Why Shares of Inovalon Holdings Inc. Crashed Today
Image source: Inovalon Holdings.
What happened
Shares of Inovalon Holdings (NASDAQ: INOV), a provider of cloud-based analytics solutions for the healthcare industry, tumbled on Tuesday after the company slashed its full-year guidance. Inovalon now expects revenue and earnings to be substantially lower than previously expected, with the change driven by the company's failure to enter into an anticipated agreement. At 11:45 a.m. EST, the stock was down about 36%.
So what
Inovalon has been negotiating a multi-year collaboration agreement with an unnamed counterparty over the past nine months, and the company expected a deal to be reached during the fourth quarter. However, Inovalon was informed by the counterparty on Dec. 7 that an unexpected material development unrelated to Inovalon's products would prevent any transaction from taking place. Inovalon was expecting the deal to contribute about $40 million of revenue during the fourth quarter.
This development prompted Inovalon to significantly reduce its guidance for the full year.
|
Metric |
Old Guidance |
New Guidance |
|---|---|---|
|
Revenue |
$470 million to $490 million |
$426 million to $428 million |
|
Net income |
$43 million to $53 million |
$25 million to $26 million |
|
EPS |
$0.28 to $0.35 |
$0.16 to $0.17 |
|
Non-GAAP EPS |
$0.39 to $0.46 |
$0.32 to $0.33 |
Data source: Inovalon.
With issues outside of its control affecting the counterparty, Inovalon offered no assurances that any deal would be reached at a later date.
Now what
Inovalon CEO Keith Dunleavy tried to find a silver lining:
While the company made clear that the guidance cut was strictly due to the transaction falling through, the stock carved out a new 52-week low on the news. Shares of Inovalon are down about 70% from their peak in early 2015. With revenue now expected to decline this year, investors are no doubt questioning the growth story.
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