Q3 2019 Earnings Call
Good day, ladies and gentlemen, and welcome to the Inovalon third quarter 2019 earnings calls at this time all participants are in listen only mode.
Later, we will conduct a question and answer session if you'd like to ask a question. Please press Star then one now.
As a reminder, this conference is being recorded and now I'll turn the conference over to your host Kim Collins. Please begin.
Good afternoon. This is Kim Collins senior Vice President of communications at an overall on I'm here today with Dr. keep done Levy Inovalons, Chief Executive Officer, and Chairman of the board and Jonathan Bolt Inovalons Chief Financial Officer.
I'd like to welcome you to our third quarter 2019 earnings call.
The press release announcing our financial results for the third quarter was distributed this afternoon and a replay of today's call will be available shortly posted on the Investor Relations page of Inovalons 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 October Thirtyth 2019, and will not be updated subsequent to the 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 implant market growth and our objectives for future operations.
Those statements involve a number of factors that could cause actual results to differ materially.
Additionally, information concerning these factors is contained in the Companys earnings release and filings with the FCC.
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 will 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.
No. It is my pleasure to turn the call over to Dr. Keith done Levy.
Thank you Kim good afternoon, everyone and thank you for joining our call.
For the past several years, we've focused on executing across a number of key objectives.
We have transitioned are foundational technology from an enterprise approach to a modular cloud based platform approach, we've transitioned our contracting structure from a more complex legacy approach to more streamlined subscription based approach, we have diversified and expanded our end customer base through acquisition.
And organic development.
And we have dramatically increase the scale and sophistication upper sales capability.
And the result is that today, we stand as the unique provider of the market's leading cloud based platform empowering data driven healthcare.
Concurrent with the focus on these four key pillars of strategic transition. We've continued to focus on her primary differentiating strikes health care ecosystem connectivity.
The primary source datasets sophistication of analytics and the ability to empower patient specific data driven interventions at the point of care.
And further still we are focused on raising the bar for how we operate.
From the degree that we automate or processes to the manner by which we structure organization and incentivize associates performance.
And the impact of this focus on execution showing up in the strong growth and profitability of the company.
On the trailing 12 month basis revenue was up 20% year over year.
This quarter saw organic growth that was 6% sequentially versus the second quarter of 2019, and up 14% organically versus the year ago third quarter of 2018.
From two years ago, we've increased our gross margins from 66% to greater than 74% and we have increased our adjusted EBITDA margin from 24% to 33%.
We've increased our trailing 12 month net cash provided from operations to more than 102 million and we've increased our free cash flow to 45 million, reflecting a greater than 1000% increase from the year ago period.
And we have started our debt paydown ahead of schedule with a payment of an additional $50 million from our excess cash flow from operations.
For the third consecutive quarter. We've reported results that are at the high end or ahead of our guidance for revenue and profitability and for the third consecutive quarter. We are again raising the ranges for net income net income per share adjusted EBITDA non-GAAP net income and non-GAAP net income per share range.
Yes.
For all of this a credit our strong customer partnerships with whom we are honored to work.
Great My colleagues all of the associates of Inovalon, who are doing a tremendous job every day.
But despite all these positives and is not time for us to take a victory lap we're not here to celebrate.
We have a lot of work ahead to realize the significant opportunity that we have in front of US. We are indeed, just getting started.
So I message to you today is that we are excited and pleased with what we've accomplished but we remain focused on execution.
With that allow me to touch on some of the exciting advancements and how they speak to a strong and positive 2020 and beyond.
First is the continued advancement of our portfolio of platform capabilities and the markets response to them. During 2019, we've been watching significant cloud based capabilities in all areas of our client base from pharmacy platform supporting specialty pharmacy script met exchange platform supply.
Putting hubs and electronic risk evaluation and mitigation strategies or he rems capabilities.
Additionally, we're seeing exciting use of the company's elastic container technology, where do you see T now readily being selected by clients desiring to burst store accelerate analytical runs.
We've also seen new platform offerings supporting population health initiatives, our automated each our data extraction modules and are natural language processing of non structured clinical data modules are all seeing meaningful sales.
We are in the midst of launching a new cloud based interface supporting larger team utilizations of our MLP tools expanding applications of our AI capabilities are very excited about the arrival of real time patient specific data supplementation, toolsets and the growing availability of inovalons capabilities through transaction.
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All of these examples are exciting areas of differentiated value delivery that are benefiting our clients driving demand and resulting in clients stickiness and sales growth.
Second is the continued expansion of the client patient populations that are connected to the noble on one platform.
As an old one continues to add new client logos to its customer base 81, new logo. So far this year and expand the number of populations within an organization that are utilizing the and over one one platform the reach of Inovalons value benefit expense.
Recently, no one has entered into new contracts, incorporating very large additional new member populations, which will become more evident as implementation occurs in 2020.
The continued strong expansion of patient populations allows inovalons solutions to expand its positive benefit of clinical quality improvement and economic performance for clients.
I think we've seen for even greater expansion of business with the respective organizations.
The classic land and expand that has achieved as positive value is demonstrated.
We're excited about these population expansions, what they reflect as far as an old ones reception by the marketplace and what they portend for the financial performance in 2020.
Lastly, I want to draw your attention to the meaningful differentiation and positive value impact that the you know of on one platform is bringing to the clients in the marketplace and why this is translating into both expanding market demand and meaningful positive impact on the health care ecosystem.
As reported on Monday for the six you're in a row clients utilizing an old ones platform outperformed the rest of the marketplace in the approval of their clinical quality performance scores notice star scores.
Well the nation as a whole improved their clinical quality scores as reported by the Federal Government Center for Medicare and Medicaid services or CMS on October 11th clients utilizing a noble and software improved nearly 300% more than those not using in Oakland software.
No one's breadth of data connectivity analytics and data driven intervention tools are delivering highly differentiated capabilities, resulting in highly differentiated market share expansion stickiness and land and expand opportunity.
As an over one integrates additional populations into its client base and platform. The scene is increasingly set for the growing network effect increasingly deepening our votes and meaningfully differentiating our value delivery.
These differentiated capabilities are but one example, the breadth of the you know one one platform is growing.
The number of patients on the platform is expanding.
The barriers between silos within the ecosystem are coming down.
Cross pollination between clients and network effect of growth and value delivery is occurring.
This is translating into our clients realizing differentiated performance and inovalon experiencing the same as a result.
With that I will in my comments as I began them. We're proud of the execution that we're seeing the value. It is delivering to our clients into the strength of the performance that's resulting for an overall.
Our third quarter performance marks an important demonstration of a nov. One 2.0 strength, we're not viewing today as a day to celebrate but rather an exciting point along a path of many steps we have much on which we need to focus and much on which we need to execute to deliver this great opportunity on behalf.
Our clients, our associates and our shareholders with that please allow me to turn the call over to Jonathan to review the results of the quarter and our outlook for the balance of the year end 2020 ahead.
Jonathan.
Thank you Keith and good afternoon, everyone.
I'd like to begin by highlighting a few key points building and Keith opening remarks.
First the third quarter's financial results reflect another quarter of solid execution with revenue adjusted EBITDA, a non-GAAP EPS at the high end or above our previous provided guidance ranges second we are updating our full year 2019 guidance for the third consecutive quarter. This year.
We're tightening our revenue guidance within our range and revising upward our GAAP and non-GAAP earnings guidance range and increasing our adjusted EBITDA range.
Third in this setting of our strong continued cash flow and our positive financial outlook, we initiated an acceleration of our debt repayment on October 4th 29 team with a 50 million dollar payment incremental to our mandatory obligations.
And fourth the company is again, providing forward annual guidance before the year begins.
The strong continued sales and client retention rates. We are pleased to provide 2020 organic revenue guidance for growth of 9% to 12% net income growth of 100%, 255% adjusted EBITDA guidance for growth of 9% to 14% and.
non-GAAP diluted net income per share growth of 12% to 20%.
Now turning to our third quarter results third quarter 2019 revenue was 166.5 million inorganic increase of 14% year over year and 6% sequentially subscription based platform revenue grew to 84% of third quarter revenue compared to 83 per se.
In the third quarter of 20 team the year over year organic revenue increase of 20.6 million was driven by an increase of 11.9 million in revenue from existing customers, reflecting expanded relationships and an increase of 8.7 million in revenue from new customers.
Reflecting continued adoption of our platform offerings.
On a trailing 12 month basis third quarter 20 maintain trailing 12 month revenue was 605.2 million increase of 20% compared to the third quarter 2018, trailing 12 month period.
Trailing 12 month revenue growth continued to be driven by continued strong new client sales growth and strong client contractual renewal retention rates.
New sales annual contract value or HCV during the quarter came in at 44.1 million.
And 28.1 million excluding services.
He CV is down year over year. It is important to remember that numerous factors and dynamics such as deal size and signature timing can result in quarter to quarter variability of this metric.
Turning to gross margin third quarter 2019 gross margin was the strong 74.2%.
Strong gross margin continues to be driven by higher value products shifts as well as increasing scale and efficiency of the company's platform offerings.
As the company's performance has demonstrated through 29 team the company's platform offerings and delivery structure position the company nicely for continued profitable scalable growth.
Sales and marketing expense for the third quarter was 16.2 million, an increase of 4.4 million or 37% year over year and $1.8 million sequentially.
Sales and marketing as a percentage of revenue was 9.7% for the third quarter of 2019 compared to 8.1 person in the third quarter of 2018.
Third quarter 2019, trailing 12 month sales and marketing expense was 57.8 million or 9.6% of revenue, which represents an increase of 16.3 million or 39% compared to the third quarter 2018, trailing 12 month period of 41 point.
5 million or 8.2% of revenue.
Our increased investments in sales and marketing engine continues to be driven by the company's focus and delivering strong organic revenue growth.
General and administrative expenses for the third quarter of 29 team continued to demonstrate very positive operational leverage and was only 49.3 million, which represents an increase of only 2.1 million or 4% year over year.
Gionee expense as a percentage of revenue was only 29.6% in the third quarter of 2019, compared with 32.4 person in the third quarter of 2018.
Increase revenue strong gross margin and continue operating expense efficiency drove strong profitability during the quarter adjusted EBITDA for the third quarter was 56.3 million increase of 3.8 million or 7% year over year inclusive of the increased.
Investment in sales and marketing expense of 4.4 million.
Adjusted EBITDA margin for the third quarter was an impressive 33.8%.
On a trailing 12 month basis third quarter 2019, adjusted EBITDA was 191.9 million in increase of 38% when compared to 138.6 million during the preceding 12 month period.
Which includes the increased investment of sales and marketing activities of 16.3 million.
Third quarter 2019, trailing 12 month adjusted EBITDA margin was 31.7%, which represents a 430 basis point increase compared to the year ago period.
Third quarter 2019, non-GAAP net income per share was 15 cents, which increased four cents per share or 36% from a year ago period.
And third quarter 2019, trailing 12 month non-GAAP net income per share was 43 cents an increase of 65 per cent compared to 26 cents during the preceding 12 month period.
Turning to cash flow net cash provided by operating activities in the third quarter of 2019 was 32.4 million, which is after our debt service interest payments of 16.4 million and after an incremental cash payment for acquisition related contingent consideration of too.
Point 5 million.
Third quarter, Capex was 14.7 million or 9% of revenue continuing to return the company back towards historical levels as previously projected.
For the trailing 12 months ended September Thirtyth 29 team, a noble him generated $45 million and positive free cash flow, an increase of 41.8 million or 1304% as compared to 3.2 million of free cash flow in the year ago period.
Importantly, this free cash flow was after incremental cash outflows of 34.6 million in cash interest payments.
Further highlighting the company's business models very strong cash flow generation capability.
Additionally over the same trailing 12 month basis, Capex decreased by 21.9 million or 29% as we continued to see capex returned to normalized levels.
Additional details on trailing 12 month results and Capex can be found on slides 10, and 23 of our earnings supplement duck.
On the balance sheet no one's financial position remained solid the company exited Q3 with cash and cash equivalents of 133.6 million.
Total outstanding debt of 970.2 million.
Reported balance sheet debt of 944.9 million.
And the company had not drawn any of its 100 million dollar revolving credit facility.
Bringing this altogether as of the ended the quarter. The company's net debt position was 836.6 million and our net debt ratio as defined under our credit agreement was approximately 4.23 to one.
As we announced earlier today subsequent to the ended the quarter. The company initiated an accelerated paydown of our debt with an incremental repayment of $50 million above our mandatory payment schedule of 2.4 million per quarter.
This incremental payment was made from surplus cash flow from operations and as of today. The company continues to have no amount drawn on its 100 million dollar revolving credit facility.
Using current one month LIBOR rates. This principal reduction will drive an estimated decrease in annual cash interest expense of $2.8 million and thereby increasing return to our shareholders.
Now, let me conclude by sharing updates on the company's 2019 guidance in a full year 2020 financial outlook.
For the full year 2019.
First we're tightening our revenue range previously provided to be 638 million to $643 million, reflecting a year over year as reported revenue growth of 21% to 22% and organic revenue growth of 13% to 14%.
Second we are once again, increasing our guidance for GAAP and non-GAAP net income GAAP and non-GAAP net income per share.
And adjusted EBITDA.
Third we are reaffirming our prior guidance ranges for capital expenditures and net cash provided by operating activities.
This results in fourth quarter 2019 guidance as follows we see 169 million 274 million in revenue, reflecting year over year growth of 24% to 20% compared to the fourth quarter of 2018.
We see adjusted EBITDA to be between 56 million to 62 million a year over year increase of 44% to 60% and third we see non-GAAP diluted net income per share of 12 cents to 15 cents a year over year increase of hall hundred 40% to 200 per.
Excellent.
Looking ahead, our 2020 financial outlook is as follows first we see revenue of 698 million to 718 million, representing organic revenue growth of 9% to 12%.
Second we see 2020, adjusted EBITDA of 231 million to $241 million representing growth of nine took 14%.
Third we see non-GAAP diluted net income per share of 57 cents to 61 cents representing year over year increase of 12% to 20%.
And finally, we expect capex to be flat year over year with our full year 2020, Capex range of 52 million to 58 million or 78% of expected 2020 revenue.
We encourage you to refer to today's earnings release in our third quarter supplement earnings deck for more details on our 2019 and 2020 guidance ranges.
With that let me turn the call back over tour, operator to conduct our Q and a session.
Thank you as a reminder to ask a question you when you press star one when you touched on telephone.
To withdraw your questions press the pound.
Yes, let me your questions to one and one follow up and then reenter the queue.
And our first question comes from Ricky Goldwasser with Morgan Stanley . Your line is open.
Hi, there good evening.
Hi, Richard.
Yes. So thank you very much for the early comments on on guidance.
Couple of questions on there.
First of all when we think about next year I think last year, you talked about kind of like the visibility that you had when you provided us the early guide so.
Can you just give us some some some color on that and then second of all when we think about.
The margin expansion opportunity honesty.
Into fourth quarter, you shrink very nice margin expansion.
Seem more.
You did.
Next year can you maybe talk about how we should be thinking.
Margins when youre, introducing new products.
Aim got means to the margin and how we should think about the margin progression because when we think about a 2020 outlook. It seems that arent there are lot of new product can service offerings.
Got you are selling to your customer base.
Great Ricky Thanks for the questions I think in about four or five of them there let me.
Well you quickly.
So first thanks, thanks for taking the time out for the call.
His ability is really good.
We have very strong client retention rates going very strong.
Client retention rates strong pricing power in the market, we're very excited about all the above.
Last year as you know we were transitioning from a period of Navy negative, 10% organic growth to positive 13, 14% growth.
Swing of 20, 324% that we rightfully.
Wanted to provide a lot of visibility to to the market. This year. After having delivered on that we think really nicely and hit an indoor beat quarter. After quarter end raises we marched our way through the year. We spent some time looking at competitor metric benchmarks, we took a look at.
What sort of market information our peers in the space, we're giving out and we really wanted to take the opportunity to then realigned with them as we put out.
These numbers today, but again for clarity really strong pipeline really strong visibility really strong retention rates.
And then also last thing I'll give you one on the visibility and processing through 2024 moving onto your other parts of your question in the supplemental deck Slide 21, we give you a revenue cadence that you should expect throughout the year.
So there's a graphic in there and illustrative graphic the basically shows the street should look for 9% to 12% organically each quarter over the 2019 quarters. So just a nice progressive Caden I'd like you saw in 2019.
You will see the same thing in 2020, just just higher nine to 29% to 12%.
The second thing you asked is on profitability you made comments on the 33% EBITDA.
And the muted number I think as the number you are the word you used we've seen really strong progression of our profitability here in 2019 marching it up virtually every single quarter.
With strong ability to show operational leverage increased connectivity and increased automation, bringing more and more of that to the forefront we've been pretty.
Well, if you will in the marketplace about how we want to spend this expanding profitability on further accelerating our growth and investing in new products and new markets and that's what you're going to see us do so.
Really strong ability to generate profitability, we hope that that's been very clear to the marketplace. We have very comfortable levers. If you will on those profitability metrics and we want to spend a good amount of money on further accelerating or growth in taking advantage of.
Further broadening our breadth so.
Strong profitability is what were conveying and a strong control on that a profitability.
Also and then the last part of your question had to do with new products and if I'm interpreting right new products versus existing products. So a number of different things are receiving our investments certainly investments and expanding our sales and marketing capacity and sophistication.
In expanding our product offerings as well to your implication product new products do tend to be a little less profitable on their initial launch but with his broad of a client base that we have what we find is a very strong inbound indication to us from the mark.
But as to what capabilities that are looking for that gives us the advantage to it we use the portfolio of modules that we have those Lego blocks. If you will have the noble on one platform and bring a product to market quickly and profitable really nicely profitably.
For one so we're very content there on new product launches and content on what you will see profitability from them.
Thank you and our next question comes from Stephanie Danco with Citi. Your line is open.
Hi.
Thank you for taking my question Keith.
Yes.
Very similar to the prior question just looking at the midpoint of between 20 guidance. It does imply from top line deceleration.
From where you where this year.
I just love to know the balance that's driven from conservatism versus large numbers or visibility that you're seeing as you ramp up.
Yes, well first of all Stephanie great to have you on the call. Thank you.
And we definitely appreciate the question in the various versions of it.
I'm sure you. All know this is this is a function of continued demonstration of credibility in reliability to the marketplace and making sure that we are under promise and over deliver to the market to our clients to to all involved.
Certainly street expectations from us was a bit lower than where conveying here. So we're good 20 million in revenue above where consensus was in very significantly ahead on an EBITDA and earnings and that the message we want to strongly send to the market.
Place that things are going very well, we expect them to go very well you're mathematically you're correct that it's not an unfair.
So as you are coming from mathematically, but we also one should be here very strong confidence and excitement about what we're seeing from our customer base going into the year, but but lets under promise and over deliver.
Understood understood that.
Makes sense.
Great that track record now one quick follow up at different topic, just thinking about your your E. H R data extraction tools that you have.
With players like Star and Allscripts now entering the for Ray into healthcare data did that make them competitors or is your tool make it more.
But you need for partnership.
And we really see it as the latter Stephanie so any entity out there. Obviously those you charge you mentioned are great organizations that have great.
Market presence, but still typically they would have only roughly around 15% of anyone patients clinical data and it's really tough for an organization has a small window and important window, but a small window on a patients clinical life to do analytical.
Capabilities on that it's hard to predict whether or not a patient diabetes is being properly managed or how to improve upon it it's tough to predict whether or not there chemotherapeutics agents should be changed or adjusted and so forth. So the platforms over the age are excellent partners and Utilizers frankly of Apiay calls in.
To the Inovalon one platform given the ability to aggregate the data that they do have together with the analysis of the broader assessment that ennobling can bring and that's also not only the strength of the CPI toolsets, but what you heard us mentioned in her prepared remarks about supplemental data.
Supplemental data something you're going to hear a lot about as we move forward into 2020, we've started rolling that into our product offerings here in the pharmaceutical space already the ability to aggregate a holistic view on a patient from across multiple different year jar brands multiple different HIV networks multi.
Little different claims sources labs sources administrative data sources decision support platform sources and our data sources. All in just a couple of second aggregate that analyze it stood back in to answer from from anywhere securely in a transactionally pie format, we see that capability is unique in the marketplace.
And we see it is applicable in any mobile device and the HR device any clinical point of care environment, and we're excited to be putting to work in the marketplace.
Good day.
Thank you for taking my questions Keith.
Thanks, Stephanie.
Thank you. Our next question comes from Frank Sparacino with Stifel. Your.
Your line is open.
Hi, Keith maybe just one for me earlier, you talked about scrip and I was wondering if you could give an update just on the.
Pharmacy side of things and then also perhaps touch on thanks spent a while since we've talked about some of the value based contracts in pharma I know you had some news recently with Astrazeneca, but I was.
More interested in some of the contracts that were signed.
Perhaps a year or two ago and.
How are those are.
Performing thanks.
Great Frank Thanks. Thanks for the question your first of all all those areas, we're seeing really nice double digit growth. So important way to start the answer to that question.
The pharmacy space is likely to be the strongest area of growth here as we go forward. So obviously very substantive double digit growth.
That.
Set of implementations and new client additions to it is nothing short of very robust and what is interesting intentionally or unintentionally is the second part of your question actually is now tying into that first part which is we're seeing that the RBC marketplaces now becoming.
As you heard in my opening remarks a.
Reflection of the breaking down a silos between the different parts of the ecosystem. So because of the fact that we now have so many payers on our platform and pharmacy on our platform and life Sciences on our platform, we're finding that serving as that single source of truth and that trusted independent mediator for the data aggregation.
An analysis reporting around OVC contracts is proving an additional value add so we anticipate you'll hear a lot more about that im actually off to our script med.
Conference down in Florida. This this weekend, where I think just about every major pharmacy company will be.
As well as many life sciences companies and that's one of the major talks of the town as we're rolling that out with partners. So it's looking good very strong double digit growth in 2020, we're excited about it.
Thank you.
Thank you. Our next question comes from Ryan Daniels with William Blair. Your line is open.
Yes. Good evening. This is Jerry at Haas in for Brian . Thanks for taking the question just wanted to maybe take a step back.
And talk a little bit about kind of the competitive landscape and given the investments that you've talked about for a couple of quarters here in sales and marketing and product development I'm kind of just curious if these kind of seen any sort of meaningful change in your competitive positioning and maybe more specifically if you've seen a.
Material uptick or change in in your win rate given those investments.
Sure.
Thank you thanks for being on the call. So the competitive landscape for US we we classified in three different pieces. We laid this out I think it's on slide 23, if I'm not mistaken on our Investor day deck from December of last year, we break into three categories clients deciding to do work themselves.
In sourcing or whore part number two the classic competitor right. The poster board large company brand names competitor and category number three.
Small individual point source solutions.
That could be brought together to serve a capabilities that a client might need we reported back in December of last year that we were seeing a trend change in the marketplace that was a positive in our favor in that competitive landscape for reasons, we laid out at the time a lot of organizations that.
Tried to in source and found that to be more challenging than they thought more expensive harder to find the right talent subject matter expertise not having the connectivity and not having access to the primary source data that we had.
The the poster child competitors really have not changed a whole lot.
In the marketplace, we reported the time and we're very respectable organizations that we kept strong and good ion, but certainly one that was not.
Moving against Us and the disproportion away and in fact.
The opposite than the last when the smaller players we reported again I'm just reiterating what we said roughly a year ago that space, we were seeing a movement by the marketplace away from or not liking as much if you will not selecting as much the smaller players.
And the word that we were hearing was.
Organizations are reticent to entrust their data in trust their business critical operations and platforms to smaller organizations that have less investment in things like cyber security and governance data governance and.
And disaster recovery and sold and so forth.
That environment Jared has not really changed we actually have seen upticks in our win rates.
Over 2019 in many areas, we're very respectful of the competition, we work hard to stay ahead of it.
But we have been winning some very substantive and recurrent themed wins in the marketplace against competition and we'll continue to work hard to make that the case.
But it's been a positive story for us in 2019.
Great appreciate the color.
Thanks.
Thank you and our next question comes from Sandy Draper with Suntrust. Your line is open.
Thanks, very much a lot of my questions have been asked maybe is a.
Fine in on the last question.
No. Jonathan you mentioned on TV was down year over year, but theres quarterly volatility in fact, we appreciate can you just want to remind me was there any.
Specific large deal that may 3rd quarter, a tough comp and then following up with their doesn't sound like competitively with an issue, but was there any not on terms that deal flow slowing down but the visibility for deal on the fourth quarter, improving if any commentary on those two things would be great.
It's any great great to talk to you.
For your first question. There Q3 was a tough compare from a ACB perspective, there were some large deals in Q3 of 2018, but they continue to velocity of all of our other deals in Q3 2019 were impressive for sure.
I'd actually say that our October is currently is shaping up already to be a record HCV sales for the last five years. So it's pretty strong are very strong I should say.
But the continued velocity strength of the pipeline continues to be impressive and the delivery of our Salesforce team is has been really kind of top notch.
That's really helpful. And then my one follow up on the capital deployment nice to see that $50 million debt pay down don't necessarily expect that quarter to quarter, but generally would you say that's going to be a strategy are going to be looking at every time, you generate free cash flow that thats going to be the primary source or use of Europe capital.
Right.
Yes, any that's one area that we continue to focus on and how we're deploying our capital and we're sitting in a very strong position really from our our cash flow.
We continue to have a lot of flexibility as to how we deliver in deploying that cash flow for shareholder return and as we continue to accumulate excess cash flow or capital on our balance sheet, we'll look for areas to maximize the return for our shareholders.
Great. Thanks.
Great.
That being our final question.
Please allow me to give a few comments before we close.
Number one no one is increasingly being seen as the leading provider of cloud based platform capabilities empowering data driven healthcare.
Number two the market demand for these capabilities as you heard US comment on Tonight is very strong and the translating into double digit organic revenue growth than we're very excited how that is playing out number three as we continue to expand our scale inefficiencies you're also seeing all of that growth translate into a very nice operational.
Leverage and profitability, which we also see continuing nicely here into 2020, we're excited about the momentum we're excited about the positive outlook not only for the remaining portions here of 2019, but for 2020 and beyond we remain committed to execution execution. We know is really the number game.
That is important for being our focus here in the remainder of this year and into next we expect to give you very strong revenue growth and very strong profitability as well as very strong value for our clients. Thank you. This evening for your time and thanks as always for your interest in Oman Tonight everybody.
Ladies and gentlemen. This concludes today's conference call. Thank you for participating you may now disconnect everyone have a great day.
Okay.