Cotiviti Holdings' (COTV) CEO Doug Williams on Q2 2017 Results - Earnings Call Transcript

| About: Cotiviti Holdings (COTV)

Cotiviti Holdings, Inc. (NYSE:COTV)

Q2 2017 Earnings Conference Call

August 2, 2017 8:30 AM ET

Executives

Jennifer DiBerardino - Vice President, Investor Relations

Doug Williams - Chief Executive Officer

Steve Senneff - Chief Financial Officer

Analysts

Matthew Gillmor - Robert W. Baird & Co.

Stephanie Davis - JPMorgan Chase & Co.

Ryan Daniels - William Blair & Company

Anagha Gupte - Leerink Partners LLC

Nicholas Jansen - Raymond James & Associates, Inc.

Mark Rosenblum - Morgan Stanley

Frank Sparacino - First Analysis Corporation

Sean Dodge - Jefferies Group

Operator

Good morning, and welcome to Cotiviti's Second Quarter 2017 Financial Results Conference Call. All participants will be in listen-only mode. [Operator Instructions] Please note, this event is being recorded.

For opening remarks and introductions, I would like to turn the conference over to Jennifer DiBerardino, Vice President of Investor Relations. Please go ahead.

Jennifer DiBerardino

Good morning, and welcome to Cotiviti's Second Quarter 2017 Earnings Call. This call is being webcast live, and a recording will be available on the Events page of our investor website at cotiviti.com through September 1, 2017.

Also available on the Financials page of our investor website is a financial supplement containing key financial measures on both a GAAP and non-GAAP basis. We will be referencing this supplement throughout the call.

On today's call, we will discuss Cotiviti's business outlook and we'll make certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Any statements that are not historical facts are subject to a number of risks and uncertainties, and actual results may differ materially. We urge you to read the risk factors, cautionary language and other disclosures in our SEC filings for the factors that may impact statements made on this call.

We will also discuss certain non-GAAP financial measures, including adjusted EBITDA, adjusted EBITDA margins, adjusted net income, adjusted net income per diluted share and free cash flow. Reconciliations to the relevant GAAP numbers for these non-GAAP measures are included in the press release and also within the financial supplement posted on our investor website.

Joining me on the call today are Doug Williams, Chief Executive Officer; and Steve Senneff, Chief Financial Officer.

Now, I will turn the call over to Doug.

Doug Williams

Thank you, Jennifer, and good morning. Our solid second quarter results reflect Cotiviti's continued success in extending our track record of delivering significant long-term value for our clients.

We grow by delivering value to clients with our fully aligned financial model, applying our deep understanding of the market and by providing critical solutions that serve our clients' needs. We maintained our momentum for the six months ended June 30, with total revenue increasing 9% to $327.7 million.

Revenue growth was driven by executing on the fundamentals within clients as well as growth from new clients and cross-sells. Year-to-date, adjusted EBITDA increased 7% to $121.9 million reflecting our revenue growth, which was partially offset by investments we have continued to make in analytics, technology and go-to-market.

In the second quarter, we went live with one new client and two cross-sell expansions, bringing our total for the first half of the year to four new and two cross-sells.

When we combine these with the new sources of revenue from 2016, we now have 16 new sources of future growth. In addition to maintaining our focus on organic growth, compelling M&A opportunities in line with our previously stated objectives continue to be part of our growth strategy. While not included in our second quarter or first half results, I want to take a moment to address our July addition of RowdMap to Cotiviti's Healthcare solutions set. The acquisition is aligned with our stated M&A criteria and is a unique asset that will broaden our data analytics capabilities and provide enhanced insights to our clients through a new dimension of solutions.

The combined organization will provide differentiated value with solutions that target over $600 billion of the estimated $900-plus billion in wasteful healthcare expenditures in the U.S. We have watched the talented and innovative RowdMap team for some time, and admired the value they were delivering to the market. RowdMap has approximately 20 clients, and we have about half in common.

Collectively, we now count over 60 healthcare organizations as clients. RowdMap helps its clients identify and reduce waste associated with low-value care from inefficient and unnecessary services. Our RowdMap Risk-Readiness platform develops benchmarks on physicians and hospitals within most zip codes in the United States. The RowdMap solution applies proprietary analytics against data sources, including comprehensive CMS information, clinical policies, health guidelines and value-based analytics to evaluate provider performance across multiple dimensions.

Based on these benchmarks, RowdMap develops a Risk-Readiness Network Efficiency Score to measure the efficiency of a provider network. Clients may use these insights in many ways, including network sculpting, contracting and payment differentiation. The revenue model is typically a subscription-based pricing model based on size and complexity. This market is a natural adjacency to Cotiviti's primary segment. The focus on high-value care and payment accuracy are both central to the strategies of controlling cost of care and improving the health system.

These are priorities for our clients and for Cotiviti as the healthcare market shifts from volume to value. Looking forward, we expect revenue and earnings contributions from RowdMap to be minimal in 2017 given the timing of the acquisition in the calendar year and as a ramp-up to their expected run rate with existing clients. We project RowdMap revenue to be approximately $20 million for 2018.

We're excited about the opportunity that RowdMap provides to Cotiviti. This is a complementary addition to the portfolio, allowing us to continue to balance our strategic priorities for technology and analytics, while maximizing the growth opportunities we have within payment accuracy.

Now, I'll turn the call over to Steve to review our second quarter financial results.

Steve Senneff

Thank you, Doug. Good morning, everyone. As I walk through our second quarter 2017 financial results, I will be referencing the second quarter financial supplement posted on our investor website.

Beginning on Slide 2 of the supplement, you can see that second quarter 2017 revenue increased 6%, in line with the mid-single-digit growth we messaged last quarter. Healthcare revenue increased 7%, while retail revenue declined 7%, both in line with expectations.

Within healthcare, retrospective solutions or RCA revenue growth in the second quarter increased 7% from a year ago. The second quarter 2017 is a difficult comparison to the second quarter 2016, when we had higher-than-usual special project revenue. And they were still auditing under our original Medicare RAC contract.

In March 2017, we began reviewing charts for the two new regions awarded to us by CMS in October 2016. We're ramping up the two new contracts now, but they're still in the early stages. Therefore, we are maintaining our 2017 forecast for CMS revenue to be in the 1% to 2% range as a percentage of total revenue.

Prospective or PCA revenue increased 9% in the quarter from the second quarter last year, reflecting the revenue ramp from successful cross-sells, albeit, at a slightly lower rate than anticipated. This is primarily timing related and not a fundamental issue with the clients. We have experienced some variability as to when revenue is generated versus our expectations at the beginning of the year.

There are two main areas driving the variability: First, slower implementation ramp for certain new client and cross-sells primarily due to timing; and two, conversions of identified savings into revenue concentrated in a small number of clients. These clients have experienced some system changes, which have impacted their ability to convert claim identification to revenue.

As we look to the back half of this year, we expect third quarter revenue to return to a more normalized 10% to 12% growth rate year-over-year with adjusted EBITDA margins similar to second quarter levels. We expect fourth quarter revenue to be even stronger with corresponding substantial margin expansion. We expect our clients' conversion rates to be particularly strong and the ramp from implementations will be back on track in the fourth quarter.

As Doug mentioned, the substantial new and cross-sell clients we have implemented to date and our pipeline for additional opportunities set us up for a strong growth potential beyond 2017. Turning to our Global Retail and other segment, revenue decreased 7% in the second quarter related to the factors we described last quarter on settlement timing and client audit date shifts.

On a year-to-date basis, Retail revenue was up 2% from the first half of 2016, which was in line with our expectations. Moving to Slide 3 in the supplement, net income increased 94% in the second quarter of 2017 versus a year ago. The effective tax rate for the second quarter was 26.9%, and for the first six months of the year was 12.5%.

Excluding the impact of stock option exercises and other discrete items, the tax rate was approximately 38%. We used the forecasted 38% rate to tax affect the relevant line items in our adjusted net income bridge, because we exclude the tax benefit of stock option exercises in the bridge.

As we indicated last quarter, investments in analytics, technology and go-to-market planned for 2016 carried over into 2017. SG&A expense increased 7% in the second quarter and 14% for year-to-date through June 30, driven by higher compensation as we continued these investments. SG&A growth through six months is indicative of our expectations for the full year. To assist in the analysis of our underlying results, we provide two non-GAAP measures: adjusted EBITDA and adjusted net income.

On Slide 4, you can see that adjusted EBITDA increased 2% from the second quarter a year ago, with a corresponding margin decline of 152 basis points due to the tougher revenue comparison and continued investments in analytics and go-to-market. On Slide 5, adjusted net income in the second quarter 2017 increased 16% to $36 million or $0.38 per diluted share. The increase was primarily driven by year-over-year revenue growth and the $6 million reduction in interest expense due to debt pay-down and the rate reduction from our September 2016 refinancing.

Actual shares outstanding at June 30, 2017, were 92.2 million, while weighted average fully diluted shares for the quarter were 95.3 million. On Slide 7, you can see that cash flow from operations declined 42% to $42.3 million from the same period a year ago. The decline was primarily due to timing of estimated tax payments and collections.

Free cash flow, a non-GAAP measure defined as cash flow from operations less capital expenditures was $26 million year-to-date, reflective of the timing-related items described above. Free cash flow will increase in the second half, although there will be puts and takes related to the RowdMap acquisition.

Turning to the balance sheet data on Slide 8, we ended the first quarter with $137.4 million in unrestricted cash and $775.2 million in long-term debt, net of original issue discount and deferred financing costs. The decline in debt from yearend was due to total quarterly scheduled principal payments of $9 million. We are maintaining our $35 million interest expense estimate for 2017 despite the recent slight uptick in LIBOR.

With the scheduled loan payments and the result of our strong EBITDA growth and cash flow generation, we ended the quarter with a leverage ratio of 2.6 times, down from 2.9 times at December 31, 2016. The pro forma impact of the RowdMap acquisition would increase the leverage ratio to approximately 2.9 times due to the $70 million reduction in cash. We will continue to de-lever naturally, as cash builds through EBITDA growth and margin expansion.

As we look forward to the balance of 2017, we are maintaining our 2017 revenue and adjusted EBITDA guidance. While we will have revenue contribution from RowdMap in the third and fourth quarters, it will be minimal based on only 5.5 months of revenue post acquisition, and the fact that they are still ramping to their expected run rate with a number of newer clients.

RowdMap's revenue contribution is being partially offset by a reduction in revenue from our healthcare transaction services business. We have transitioned certain contracts with non-health plan customers to a third party as we continue to focus on our core payment accuracy businesses. We expect RowdMap to have a neutral impact on financial results in 2017 due to purchase accounting, but we expect our newest solution to contribute to profitability and be accretive in 2018 on an adjusted net income basis.

To summarize, our full year 2017 guidance is as follows: total revenue in the range of $688 million to $700 million; net income in the range of $97 million to $103 million; adjusted EBITDA in the range of $266 million to $272 million; and fully diluted weighted average shares outstanding of approximately 96 million.

We're also providing the following key assumptions that support our full year guidance: interest expense of approximately $35 million; stock compensation expense of approximately $12 million, which is an increase from our previous assumption due to the RowdMap acquisition; and effective tax rate of approximately 38% excluding the impact of stock option exercises; and CapEx of approximately $40 million.

A reconciliation of net income to the non-GAAP measures, adjusted EBITDA and adjusted net income is provided in our earnings release and in the second quarter financial supplement available on our investor website. Now I will turn the call back over to Doug.

Doug Williams

Thanks, Steve. Cotiviti's first half 2017 results reflect steady growth and sound execution on our strategies to drive increasing value for our clients. From our established ability to deliver client value, Cotiviti continues to perform in line with our stated objectives and with a sharp focus on creating long-term value.

The acquisition of RowdMap in July further expands our client value creation opportunities. We're excited about the future and our growing solution set that creates a meaningful medical cost savings for our clients, while continuing to generate significant returns for our shareholders.

In follow-up to last night's announcement, I would like to take this opportunity to thank Steve for his service to Cotiviti. It has been a pleasure to work with him over the past few years and have his partnership and counsel through the IPO and as our first year as a public company. I wish Steve much success in his new professional endeavor.

We are very fortunate to have Adrienne Calderone fill the role of interim CFO, while we conduct a search for Steve's replacement. Adrienne, Vice President and Controller, started with the company in 2012 and has been instrumental in helping Steve build out the finance function, to be ready for us becoming a public company. We have strong people and processes throughout our finance division and we expect a smooth transition.

Now, I'll ask the operator to open the lines for your questions.

Question-and-Answer Session

Operator

We will now begin the question-and-answer session. [Operator Instructions] The first question comes from Matthew Gillmor with Robert Baird. Please go ahead.

Matthew Gillmor

Hey, thanks for taking the question and just wanted to wish Steve all the best for the new opportunity. I wanted to ask about the prospective revenues. And, Steve, I think you mentioned there were two issues that hampered the performance there relative to internal expectations. And I think I understand the client system upgrade issues, but on the first issue you mentioned, I think you may be said there was some variability in the timing of the recognition of those revenues. Can you maybe just help us understand that aspect of it and when you think that will normalize?

Steve Senneff

Sure. Thanks, Matt. Yes, the two things that are going on, they're just putting a little bit of pressure on is a couple of delays in implementations. And again, it's just timing and when we get started with the client. And the other is just the ramp of some of the new and cross-sells are little bit slower.

The way that happens is sometimes the way that policies are adopted, the client usually will sometimes start off little bit more aggressively, and so we get into the process, they pull back a little bit. It's more just managing the provider abrasion and making sure that we were setting up for success for the long run. And that's in the best interest of us too.

In the short term, it might be a little bit of a timing delay, but in the long run it's going to build a lot more confidence with the client and give us that opportunity to build out faster. So, both of those are a little bit of headwinds right now. But there's nothing systemic in the market that's put in. It's really just timing delays. And as we see those ramp up, we should see that and the third and fourth quarter, we will start to see that and then heading into 2018, it should be strong.

Matthew Gillmor

Got it. That's helpful. And then, maybe one more on the pipeline, you've obviously had a lot of success with bringing a number of go-lives this year, both from a new and cross-sell. But just curious if you've got any kind of updated perspective on what you're seeing from a pipeline perspective? Is the level of engagement with new and existing clients higher or lower compared to last year? And is there any shift either from a payer type perspective or a product mix standpoint that are driving some of the discussions?

Doug Williams

Hey, Matt, I would say that we would characterize our pipeline as being very robust. Not particularly, higher or lower, because it was also that last year and we've seen that convert into yeses and then we - once they go live, we announce them to you in the market. So we feel very good about it. There tends to be a - if we looked at our book of business and we look at our pipeline, there would be a bit of a layering of more in terms of size, type, payers, et cetera. So we don't really see a shift. But we're not driving that. We're really responding to the market's needs, and that's just how it's spread.

Matthew Gillmor

Got it. Thanks very much.

Operator

The next question comes from Stephanie Davis with JPMorgan. Please go ahead.

Stephanie Davis

Hey, guys, thank you for taking my questions. And, Steve, best of luck in your next role.

Steve Senneff

Thank you.

Stephanie Davis

Could you talk to your expanded TAM following the RowdMap acquisition? Maybe how you plan approaching the near-term opportunities in a necessary and efficiently delivered services, and what the low-hanging fruit would be in that space?

Doug Williams

Hi, Stephanie. I think the immediate focus is to make sure that we convert the pipeline that RowdMap already had with the existing products and services. It does address a much larger section of the category that is generally categorized as wasteful U.S. expenditures in healthcare. In the current solution set, it's fundamentally a subscription model based on the size and complexity of that. We would expect in the future quarters to be able to give you a little more clarity on TAM and how that will work for us as we start making progress in terms of building out how our solutions can work in tandem.

Stephanie Davis

All right, thank you. That's helpful. And one follow up on the - just on the recent new wins question. Could you walk us through any macro drivers that might be adding to kind of this pace in new wins?

Doug Williams

I think the thing that's probably the biggest piece of it is, when we combine the companies, now it's been three years since we combined them. One of the leading strategic thesis was the sales cycle are so long and implementation cycles, et cetera, if we could go to a client not with a solution, but with a solution - a set of solutions or a portfolio, would we be able to be a more attractive partner with them, and also to effect that cycle time. Because when we merge, we had just about 10 clients in common.

And I think if we look back in the rearview mirror, our new business sales rate has been pretty constant and consistent with what the sum of the parts were before, but the real accelerator has been in the cross-selling.

Steve Senneff

Yes, I think the other thing to add there is the investments that we've made in go-to-market and really building out that team and is proving to be very fruitful as we've - and the coverage has expanded and really able to show the clients the value of Cotiviti.

Stephanie Davis

All right, great. That's super helpful. Thank you, guys, with the questions.

Operator

The next question comes from Ryan Daniels with William Blair. Please go ahead.

Ryan Daniels

Yes, good morning, guys. Thanks for taking the questions. Let me ask a follow-up on RowdMap. I'm curious, and looking at the company, it appears they also have some provider clients that are perhaps bearing more risk or entering into ECOs or shared-savings models. And I'm curious if your intention is to kind of further pursue the provider market in addition to the payer market given this acquisition?

Doug Williams

Hey, Ryan, this is Doug. That's a great question. I think your characterization is correct. These are provider entities in terms of how they're known. But they are actually - the determine the market for the last years has been the convergence, where our providers and payers converging and there's this new segment of risk-bearing entities.

And so all of the ones that RowdMap brought with the acquisition are the - effectively the payer function of a provider's entity, often called a provider-sponsored plan or something like that. And we consider those very viable markets for us. We already had a subset of our client base that we're in, where we were servicing provider-sponsored plans. RowdMap gives us an ability to expand that relevant market more than we had in the past. So we consider it to be a part of the future.

Ryan Daniels

Okay. That's helpful. And then also on RowdMap, it appears that a lot of their capability is identifying kind of outlying physicians or areas of utilization that don't warrant the cost given the quality of care and they use that to establish kind of narrow networks. I'm curious if the target there on your existing customer base is more, things like managed Medicaid on Medicare Advantage books of business given that they typically have these narrow networks and they are more accepted. So is that's kind of the initial cross-sell opportunity? Or is it broader than that?

Doug Williams

Well, I think your sense of understanding those lines of business is accurate. And what - just to be clear, what we do with our RowdMap asset is, we do the analysis and then we provide that analysis in terms of scoring to the clients who then can choose what they want to do with it.

Many of them would use it for network sculpting, but they might also use it for network education. They don't want to carve that provider out, but they're going to talk to them about where is - where are they efficient user of resources and where might there be opportunity to improve. There are also conversations with various clients about wanting to have payment differential.

So the real value is in the clarity. And I'm not a clinician. But if we - it goes deeper, it uses the Dartmouth Health Atlas as a clinical base for the study on unwarranted variation of care. And it really helps peer down into both not only the visit and the procedure score, but the pharmacy piece and also the referral patterns to bring a comprehensive view of that provider and the resources that they may consume personally or direct. And all that comes together. And that's a level of insight that most payers would say they don't have today.

Ryan Daniels

Okay. That's extremely a helpful color. Thank you.

Operator

The next question comes from Anagha Gupte with Leerink Partners.

Anagha Gupte

Hi, thanks. Good morning. And congratulation, Steve, and good luck. Again following on the RowdMap question sets. I was trying to follow-up on your guidance of minimal revenue this year and $20 million next year. And you say it's a subscription based model. But you go at risk to some degree, right, on your payment integrity. So are they looking to go at risk? And is that the difference between not having maybe $8 million to $10 million this year versus next year? And might your revenue model change when you now integrated into Cotiviti?

Doug Williams

So it's around minimal this year, just the quantity of revenue. That really reflects the fact that RowdMap is getting a lot of - was getting a lot of acceptance in the market. But even when you get to yes, you got to turn it into a contract and then you need to get paid for it. So we feel good about next year, because some of these activities that they've had underway are maturing, and many of them in the later part of this year.

As far as what we might do in the future, we fully intend to evaluate the assets that come with RowdMap and the assets that we already had. And try to ask ourselves where can one plus one equal more than two, because product combinations, and it's very difficult many times for our clients to have lots of individual pieces of - they may be valuable, but the more we can bring them the opportunity to have integrated solutions of both analytics and also that driving an executed outcome, we think that's a real opportunity for us. We don't have anything to announce today. But that's certainly the work streams that we have underway.

Anagha Gupte

Okay. And then on the margins, just following up on the same question. Might there - might the projections that they have right now on pricing, would that change? And as you look at that relative to any potential cost synergies that may be even possible on this, what might this do to your margin profile in the near term, when you're realizing the synergies and then on a normalized basis?

Steve Senneff

Hi, Anagha, this is Steve. In the short-term - look, right now, it's pretty much a breakeven business, but it's very low scale. As we scale this in the future, it's definitely a scalable business where the margins will increase. I think as we to 2018, we've not given any margin guidance. But it's probably going to be something south of where we are today. But given the size, it shouldn't have much of an impact on margin.

And we'll continue to look at the synergies and where we can expand those margins. And as Doug said, look at new solutions that could give us new revenue and new EBITDA opportunities going forward.

Anagha Gupte

And then finally, if I may, one last one on RowdMap. What is the competitive moat with this asset? And it sounds like they use public data from CMS, but then apply analytics to develop this Risk-Readiness profile with providers to help peers and health systems. Do you know of others that are doing anything similar or might do something? Or this is really proprietary and patented on the IP and so on?

Doug Williams

Well, I think, the core of this, trying to understand provider patterns, it's very much like our payment business, in that clients already do this themselves. They do it very well themselves, and we act as a supplement in payment accuracy just to help them perfect an imperfect picture at some times.

And in this scenario, I don't expect that any payer out there is not executing their own analytics, and then what we bring to them with RowdMap is a deep dimension that may not be available in other places. There is - you're correct that they - that one piece of it is the CMS data set. But that is actually not one piece of data, it has lots of dimensions. And we correlate around 100 different dimensions of datasets and reference data in order to develop the risk - the network efficiency scorecard.

Anagha Gupte

Got it. Congrats on the deal. And thanks for the color. I appreciate it.

Operator

The next question comes from Nicholas Jansen with Raymond James. Please go ahead.

Nicholas Jansen

Hey, thanks for the color. Two questions for me. First on free cash flow. This year, year-to-date is certainly tracking a little bit lower than last year. And I understand kind of timing dynamics. But how do we consider the back half of the year ramp and context. I think of prior discussions of relatively flattish free cash flow year-over-year in 2017 versus 2016 of around $150 million?

Steve Senneff

Nick, it's Steve. Yes, on the free cash flow, we definitely have some timing issues that are impacting the first half. The biggest one is from a tax perspective. We came into 2016 with - in a prepared tax position and so our cash taxes was very low, became a source of cash. In 2017, just the way we were required to do our estimated tax payments, we're actually building into a prepared tax position. That will not - that's something that will wind down in the second half. So it's purely timing. If we neutralize that, we would be pretty close to where we were last year.

We do have also some, if you dig into our DSOs that were declining slightly in the quarter as well. So we've got some improvements underway there. But some of that was just purely timing and close to the - with the June 30 cutoff, we had a few clients that tipped into July, and then with the July 4, came in right after that. So those are the things that - there's nothing systemic there that we're worried about it. It's just we need to make sure we tighten that up a little bit. If you take those two things and look at our revenue build for the second half, and we feel good about the free cash flow increases that we've projected.

Nicholas Jansen

Great. Thanks for the color. And then lastly, just looking at the margin build, particularly in the fourth quarter where you're going to be and obviously pretty strong relative to where you were last year. How do we think about that as a starting point for 2018? I know there is some seasonality in the business in terms of when revenue comes in, but just wanted to better understand how we think about the strength that you're predicting in 4Q relative to the run rate heading into next year? Thanks.

Steve Senneff

Sure. What I - look, we're going to have a strong margin profile in Q4 with the revenue spike that we typically have. And if you look back at history, you would say, well, you haven't typically had that. But we also have had some charges in Q4 related to some of the changes in our variable compensation programs that offset that.

I wouldn't take Q4 as the new base in our margin profile, because if you look at that, we typically would have a higher revenue, a higher margin and then reset. I think you should still reset your thinking around a 30 to 50 bps improvement in the year, and that would be our new base heading into 2018.

Nicholas Jansen

Thanks for the color, and best of luck.

Steve Senneff

Thank you.

Operator

The next question comes from Ricky Goldwasser with Morgan Stanley. Please go ahead.

Mark Rosenblum

Hey, guys, it's Mark Rosenblum on for Ricky. I just wanted to follow-up and get a little more detail on the clients that you mentioned were transitioning out of the business. They were non-healthcare clients. Could you just give a little more color on that?

Doug Williams

Hi, Mark, this is Doug. Yes, so in that transaction services, we had certain contracts that we service that were legacy in nature. They basically came with some acquisitions from the past. And we continued those contracts. As we want to make sure that we're very focused on the core markets, we had an opportunity to transition those in a way that was attractive for us through a third party, who felt that, that was their core business. And so we just went through an orderly process of transferring those contracts. And they were not servicing to any of our core market. They were non-health plan clients.

Steve Senneff

Right.

Mark Rosenblum

Got you. Okay. And then on cross-selling. You mentioned, three years ago, that there were 10 common clients and that cross-selling has really been driving the above market growth. Where are you guys right now in the cross-selling opportunity? And how much is left going forward?

Steve Senneff

Well, if you do the math, we've had four last year, we had two more this year. And so we continue to make progress. When we talked about the 10, we are around 40 plus five. So now we've got the new clients, we add the cross-sells there. So we still have a long runway of cross-sell opportunities across the business.

Doug Williams

Right. And so today when we go and we get a new client, we are articulating the value of - to mention the service, but from a standpoint of them implementing us, they have to practically make a choice of is RCA or PCA the preferred starting point. So each time that happens, a new client manufactures a cross-sell opportunity.

Steve Senneff

Because it would just be a difficult resource equation for them to implement both at once.

Mark Rosenblum

Got you. Okay. All right. That's helpful. Thank you.

Operator

The next question comes from Frank Sparacino with First Analysis. Please go ahead.

Frank Sparacino

Hi, guys, just one for me, more from a macro perspective. Was there anything noteworthy in your discussions this quarter without plans across different populations whether it was Medicare Advantage, Medicaid Managed Care or even on a commercial sort of exchange side of things that was noteworthy?

Doug Williams

The only one would maybe the obvious is that our clients are large sophisticated organizations. And they can deal with a lot of things. But one thing is really difficult for them is uncertainty. And with the uncertainty of the ACA program, will it stay, will it not stay, et cetera, that's very difficult for them to manage.

And so I think we've seen some of that and we've heard it in the news reports, et cetera is, if it is not going to be what this plan is, what's the next plan going to be? Because they have to get about the business of being prepared to live in that world. That hasn't really changed how they are talking to us about what we do. But that's just, I think the world that they are in.

Frank Sparacino

Thank you.

Operator

The next question comes from Sean Dodge with Jefferies. Please go ahead.

Sean Dodge

Good morning. So maybe going back to RowdMap and looking at the commercialization strategy a slightly different way. We think your existing client base, how easy of a cross-sell should this be? You've already got relationships with individuals within your client organization that buy the payment accuracy solution, so cross-selling those seem like you've already built the pathway. Are those the same people that are going to be the buyers of the more RowdMap care management type products?

Doug Williams

In our current business, it really is a fairly complex constellation of who is an influencer in that buyer. In the RowdMap scenario, it would likely be a different executive sponsor, but an area that is involved in the collective decision around payment accuracy. But in general, it's probably going to be sponsored by the person or persons who are responsible for network. Because that would be following a strategy, if they want to narrow the network or sculpt it, et cetera, then this is going to be a part of their toolkit.

Sean Dodge

Got it. Okay. And then, maybe looking a little longer term. How much leverage is there in the compensation and other SG&A lines? Maybe you can talk a little bit about your ability to grow within your existing client base versus the investments you need to make in those lines again over the longer term to support that?

Steve Senneff

Sean, this is Steve. So we believe that the investments that we're making right now in analytics go-to-market and technology, those are investments that will largely be completed by year end. So as we look to 2018, 2019, that should be a source of leverage for us going forward.

Sean Dodge

Understood. Thank you again.

Operator

This concludes our question-and-answer session. I would like to turn the conference back over to Doug Williams for any closing remarks.

Doug Williams

We like to thank you for your participation on call today. We look forward to seeing you soon. If you have any follow-up questions, please contact Jennifer. Thank you.

Operator

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

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