increased 18% to $239.7 million, compared to $203.4 million for the same period a year ago.
  • Non-GAAP Adjusted Net Income increased 34% to $124.3 million, or $1.40 per diluted share, compared to $92.7 million, or $1.19 per diluted share in 2015.

Guidance

Cotiviti is providing full-year 2017 guidance as follows:

  • Total revenue in a range of $688 - $700 million
  • Adjusted EBITDA in a range of $266 - $272 million, and
  • Fully diluted weighted average shares of approximately 97 million.

1Adjusted 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.”

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: 3271911. 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 that is 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 $3.5 billion annually through improved payment accuracy. Cotiviti provides services to twenty of the top twenty-five 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 clients; 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; our rebranding may not be successful; 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 rules; 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; risks related to our substantial indebtedness and holding company structure; volatility in bank and capital markets; our status as a controlled company and as an emerging growth company; and provisions in our amended and restated certificate of incorporation. 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 (loss) before depreciation and amortization, impairment of intangible assets, 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 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.

 

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Investor and Media Contact:
Cotiviti Holdings, Inc.
Jennifer W. DiBerardino, 203-642-0718
Vice President, Investor Relations
Investor.Relations@Cotiviti.com

Source: Cotiviti Holdings Inc.