Operator: Good day, ladies and gentlemen, and welcome to the Inovalon Second Quarter 2021 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. And now, I'll turn the conference over to your host, Kim Collins. Please begin.
Kim Collins: Good evening. This is Kim Collins, Senior Vice President of Communications at Inovalon. I'm here this evening with Dr. Keith Dunleavy, Inovalon's Chief Executive Officer and Chairman of the Board; and Jonathan Boldt, Inovalon's Chief Financial Officer. I'd like to welcome you to our second quarter 2021 earnings call. The press release announcing our financial results was distributed this afternoon, and a replay of today's call will be available shortly posted on the Investor Relations page on Inovalon's website. For those of you listening to the rebroadcast of this call, we remind you that the remarks made herein are as of today, July 28, 2021, and will not be updated subsequent to this initial earnings call. I will 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're 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 evening, everyone, and thank you for joining our call. Once again, our second quarter results exceeded our expectations across the board and demonstrated the success we are having accelerating revenue growth while continuing to deliver SaaS industry-leading profitability. We continue to see Inovalon's growing leadership across the health care ecosystem, serving as the enablement layer for data-driven health care initiatives across an ever-increasing breadth of the health care marketplace. Strength in market demand, sales, implementations and execution once again continued to drive top line growth acceleration. This resulted in revenue again exceeding the top end of our original guidance increasing to $190.4 million, reflecting an organic growth rate of 17% year-over-year and 8% sequentially. This reflects a further acceleration above the strong results achieved in the first quarter of 2021, which demonstrated 15% year-over-year growth. If we look specifically at our Inovalon ONE Platform growth, which contributed $172.1 million in revenue or 89% of the second quarter's total revenue, it reveals an even stronger acceleration, achieving a growth rate of 19% versus platform revenue in the year ago period. Second quarter new sales annual contract value, or ACV, was $60.5 million, and platform new sales ACV, excluding services, totaled $43.2 million. Both ACV metrics compared to record levels in the same period last year, this being driven by the broadening adoption of Inovalon's cloud-based SaaS solutions with marquee industry-leading wins across multiple segments of the marketplace, and are contributing to the company's continued strong expansion in its subscription-based platform business. Solid sales performance in the quarter reflected hundreds of engagements, including both substantive expansions of existing relationships as well as a record 588 additions to the company's new logo list. Strength continued to be seen across all business units, where each is not only executing well, but also seeing very strong sales pipeline opportunity levels in the quarter despite multiple successive quarters of record or very strong deal closures Simultaneously, Inovalon's investments and focus on delivering an unmatched total customer experience in combination with the increasing value impact of the Inovalon ONE Platform solutions continue to yield strong benefits during the quarter. During the period, Inovalon continued to see strong increases in contract renewal and retention rates, extended contract durations and contract expansions. In addition to continuing to realize new substantive contracts of considerable duration of 5 years or greater, Inovalon is also realizing the extension of contracts well in advance of their expiration. This was clearly demonstrated with the extension and expansion of Inovalon's existing relationships with Walmart, one of the world's leading retailers, which expanded and extended its relationship with Inovalon into 2028 as announced on June 24, 2021. During the second quarter, Inovalon also continued the expansion of its health care ecosystem connectivity. The company added connectivity with additional EHRs to Inovalon's real-time data access and interoperability platform, increasing the total number of addressable providers to more than 800,000 across use cases of accessing and applying data for health care research, analyses, operations and treatment. Concurrently, Inovalon's proprietary primary source longitudinally matched data set, the more squared registry, climbed to more than 63 billion medical events across more than 338 million unique patients. The combination of these resources and capabilities reflected within a system design and technology architecture that allows for real-time data access and analysis of otherwise disparate data resources, was awarded a key patent during the quarter on May 18, 2021. Specifically, U.S. Patent No. 11,011,256 for the systems and method for providing on-demand real-time patient-specific data analysis computing platform. We announced this on May 25, 2021. I think that this is worth spending a minute on it. Through this proprietary technology, an authorized application, which can be one of ours like ScriptMed Cloud or a customer's proprietary application or a mobile app written by a third-party on a mobile phone or a tablet, or a giant enterprise applications, such as the hospital EHR or a global technology platform operator, can make an API call for data and analysis pertaining to a specific patient and receive the answer back within seconds. The data request could be simple, like what is the person's most recently known blood pressure or it could be complex, like what are all the known laboratory tests and results over the past 10 years or requiring advanced AI, like what is the person's likelihood for their diabetes to worsen over the next 6 months and what would be the best course of care to prevent it. In each case, regardless of whether the data might be spread across 15 different hospitals, laboratories, pharmacies, health plan claim systems and doctors' offices across many different years as the patient moved employers, doctors and geographies, Inovalon's technology has the ability to combine data already known by and held by Inovalon, to multiple additional managed data sets and thousands of additional locations and systems where the patient's data resides. Link that data, longitudinally match the data, apply data integrity analyses to normalize and transform the data, apply requested analytics to the data and respond to an authorized request all within seconds. This offering referred to as the Inovalon DataStream API is being recognized as highly unique within the marketplace and is showing strong reception across many use case applications as the marketplace increasingly appreciates the value of Data as a Service and a single-source, real-time fire-enabled API flexible availability. Well, there are many success stories across all our business units this quarter, I'd like to highlight just one from our provider business. Exemplifying the continued successful innovation and market leadership by our colleagues within our provider team. On June 22, 2021, the company announced a multiyear agreement with Homebase Home Care, the leading agency management and EMR software platform for the home health and hospice industry, where they will exclusively offer Inovalon's EASE All-Payer applications to their customers, representing more than 25% of the nation's home health providers to deliver greater administrative efficiencies and increased accuracy of payment processes. Available as a module of the Inovalon ONE Platform and leveraging data-driven routing and a sophisticated analytics engine, EASE All-Payer is the industry's first fully-integrated cloud-based workflow engine that combines broad connectivity and advanced data intelligence to empower providers to efficiently manage the entire data and revenue cycle process of clinical encounter data, claims and receivables accuracy from all commercial payers and Medicare in one integrated platform. Lastly, I'd like to take a moment to welcome Inovalon's new Corporate President, Eron Kelly, as previously announced on June 28, 2021. The Eron brings more than 20 years of experience in global software and cloud-based technology growth as a seasoned executive leader at Amazon and Microsoft. Eron reflects not only the company's increasing focus and strength in cloud software leadership, but also the caliber of industry-leading technology engineering talent and executive leadership joining Inovalon. Each and every day, Inovalon is increasingly being recognized as a leader in data-driven health care, a place where mission and meaningful impact matter, a tremendous group of people and a great place to work. We are honored to have the opportunity to so meaningful empower our customers and the millions of individuals they serve every day. In summary, the second quarter was another demonstration of our team's outstanding performance, the market's increasing demand for our capabilities, continued sales success, solid execution and the vast growth opportunity still in front of us, all of which continues to fuel our strong excitement and enthusiasm for many great quarters and years ahead. Before I turn the call over to Jon, I'd like to also encourage anyone who has not yet had the chance to view our 2021 Investor Day, which was held virtually on May 18, 2021, to do so. The event highlighted the company's people, technology, differentiation and long-term growth opportunity and continues to be available for replay on Inovalon's website in our Investor Relations section. And with that, please allow me to hand the call over to Jonathan Boldt, our CFO, to walk through the financials and guidance in more detail. Jon?
Jonathan Boldt: Thank you, Keith, and good evening, everyone. I'd like to begin by highlighting a few key points building on Keith's opening remarks. First, Inovalon's second quarter performance once again exceeded our expectations with total revenue exceeding the high end of our quarterly revenue guidance range, growing 17% year-over-year and 8% sequentially. Second, based on our strong second quarter performance, we are once again increasing our full year 2021 revenue guidance to 14% to 17% growth year-over-year; and third, we are very pleased with the strategic investments we have been undertaking here and in 2021 to further accelerate our growth, investing in areas of sales and marketing, product innovation and delivery, the sum of which are driving very positive returns and payback periods. Now, turning to our second quarter results. Second quarter 2021 revenue was $190.4 million, a 17% year-over-year increase, accelerating from 15% year-over-year growth in the first quarter and growing 8% sequentially. This increase was primarily fueled by an increase from new customer wins over the last 18 months and the continued adoption of subscription-based platform offerings from both new and existing customers. Focusing on our revenue streams, subscription-based platform revenue in the second quarter was $168.7 million compared to $142.1 million in the second quarter of 2020. This represents an organic increase of 19% year-over-year, accelerating from the 15% year-over-year growth in the first quarter and growing 7% sequentially. Subscription-based platform revenue for the second quarter equated to 89% of total revenue. Services revenue in the second quarter was $18.4 million, an increase of 22% from the year ago period and represented 10% of our second quarter 2021 revenue. Legacy revenue was $3.4 million and contributed to the remaining percentage as expected. Inovalon's new sales ACV was $60.5 million and platform new sales ACV, excluding services, totaled $43.2 million. Trailing 12-month platform new sales ACVs totaled $217.8 million, representing growth of 30% year-over-year. As Keith mentioned earlier, both ACV metrics compared to record levels in the same period last year, which included the broadening adoption of Inovalon's cloud-based SaaS solutions with marquee industry leaders across multiple segments of the marketplace, and are contributing to the company's continued strong expansion in its subscription-based platform business in 2021 and for years to come. Despite successive quarters of strong deal closures, we continue to see record sales pipeline opportunity levels in the quarter. Turning to gross margin. Second quarter 2021 gross margins were strong at 72.9%, and reflect the additional investments into increasing our marketplace technology connectivity and delivery acceleration. Sales and marketing expense for the second quarter was $21.7 million, an increase of $6.7 million year-over-year. Sales and marketing as a percentage of revenue was 11.4% in the second quarter of 2021 as compared to 9.3% in the year-ago period. Given Inovalon's large market opportunity and increasing market demand for the Inovalon ONE Platform, the company continues to invest in its sales and marketing engine to drive further organic revenue growth acceleration. As we discussed on our last few earnings conference calls, Inovalon resumed its investment into further expanding its sales and marketing engine in response to the strong demand we are experiencing for our data-driven technology platforms. At the end of the second quarter, Inovalon's sales and marketing team expanded to 301 people from 277 at the end of the fourth quarter of 2020. Second quarter 2021 adjusted EBITDA was $64.1 million, an increase of $7.4 million or 13% year-over-year. Adjusted EBITDA margin for the second quarter was 33.7%, representing an increase of 60 basis points compared to the first quarter of 2021. Our profitability continues to reflect industry-leading SaaS profitability. Second quarter 2021 non-GAAP net income per share was $0.19, an increase of 27% as compared to Q2 of 2020. Turning to cash flow. Net cash provided by operating activities in the second quarter of 2021 was $25.1 million, which is after interest payments of $11.9 million. Q2 2021 net operating cash flow and free cash flow decreased from the year ago period, primarily driven by cash tax payments of $10 million, and account receivable working capital uses of $13 million, driven by our revenue growth; and finally, an increased capital spend investment as we continue to accelerate the Inovalon ONE Platform's capability deployments driving our new sales ACV success. Additionally, the company continues to expect a net federal income tax receivable of approximately $32 million relating to net operating loss carryback benefits associated with the 2020 CARES Act. Moving to the balance sheet. Inovalon's financial position and liquidity continues to be strong. Inovalon's cash and cash equivalent balance as of June 30, 2021, was $117.9 million. Total outstanding debt was $903.1 million. Reported balance sheet debt was $884.7 million, net of issuance discounts and deferred financing fees. And our net debt position was $785.1 million. Our net debt leverage ratio, as defined within our debt agreement, continues to improve. At the end of the second quarter 2021, our ratio further reduced to 3.17:1. This compares to 3.69:1 at the end of the second quarter of 2020 and 3.19:1 at the end of the first quarter of 2021. At the end of Q2 2021, Inovalon's weighted average interest rate on its debt was 4.94%, of which 78% of the principal is fixed. Now, let me conclude by sharing updates to the company's 2021 financial outlook. Once again, we are raising our revenue guidance range based on our second quarter strong performance. For the full year, we now see revenue ranging between $760 million to $778 million, representing an organic growth rate of 14% to 17%, with subscription-based platform offerings contributing 88% of our total 2021 revenue. We continue to see strong profitability and strong cash flow generation, and we are reaffirming our adjusted EBITDA range of $265 million to $275 million, representing an adjusted EBITDA margin of 35%. Non-GAAP net income growth of 18% to 21% and net cash provided by operating activities growth of 23% to 33%. Additionally, we are raising our capital expenditures guidance by $5 million to $64 million to $70 million, as we continue to accelerate our new platform product and functionality release schedules. For the third quarter of 2021, we are providing guidance of $191 million to $197 million in revenue, reflecting year-over-year organic growth of 18% to 22%, adjusted EBITDA of $66 million to $71 million and non-GAAP diluted net income per share of $0.19 to $0.20. We encourage you to refer to today's earnings release and our second quarter supplemental deck for more details on our 2021 guidance ranges and quarterly revenue cadence for the rest of the year based on our views today. Before going to Q&A, I'd like to reemphasize Keith's comments. First, Inovalon's performance was strong, coming in above our expectations for the second consecutive quarter. Second, we are seeing strong demand for our platform with significant new sales and a continued robust sales pipeline. Third, implementations of prior sales continue to come online as planned, resulting in a compounded subscription-based growth. Fourth, we are seeing a rising appreciation for the differentiation of our data and our analytic capabilities across the marketplace. And fifth, our investments in further accelerating our growth, increasing our sales and marketing, delivery and innovation are showing very positive results. With that, let me turn the call back over to the operator to conduct our Q&A session.
Operator: [Operator Instructions] Our first question comes from the line of Sandy Draper of Truist Securities.
SandyDraper: Congratulations on another really strong quarter. I guess the first question, when I think about the raised revenue guidance and the maintaining EBITDA guidance, Jonathan, you highlighted continued investments. When you think about -- are there any new areas that sort of came up over the quarter? Or is this just basically, okay, we had another good quarter, we're going to reinvest it. Or is there something new that's going on that you think you're going to be investing in?
Dr. Keith Dunleavy: Sandy, thanks for the question. Before I go to your question, if I could just first say and before we go through the rest of Q&A, I just want to convey that we are very much aware of the reports by Bloomberg mentioning Inovalon as -- and the potential acquisition of the company that came out late on Monday evening. And I want to make sure it's clear that as a matter of corporate policy, we will not be commenting on market rumors or speculation. And therefore, as you have kindly done here, Sandy, we will not be answering any questions on that topic, but we'd like all questions to be kept to the topic of the company's Q2 performance, our outlook and such matters. So Sandy, to your question, thank you. We are seeing fantastic demand for our capabilities. And the number of asks and applications of our technology continue to increase. It is abundantly clear to us that the continued investment in our ability to drive greater sales, marketing, delivery and innovation expansion is returning tremendous results on those investments. So indeed, that does continue to be our focus with the excess dollars that we're driving with the acceleration of our top line growth. So no, during the quarter, there wasn't any change from that strategy or any specific element other than the multiple, happy to talk about the multiple different areas of demand for our offerings that we are very excitingly accelerating.
SandyDraper: Great. That's really helpful. And sort of a related follow-up. You addressed the -- you're starting to see some people renewing before contracts are coming up, obviously, very notable with Walmart. When I think about it, that could be because maybe you're coming out with new offerings that they want to go and add now, they're getting a higher ROI than they expected. And so they want to lock in for longer. What is driving it? Is there a common theme? Or am I missing something else that's obvious that, hey, this is what's bringing to the table -- people back to the table sooner?
Dr. Keith Dunleavy: Thanks, Sandy. So I want to be careful to not specifically overreach to specifically talk about Walmart, but let me talk more broadly to your question. The cloud-based nature of our platform and the ubiquity of its connectivity, data assets and analytical capability, is increasingly being built into the business strategy and the business design and operations of our customer base. As they are seeing that value and are incorporating it within their longer-term business strategies, they are looking to secure that access to that capability, secure pricing on those capabilities, and very often expand the capabilities that they're using as Walmart did, both extending the length of the agreement and adding additional modules of capability. So what we're seeing is increasing value demonstration in the product offering as we connect more to the system, as we aggregate larger sums of data, as our analytics are becoming smarter and smarter informed that data capability, we are delivering more value for our customers. They're recognizing this value, and they are building it into their longer and longer-term views of how to run their businesses.
Operator: Our next question comes from David Larsen of BTIG.
DavidLarsen: Congratulations on a very good quarter. Can you maybe talk a little bit about the trend in ACV? Obviously, your revenue was very good, be it expectations, be it our estimate. ACV was down a bit year-over-year. Just any color or comments on that? And any impact that COVID has had, especially with like this delta variant?
Dr. Keith Dunleavy: Sure, David. Appreciate the question. Let me hit the first one, first, the ACV question. We are very pleased with our sales pipeline and the sales process flowing through that pipeline. As you know, we do have an aspect of lumpiness of our sales, but we're seeing very strong sales opportunity pipeline, both in the quarter and following the quarter. During the quarter, you might recall from the prepared remarks, we had 588 new logos, which was a new record, which is all part of our land and expand strategy, the company's expanded sales capability. The pipeline was hitting records during the quarter, extremely strong as we stand today, had a number of really great wins, not only another one in the pharmacy space, which we did not press release that came in towards the end of the quarter, which was another adjacency expansion of our specialty pharmacy capabilities. This one in the hub space, demonstrating our ability to further extend or demonstrate the extensibility of the ScriptMed Cloud platform into the pharmacy adjacencies. Also, added another top 10 major payer in the nation adopting our ePASS decisions to support platform and many other great sales like it. And just as a reminder, these ACV wins are just showing the initial part of revenue that was from a signature and don't show things like the impact of Walmart's extension and other organizations that are extending their contracts. So in summary, on the first piece, the year-over-year compare, we get your point, you're comparing to a record in last year's second quarter, but extremely strong pipeline and closure of sales throughout and now here in the third quarter as well. To your second piece on COVID, we are not seeing a change in the business environment from Delta variant or those changes of late in the marketplace. We continue to operate per the projections that we expected in the earlier parts of the year. As you might remember, COVID predominantly was impacting our services area and our legacy area. We've made a number of adjustments to the offerings and to our projections to account for that. As you might recall, we expected just approximately 2% contribution in the first half of the year and for the full year, only approximately 3%. We still see ourselves marching well within those tolerances and felt very comfortable raising the guidance today.
Operator: Our next question comes from Jessica Tassan of Piper Sandler.
JessicaTassan: So I think as of last quarter, you guys were in 25 of the top 25 global pharmas, 24 of the top 25 health systems and 7 of the top 10 specialty pharmacies. So can you just help us understand, I guess, the continued investment in the sales force now that you guys have already got a footprint in most major players across all end markets? And kind of how are the sales teams structured at these large accounts and what's the strategy to drive penetration?
Dr. Keith Dunleavy: Great. Jessica, thanks for the question. So certainly, we're super happy to have those top players at the top. Our wallet share penetration in that space is still only approximately about 3%. So we have a ton more selling inside those top 25, top 25, 24 and 7 of 10. So that is part of the sales force as we continue to evolve to also embed people within these really larger organizations, which is being very effective. Another part of that go-to-market strategy is also we have been building out more and more of what's called a total customer experience approach, which some organizations have as part of delivery, some organizations as part of what they call customer success. We are evolving that to total customer experience, and have changed our incentive programs this year to make that group's focus on delighting the customer and expanding that relationship. Further, there's a lot of moving downstream that we're working on. So we have an amazing sales force at the lower end of the quintiles in the marketplace and on the upper end of the quintiles of the marketplace. What we're doing now is we're converging on the middle, if you will. We're doing that through channel partnerships like the one we mentioned today in the provider space, where of the post-acute care space dominated by 20 -- or dominating 25% of the marketplace has chosen our platform as their exclusive offering within their customer base. And we're also expanding our sales teams to go after that middle market, if you will, or those middle tiers. And then also, Jessica, it's a lot of what's called adjacencies, right? So you can have a relationship with the classic poster child health plan or a pharmaceutical company or specialty pharmacy. But in the adjacent spaces, you have things like durable medical equipment distributors. You have home infusion operators, you have nursing home companies. So there's a lot of other health care organizations that don't land in the classic center points of each one of those verticals that we are building out our sales and go-to-market capabilities as we build out more offerings and network impact capability for them. So tons of opportunities that we're growing our force into, both from the sales side, the product side and the delivery and customer experience side.
JessicaTassan: Got it. And then if I could just follow up with -- so I think you highlighted a couple of large expansions at payer customers and pharmacies. Maybe if we could focus on the payer expansion. Can you just help us understand what the progression of a contract kind of looks like maybe from like a net revenue retention basis? And then is that revenue growth driven by utilization? Or is it module based? And just any color you could provide in terms of the progression of a contract expansion over time in the payer market specifically?
Dr. Keith Dunleavy: Sure. So historically -- let's take 2 different approaches. So historically, Jessica, obviously, we sold with what we had, right? So the -- if you want to look at the longer-term progression of a client that started with us 5 years ago, it's going to provide a pattern of -- they started with the products we had 5 years ago and have added the products we've developed and implemented since then, very consistent with how we've rolled out those products. So it's a different answer for adding a new customer today who can select from a much broader arsenal of products that might be their first product or second product or a third product. So the pattern today is very different than the pattern before for that hopefully very obvious reason. So today, we're seeing payers come in for many different reasons because their pains are different than each other. But whenever they start with, whether it be quality improvement, whether it be risk or accuracy improvement, whether it be vaccine adherence, whether it be consumer health gateway and compliance with the interoperability rules of the 21st Century CARES Act, whether it be a data lake or something else. Whatever their first starting point is, what's key to us is they're doing a master service agreement with us. They're doing data authorization and business associate agreement documents with us, and we're setting up our connectivity with them, which lays the groundwork for them to add #2, #3, #4. So I would say today, a new customer coming in today doesn't have a classic pattern, like they might have 6 years ago because the classic pattern 6 years ago was what did we have to offer, whereas today, it's a much larger arsenal to offer. But be that as it may, we typically see those customers signing for a second product usually within a year. So it takes a little bit of time for them to gain confidence in the impact and the capability of the offering, start to see that translate into the financial or clinical quality goals that they set out for us and for them. And as they start to see that, we're seeing them buy more and more. And maybe an easy poster child example for you, Jessica, is the Humana release from roughly a month ago. So Humana, obviously one of the top payers in the United States, a fantastic organization that's well known for its reliance on leading-edge technologies, often built themselves, but in this case, partnered with us started in 2019 with their first engagement. And as of the announcement 2 months ago or so, they had done -- I think by the time that release came out, it was 5 or 6 product engagements for multiyear expansions with us ranging from work in electronic decision support to vaccine adherence to specialty pharmacy as well. So it contain a lot of different patterns, Jessica. But the point is, is we land them and we expand them by demonstrating value.
Operator: Our next question comes from Daniel Grosslight of Citi.
DanielGrosslight: Congrats on the continued momentum. You've previously ranked the strength of your pipeline based on customer type, payer, provider, life sciences and pharmacy. Wonder if you could do the same for the sales momentum you're seeing this quarter and looking forward to 2022?
Dr. Keith Dunleavy: Thanks, Daniel, thanks for the question. We actually -- we're just hitting on this prior to the call today. We're seeing the same pattern that we saw in Q1. Pharmacy is still on fire and blazing really well and quickly and out in front. Behind that is a tied horse race between payer and life sciences. And then quite impressively accelerating is the provider. By the end of this year, provider might be getting up to neck and neck with the payer and life sciences. But right now, they are impressively accelerating and -- but technically, still, we'd have to put them at #4. And then the other one that we would start layering in there is we're seeing more and more direct data and analytical business strength, very, very significant expansion there in things like our data stream capabilities and our provision of data to the major players in both life sciences and provider world today. So quite a bit of strength across all 4 areas, all really solid double-digit and some impressively high double digit. And I don't mean in teens. I mean much higher double-digit growth rates we're seeing. So we're pretty pleased across the board.
DanielGrosslight: Got you. That's helpful. And then as a follow-up, I just wanted to focus a little bit on legacy. Obviously, it's not that important of a revenue stream now for you, but it's still a little depressed coming in less than 2% of revenue this quarter. You're guiding for the full year still that, that's going to be 3% of revenue, which would imply more than doubling of that in the second half of this year? Curious what's keeping that at sub-2%. And what gives you confidence that you'll be able to kind of get that back up to around 3% of total revenue for the full year?
Dr. Keith Dunleavy: Yes. Thanks, Daniel. So as we commented in the first quarter, we expected that through the first half of this year. So we expected it to be at 2% for the year. We have a lot of visibility into how that progresses in the second part of the year. Certainly, that is a reflection of a very, very mild expansion of use and very conservative compared to the utilization expansion we're seeing across the health care industry in general. Most utilizations have accelerated nearly back up to normal, and we're still holding our estimates quite a bit conservatively below that. But we've got a nice bit of cushion in there on that projection.
Operator: Our next question comes from Stephanie Davis of SVB Leerink.
StephanieDavis: I echo my congrats as well. So the first one, just a quick housekeeping one. I think on ACV, obviously, it's the toughest comp for the year because you're at Cardinal and your Walmart in 2Q of last year. But it was still a big delta versus our numbers. How much of that is just some mismodeling versus maybe a push out to some future quarters in some of your larger deals that we've been talking about in the pipeline?
Dr. Keith Dunleavy: Stephanie, thanks for the question. So certainly, we are very pleased with what we're seeing in sales. The key thing that we have learned now is let the clients sign when the client is ready to sign and avoid pressuring them to sign by the magic of June 28, June 29, June 30. We have a tremendously robust sales pipeline and closures here in Q3. So this to us is very much the norm and expected. We have things that are what we call singles and doubles, and then we have things that are triples and home runs. And the home runs and the bigger ones layer in as we see them come through the pipeline, and we don't want to push and rush them. We want to treat them with the care that they need. So we have plenty of the sales that we've already done closing and implementing now and plenty in Q3 and Q4 that I am quite confident you'll be pleased with.
StephanieDavis: Perfect. I agree with that philosophy, don't let themselves for the off [hook], especially with the largest clients on that. Now my second question is a little bit more kind of far-reaching strategy focus, so kind of in your kind of long-term hat year. But would we hear a bit more about the direction you'd like to go in for your Life Sciences business. You have your more square database. It's got a ton of different lives, its got a lot of access to folks in the U.S. There's a lot of demand for real-world evidence solutions and platforms out there in the life sciences side of the world. What's kept you more on the advisory side of the Life Sciences business and less into this real-world data opportunity? And is this something you're considering? Is it something that you're looking at as it buys? Is it something you're going to build? Or is there a structural reason why you wouldn't want to go into that?
Dr. Keith Dunleavy: Stephanie, that is a really great question. We completely agree with you. This is a massive opportunity for us that we are taking from 2 sides. Side #1 is the software platforms to service that space. And the software platforms that are out there today in the clinical trial process flow management arena and in the patient selection, identification, recruitment and engagement and retention marketplace and also in the analytical research space. These are very, very large opportunities for us that we are in the process of working towards and feel that, that will be a very strong expansion area for us. But importantly, also, there's another angle that we think is really important in Life Sciences, and this is driven by the data stream capability. If you take a look at the capabilities of data stream, which we've been awarded some pretty important intellectual property protection on this quarter, it is the only platform in the country, perhaps arguably there for also the world, that gives you the ability to identify all of the data for a particular patient connected into the network. The EHRs, the claim systems, the lab systems, the pharmacy systems, the decision support systems, whether they'd be in a hospital or doctor's office or 5 hospitals and 5 doctors' offices and aggregate that data in real time, either identified or deidentified across the marketplace within seconds. So this is enormously valuable to the clinical trial marketplace and incredibly valuable to the post-market surveillance and monitoring of patients and also the underlying research on patients. Because identified primary source data allows you to longitudinally match and link across all data sources and allows you to also impact care. So not just the research of a particular disease and treatment combination, but also the ongoing treatment and outcome management and improvement of a patient. There is no other platform in the country that can do that. And the capability of our data stream API system, not just for deidentified data, but for the applications in life sciences in the identified marketplace, we believe will rapidly be seen as second to none in the country. So that is a process that we are very focused on. We're getting a nice response on that. It will take time. It is not in our numbers, obviously, but we see it as a very large opportunity going forward, and we're excited about it.
StephanieDavis: So scaling it up, build or buy, what's your quick-fire answer?
Dr. Keith Dunleavy: Build.
Operator: Our next question comes from Vikram Kesavabhotla of R.W. Baird.
VikramKesavabhotla: I wanted to follow up on the ACV. Obviously, it looks like it's been a bit lumpy here over the past few quarters. I guess could you just help us frame what a normalized ACV growth rate should look like for the business? And in particular, any color on what we should be expecting in the second half of the year just based on the state of the pipeline right now?
Dr. Keith Dunleavy: Sure, Vikram. I think if you take a look at our ACV and conversion of ACV to platform revenue in our side and our supplement, you're going to see that the pattern is a very consistent pattern. I know Wall Street measures everything in 90 days, but our clients don't. So the pattern is a very -- a very consistent sort of pattern that we have. But the underlying pipeline is hitting records. The conversion of that pipeline is doing fantastically well. So we would expect to see very strong performances here in the second half of this year, let alone third quarter and/or fourth quarter, meaning both. So we have 0 concern over that, given the strength that we're seeing in that process. Anything else specifically, Vikram, on that?
VikramKesavabhotla: No, I think that's helpful. I mean, I guess, just a follow-up question to that, and I appreciate this may be tough to answer. But just given the strength of the pipeline at this point and the rising contract durations that you talked about. Curious if you could just give any early commentary on what the growth potential of the business could be in 2022, just given relative to the long-term range and what you're seeing right now?
Dr. Keith Dunleavy: Well, Vikram, as I hope we're demonstrating very well to Wall Street is our theme has been under promise and over deliver. We've raised our guidance now successively increasing coming in the year at 11% to 15%, then raising 12% to 16%, today raising 14% to 17%, and on fourth quarter, we're seeing 18% to 22%. So our theme to you is underpromise and overdeliver. It's premature for us to give guidance for 2022, but we see a very strong growing momentum, and our ability to execute on it is absolutely getting better every day. So we're excited for it. We have to keep our head down, work hard and continue to perform, but the team is doing a phenomenal job to achieve exactly that. So I hope that helps.
VikramKesavabhotla: Great. Thank you.
Dr. Keith Dunleavy: Thank you, Vikram. And with that, I'd just like to thank everybody for taking the time to join us this evening. But before I wrap up, I just want to reiterate, if I may, on a few key points. First of all, Inovalon's second quarter performance was really strong, came in well above our expectations for the second quarter, a second quarter in a row as well and another strong demonstration of the team's outstanding performance and solid execution for which I am very grateful. Second, strong demand continues to be seen across all of our business units. It's not one cylinder in the engine that's firing, but it is all of the cylinders in the engine that are firing. And for things like data and data stream and the points that Stephanie brought up, we are adding cylinders to this machine as we speak, and we're excited about them. And we're seeing the strong sales and pipeline opportunity at record levels, both during the quarter and here already now in Q3. Third, implementations on prior sales are continuing to come online as planned, and that is resulting, as you're seeing in a compounding subscription-based tailwind of growth and revenue acceleration. Fourth, we're continuing to see a rise in the appreciation for the differentiation of our data and our analytical capabilities with that data across the marketplace as evidenced by the numerous contract expansions, longer-term contract durations, the strong increases in contract renewals and retention rates that we're seeing, all of which are moving very strongly above our historical metrics. And fifth, our investments in future accelerating of our growth are doing extremely well, increasing in our sales and marketing, delivery and innovations are all showing very positive results. We're seeing that in our 2021 revenue outlook of 14% to 17% organic growth and continued strong profitability with adjusted EBITDA up 15% to 19%, as well as our guidance for third quarter, where we see growth accelerating at 18% to 22% year-over-year. So clearly, we have a lot of excitement and enthusiasm for what we're seeing now and ahead of us. And we thank you for your time this evening and all of your ongoing interest in Inovalon. Thank you, and good night.
Operator: And this concludes today's conference call. Thank you for participating. You may now disconnect.
