Q4 2019 Earnings Call
Ladies and gentlemen, today's conference is scheduled to begin shortly please continue to standby. Thank you for your patience.
[music].
Good day, ladies and gentlemen, and welcome to do you know blonde fourth quarter in full year 2019 earnings call.
At this time, all participants are in listen only mode.
Later, we will conduct a question and answer session. If he would like to ask a question. Please press Star then one now.
Hi, Andrew This conference is being recorded and I'll now turn the conference over to your host Kim Collins. Please begin good afternoon. This is Kim Collins senior Vice President of communications that an over one I'm here today with Dr. Keystone Levy and over lunch Chief Executive Officer in Chairman of the board and Jonathan Bolt Inovalons Chief.
Actual officer.
I'd like to welcome you to our fourth quarter and full year 2019 earnings call.
The press release announcing our financial results for the fourth quarter and full year 2019 was distributed this afternoon and a replay of today's call will be available shortly posted on the Investor Relations page on Inovalons website.
For those of you listening to the rebroadcast of this call. We remind you that the remarks made herein are as of today February 19th Twentytwenty 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 plan 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 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'll find definitions of these non-GAAP measures 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.
The fourth quarter of 2019 demonstrated another period of strong performance not only record revenue and adjusted EBITDA, but also with record sales strength and data growth.
The strength of the capabilities brought to the marketplace fight over one the demonstration of differentiated value to our clients and the cohesiveness of the teams that are making this happen I've never been stronger.
Across the key performance metrics that we track on a daily weekly monthly quarterly basis, we're very pleased with what we're seeing.
This is not to say that we do not have a great amount of work to do.
There continues to be many areas for improvement continued scaling and long lists of technological capabilities that we are arduous lead developing to bring to market.
But the noble on vision for empowering data driven healthcare is resonating in the marketplace and our teams are energized.
The fourth quarter and the full year or 2019 was a great demonstration how the market is embracing our platforms capabilities.
That said, we are anything but complacent, we're aware of the tremendous opportunity that we had before us and we are determined to execute on it you can count on us to keep our heads down as we see another strong year ahead.
As we navigate the opportunities before us I'd like to share with you. Our three guide posts that Describer execution strategy. We believe these out on slide six or supplemental duck.
The first is lead and innovation.
Bring to the market the industry's most advanced most differentiated cloud based software platforms with the greatest breadth of connectivity the deepest access to primary source data and the most advanced analytics to empower the transformation of data driven health care.
2019, we did exactly that we led and innovation.
We advance the company's cloud based pharmacy platform noticed script med quell we bounce or cloud based clinical data extraction capabilities known as C. D. As a service and we advanced our cloud based natural language processing toolsets known as MLP as a service and we significantly expanded a number of.
Artificial intelligence applications within the overall platform.
Additionally, during 2019 newborn moved into production, but fired enabled epi tools that providing data and data derivatives on demand for cloud based applications, allowing for real time availability of data and analytics on a transactional basis.
Lastly, as we announced on January 13, we introduced our cloud based healthcare data lake offering providing organizations with industry, leading single source of truth aggregation of clients otherwise disparate datasets supporting translation structured and unstructured data indeed, a supplement.
Patients from the industry's largest primary source health care dataset Nov ones more squared registry of de identified data.
Powering clients to unlock the value of their own data assets and reduce costs from the elimination of their often multiple legacy enterprise data warehouse environments quite exciting about this offering is its applicability to all audiences and health care health plans provider organizations pharmaceutical costs.
Ladies and other large complex organizations operating in the health care ecosystem.
Second strategic Ipos has been to become the enablement layer.
That is to bring to bear the resulting capabilities of our innovations to become ubiquitous independent connection data and analytics, they're serving as the Intel inside that empowers the health care ecosystems innumerable transformation initiatives.
As the use of apart from expense sort of network effect and virtuous cycle develops.
Addition, disturbing is a high value element individual organizations. The enablement layer that are no. One has been developing surged to facilitate innovative offerings between multiple concurrent organizations, which would be otherwise unlikely to enter coordinate.
This bird silos of health care can leverage capabilities of the noble on one platform in a way that allows them to collaborate on a single goal.
Health plans can achieve goals across the nation of disparate providers pharmacy organizations can gain access to data up to speed time to fulfillment and lower errors with access to historical data patients otherwise too costly or time consuming the access.
Pharmaceutical companies can design outcomes based contracts with health plans for high cost and high complexity patients spread across the wide member catchment areas.
As they do the the depth and uniqueness of value able to be delivered by newborn increases the dataset expands and the network effect and virtuous cycle takes another step forward.
See this and the expansion of our client base and her datasets now with more than 340 million any patients and 53 billion medical that's an increase of 19% and 24% year over year, respectively.
And the third of the three strategic guide posts is the mantra of landing and expanding efficiently.
No one focuses on providing its capabilities and highly efficient scalable quite friendly and flexible ways that align with the growth and success of our clients.
Meaning once your platform is in place delivering one of many potential capabilities. It makes it easier for us to demonstrate value and achieve greater adoption of our solution within the organization.
Given the nature of our platform. This also translates into not only strong growth in sticky Miss but also strong operating leverage resulting strong financial performance.
2019, we added 111, new logos to our client base County, only those with more than 100000, an expected annual revenue.
These new logos contributed 64.4% upper sales driven revenue expansion and the balance of 35.6% was added through successful expansion within our existing client base.
As an organization sees the value ease of implementation gained insight or outcomes impact of utilizing the newborns platform in one line of business or geographical area. We gave me ability to expand the relationship with the client further.
And as we deliver for client focus on their success. This is precisely what we're seeing.
In fact, both of the announcements on January 13th and 14th we're not only examples of meaningful incremental multiyear engagements, but they were also examples of successful land and expand strategy execution.
In both cases the claims had previously began working with the noble on one platform and added meaningfully new solution capabilities in the fourth quarter of 2019.
To reiterate there are three strategic Ipos summer growth number one lead and innovation.
Number two become the enablement layer and number three land and expand efficiently.
Execution on these three takes great coordination throughout many teams.
I'm proud to report that this is precisely what we are achieving.
We have a truly great team they are energized and I'm thankful to have the opportunity to work with them as always though we know that we have much work ahead to capitalize on the huge opportunity that is expanding before us.
Together, we're proud of the execution, we're seeing the value it is delivering for our clients and the strong performance that is resulting for noble on and its shareholders. We're pleased with the performance in 2019, and we look forward to continuing this in 2020.
With that allow me to turn the call over to Jonathan to review the results of the quarter and our outlook for the year ahead Jonathan.
Thank you Keith and good afternoon, everyone.
I like to begin by highlighting a few key points building and Keith opening remarks.
First the fourth quarter's financial results reflect another quarter of solid execution with revenue adjusted EBITDA, a non-GAAP EPS within or at the high end of our previous guidance ranges.
Second based on our increased creditworthiness and cash flow generation, we're able to reprice, our term loan and revolving credit facility to reduce the applicable margin in February of 2020, which will reduce our annual cash interest expense and will increase shareholder return.
And third we are increasing or 2020, GAAP and non-GAAP net income and EPS guidance ranges.
Increasing our net cash provided by operations guidance ranges and reaffirming our previously announced revenue adjusted EBITDA and capital expenditure guidance ranges.
Now turning to our fourth quarter and full year results.
Fourth quarter 2019 revenue was 173.5 million in organic increase of 27% year over year subscription based platform revenue grew to 83% of fourth quarter revenue compared to 81% in the fourth quarter of 2018 services revenue represented 11%.
On a fourth quarter 2019 revenue with legacy revenue with the remaining 6%.
The 37.2 million year over year organic revenue increased in the fourth quarter was driven by an increase of 18.8 million in revenue from new customers and an increase of 18.4 million in revenue from existing customers, both reflecting continued strong adoption of our platform offerings.
Full year 2019 revenue was 642.4 million, which was within our initial guidance range provided on November 728 team.
The 22% year over year revenue increase and 14% organic growth was driven by an increase of 48.2 million in revenue contributed from new customers in increase of 26.7 million in revenue from existing customers and 39.8 million an interview.
Organic revenue contribution.
Looking at our vertical markets, all four of our verticals payer provider pharmacy and life Sciences, each grew at 10% organic revenue growth or greater during 2019.
Finally, we continue to meaningfully reduce our customer concentration with our top 10 customers, representing only 35% of 2019 revenue with no quite representing 10% of revenue or more.
For comparison this is down significantly from the customer contract concentration metric of 76% of revenue reported by the company in 2014.
New sales ACB during the quarter came in at a record 73.5 million in increase 60% year over year and represents a quarterly sales record.
Fourth quarter 2019, new platform sales ACB, excluding services was 52.7 million or an increase of 96% year over year.
Turning to gross margin.
First quarter 2019 gross margin was the solid 73.2%.
Gross margin decreased by 50 basis points year over year, primarily as a result of increased investments in data connectivity and employee investment.
Full year gross margin was strong at 73.9% increase of 130 basis points year over year.
Sales and marketing expense for the fourth quarter was 18.4 million, an increase of 4.6 million year over year.
Sales and marketing as a percentage of revenue was 10.6% in the fourth quarter of 2019, which was in line year over year.
Full year, 2019 sales and marketing was 62.4 million or 9.7% of revenue compared to full year 2018 sales and marketing spends a 45.5 million or 8.6% of revenue.
We continue to see attractive returns on our investments in our sales and marketing engines as demonstrated in our record fourth quarter, new sales ACB and strong quarterly organic growth.
No I like to spend a moment on profitability.
As highlighted on slide 18 of our earnings supplement duck, our investments in cloud architecture automation and connectivity have allowed us to reduce the number of headcount in our business model.
From Q4 2015 to Q4 2019, the company has been able to reduce more than 1400 net position.
Even after our significant investment and expansion and personnel within our sales and marketing engine.
This reduction in necessary head count together with more efficient technology platform operating environments, a progression of product mix shift and a continued stronger market value pricing trend has driven continued profitability expansion.
For the fourth consecutive quarter adjusted EBITDA grew to a record 57.6 million in increasing 18.8 million or 48% year over year.
Adjusted EBITDA margin for the fourth quarter was a notable 33.2% representing an increase of 470 basis points year over year.
Full year 2019, adjusted EBITDA was 210.7 million, an increase of 58.7 million or 39% from a year ago period.
Full year 2019, adjusted EBITDA margin was 32.8%, which represents a 400 basis point increase compared to full year 2018, adjusted EBITDA margin of 28.8%.
Fourth quarter 2019, non-GAAP net income per share was 15 cents, which increased 10 cents per share or 200 person from a year ago period.
Full year 2019, non-GAAP net income per share was 52 cents, an increase of 93% compared to 27 cents during full year 2018.
Turning to cash flow net cash provided by operating activities in the fourth quarter 2019 was 34.2 million, which is net of or after the payment of 14.9 million an interest payments.
In 106.5 million for the full year 2019, which is also net of or after the payment of 62.8 million in interest payments.
For the full year 2019, net cash provided by operating activities was impacted by the timing of certain client account receivables, which has since been collected.
As a result, the company has increased its 2020 operating cash flow guidance for the corresponding amount of approximately $25 million to reflect the timing of these account receivable collections.
Fourth quarter, Capex was 18.9 million and for the full year was 58.9 million.
Pulling this together a noble him generated 47.5 million in positive free cash flow and 29 team an increase of 22.1 million or 87% as compared to 25.4 million of free cash flow in 28 team.
Notably a noble on free cash flow was after net incremental cash outflows of 19.2 million in cash interest payments.
No one's cash flow generation capabilities continues to highlight the profitability and scale of the business model.
Additional details of full year results in Capex can be found on slide 16, and 25 of our earnings supplement duck.
Moving to the balance sheet, no one's financial position continues to build and strength.
In 2019, the company repaid 59.8 million in principle on our credit facility.
Additionally, subsequent to year end, the company's successfully repriced, our term loan and revolving credit facility to reduce the interest rate margin on both by 50 basis points.
The Boulder automatic reduction of 25 basis points to a 75 basis point reduction when our net leverage ratio falls to 3.4 or five to one or lower.
The interest rate merger reduction represents a cumulative pre tax cash interest cost savings of $23 million at the 50 basis point reduction Mark and 34.5 million at the 75 basis point reduction Mark over the remaining life for the facility assuming no additional Bob.
Ontario early principal Paydowns in excess of our 9.8 million scheduled annual payments.
The company exited 2019 with cash and cash equivalents of 93.1 million total outstanding debt of 917.8 million reported balance sheet debt of 893.7 million net of issuance discounts and deferred financing fees and the company.
Had not drawn any amount from the hundred million dollars revolving credit facility.
As a result, the company's net debt position at yearend was 824.7 million and the net debt leverage ratio as defined within our debt agreement decreased from 4.23 to one as of the end of Q3 2019 to approximately 3.83 to one.
Yearend.
Now, let me conclude by sharing updates the company's 2020 financial outlook.
For the full year of 2020.
First we are reaffirming our prior guidance ranges for revenue adjusted EBITDA and capital expenditures.
Second we are increasing our guidance for GAAP and non-GAAP net income and GAAP and non-GAAP net income per share by two cents to reflect the positive impact on the companies that repricing.
And third we are increasing our net cash provided by operating activities to reflect the impact of accounts receivable collections timing.
For the first quarter of 2020, we're providing the following guidance ranges.
For revenue.
We see revenue at 158.5 million 263 million, reflecting year over year organic growth of 9% to 12% as previously message during our Q3 2019 update.
Adjusted EBITDA of 48 million to 51 million.
Non-GAAP diluted net income per share of 11 cents to 13 so.
We encourage you to refer to today's earnings release, and our fourth quarter supplemental earnings deck for more details on our 2020 guidance ranges.
Before going into Q day, I will close by echoing Keith common.
The fourth quarter and full year of 2019 was a strong reflection of the company's capabilities and their reception by the market.
And we're seeing more of the same in 2020.
With that let me turn the call back over tour operator to conduct our kinase session.
Thank you as a reminder to ask a question you want me to press Star one on your telephone we ask that you. Please limit yourself to one question and one follow up question. You May then returned to the key to withdraw your question. Please press the pound <unk>. Please stand by wildly compound the culinary roster.
First question comes from Sandy Draper with Suntrust.
Thanks, very much and good afternoon, I guess first off a product question Keith I appreciate the.
Update on the data like maybe just a little bit deeper or thinking about competitively <unk> when when customers are looking across the board data like what is a noble on providing that you know a Google and Amazon or some of the other health care specific data like providers, what do you guys, bringing.
To the table that that's the competitors you don't think couch.
Great. Thanks City. Thanks for the question I appreciate it.
Before I hit the question funeral mine just want to take a moment to welcome whose l. play.
This is our new head of Investor Relations. He comes to us from the marketplace known to many of you I'm sure a lot of Investor Relations and Wall Street experience you might know reputation from his work at Medidata global provider vertically specialized cloud based solutions for the pharmaceutical marketplace. It was recently acquired by just.
Systems.
We're very excited I'm joined the team and then also today with US for culinary is Jason capital, our chief operating and revenue officer.
Now to your question Sandy so the data Lake.
The good marketplace, whether it be health plans, whether it be pharmaceutical companies, whether it be large provider systems finds themselves having multiple different enterprise database environments, perhaps several in each hospital in the health plan arena several for different initiatives over years, perhaps in Ocwen.
Wired parts of their business and the pharmaceutical marketplace. The same as well as those purchased datasets that they have accumulated over time the point being traditional enterprise environment.
Data warehouses that carry with them individual cost to operate Costa mean team and typically do not allow the health care market place to do analysis across the whole data the landscape so step.
The first aspect of it would be as you point out also capable by other organizations in the cloud marketplace. The googles of the world. The Amazon's of the world to put in place a cloud based data Lake environment that takes over for those previously disparate enterprise systems, but from there are slow.
Starts to change quite quite notably and that is because we have a lot of connectivity that those other enterprise or other industry players don't have which allow us to start to create more holistic a single source of truth of their data linking together the data from their disparate data side.
Lows and adding into it the David that represents their patient base and provider base with wandered Twod Muhly matched data agree our data supplementation.
Able to get that from the more squared registry none of the other players in the marketplace have that capability. So this 314 million patients worth of data about 998000 providers. Some 60 or so billion medical then we're able to then fill in imperative information.
For that client, but then we go a step further right we have connectivity into the clinical data that represents that healthcare organizations world and that allows us to import clinical data and then put it through or natural language processing capability to allow us to layer in both structured and unstructured data. So the previously could.
Bringing on board or if they did bringing on board had trouble or in possibility of longitudinally linking it with the rest of the data. So we're able to bring all those things together, rather rapidly give them common reporting capability comment analytical capability and then as they want to apply individual use cases.
On top of that dataset, we're able to power that in a very fast fashion, meaning rather compute across that whole data set on a rapid basis.
Minutes hours.
Faster than before they could have done it so number of variables that are to their benefit as well as a cost savings with the elimination of their enterprise.
See systems.
Great. That's really helpful. Keith and then maybe follow up just sort of doing a quick numbers look obviously you had a strong year on the payer side on my calculation looks like payer revenue grew about 17%. That's after three years of of declining revenue.
Which was there any one product already one thing that was really driving that and I'm just trying to think about the sustainability of the payer business still growing some type of double digit rate or is it just a function of you have you had you know the easier comp and it's going to moderate just trying to think about longer term you certainly not.
You see the improvement of whats the sustainability like on the payer revenue side. Thanks.
Sure says sustainability looks looks great sandy.
We're seeing a multi product uptake in the marketplace across our quality products or risk products or data visualization products. The data warehouse products, but connectivity the MLP really the salesforce that Jason and his team have put together are now in the marketplace would not one or two to three not for not five but many different.
Sure.
That are really resonating well, so don't want to make any predictions of what that growth rate is going to be this year, except for what the guidance, we put out but we feel really good about what we're seeing.
Okay, great. Thanks.
Thank you. Our next question comes from Donald Hooker with Keybanc.
Great good afternoon.
I wanted to touch I think you wanted curious as to some of the detailed breakout of the revenues in terms of go legacy revenues.
We're focused on the growth of the SaaS revenues, but a legacy revenues were very low I know theres a seasonal element there.
But a little bit lower than I thought. It's I think you said, 6% of total revenues can you talk about how that's looking going into next year, maybe is that going to eventually stayed down or what's the update on the legacy side of the business.
Yes, Dan Thanks for the question.
Legacy is precisely where we expected it to be.
But let me handle over to John to give you more color, yes on a year over year basis, Don we had legacy growing about 2.5 million and really consistent kind of quarter to quarter as weve message before we see legacy at about 6% of 2020.
Revenue guidance.
And really those are signed contracts and we expect that same revenue to repeat in our 2020 revenue stream.
Just being offset obviously by the strong growth, we haven't our subscription base.
Maybe just to add a little bit of color on that if you look as we've been messaging for a couple of years now we expect that piece to stay roughly the same on an absolute basis, but the rest of the company is growing.
Obviously had a nice clip so on a percentage basis, you're going to see that piece decline, but we're not out of the market selling a legacy solutions anymore. We did as we had message go through renewals of legacy piece of that in their tightly.
But it's just going to kind of hang out at a very similar absolute number as the rest of the company continues grow but by design.
Sure and then and then also the services line must be here, a little bit more about some of these non corner is.
Seeing there's an element there that's the old avalere and sort of life Sciences can you can you maybe talk about how that's trending overtime and as we look into 2020 and ended 2021.
Sure. So our services are made up as you point out it has a fair amount in there from legacy Avalere, but Theres also services in there that help support the implementation integration and just overall questions and support that clients have on the cloud Foundation work and also.
So some of our quality analytic support there's a.
One, 1% or so of those services fall into that category. So it's a mix of a few different thing you grew consistent with the rest of the business in 2019.
We had it at roughly 10% for the full year and again in 2020, we have a directionally. The same number it's growing alongside everything as we match up those services with the implementations them a lot of our other other work. So it's great having the reputation that group has in the marketplace in the C suites and.
In the a strategic thought processes about number of our large clients and its proving very helpful to seeding introducing and supporting our larger more complex the implementations.
Super maybe one last numbers question for me on the sales and marketing side I know you guys had been ramping up the salesforce, they're pretty aggressively.
Terms of staff and personnel at some point I guess that sales and marketing line is going to start to stabilize and you'll start seeing scale in that particular expense line.
When you think that would happen as I couldn't be more 2000 beyond 2020 are we gonna start seeing scale in that line.
Maybe.
Maybe the next few quarters.
Yes, Thanks, Don this is Jason so.
Different parts of the business or in different innings or the game. If you will when its maturation process and we try to manage it on a productivity per head basis, and a density of coverage basis in where we can optimize value creation and delivery for the clients. So all of those things are taken into effect I'd say.
In the payer business, we're probably in the sixth inning or so I think in the in the provider business.
You know, we're probably in a similar space.
In the specialty pharmacy side, we're probably in the earlier innings of maturing how we go to market in those spaces and so.
We really take a disciplined approach when we add people and.
We're really excited about theme that we haven't place that's driving great value for our clients.
Thank you. Thank you John anything you want to answer that yet is the only thing I'd like to add is that as we continue to see our investment sales and marketing, we're still able to grow adjusted EBITDA pretty nicely year over year. So even though we've had that increased investment in for 2019, Oh, we still been able to grow over 400 basis points of improvement in our adjusted.
EBITDA margin line.
Very pleased with the sales growth that we were able to produced in the fourth quarter and full year.
Sure. Thank you so much.
Thank you. Our next question comes from Ryan Daniels with William Blair.
Yeah. Good evening. This is Jerry passion for Ryan Thanks for the questions.
Just on the 2020 sales outlook.
It looks like you guys reiterated the quarterly revenue cadence of 9% to 12% growth each quarter.
Kind of look at the pipeline today I'm, just curious if theres anything unique with with sort of the deployments that you had expected that could cause any sort of noise or or timing related issues associated with that cadence.
Hey, Gerry Thanks for the question look our pipeline huge right I mean, it's Scott.
Hundreds and hundreds and hundreds and hundreds of deals on different stages. So we don't control exactly when they close it exactly when they implement but we as we hope we demonstrated very nicely in 2019 have a good feel for that and a good cadence to that and we see that occurring again this year.
But.
The other day the client.
Goals or what are most important to us and the their desired timing things look really great right now, but we're always going to listen to our client Jason.
Yes, I think you said it well keep I mean, we're focused as a business on being predictable.
For our clients on value delivery being predictable for our shareholders and making sure we're doing the right things and as Keith stated the pipeline looks good we feel real good about.
The year ahead, and we're excited to get after it.
Got it I appreciate the color there and then maybe just one more on the 2020 outlook.
Should we kind of continue to expect a roughly sort of 60 535 split between the contribution from new logos versus the land and expand existing customer opportunity going forward.
Great Great question.
Sure. We have historically encouraged people to think of it as a 50 50 split 50%, new and 50% cross sell up so.
We've seen because we're we're growing faster and we're landing a bunch new logos.
You saw that get a little bit 60 40 ish.
And in the most recent period, but we still think longer term the right way to think about it is 50 50, and we wouldn't change your thinking from a shorter period that 60, 40 was really because of more from new customers.
And we're excited about that but we're seeing both really strong.
Got it appreciate the color. Thanks.
Sure. Thanks.
Thank you. Our next question comes from Sean Whalen with Piper Sandler.
Hi, Thanks very much.
I think you said, 65% HCV worse from new clients could you break that down a bit maybe by market.
A little more insight on what products are resonating and is that.
A handful of big fish or is it spread across numerous clients would heavy.
Hey, Sean good evening to for clarity was 65% on the new revenue on the revenue growth of the year.
So the revenue growth of the year 65 from new logos balance from existing logos.
There's no big fish phenomena as Jonathan pointed out in his prepared remarks client concentration is.
Less than half of what it was a number of years ago. We don't have any clients of a significant size and were down what's their 30, 35% a top 10 clients on average about obviously, 3.5% or so so no big fish in there but.
As far as the cause of of the growth.
Really we're seeing strong uptake of quite a few of the products.
What you have to give you a couple of powerful question colorful examples the two deals announced in January I think it was a 12 13 off top my had both of them were previously existing customers one of them.
The one that bought the pharmacy platform became a client just in the first quarter ish might have been second quarter early.
John Jonathan signaling first quarter of 2019, so they bought other first solution.
On.
On a classic set of payer solutions in early 2019, and then by fourth quarter. They bought a larger side implementation on the pharmacy platform side.
The other example, the healthcare data Lake that we announced at roughly the same time.
That client started with us in 2016.
They started with.
Earlier version of one of our software platforms. They went over in 2018 or 19 to the cloud based versions of those solutions and then in 2019 I think they bought two or three or four additional solutions in no 19, and then in the fourth quarter Evault 19 update.
Okay.
The health care data Lake implementation, which is.
No it larger implementation a solution for them. So we're seeing a lot of that sort of scenario, both new logos, which we tried to get in their easy be easy to buy from easy to implement be easy to do work with and then do good job and.
We see a lot of growth coming from that.
Super Thank you and Jonathan what about do you care to give us some insight on 2020 free cash flow guidance.
Oh sure Sean So as we look to free cash flow guidance range, we given for operating cash flow is 170 to 185 million and our Capex guidance range was was 50 to 58. So the difference there will be our free cash flow.
Okay. So they won't be anything else in there what would the dsos.
In the quarter.
Dsos slightly around 66 days.
Okay. Thank you very much.
Thank you and your final question will come from Ricky Goldwasser with Morgan Stanley.
Yeah, Hi, good afternoon. So.
Couple of follow up questions here first of all if we think about the sales force expansion and and we talked a little bit about it earlier, but.
How should we think about the.
The long how how long does it take for the sales force to reach a full productivity.
And also you know I think you mentioned that into payer and provider you're into 16 things in expanding sales force and earlier on on the pharmacy side, considering that no you're dealing with tech sales personnel are you should we think about kind of like the sales force that you have no about to fight.
55 ramp is dead infrastructure that you can.
Using Ross.
Customer base.
So so thanks for the question Ricky This is Jason.
So I would suggest you that there's there's very different business units and different buyers in that's in those segments right and if you think about our provider business and you think about number of transactions that.
That happened roughly 500 per month.
Getting somebody up the productivity to do smaller sized deals happens much more rapidly than doing multimillion dollar.
Solutions that you really have to build relationships with.
Most the board and Ceos, and Cfos and do those sorts of things show. So the maturation process to full productivity on a payer rep might take three or four quarters and we've gone through a lot of that already and we feel great about the team that we have there.
It's faster time to productivity on the provider side.
And then on the pharmacy side, particularly in the specialty pharmacy World I don't want you think it's just a tech people that are going out and showing the are very specific nuanced things in the marketplace for specialty pharmacy that we need experts and we have those experts in place. So we're in the process of Mary.
Being that sales disciplined sales DNA with the expertise of specialties pharmas solution and those things take a little bit of time, but we're confident and we've seen the productivity on the payer side, we've seen the productivity actually across all business units, but we're looking for accelerating the productivity and all.
Those areas in the coming here.
Okay, and then one follow up on data Lake <unk> contracts. It seems like it hit in the Fortunately CV. A was that also included in your revenue guidance that you provided earlier.
So we make sure I understand that the question Ricky the data Lake you're asking okay. Yes. It was in Q4 he should be that's correct statement you asking is it also in our revenue guidance. It didn't do original in original revenue guide.
Was it in the yes. It was in the original revenue guidance by that time, we got to the year, we already knew or we had good insight into where things stood.
Okay, Great and then when we think one quarter guidance versus kind of second half of the year. When we think about the level of investments you're making earlier in the year versus second half.
Hmm any color there that you can provide us.
We see investment Ricky you talking Capex are you talking on the operating.
Good morning, operating side right, because if we think about to guide as to date for the first quarter versus whats implied for the rest of year teams interest, we gonna see margin expansion throughout the year. So what's driving it is it is it the additional investments is it how how do you think about the customer makes that that's going to ramp throughout the year.
So we give a little bit of Oh, waving subscriptions I'll hand, it over to someone smarter to walk you through the number on it but you know as we look at the year.
There's a.
We're looking at a very large set of clients that were onboarding gear and those are growing throughout the year. So yes, we're spending time in energy on getting systems prep for them in implementing those you were just closed on $73.5 million in the quarter, but that's a record amount and this quarter looks good.
I would also so we're making sure we have the right personnel on staff and have them out with the client implementing.
These capabilities. So we <unk>, we have a fantastic team here I can't tell you how how great everybody is operating with each other if we stood here thanking all the people that have made 2019 as good as was and how many are just doing a fantastic job now we'd be here all night, but those do.
Provide some operating expense for us here in the earlier part is we implemented get those revenues up to match, but John Yeah, Ricky just to hit the investment. So obviously, we have a 11 investment throughout the year, but but really where the operational leverage is coming is where you're seeing the margin expansion right. So as we continue to grow the topline instill man.
The the expenses on the bottom line, that's where we see the expansion continuing and you can see that as we have just looking through our expenses from Q4 to Q1, that's what that's what you're saying the only other thing Ricky then add onto that is we're continuing to expand our connectivity continue to expand our MLP application.
All of those initiatives, which you saw contribute quite nicely to operational efficiency and operational leverage in 2019, those are all still implementing and expanding here in 2020. So that the tools, we have are giving us more levers in the profitability realm, and allowing us to decide.
More where do we want to apply that additional.
Income to continue to accelerate the growth of the company.
Thanks, and congrats on a very good quarter in here.
Thank you Ricky Thank you and with that before I close the call I just wanted to leave with a few salient points first I think this is a really important thing to keep in mind. We are in the early innings of a huge opportunity 161 billion dollar opportunity to help our clients with meaningful measurable value empowerment as they move into a data driven.
Health care cloud World. The second is the strategic investments, we made in sales and marketing and research and development, you're seeing them bear a lot of fruit you are seeing record performance as a result, if you're seeing ACB ease of 73.5 million you're seeing a 111, new logos added those investments are really.
Doing very well and then third the scale of the company continues to improve our efficiency are the noble on one platform continues to improve it sophistication and connectivity and this is all driving more operating leverage profitability and cash flow to the bottom line.
Certainly pleased with our strong performance in 2019, and the momentum were seeing right here in 2020 following through so we remain very laser focused on the plans to execute on 2020 look forward to speak to you at the next quarter. Thank you for your time US evening, Thanks, you're interested in Oman I'm Tonight.
Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.
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