Inovalon Holdings, Inc.
Q3 2017 Earnings Call Transcript

Published: 4 Nov 2017

[Kim Collins:]

Good afternoon. This is Kim Collins, Senior Vice President of Communications at Inovalon. I'm here today with Dr. Keith Dunleavy, Inovalon's Chief Executive Officer and Chairman of the Board; and Chris Greiner, our Chief Financial Officer and Chief Operating Officer. I would like to welcome you to our Third Quarter 2017 Earnings Call. The press release announcing our financial results for this third quarter was distributed this afternoon, and a replay of today's call will be available in a few hours and posted on the Investor Relations page on Inovalon's Web site. For those of you listening to the rebroadcast of this call, we remind you that the remarks made herein are as of today, November 1, 2017, and will not be updated subsequent to this initial earnings call. I'll remind you that certain statements made during this call may be characterized as forward-looking under the Private Securities Litigation Reform Act of 1995, including statements related to future results of operations and financial position, our business strategy and plans, market growth and our objectives for future operations. Those statements involve a number of factors that could cause actual results to differ materially. Additional information concerning these factors is contained in the company's earnings release and filings with the SEC. In an effort to provide additional information to investors, this conference call and webcast is accompanied by a presentation, which is available on the IR section of our website. You are encouraged to download a copy of this presentation to follow along with our prepared remarks. Our presentation also includes certain non-GAAP financial measures. You'll find definitions of these non-GAAP measures and reconciliation charts at the end of the company's earnings release and on the company's website. Now it is my pleasure to turn the call over to Dr. Keith Dunleavy.

[Dr. Keith Dunleavy:]

Thank you, Kim. Good afternoon, everyone, and thank you for joining our call. Chris and I would like to share with you the results of our third quarter of 2017, highlight in more detail the continuing significant progress we are making in our business and discuss our financial outlook for the remainder of the year. Let me begin briefly with our results in the third quarter. As Chris will discuss in more detail shortly, we are seeing very positive revenue and profitability momentum in our business, with revenue expanding 10% year-over-year, our profitability expanding at an even greater rate of 17% and another quarter of very strong cash flow. We remain pleased with our execution as we continue to see the benefits of our investments and differentiated capabilities driving increasingly strong top- and bottom-line financial performance. Our financial position continues to be strong and very supportive of our ongoing investments in organic business, as well as our capacity to consider strategic opportunities and share repurchases. Health care is becoming increasingly data driven, and Inovalon is standing out as being highly differentiated in its ability to empower the leading participants in this ecosystem to thrive. I am pleased to report that the connectivity, data assets, analytics and intervention capabilities of the Inovalon ONE Platform are resonating strongly within the marketplace. Allow me to walk you through four market examples. Health plans want to be able to have greater access to data and toolsets that can empower superior clinical outcomes, lower hospitalization readmission rates, improve financial performance and achieve a more customer-centric experience. They want to be able to match the right patient with the right diagnostic, treatment paradigm and support programs. They want to achieve this using a combination of their internal capabilities, existing program elements and industry-leading advancements. They want the ability to bring together their views of best-of-breed onto one integrated solution, feeding off of and dumping into one data environment. They want the ability to have up-to-date summary insights on performance, operational, clinical or financial, and they want to be able to drill down deeply, and they want all of this in real time. And they don't want the monolithic solutions that force them into an all or nothing decision. And they are seeing that the Inovalon ONE Platform can give them this. The second example will be pharmaceutical companies, which are looking to be more integrated into the holistic health care workflow. They want to be more closely allied with the payer and provider marketplace, understanding which patients would benefit best from their medications, helping their medications stand out in a crowded marketplace that is increasingly focused on value, decreasing cases where poor outcomes may more likely occur and tracking performance so that the value of their medications can be better appreciated. They want providers to be better supported in the care of their patients when using their medications. And they want the patient have a greater engagement and insight into the benefit of the medication. And they are seeing that the Inovalon ONE Platform can give them this. The third example would be medical device manufacturers who are looking to be similarly woven into the data flow of the health care ecosystem, packaging increasingly complex patient identification routines, data aggregation processes and care support pathways together with their medical devices, and even combinations of medical devices, which may be applicable for patients who are increasingly living longer with increasingly complex chronic conditions, cardiovascular disease, musculoskeletal disease, neurological and endocrine conditions. They need to do this through a melding of payer data, provider data, their own device and program data. They need to enable provider engagement through individual hospital and provider system EHRs and patient engagement, acknowledging an increasingly consumer-driven world. And they need to do this across sometimes highly disparate geographies, uploading real-time cardiac data in the middle of Nebraska and interpreting it with the help of data sets that are aggregated from centralized databases in hospitals that may be thousands of miles apart, all in seconds. And they are seeing that the Inovalon ONE Platform can give them this. And the fourth example, the specialty pharmacies. They're looking to deliver advanced clinical paradigms, seamless integration with the various ecosystem participants, including the payer, the provider, the manufacturer, the distribution system and the patient. They're looking to provide personalized data-driven experiences, automated processing and dramatic improvements in time to fill and cost to fill. They want to achieve greater compliance and persistence, allow for multiple stakeholders to simultaneously access and manage each case and achieve fewer adverse outcomes. And they want to do all this while materially driving down costs. And they are seeing that the Inovalon ONE Platform can give them this. The point here is that the health care industry is doing more than becoming increasingly focused on value-based care. It is becoming increasingly focused on being data-driven care

[Chris Greiner:]

Thank you, Keith, and good afternoon, everyone. Inovalon delivered another strong quarter of broad-based execution. The continued sequential improvement of our business is an important sign post of progress we are making in the transition to a more subscription-based business model. During the third quarter, revenue, profit, margins and cash flow all expanded sequentially as well as year-over-year. Our results reflect building momentum and demand for our cloud-based Inovalon ONE Platform offerings and the operating leverage achieved through technological delivery advancements. Each of these drivers is spurred by an accelerating need in the healthcare market for data-driven, value-based delivery models. These dynamics, combined with the improved execution across many functional areas of the company, generated results that are in line to ahead of the plan we outlined nearly 270 days ago. Through this lens, let me now discuss our third quarter results and 2017 financial guidance in more detail. Revenue in the third quarter of 2017 was $115.9 million, above the midpoint of our expected range. This continued the trend of quarter-over-quarter expansion we've seen since the first quarter, representing growth of 4.8% sequentially. The continued ramp of quarterly revenue was in part driven by the implementations of four national health plans announced joining the Inovalon ONE Platform and the acquisition integration of CCS. On a year-over-year basis, revenue grew 10.3% as reported, with solid contributions from account growth, new business and acquisitions, most notably, with the significant amount of newly signed Inovalon ONE Platform business year-to-date, which is now ramping rapidly as part of the contractual phasing in of various respective populations. We are seeing a dramatic transition from the approximately 16% decline in organic revenue in the second quarter to a positive organic contribution growth of approximately 19% in the fourth quarter at the midpoint of our projections. We also delivered another strong margin performance this quarter. Gross margin of 66.8% in the third quarter was up 40 basis points over 2Q and up 50 basis points compared to 3Q last year. This marked the third straight quarter of sequential gross margin improvement. We saw continued operating leverage in our cost of delivery, driven again by a combination of favorable Inovalon ONE Platform mix and continued technology-enabled efficiencies. Expanding connectivity, up nearly 200% year-over-year, and increasing application of machine learning capabilities across the enterprise remain valuable levers in advancing towards our target model of 70% gross margins. Third quarter adjusted EBITDA was $30.8 million, an increase of $3.1 million or 11% sequentially and an increase of $4.5 million or 17% on a year-over-year basis. Adjusted EBITDA margin was 26.6%, up 150 basis points sequentially and up 160 basis points year-over-year, driven by continued operating leverage we are realizing from both higher gross margin and lower G&A expense. Highlighting our continued focus on overhead efficiency, G&A expense was down on a year-over-year basis, and honestly, sequentially. Notably, third quarter G&A represented the lowest percentage of revenue since the second quarter of 2016, declining by 110 basis points sequentially and 410 basis points year-over-year. And I point out that this is despite significant additional overhead expense of $1 million incurred this quarter for the first time due to our acquisition of CCS, which represents further opportunity in operating leverage going forward. In short, we continue to see strong core operating leverage, demonstrating the progress the company has made over the last 9 months by leveraging the technological capabilities and scale of the Inovalon ONE Platform. Importantly, this strong operating leverage allows us to sustain our investments in innovation and sales and marketing. As you heard Keith mention, our investment in innovation, which includes both R&D expense and capitalized R&D-related investment, was $19.9 million in the third quarter of 2017 or 17.2% of revenue, which is an increase of 51% and 470 basis points, respectively, on a year-over-year basis. We continue to invest in new cloud-based offerings for our Inovalon ONE Platform, including high-demand areas such as data visualization, as well as in further enhancing our platform modularity, scalability, leveraging of our advanced analytical capabilities and compute power to further enhance our competitive differentiation. Returns on our investment and innovation can also be seen in the broader demand and client engagement we are witnessing across many sectors of healthcare. Sales and marketing expense in the third quarter of 2017 was $7.9 million or 6.8% of revenue compared with $7 million or 6.7% of revenue in the third quarter last year. We're seeing good returns from these investments, not only evidenced by multiple engagements we have announced with national health plans, but more broadly with strong overall sales metrics we have seen in the third quarter and year-to-date. As you heard Keith mention, on a year-to-date basis, our total annualized revenue from new business signings and our average revenue per opportunity are up 66% and 163% year-over-year, respectively. Additionally, during the third quarter, sales to new clients were up over 30% year-over-year, with total opportunities won, up nearly 40% over the same period. Our pipeline supports a healthy balance of new clients and account growth opportunities, as an increasing number of Inovalon ONE Platform components and modules can be sold into existing accounts and new industry verticals. Finally, non-GAAP diluted net income per share was $0.09, up $0.01 or 13% sequentially, driven by the expanded profitability that I just discussed, as well as our share repurchase activity. Turning to the balance sheet. We continue to have the strength and flexibility to support our business long term. We ended the third quarter of 2017 with $526 million in cash, cash equivalents and short-term investments, which includes the impact of $19.8 million for share repurchases in the third quarter. As of September 30, we had approximately $28.8 million available under our remaining share repurchase authorization through the end of 2017. In addition, Inovalon again delivered strong cash flow from operations of $39.8 million in the third quarter, driven in part by our continued focus on accounts receivable, day sales outstanding, which improved this quarter to 64 days from 78 days last quarter and 85 days in the first quarter of 2017. For the first 9 months of 2017, our cash flow from operations of $80.9 million is up 18% from the year ago period. The strength of our balance sheet, the strong cash flow characteristics of our business model and our existing debt capacity continue to position us well to invest in our platform-based capabilities, consider additional strategic opportunities and opportunistically repurchase shares. Now let me turn to guidance. Inovalon is updating full year 2017 guidance, increasing net income, diluted net income per share and non-GAAP diluted net income per share. Our updated financial guidance for 2017 is as follows

[Operator:]

[Operator Instructions] Our first question comes from the line of Ricky Goldwasser with Morgan Stanley.

[Ricky Goldwasser:]

Can you give us, Keith, maybe an update on the implementation status of the four new Inovalon ONE clients that you added this year? Obviously, about a month ago -- a couple of months ago, you've added United. So how should we think about the benefit from this account and kind of like the timing in contribution to you in the P&L?

[Dr. Keith Dunleavy:]

Thanks for joining us, and thanks for the kind comment. So we've announced four of them. You're absolutely right, four national plans. We've also had a number of large regional and state plans also coming on to the Platform as new contracts and also converting over a number of contracts to the platform. So these go in different ways depending on their size. The very largest of them can often go in phases. They would turn on a few states at a time. We'd go through a large build expansion. We maintain, as you might recall, an active, active, active native cloud environment set of different data centers. Depending on the exact implementation for the client, they will be in some number of those different data centers as we build out capacity in them and we're going through some pretty large build-outs of capacity right now. So smaller clients can go active very quickly, can come online, can sign and within weeks be turned onto the Platform and be at full speed and business impact to them, to us, financially to us, business benefit to them. And the much larger and more complex ones typically go in some kind of a phasing process. So the principal impact that you will see, this is really going to be a 2018 principal impact. We are going through ramping up with quite a few of them now, but we won't be at full financial impact until we get into 2018.

[Ricky Goldwasser:]

And when we think about that, and as we head into 2018, and I know that you're not giving guidance yet. And obviously, you're seeing stronger year-over-year organic growth of 19%. How should we think about this within kind of like the context of next year? When you think about what's kind of like the drivers that drove that year-over-year and the new contracts that are coming in, should we think about this as -- this double-digit is kind of like a new sustainable growth profile for the business?

[Dr. Keith Dunleavy:]

Well, Ricky, I appreciate it. You're absolutely right on your numbers, and we're very pleased with what we're seeing. We want to be careful not to turn this into a call talking about 2018 projections. There's obviously a number of moving parts in our world. We're seeing a lot of, obviously, positive contract growth. Chris can touch upon some of the underlying metrics, some of which he already talked about in his prepared remarks. But we're seeing some pretty strong momentum in how large and how fast and how many of these are signing, but it's premature for us to really be talking about the 2018 year. Chris, do you want to add any color to that?

[Chris Greiner:]

Yes. I think when we think about 2018, a lot of the investment that we've been driving in the company as you heard Keith share, is up quite materially year-over-year, that kind of focused on the horizon and continue to expand the company's capabilities. We've been very focused on quarter after quarter delivering to the plan, and that's where our focus is in the fourth quarter and look forward to sharing what it all translates to 2018 in February.

[Ricky Goldwasser:]

So is it fair to say that when we think about the operating income kind of like in the investments that are embedded and the fact that there's also some cost, I'm assuming, associated with these large clients that are going through the phasing process, that these are investments that we might see kind of like being phased out next year?

[Dr. Keith Dunleavy:]

So a couple of different things, Ricky. So let's talk about couple of different. I don't want to accidentally try and put on my CPA hat, but there's a lot of different types of expense that we're realizing, right? So some of this, as you point out, is the build-out of additional infrastructure in these data centers. And these are large investments. We are adding physical capacity, and this is a very sophisticated set of infrastructure that requires us to coordinate with a number of large manufacturers. And that has been accelerating rather significantly, and so is the spend on that. Obviously, that's capitalized over a period of time, but that has a large people groups here running rather day and night, getting all of those builds in. And every time a new system comes online, we're not only building out the capacity for that, but we're building all the redundancy capacity out as well. So we're very tightly aligned with our various different hardware partners that are providing all of this infrastructure. Then there's the software build. The Inovalon ONE Platform is resonating really well in the marketplace, not only in our most traditional arena of the payer space but aggressively across different areas that touch healthcare. And this has our software development teams similarly running hot. And so that cost is jumping. You're seeing our investment in innovation up about 18% of revenue, up from about 12% of revenue, year-over-year, up about 50%. And it's up about 470 basis points as a percentage of revenue. So that's going to continue. And in the fourth quarter, you're going to see more of that. We are in the midst of developing quite a bit of new capability that is going to add new components to the Platform and new capacity to the Platform. So we're seeing a strong expansion of that. But obviously, we're going revenue even faster.

[Chris Greiner:]

And yes, Ricky, what Keith and the board have asked us to do is to design a business model and to execute to a business model that continues to allow the company to invest at the right pace while still delivering market expansion. If you look at the operating leverage that the company delivered this quarter, if you look at it both on a year-to-year basis and a quarter-to-quarter basis, it's pretty powerful. On a year-to-year basis, the revenue was up $11 million with adjusted EBITDA up $4.5 million. So you see that dropping at about a greater than 40% rate. Similarly, if you look at quarter-to-quarter, the incremental revenue that we're driving, it's up about $5 million, with profit up about $3 million, so even at a higher rate. So we are working hard to make sure that the technology that we're developing and utilizing not only in the platform but also in our operations is able to fund, if you will, just a solid rate of investment.

[Operator:]

And our next question comes from the line of Donald Hooker with KeyBanc Capital Markets.

[Donald Hooker:]

And so when I think about kind of you all have done a lot of work to change your, it seems like, to change your business model, moving to, I think, more of a subscription model. So I think about sort of the seasonal pulse of your business. How should we think about that changing now versus what it was maybe a year ago, kind of with all the transition to more subscription software?

[Dr. Keith Dunleavy:]

Don, thanks for taking the time to join and thanks for the comment. So you're obviously -- you're hitting a key point for us. We've been focused on this for about 18 months now, transitioning more and more of our business to subscription-based. Obviously, we have some parts of the business that are not the subscription-based. The advisory and strategy and data-driven work that Avalere does is not a subscription-based element. But increasingly, the significant majority of the business is headed to all subscription-based, and that's yielding us a lot of benefit. So how do we think of seasonality in that setting? We're not to a point of everything being subscription-based. We don't see ourselves ever being 100% subscription-based for the reason I just mentioned. So we will still have some seasonality and we're not quite ready to declare seasonality dead, if you will. And we want to be mindful of that. So we've been managing to that in advance. But obviously, looking back at the numbers, you're seeing a very good sequential process. Chris?

[Chris Greiner:]

No, I think that covers it.

[Donald Hooker:]

Okay. And then maybe on a separate topic, on the pharma business, I think at the last year's Investor Day, it seemed like you were at about $40 million of revenue run rate in 2016 with a lot of growth. And that's, I know, been a big area of focus for you. How do we think about that business growing so far this year, kind of similar growth rates, triple digits? Can you give us the numbers there, because that's obviously kind of a little bit of different growth profile than the other traditional Inovalon businesses.

[Dr. Keith Dunleavy:]

Don, I really apologize but I missed the opening few words of your question, which were quite key to it. So would you mind, please, repeat it from the start? I'm sorry.

[Donald Hooker:]

I was just trying to get a sense of the pharma business. So I think in 2016, on your Investor Day, it seemed to be you were focusing on -- it seemed to be about a $40 million revenue business, growing very, very rapidly. I was wondering if you could share, give us a sense of the continuing growth there, kind of how we think about that shaping up year-to-date from a revenue standpoint?

[Dr. Keith Dunleavy:]

You've been seeing us announce just more of these deals, the Daiichi Sankyo or DSI, as more easily we refer to them, one of them announced this past quarter. We've been working on quite a few of them. We see the whole pharma industry going through a pretty significant transformation, if not just medications being offered increasingly in a value-based way. But I think you're also seeing a transition in the relationship between the manufacturer of medications and the payer for them. So you're seeing that, I think, in the increasing willingness for drug companies to be in direct talks, direct contracting, direct various different incentivization and distribution and implementation models with the large payers. And we are very eager to make our platform the platform that enables and empowers that. So if you think about it, Don, picture a large payer has enormous purchasing power, has a very large known customer base that knows when they need on a relative basis a particular medication. This is really a deck slanted in your favor, distribution chain opportunity for a software platform that can help with distribution. There's been a fair amount of this in the media recently about who can play well in that space. We are benefited from having direct data connections into what all those patients need, who's actually prescribing what, where the providers are, who's paying for it, what are the different incentivization models, what are the outcomes, which ones are performing better. So we are looking to help in the transformation of that sector of the healthcare space. So it's growing for us, and we're looking to be an enabler, if you will, to grow it even faster.

[Operator:]

And our next question comes from the line of Frank Sparacino with First Analysis.

[Frank Sparacino:]

Chris, probably for you. Just two things. One, can you just talk about the adjustment on the contingent consideration? And then also, as you have talked about the business to more of a subscription model, I would assume that from a balance sheet perspective, we would see deferred revenue start to grow and I know there's some seasonality from Q2 to Q3. But can you just help me sort of understand why deferred revenue will grow and at what type of rate should it grow?

[Chris Greiner:]

Our revenue is actually billed monthly. So probably a bit different than other models you may be accustomed to. But back on the contingent consideration, what the company, I think, has done effectively well is it's layered in multiple different programs of incentives, and you see some of that rolling off and being adjusted. But we're not just incentivizing the acquisitions, which obviously have earn-out components to it, but also doing a nice job, doing the same with our associate base.

[Operator:]

And our next question comes from the line of Nina Deka with Piper Jaffray.

[Nina Deka:]

Could you give us an update on how you're thinking about the ASC 606 disclosures and how that can impact your reporting next year?

[Chris Greiner:]

I'm really proud of how the team has been working through the process. You'll find it in our Q tomorrow. We'll provide some specific commentary on the progress that we're making. But we're heads down on it and don't foresee it being a major disruption to our business into how we've been recognizing revenue. We will be making enhanced disclosures.

[Nina Deka:]

And then you mentioned earlier the expanding ecosystem of connectivity. What portion of your client base does this 117,000 represent? And I guess what I'm trying to get my arms around is what's the opportunity within your existing client base to continue to expand that connectivity?

[Dr. Keith Dunleavy:]

So the connectivity -- we have lots of different types of connectivity throughout the company. So the exact number of actual clinical facilities, hospitals, physician offices, laboratories, pharmacies, payer systems, integrated health care delivery systems, it's in the -- it's well over in the hundreds of thousands at this point, of actual clinical facilities and the various different promulgations of them. So that data connection, that's not the one we're speaking to. That data continues to flow in. Some of it is pushed, some of it is pulled. There's lots of different ways that, that data is connected. The 117,000 refers to EHR connections. So Electronic Health Care record connections, right to the desktop, if you will, of the individual physician. So in the United States, to put this in perspective, directionally, there's approximately 1.1 million physicians directionally inside that. Actively practicing is different numbers, between 600,000 and 700,000 so figure roughly half of them, myself being an example of a physician in the 1.1 million who's not practicing. And then in the 600,000 to 700,000, you really look at your primary care versus specialists and surgeons and so forth. So roughly 1/3 of that is really the key, key number that we keep a focus on for the highest amount of data flow. So call it the 200,000, 250,000 docs make up sort of the 80-20 rule of care data in the U.S. So we have been focusing on the nice aspect of having data on nearly the entire physician set in the U.S. We actually can prioritize with whom we want to make connections for -- impact for various different clients. So as we bring on a client and their initiative, we have the ability to run analyses to identify which physicians in the marketplace have the ability to drive greatest benefit and impact for that particular client. And then we're able -- because we know all of the different EHRs utilized by the physician community, we're able to then determine which connections are most cost-effective for us to then go and make. So we've been expanding that 117,000 number. We're going to continue to expand it. If you figure the marketplace is made up of cloud-based EHR systems like the Allscripts and athenahealths of the world. And then they're made up of the non-cloud-based EHRs like the Cerners and Epics of the world. We can connect to all of these. But we look at what is the most cost-effective for us to go through the connection for, benefit to our clients, obviously, margin and speed and differentiation it benefits the company as well. Did that answer your question, Nina?

[Nina Deka:]

I was specifically looking at the EHR connectivity, so thank you.

[Operator:]

And our next question comes from the line of Sean Mcbride with Robert W. Baird.

[Sean Mcbride:]

So this was really your first full quarter as a qualified entity, and you definitely saw some massive inflows of data. I was just hoping if you could parse out the relationship between being a qualified entity and those -- the data that came to the system this quarter.

[Dr. Keith Dunleavy:]

Sure, Sean. Thanks for taking the time to be on the call, and thanks for that comment. So the QE data started flowing and we started talking about it obviously last call. We made a point of holding off on making that publicly known until we were through all of the various different steps and we actually started receiving data as QE data. Some organizations might get QE clearance in literally one county because there's a lot of rules that apply to whether or not you're allowed to receive it, for how much of the U.S. you can qualify to receive it and then whether the additional technology and security and already existing data pools, hurdles you need to have to go on to actually start receiving it. So we are, as you pointed out, fortunate to be receiving it now virtually everywhere in the U.S. and also back all the way to 2009. So we've been told that we're the largest recipient of data in the QE program. So that started coming in. And obviously, it continues here ever after, so it will continue to just keep pouring in. It was a large portion of the jump that you saw over the last 90 days, but by far not the only component of that. We've got some massive clients that we've been onboarding and are continuing to onboard. And as we stated in our prepared remarks today still it is flowing in, in larger size and scale than can be incorporated, so we'll continue to see large expansion of that here in Q4. So definitely, I think a part of your question is also what that's meant for us. We are incorporating that data and the analysis of it to help improve things like our machine learning capabilities. That has the ability to dramatically expand out our insight into disease identification and quality performance improvement. You might have seen the press release that we put out on Monday, which conveyed that the client base of Inovalon saw on average, a half star improvement better than the rest of the marketplace, roughly greater than a 300% better performance than the marketplace that doesn't use the Inovalon platform. So we literally looked at the entire U.S. because that information ultimately does get released by CMS. We then did analysis of all of those that are using our quality improvement and quality measurement processes and did analysis compared to all those that were not. And obviously, as you know, many billions of dollars of incentive money depend upon quality performance, so it has been a positive thing for the client marketplace to use our analytics. So the expanded data informs things like that. The greater amount of data informs pharmaceutical studies, informs our patient identification, quality improvement, a number of different steps, data integrity analyses. There are hundreds of different types of analytics that the expanded database helps to make more differentiated and valuable in the marketplace.

[Operator:]

And I'm showing no further questions.

[Dr. Keith Dunleavy:]

Sandra, thank you. And thank you, everybody, for spending part of your evening with us tonight. In closing, we have really three thoughts to leave you with. Number one, the Inovalon ONE Platform is being very well received in the marketplace, generating solid demand, trade blending and the strong momentum for the company. Number two, we're executing well moving increasingly to a subscription-based model with very nice characteristics in our sequential growth. And number three, all of this is translating into expanded operational leverage, as you're seeing us generating greater value for our clients and also greater profitability for our shareholders. So with that, we thank you again for your time tonight. We look forward to updating you on the fourth quarter and the full year results in February and give you an outlook into our 2018 at that time. Thank you all again. Take care. Bye-bye.

[Chris Greiner:]

Good night.

[Operator:]

Ladies and gentlemen, thank you for participating in today's call. This does conclude the program, and you may all disconnect. Everyone, have a great day.