Image source: Inovalon Holdings.

What happened

Shares of Inovalon Holdings (NASDAQ:INOV), a provider of cloud-based analytics solutions for the healthcare industry, tumbled on Tuesday after the company slashed its full-year guidance. Inovalon now expects revenue and earnings to be substantially lower than previously expected, with the change driven by the company's failure to enter into an anticipated agreement. At 11:45 a.m. EST, the stock was down about 36%.

So what

Inovalon has been negotiating a multi-year collaboration agreement with an unnamed counterparty over the past nine months, and the company expected a deal to be reached during the fourth quarter. However, Inovalon was informed by the counterparty on Dec. 7 that an unexpected material development unrelated to Inovalon's products would prevent any transaction from taking place. Inovalon was expecting the deal to contribute about $40 million of revenue during the fourth quarter.

This development prompted Inovalon to significantly reduce its guidance for the full year.


Old Guidance

New Guidance


$470 million to $490 million

$426 million to $428 million

Net income

$43 million to $53 million

$25 million to $26 million


$0.28 to $0.35

$0.16 to $0.17


$0.39 to $0.46

$0.32 to $0.33

Data source: Inovalon.

With issues outside of its control affecting the counterparty, Inovalon offered no assurances that any deal would be reached at a later date.

Now what

Inovalon CEO Keith Dunleavy tried to find a silver lining:

"While this is certainly not the situation we expected or desired, it does demonstrate the level of market opportunity for our platform capabilities, the significance of value that can be driven by those capabilities, and the size and scale at which Inovalon is being called upon to partner and deliver them."

While the company made clear that the guidance cut was strictly due to the transaction falling through, the stock carved out a new 52-week low on the news. Shares of Inovalon are down about 70% from their peak in early 2015. With revenue now expected to decline this year, investors are no doubt questioning the growth story.