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Inovalon Holdings (INOV) Q1 2019 Earnings Call Transcript

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Inovalon Holdings (NASDAQ: INOV)
Q1 2019 Earnings Call
May. 01, 2019, 5:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Operator

Good day, ladies and gentlemen, and welcome to the Inovalon first-quarter 2019 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 -- Investor Relations

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 Jonathan Boldt, Inovalon's chief financial officer.

I'd like to welcome you all to our first-quarter 2019 earnings call. The press release announcing our financial results for the first quarter 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, May 1, 2019 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.

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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 those 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.

Keith Dunleavy -- Chief Executive Officer and Chairman of the Board

Thank you, Kim. Good afternoon, everyone, and thank you for joining our call. The results of the first quarter of 2019 reflect the progress that we continue to make against our strategic imperative to be the leading independent provider of cloud-based platforms empowering data-driven healthcare. Put into motion, over many quarters, building upon leading subject matter expertise, data sets and capabilities and analytics, connectivity and cloud architectures, brought to life through expanded sales and go-to-market expertise and now accelerating from the value being realized by clients and the chain reaction of referrals and synergistic growth being revealed.

We are seeing a compounding set of factors driving exciting performance for our clients and our company. By just about any measure, revenue or earnings growth, expanding margin rates, growth in annual contract value sales, client value realization, client retention rates, new logo sales and more, we are successfully executing against our plans, and remain on track to achieve our 2019 financial guidance that we first outlined to you last November. As I've shared with you over the past few quarters, Inovalon has transformed its business from legacy offerings to a cloud-based, subscription-based platform company. Through both organic technology innovations and the integration of industry leaders, we have brought to the marketplace the highly differentiated offerings of the Inovalon ONE Platform.

The breadth of capabilities, depth of informing data sets, flexibility of configuration and cost efficiencies of the Inovalon ONE Platform is driving broader and broader market interest, bringing to the table an increasing number and diversity of engagements and implementation opportunities, resulting in strong pipelines and strong sales. And these engagements and sales are with leaders in the healthcare ecosystem, from leading health plans and provider organizations to leading pharmacy and life sciences companies. We're tremendously proud of and excited about the organizations we support and have at the table with us today. In addition to the increased strength in our platform, we continue to strengthen and expand our sales team, strengthen and expand our management and leadership team and strengthen and expand the sophistication of our analytics and utilization of artificial intelligence to further drive client return on investment.

Over the past year, increases in depth of our datasets, breadth of our connectivity and advancements in our analytics and increasing application of artificial intelligence have contributed significantly to higher client value realization with increases of more than 30% in economic performance being achieved. The significant value realization has contributed to the very high client retention rates that we are seeing. Clients signing on for additional services and solid client referrals, all contributing to the significant expansion in new sales that the company is seeing. Each of these initiatives is individually yielding improvements to our business.

Together, they're having a compounding positive impact. As we have been speaking of since our November 7, 2018 release and conference call, we are seeing a strong interrelated success from our many initiatives. Strong platform capabilities and an increasing focus on client success is yielding strong client retention rates, additional purchases of capabilities and positive referrals. The significantly increased scale and sophistication of the company's sales teams are translating this successes into new logo additions and multiple successive quarters in new ACV sales strength, with first-quarter 2019 new ACV sales, excluding ABILITY and Services, increasing 216% as compared to the first quarter of 2018; and new ACV sales, excluding ABILITY, growing 45% compared to the year-ago period; and the trailing 12 months of new ACV sales, excluding ABILITY and Services, totaling an impressive $126.7 million, which reflects 122% increase over the prior 12-month period.

These successive quarters of new ACV sales are now layering into the business, resulting in successive strong quarterly organic revenue growth. And the efficiency of the platform and the business model is supporting significant leverage and expanding profitability and cash flow. Put simply, the evolution of the company through Inovalon 2.0 is translating into strength and performance for our clients, the company and its shareholders. We are proud of the strong progress we are making on our many initiatives and the returns that our efforts are driving.

I would like to take this opportunity to thank everyone across the organization for their contributions to our success and for the hard work that they have invested over many quarters to get us to this point of positive inflection and upward growing momentum. There are too many to individually speak of but they are the heart and soul of our mission, and the performance you are seeing and for their unwavering support and tireless drive, I am grateful. With that, I will turn the call over to Jonathan to review the results of the quarter and for our outlook for Q2 and the balance of the year. Jonathan?

Jonathan Boldt -- Chief Financial Officer

Thank you, Keith, and good afternoon, everyone. I want to begin by highlighting a few key points building on Keith's comments. First, we delivered strong first-quarter financial results with profitability improving ahead of our guidance range. Second, our focus remains on accelerating organic revenue growth, expanding technology-based efficiencies and driving strong profitability and associated cash flow.

And third, we are reaffirming our full-year 2019 revenue, adjusted EBITDA and cash flow guidance and revising upward our GAAP and non-GAAP earnings guidance. Now turning to the first-quarter results. First-quarter 2019 revenue was $145.5 million, an increase of 57% year over year and toward the high end of our first-quarter guidance range. ABILITY's acquired revenue contribution was $39.8 million, revealing strong first-quarter organic growth of 14% over Q1 2018.

In line with our successful transformation to Inovalon 2.0, subscription-based platform revenue grew 76% year over year and 10% sequentially, reflecting 83% of total revenue in the first quarter of 2019. First-quarter 2019 legacy revenue represented only 6% of total revenue and services revenue was 11% of total revenue. Turning to gross margin. First-quarter 2019 gross margin was strong at 74.4%, which represents a significant year-over-year increase of 1,050 basis points.

Sequentially, first-quarter gross margin increased 80 basis points, driven principally by higher sequential revenue and the continued progression of beneficial, higher value, higher-margin product mix shift. Excluding ABILITY's accretive first-quarter positive gross margin contribution, gross margin in the first quarter of 2019 was 69.5%, which represents an impressive year-over-year gross margin expansion of 560 basis points and an increase of 100 basis points sequentially. Consolidated gross margin expansion continues to be driven by our increasing mix of higher-value, higher-margin, subscription-based platform offerings and the realization of our technology-enabled efficiencies, which provide a solid foundation for future continued profitable growth. General and administrative expenses for the first quarter was $53.6 million, an increase of $4.2 million year over year and $5.4 million sequentially.

On a year-over-year basis, the increase in G&A was driven by $7.5 million of acquired G&A from ABILITY, which was partially offset by $2.9 million reduction in expenses achieved through integration synergies. Adjusting for noncomparable expenses, normalized first-quarter G&A was $54 million, translating into only a 9% increase in G&A in the setting of a 57% year-over-year increase in revenue, demonstrating tremendous operating leverage efficiencies. Additional details are provided on Slide 11 of our Q1 earnings supplement deck. The combination of increased revenue, strong gross margin and significant operating expense efficiencies drove the dramatic improvement in profitability.

Adjusted EBITDA in the first quarter came in at $44.5 million, an increase of $36.7 million or 466% year over year. Adjusted EBITDA margin for the first quarter of 2019 was 30.6%, compared to 8.5% for the first quarter of 2018. 2019 non-GAAP net income per share was $0.10, an increase of $0.14 on a year-over-year basis. First-quarter 2019 non-GAAP net income per share benefited from approximately $0.02 from the timing of a lower quarterly effective tax rate and a $0.6 million tax benefit.

For the full-year 2019, we continue to expect an effective tax rate of approximately 28%. Turning to the balance sheet. Inovalon's financial position remains strong. As of March 31, 2019 cash, cash equivalents and short-term investments were $121.7 million.

Total outstanding debt was $975.1 million. Reported balance sheet debt was $947.8 million, net of issuance discounts and deferred financing fees. And the company had not drawn any amount from the $100 million revolving credit facility. Bringing this all together, as of the end of the first quarter, the company's net debt position was $853.4 million and the net debt ratio as defined within our debt agreement was approximately 4.29:1.

Turning to cash flow. Net cash provided by operating activities in the first quarter of 2019 was $14.8 million, which, even after our debt service interest payments of $15.6 million, represents the strongest first quarter of cash generation since Inovalon went public in 2015. Compared to the first quarter of 2018, net cash from operations increased $7.9 million or an increase of 115%. First-quarter capex, which includes ABILITY, was $11.4 million or 8% of revenue.

Compared to the first quarter of 2018, which excluded ABILITY, capex was down $9.3 million or 45%, returning the company back toward historical levels as previously projected. The first quarter of 2019 anniversaried the ABILITY acquisition, which in combination with the restructuring activities in Q2 2018 and the significant number of initiatives that have been undertaken to transform the company to what we refer to as Inovalon 2.0, it's worth reflecting on the cash flow generation of the company today. For the trailing 12 months ended March 31, 2019, Inovalon generated $42.7 million in free cash flow, as defined as net cash provided by operating activities less purchases of property and equipment and less investments in capitalized software, or an increase of $18.2 million or 74% as compared to $24.5 million for the trailing 12 months ended of March 31, 2018. Importantly, this free cash flow was after net incremental cash outflows of $51 million in cash interest payments and after $6.7 million in integration expenses, demonstrating the very strong cash flow generation of the business model.

Additionally, over the same trailing 12-month basis, capex decreased $22.1 million as we continue to see capex decrease as a percentage of revenue from full-year 2018 levels and after the launch of the Inovalon ONE Platform. Additional details on our trailing 12-month results and capex can be found on Slides 10 and 19 of our earnings supplement deck. Now let me turn to our outlook for 2019 and provide some key highlights. While we believe that a longer term view of the company's performance is most appropriate, we wanted to provide additional insight into the company's expected progression through 2019.

As we had discussed, the majority of our revenue now comes from subscription-based platform offerings, and we are realizing a very strong client retention rate on a dollar basis, above 100% coming into 2019. On top of this, we have reported strong new ACV sales for several quarters. The net sum of these factors is a significant successive incremental layering of these sales into organic growth expansion. Keep in mind that sales do not sign an equally distributed timing intervals throughout the quarter or year, and the time it can take from the sales contract signature to implementation and revenue recognition also has variability.

Taken together, these factors that we have been speaking to since our third quarter 2018 release and conference call are translating into approximately $10 million to $12 million in successive incremental revenue at the midpoint of each quarter here in 2019, around which we see a variance range of approximately plus or minus $2 million per quarter. As such, the company is providing the following guidance: For the full-year 2019, we are reaffirming our prior guidance range of revenue, adjusted EBITDA, capital expenditures and net cash provided by operating activities. We are increasing our GAAP and non-GAAP net income and GAAP and non-GAAP net income per share to reflect the revised effective tax rate and discrete income tax benefit recognized in the first quarter of 2019 of $0.6 million. For the second quarter of 2019, we expect $154 million to $158 million in revenue.

We expect adjusted EBITDA to be between $45 million and $49 million. And we expect non-GAAP diluted net income per share to be between $0.09 and $0.11. Please refer to today's earnings release in our first-quarter supplemental earnings deck for details on our 2019 guidance ranges. With that, let me turn the call back over to our operator to conduct our Q&A session.

Questions & Answers:


Operator

Thank you. [Operator instructions] Our first question comes from Donald Hooker with KeyBanc. Your line is now open.

Donald Hooker -- KeyBanc Capital Markets -- Analyst

Great. Goof afternoon. Congrats on the quarter. I guess, maybe, I just was doing quick math while you were talking.

I think it looks like the ABILITY debt worked out at about $40 million of revenue, which is a good number. And that's, I guess, we don't have a year-over-year comp. But I mean, sequentially, over the past few quarters, it seems like it's trending up nicely. I'm just trying to get my head wrapped around kind of the right growth rate there.

Is there anything specific driving that, just new for us on the outside? Can you talk about sort of trends and ABILITY going forward through 2019 and potentially beyond?

Keith Dunleavy -- Chief Executive Officer and Chairman of the Board

Don, good evening. Thanks for joining the call. This is Keith. I'm sure.

So ABILITY is doing a great job. The integration has been a very positive process. They're a fantastic group of people. They've been contributing in not just the revenue and EBITDA and earnings contribution but also just in subject matter and how they handle different aspects of the business.

It's been hugely beneficial to us as well. Given all that, the revenue growth that we're seeing is roughly about 10% plus, we're seeing in underlying growth. But at this point, we're also getting nice synergistic revenue together, which is not counted in that number. We count that number in our organic growth, so we're getting a strong foundational aspect of the business and an increasingly strong synergistic organic growth together.

Donald Hooker -- KeyBanc Capital Markets -- Analyst

OK, great. That's good perspective. And maybe one follow-up kind of also kind of trying to understand. Obviously, the growth in SaaS is impressive, the subscription revenue line.

But it looks like Services also had a nice trend and you're looking for growth there. Can you break that down a little bit, what's in there? I assume there's -- a big part of that is the old Avalere business. Is that fair? Can you talk about that revenue line as well?

Keith Dunleavy -- Chief Executive Officer and Chairman of the Board

Sure. So that group is also doing a great job with strong double-digit growth rates, as you're pointing out. We still encourage people to think of them as roughly an 11% contribution, 10% or 11% contribution to the full-year basis. But they are demonstrating really strong capabilities.

So what makes up that services? It is predominantly, as you point out, the life sciences work that Avalere does, increasingly data-driven in its nature, supporting the strategy, go-to-market capabilities, outcomes-based contracting and other aspects of value-based pharmacy elements. But then also, we have system implementation aspects in those services as well, which is a smaller portion but also a component. And then lastly, a component of that is the marketplace looking to understand how to apply data-driven healthcare solutions or how to apply the Inovalon ONE Platform to their work. So we have an aspect of our revenue, which is working with our customers to configure and implement the Inovalon ONE platform, which I think is pretty typical for SaaS-based companies.

But somewhere around 10%, and those are the contributions.

Operator

And our next question comes from Ricky Goldwasser with Morgan Stanley. Your line is now open.

Ricky Goldwasser -- Morgan Stanley -- Analyst

Hi. Good evening and thank you for the details. So when we think about just the visibility into the full year, I know we talked about was 96% visibility and obviously I understand that we should think about the business from a long-term perspective, but what type of visibility do you have into that second half of the year? That's one. And second of all, should we think about the cadence between the first and second quarter just as some business materialized earlier than you initially expected?

Keith Dunleavy -- Chief Executive Officer and Chairman of the Board

So Ricky, let me walk you through this, too. First of all, thanks for joining the call. So point No. 1, the aspects of how the quarters are building, what kind of visibility do we have.

You're right in recollecting that in February, late February, we gave a number of 96%. Today in our materials, we convey a number of 97%. We're adding nice amounts of revenue. You can look at it from two different points of view.

Go back several quarters, look into 2018, and you'll see very strong new ACV growth rates. That's new sales, the first-year portion of the revenue of a new sale. So as you know, Ricky, many of our contracts are long term, many years. We're seeing even five and even six-year aspects in our contract.

But ACV only reflects the first year of that revenue and it's only in new contracts, so a renewal would not count and be added into our ACV. So you're seeing multiple layerings, multiple additional quarter-after-quarter strong ACV revenues. And that has built up to a very nice now 97% visibility into the full year. The company has transitioned to a majority of the business being subscription-based in its nature.

And as such, the story is becoming more and more of a sequential quarterly business. I noticed your note that came out before the call. And if you look at the second quarter, we would encourage you to think of it as a sequential growth off of first quarter. And that sequential growth that you're seeing each quarter is roughly, as Jonathan touched on in the prepared remarks, roughly $10 million to $12 million in sequential incremental organic revenue addition each quarter as we march through the year, and we have 97% of that in place.

So very good visibility, very systematic progression through the year. We're talking about many, many singles and doubles of sales wins, so there is a very nice layering nature of how the revenue is playing out through the year. So hopefully, that adds a little bit of visibility and help with how to think through the year. But it's a -- as we just reported, $145.5 million in Q1.

Just add $10 million to $12 million on that midpoint each quarter through the year with a plus or minus $2 million on the range for variability in each quarter and you're going to land at $647 million at the midpoint.

Ricky Goldwasser -- Morgan Stanley -- Analyst

So basically, we should think about it as compacted about a 7% sequential revenue growth per quarter to the rest of the year?

Keith Dunleavy -- Chief Executive Officer and Chairman of the Board

That's about right.

Ricky Goldwasser -- Morgan Stanley -- Analyst

Is that a good way? OK.

Keith Dunleavy -- Chief Executive Officer and Chairman of the Board

Yes. That's a good way of looking at it, with obviously, a very strong amount of operating and profitability leverage.

Ricky Goldwasser -- Morgan Stanley -- Analyst

Thank you.

Operator

And our next question comes from Sean Wieland with Piper Jaffray. Your line is now open.

Sean Wieland -- Piper Jaffray -- Analyst

Thanks. In the prepared remarks, you mentioned the interrelated successes that you're having. And so was wondering if you could just give us, you don't have to name client names or anything, but some instances of where you've been able to deliver a solution that does lead, together, some of the different aspects that you've got across core Inovalon, Creehan, ABILITY, Avalere and such, just to help me understand that.

Keith Dunleavy -- Chief Executive Officer and Chairman of the Board

Sean, good evening. I'm having a little bit of tough time hearing you. What I think I heard you say is could we give some examples of the interrelated synergistic benefit between the different companies. Did I understand you correctly?

Sean Wieland -- Piper Jaffray -- Analyst

You did, and I will talk into my mic. Yes.

Keith Dunleavy -- Chief Executive Officer and Chairman of the Board

Great. So that plays out in a number of different ways, Sean. Let's talk about it in just bringing parties to the table, meaning increased interest from organizations that makes us more differentiated at an alternative end marketplace that's driving sales. Then let's also talk about where the product itself benefits from having the multiple different parts interconnected and compounding the benefit.

So the first piece, the examples are many. And that is organizations like pharmacies -- and we've announced deals like the specialty pharmacy at Walgreens, AllianceRx Walgreens Prime. We've had a number of other deals, some we've announced, some we haven't. But what they are looking to do is increasingly play a valuable role in the increased complexity that is the payor marketplace and the provider marketplace.

So the fact that we have customers and data flows and relationships with the large majority of the health plan marketplace, as well as tens of thousands of provider sites, well north of 50,000 at this point, is of great interest and value to the pharmacy marketplace. That's bringing them to the table with us to provide and deliver collaborated engagements that differentiate them in the marketplace. So that's one easy example and one that has an element of already publicly disclosed nature to it. In the other category where the different parts of and pieces are working together, the easy example is in the life sciences space.

Value-based contracting, outcomes-based contracting, go-to-market strategy capabilities are bringing a significant number of pharmaceutical companies to the company where the subject matter expertise that is the Avalere Group is able to combine the data sets and analytical capabilities of Inovalon to provide a very unique offering into that under-pressure marketplace today. So the offerings that that group, the Avalere Group, are now able to provide are very much using the tool sets that Inovalon and the platform are able to provide but informed and brought to life by the subject matter expertise services that is Avalere. Does that help?

Sean Wieland -- Piper Jaffray -- Analyst

It does. It helps a lot. And then a numbers question, quickly. What exactly was the discrete tax item of $600,000?

Jonathan Boldt -- Chief Financial Officer

Sean, it's Jon. The $600,000 was the result of some deferred tax liability remeasurements, which occurred in the first quarter.

Operator

And our next question comes from Sandy Draper with SunTrust. Your line is now open.

Sandy Draper -- SunTrust Robinson Humphrey -- Analyst

Maybe first for Keith. Just a nice start to the year, ACV continues to grow. Just curious when you think about, and I know one quarter, it's early to call, are there any changes to what -- where the interest levels are, where the demand is starting out in '19, relative to sort of where this business was starting to build up in '18? I'm just trying to think different environment, politically. And just trying to see if there -- what drivers are out there, if they're changing or if it's pretty much just a continuation of what you saw starting to happen in 2018.

Keith Dunleavy -- Chief Executive Officer and Chairman of the Board

Sandy, thanks for joining the call. Thanks for the question. We're seeing significant pipeline strength, and there has been no change other than an increase in that strength here in 2019. If you put the ACVs together, Q2, Q3, Q4 last year and Q1, you'll see that they have each been strong.

There is, obviously, variability, some of it is seasonality, some of it is just when things happen to sign. But the pipeline and strength that we're seeing is increasing, and we're very excited about that.

Sandy Draper -- SunTrust Robinson Humphrey -- Analyst

OK. Great. That's helpful. And I'm not sure if this is for you, Keith, or for Jon.

But when I think about the ACV -- I just want to make sure I understand it correctly. The ACV you're calculating is for the forward 12 months, but it doesn't necessarily mean it's all going to start at the same time. So we can sort of get an idea of coverage, thinking about annualizing, say, first-quarter numbers and then adding the ACV to it. But there, as you said, there's some variability to timing, so it's not like it's all going to start on April 1 and then on July 1 and then on October 1.

There are staggering effects that we can't model it exactly. Is that a fair way to think about it?

Keith Dunleavy -- Chief Executive Officer and Chairman of the Board

Sandy, you're thinking about it the exact right way. I mean, some of the business can sign and within three or four weeks be generating revenue at near run rate, meaning, needing very little additional ramp-up time. Others are more complex, and it might take several months before the configuration is done and revenue starts to be recognized, and then there can even be a little ramp up period as well. So you're thinking about the right way.

Jonathan Boldt -- Chief Financial Officer

Yes, that's the right thing.

Sandy Draper -- SunTrust Robinson Humphrey -- Analyst

OK. And then one last one, I'll sneak in. When -- I appreciate you guys, with all the organic numbers, pulling out ABILITY, going forward once we've lapped it, do you think -- will you still talk to ACV excluding ABILITY? Or will you change over and look at total company once it's sort of annualized? Just trying to get ahead of that. So are the numbers going to change? Or is it going to stay consistent going forward?

Keith Dunleavy -- Chief Executive Officer and Chairman of the Board

You're right, Sandy. With the annualization of the ABILITY acquisition, their ACVs will now be wrapped in and we'll be recording them as full platform ACVs and services separately.

Operator

And our next question comes from Ryan Daniels with William Blair.

Ryan Daniels -- William Blair -- Analyst

Keith, one for you on the sales front. Obviously, a great job moving to more, I think, you refer to them as dedicated comp management model versus your healthcare subject matter experts last year. So I'm curious, as we head into 2019 and beyond, are there further investments you're making in that team or anything else in the model that you're honing going forward given the strong new client adds you've seen from some of the investments?

Keith Dunleavy -- Chief Executive Officer and Chairman of the Board

Ryan, great to have you on the call, and thanks for the question. First of all, the job that people are doing in sales and the company is just absolutely phenomenal. From Bud Meadows at ABILITY to Michael Hasbany and Jason Capitel here, they've just been doing a tremendous, tremendous job growing things out. And as you properly point out, we've really transitioned how we're selling, how we're going to market, really, to a more technology-driven sale and a more account management-focused sale as you conveyed.

We've invested significantly there. We're likely very close to roughly the, on a percentage basis, the run rate that we expect to be at. I have a lot of faith in that team, and we're allowing them to run and grow that sales team as they see best because their delivery has just been phenomenal. But that said, the rate at which they're growing revenue, we expect that on a percentage of revenue basis we're pretty darn close to where we will likely be here.

Jonathan, anything to add to that?

Jonathan Boldt -- Chief Financial Officer

No. That's exactly right, Keith.

Ryan Daniels -- William Blair -- Analyst

OK. Perfect. And then the follow-up question will be more on the margin front. Obviously, great margin expansion you're seeing, both given the ABILITY deal and, even X that, some strong performance.

So as we think about going forward, what will be some of the key drivers to continue that outside of revenue growth? I know mix shift has benefited you over the last year. You had some IT investments probably paying off with less human intervention and more AI and machine learning driving yield up. So what are the '19/2020 drivers to continue outside of revenue growth?

Keith Dunleavy -- Chief Executive Officer and Chairman of the Board

Sure. Well, you're hitting the right things, Ryan. Those factors are continuing. They have not yet maxed, if you will.

As we drive greater value to our clients, they are buying higher and higher value variations and configurations on the platform and that's generating greater value for them and higher margin offerings for us. That is continuing, we made reference to it in some of our remarks, with the increased layering of machine learning and AI into the solutions and the connectivity and data depth. We're seeing very strong yield improvements on already happy client offerings, which is helping both them and us, them being the clients and us. So that's continuing.

And then in addition to that, connectivity, we're -- we still have a long way to go. And NLP is driving quite a bit of efficiency improvement for us and for our clients as well. All these things are literally at early innings for the company. And then the scale benefit is significant as we talked about increasing our G&A by roughly 8.5%, 9% while we drove revenue up 57%.

That tremendous leverage you should expect to continue to see as well. So all the things you listed it, but we don't feel like we're close to the end on those but in fact actually just getting started.

Ryan Daniels -- William Blair -- Analyst

Thank you.

Operator

Our next question comes from Matthew Gillmor with Robert Baird. Your line is now open.

Matthew Gillmor -- Baird -- Analyst

Hey, thanks for the question. I wanted to follow up on the discussion with Ricky and Sandy on the revenue progression. And I guess since most of the revenue is signed and you've got 97% coverage, the only risk to revenue would be on the implementation side. So can you maybe just help us understand how you schedule implementations? And are there any larger implementations to call out that we should be thinking about? Or are they pretty spaced out over the course of the year?

Keith Dunleavy -- Chief Executive Officer and Chairman of the Board

Matt, thanks for the question. You're right. With 97% of things covered, that obviously still leaves 3%. 3% is important to us.

We don't want to minimize that. But operational implementation and getting all those clients configured and turned on is an important part of delivering on the year. We feel very good about that. One of the key aspects I would draw attention to on this year is because of the success of the sales team, you're seeing these ACVs come from many, many singles and doubles, the occasional triple, but this is not an elephant-hunting revenue growth, which can have more and more single point of challenged implementations, as your question implies.

So we're pleased to be seeing a very diversified expansion in client base and client accounts. Nevertheless, all those implementations, all those turn-ons are important. We have teams focused on them constantly. It gets a lot of our attention.

But there is not a one single one or a two single two or a three single three or even like -- there is not that kind of lumpiness in implementation that is the all-or-nothing issue here. It's a lot of doing our knitting and executing through the year.

Matthew Gillmor -- Baird -- Analyst

Got it. Fair enough. And then one numbers question. Looking at some of the EBITDA add-backs, I was curious to know if the -- do the integration costs go away next quarter as you anniversary ABILITY? And then how should we think about the noncomparable cost item? Is that something that wanes at some point? And if you can give us some sense to what that's related to.

Jonathan Boldt -- Chief Financial Officer

Absolutely. So the first is for the integration. We still have integration costs or targeting $3 million to $4 million for the year of that spend, approximately $1 million occurring in the second quarter. We did include some additional details on our adjusted EBITDA reconciliation on Slide 23 of our supplemental deck.

For the other noncomparable items, for the full year, still have $3 million to $4 million in our plan. That does include some onetime item, specifically, as the result of integration or system migration on the overhead perspective and wrapping through or resolving legacy operating systems and then putting in new more advancements.

Keith Dunleavy -- Chief Executive Officer and Chairman of the Board

Great. Well, with that that was our final question. I'd like to thank everybody for taking the time to join us this evening. Before we wrap up, I'd like to just reiterate a few key points.

No. 1, the Inovalon ONE Platform is delivering a highly differentiated value to our clients and driving demand with an increasingly diverse audience and industry-leading client group. No. 2, with the strong client retention rates that we've talked about, above 100% now, multiple quarters of continued strong ACV sales translating now into incremental quarterly layers of organic growth.

And then No. 3, the leverage we're seeing, the operational efficiency of translating that growing organic expansion into increased profitability and increased cash flow. The evolution of the company to Inovalon 2.0 is translating to us into the performance for our clients, the company and the shareholders that you all speak for and we have out there, that we work hard for everyday. We're excited about the performance and the expansion we're seeing.

We're looking forward to the rest of the year, and we're excited to bring you updates along the way. Thanks for your time this evening. Thanks for your interest in Inovalon. Good night.

Operator

[Operator signoff]

Duration: 43 minutes

Call participants:

Kim Collins -- Investor Relations

Keith Dunleavy -- Chief Executive Officer and Chairman of the Board

Jonathan Boldt -- Chief Financial Officer

Donald Hooker -- KeyBanc Capital Markets -- Analyst

Ricky Goldwasser -- Morgan Stanley -- Analyst

Sean Wieland -- Piper Jaffray -- Analyst

Sandy Draper -- SunTrust Robinson Humphrey -- Analyst

Ryan Daniels -- William Blair -- Analyst

Matthew Gillmor -- Baird -- Analyst

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