Cotiviti Holdings (NYSE:COTV) Q1 2018 Earnings Conference Call May 2, 2018 8:30 AM ET
Jennifer DiBerardino - IR
Doug Williams - CEO
Brad Ferguson - CFO
Ryan Daniels - William Blair
Sean Dodge - Jefferies
Anne Samuel - JPMorgan
Ana Gupte - Leerink Partners
Matthew Gillmor - Robert W. Baird
Dolph Warburton - Nephron Research
Stephanie Demko - Citi
Sandy Draper - SunTrust
Good morning, and welcome to Cotiviti's First Quarter 2018 Financial Results Conference Call. [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.
Good morning, and welcome to Cotiviti's First Quarter 2018 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 June 1, 2018. 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 will 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 net revenue, 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 Brad Ferguson, Chief Financial Officer. Now I will turn the call over to Doug.
Thank you, Jennifer, and good morning. On the call this morning, I'll review our first quarter 2018 operational results and then turn the call over to Brad to review the first quarter financial results.
In the first quarter, we continued to see the benefits from our strong and experienced team and the investments we continue to make in our technology and analytics capabilities as well as our go-to-market strategy. First quarter revenue of $219 million represents 37% growth, including a liability release of $46.6 million from our original Medicare RAC contract due to its expiration. While we don't believe this revenue should be considered in our run rate going forward, the release of the liability represents significant revenue not previously recognized over the course of the contract.
Excluding the impact of the liability release, adjusted net revenue growth of 8% in the first quarter was driven by a 10% increase in Healthcare revenue, partially offset by an 8% decline in Retail. The strength in Healthcare was led by our retrospective business or RCA, which increased 13% on an adjusted basis from a year ago. As we discussed in February, we are seeing significant growth from our clinical chart validation solutions as we benefit from our investments in advanced analytics. We continue to see solid progress across the various solutions within our RCA portfolio.
Our Prospective business or PCA results reflect a slight decline in the first quarter reflecting a mix of volume growth and adoption from both new and existing clients, offset by declines at other clients due to volume decreases as a result of market exits, membership declines and claim platform changes. Additionally, there is a continuation of the measured policy adoption by new large sources of opportunity, as we discussed in February. Our PCA outlook is encouraging, stemming from the success we've had in recent meaningful scope expansions, cross-sells and new clients. In fact, we have signed some of the largest sources of PCA opportunity ever in the history of the prospective business.
Volume is a leading indicator for value creation and revenue growth. In our fourth quarter call, we indicated that there were several large PCA opportunities in implementation and newly into production. These large complex clients often have multiple platforms and implement in stages. PCA volume increased over 20% in the first quarter of 2018 as compared to 10% for the full year 2017. As these large clients progress and their implementations mature in policy adoption, we expect to see increased value creation and, in turn, PCA revenue growth.
While the seeds of growth have been planted in PCA, we expect RCA adoption expansion to occur at a more rapid rate in 2018. We continue to build out our solution portfolio using analytics and technology to augment innovation so that we remain at the forefront of delivering tangible value to clients and deliver solutions more rapidly. The dimensions vary and include continued progress on real-time solutions while also accelerating the depth and breadth in which we interrogate data for value.
We have aligned our digital organization with the broader organization to continually enhance our solutions and value. Our Risk-Readiness platform is performing as expected. We are integrating the RowdMap assets to enhance other dimensions of core content that we'll be able to leverage in both PCA and RCA to drive incremental client value.
Adjusted EBITDA for the quarter increased 11% to $63.8 million, which, in turn, generated substantial cash flow. We can utilize our significant financial flexibility to continue to invest in the business for future growth, either organically or through strategic M&A in line with our stated criteria.
The strategic investments we have made in technology and analytics and the success we are having with our go-to-market efforts have set a solid foundation for a long runway of growth opportunities. We have a strong pipeline from new clients, significant expansions with existing clients and implementations of new opportunities. The business fundamentals remain strong, and we continue to be optimistic about our future.
Now I'll turn the call over to Brad to review our financial results.
Thanks, Doug, and good morning. As I walk through our financial results for the quarter, I'll be referencing the 2018 first quarter financial supplement posted on our website. I'll start on slide 2 with our first quarter revenue by segment, which includes the Medicare RAC refunds and appeals liability released during the first quarter.
As we discussed on our call in February, in connection with the January 31 expiration of the original CMS contract, we determined that we have no obligation for certain aspects of the legacy appeals and settlement. Accordingly, we reduced our estimated liability to approximately $4 million based on our best estimates of the potential refunds related to the original contract. The result of the reduced liability was a onetime increase to revenue of $46.6 million.
Moving to slide 3. I will focus my commentary on revenue excluding the nonrecurring Medicare RAC liability release. On a run-rate basis, revenue increased 8% in the first quarter of 2018 from a year ago, which represents a 10% increase in Healthcare revenue offset by an 8% decline in Retail revenue.
Within Healthcare, RCA's first quarter growth of 13% was driven primarily by the continued strength in our clinical chart validation solutions. Revenue from the new Medicare RAC contract was minimal in the first quarter as work continues to ramp at a slow pace. We maintain our expectation that the RAC contributions to 2018 revenue will be approximately 1% of overall revenue.
In PCA, revenue was down $1.5 million or 2% year-over-year due to the items that Doug outlined. We believe there's a significant opportunity from new expansion and cross-sell opportunities that will ramp to their full potential over time. We expect the PCA pacing to slowly trend upward in 2018 and accelerate into 2019.
Within the other Healthcare revenue on slide 3, growth was in line with our expectations. The increase is driven by our Risk-Readiness solution adoption, offset by the roll-off of certain noncore contracts.
Turning to Global Retail and Other, where revenue declined in the first quarter of 2018 in line with expectations. For the full year 2018, we still expect retail and other revenue to decline approximately 10% compared to 2017 due to the previously announced wind down of the UK operations and our runoff of noncore contracts in the retail/other line, which expired in 2017.
Moving to the bottom of slide 4 and focusing on our operating costs. Our total operating expenses including cost of revenue and SG&A increased 13% compared to the first quarter of 2017. Excluding stock compensation and costs related to the Medicare RAC liability release, our total operating costs increased 6% year-over-year.
Cost of revenue increased 3% in the first quarter, including $1.2 million in variable compensation associated with the Medicare RAC liability release. Absent this onetime item, cost of revenue was essentially flat year-over-year as we continue to benefit from the scale on the business and technology investments we've made.
Over half the increase in SG&A expenses in the first quarter was driven by a $6.3 million increase in stock compensation primarily related to the restricted stock issued in connection with the RowdMap acquisition. We expect total stock compensation expense for 2018 to be around $30 million, with the second quarter being similar to the first quarter and the third and fourth quarters dropping to about $6 million per quarter.
Still on slide 4, moving to taxes. Our effective tax rate in the first quarter was 22.8%, below our guidance of 25% due to a $2.6 million benefit we received from stock option exercises and the vesting of RSUs in the quarter.
To assist in the analysis of underlying results, we use non-GAAP measures, including adjusted net revenue, adjusted EBITDA, adjusted net income and free cash flow. On slide 5, you can see that adjusted EBITDA increased 11% from the first quarter a year ago with a corresponding 99 basis point margin increase.
On slide 6, adjusted net income in the first quarter 2018 increased to $39.1 million or $0.41 per diluted share. The 22% increase was primarily driven by year-over-year revenue growth and a lower tax rate. Actual shares outstanding at March 31, 2018, were 92.9 million, and the fully diluted weighted average shares for the quarter were 95.3 million.
On slide 8, you can see that free cash flow was $22.3 million for the first quarter, a 50% increase from a year ago. We ended the quarter with $189.3 million in cash and cash equivalents. We expect to continue to generate strong cash flow as we grow our top line.
There were no shares repurchased during the quarter under our outstanding share repurchase program. We continue to evaluate opportunities to deploy capital, including investing in the business, strategic M&A and opportunistically buying back shares.
Turning to the balance sheet data on slide 9. The decline in debt from year-end 2017 was due to our $4.5 million scheduled principal payment in the first quarter of 2018. Interest expense was $9.2 million for the quarter. Given the recent increase in LIBOR and expectations that it may continue to increase, we now expect our full year 2018 interest expense to be in a range of $40 million to $45 million.
We ended the first quarter with a net leverage ratio of 2.1 times, down from 2.3 times at December 2017. In recognition of our strong operating results and significant deleveraging since our IPO, Moody's recently upgraded our debt rating to BA3 with a stable outlook. Additionally, on April 23, Standard & Poor's reaffirmed our BB- corporate rating and moved our outlook to positive.
Based on the trends we're seeing, we are narrowing our revenue guidance and maintaining our adjusted EBITDA guidance. Our outlook includes the following: total revenue including the CMS RAC liability release in the range of $787 million to $807 million, total adjusted revenue in the range of $740 million to $760 million, net income in the range of $140 million to $155 million, and adjusted EBITDA in the range of $295 million to $310 million and fully diluted weighted average shares outstanding of approximately 96 million.
The following key assumptions support our full year guidance: interest expense in the range of $40 million to $45 million; stock composition expense of approximately $30 million; an estimated effective tax rate of approximately 25%, excluding the impact of stock option exercises, RSUs and non-deductible stock-based compensation; and CapEx in the range of $40 million to $45 million. A reconciliation of net income to the non-GAAP measures, adjusted net revenue, adjusted EBITDA and adjusted net income is provided in our earnings release and in the first quarter financial supplement available on our investor website.
Now I'll turn the call back over to Doug.
Thanks, Brad. Our business model remains strong. We have a dedicated and amazing team supported by the technology and analytics innovations we continue to produce, and we remain optimistic about our growth opportunities.
Our ability to extract value from large quantities of data continues to be at the center of our value delivery proposition for clients and key to driving growth. We believe that we will be able to convert significant growth opportunity into strong returns for both the company and our shareholders.
Now I'll ask the operator to open the lines for your questions.
[Operator Instructions] Your first question this morning will be from Ryan Daniels of William Blair.
Doug, I wanted to go back to some of your prepared comments on the PCA contract signings and volume. Can you talk a little bit more - I think you said the volume of claims reviewed was up about 28% year-over-year, which is much more rapid growth. How long, number one, does that take to translate into recognized revenue? I thought that was fairly quickly. And then, number two, is there any way to kind of size that so that we can get a feel for the volume growth and what that means from a revenue growth standpoint for PCA?
Ryan, yes. I don't know if the audio was unclear, but we said 20% in the first quarter, not 28%. And it's a good question. And the - in our sort of funnel what comes first is claim volume. And then - and that tends to come in large steps because a client wants to make sure that the interface and the technology works and it's not going to be disruptive to their operating system, and then clients go on. And they have varied patterns, but adoption of what they will use of our content library. And that's what generates the value, and obviously, the revenue comes from that.
What we have seen, I think we spoke about this maybe last quarter, is with some of these very large clients, either new, cross-sell or expansions, in that volume, the very largest clients are more measured in how they implement. The volumes are so significant, they have more testing around the system and want to see it work for a while. And then they have a very deliberate process in terms of their own internal approvals, et cetera, to make sure it's not disruptive. Obviously, the value is significant to them, but they also want to make sure that they are not negatively impacting the provider network in a way that was unintended. So we think of it as - these are seeds that will grow over years. More than - it wouldn't be like a quarter by quarter, but we would expect to see a long runway of consistent growth coming from that volume.
Okay. So the right way to think about it is the volume is the reflection of having these large customers and now the opportunity is to capture more of that volume and generate revenue over a longer period of time versus it being kind of immediate corollary to revenue growth?
That - I think that's a good summary, yes. And some of these large clients are really almost like multiple instances within a same client if they have multi-platforms or multi-market or other dimensions to roll out. So we obviously see that as good for the long-term growth.
Yes, okay. And then, kind of conversely, clinical chart validation, you mentioned that, that continues to be very strong, I think being helped by some of your investments in technology. And can you speak a little bit more to - is that better yield that you're getting from the charts you're pulling? Is it increasing your win rates, you're getting more business, moving you up in the stack within health plans because the execution is stronger? Just what exactly are your machine learnings or AI investments there allowing you to do to generate more revenue?
Sure, Ryan. So it's a multidimensional answer. It's not one thing. So in one case, it is helping us be far more effective at selecting more accurately or at a more rich analysis that will diminish the impact of - provider impact if there's no finding. And so that operational improvement is appealing to our clients and helps with their strategies around provider collaboration, et cetera. And so it's a matter of selecting better. It's a matter of when we select the ability to have an impact more frequently. And it's also a matter of, when we do those things that are more aligned with clients, we're awarded with the opportunity to do more business with them.
The next question will come from Sean Dodge of Jefferies.
Maybe starting with a broader question on your client base. We're continuing to see the MLRs for the payers come in very favorably, so cost trends there staying pretty low. Are you seeing any signs that's beginning to influence the pace your clients are looking to adopt more of your solutions or the aggressiveness with which they're going after audits or auditing?
Sean, that's a good question. So at a high level, certainly, the financial motivation of a client can be a factor. We don't see it affecting us in terms of getting to new clients or clients extending our capabilities. Look, we don't ever - I've never heard a client say, because we're fine on MLRs, we're fine overpaying or mispaying for something that's been incorrectly coded, et cetera, because there's a lot of dimensions of value beyond economics. But we do think that it has some effect or influence on, the point you made, of the rate of adoption.
So we would consider it to be in a sort of a moderate world of financial motivation, and most of the motivation of our clients is about getting it right. Our clients' number one motivation is to have claims as accurate as possible. Because that feeds almost every dimension of their enterprise, whether it's data, contract management, provider management, et cetera, so it matters to them a lot.
Okay, that's very helpful. And then maybe a quick update on RowdMap. I think you all had originally expected it would contribute something in the neighborhood of $20 million of revenue this year. Is that still the target? And maybe you could comment a little on the pipeline or activity you're seeing around that offering.
Sure. So in the context of the RowdMap portfolio that we acquired, that's on track. So it's pretty much within the range of expectation. I think the most significant part of RowdMap is we had a hypothesis at putting it together, but we now feel much more strongly about the significance that, that can add to our core business when we can meet with a client and have decisions informed by the relative effectiveness of a provider's utilization of resources and how might that influence their payment strategy for that provider and be able to differentially - give them the opportunity to differentially use payment practices to influence behavior.
So from a revenue perspective, there's one line that - where that Risk-Readiness shows up, on the other revenue line. But again, the value is beyond that and shows up in other places, too.
The next question will be from Anne Samuel of JPMorgan.
You narrowed the top end of your guidance range. Can you help us bridge the delta versus your prior guide? What differed versus your initial expectations? And then as we progress through the year, how should we think about cadence?
Yes. So when we set a guidance range, I mean, we want one that has many paths within it to achieve. And obviously, more things have to happen to get to that upper end. And just based on what we're seeing and trends on certain things, we just think it's prudent now to kind of taper that top end. And really, it's not just one thing but - a couple of things, but some of the things you've heard here. Just the timing shows up in different places, but, certainly, the pace of adoption on some of these larger clients have - impacts in just how those work out over time. So it's not like things aren't happening. It's just really the pace at which they're happening, and the insight that we get from that just caused us to lower it.
Okay, great. And then thinking about it on the margin side. By holding your EBITDA guidance, you were actually able to kind of raise the margins. I mean, is that a result of 1Q outperformance versus your internal expectations? Or as you look out, are you more optimistic as you look to the rest of the year?
There's levers that we can pull, and we are obviously more comfortable on how you can control the costs versus the revenue. So there's just a lot of things that we can do to kind of influence that and feel comfortable holding the EBITDA range where it is now.
The next question will be from Ana Gupte of Leerink Partners.
So the first question was on the PCA business. Do you have a sense for or have you disclosed the retention rate that you usually expect on the current book of business? And you talked about exits or membership declines. Maybe it's a bit around claims volume. Do you see that PCA retention rate go down mainly on those factors? Or also, do they just stop employing the solutions because of FTEs or installation costs or whatever? And does that vary at all by payer mix?
Ana, yes, sure. So the piece that I - in the prepared remarks, when we were talking about market exits, that was really concentrated on a small number of clients who, in total, exited five - they're still clients and they're still using us where they're in business, but they exited five markets. I guess one of them was still running out in the first quarter. And then another volume impact was a client who is migrating off of one platform and on to another. And we are sort of at a mature run rate where they're migrating off, and they're migrating toward their platform that they'll use in the future which is at a much younger stage of adoption. But in general, we have really good retention of clients.
So this is more idiosyncratic and related to their own issues as opposed to trend is weak and utilization is weak and so they're just not investing as much in payment integrity?
Yes. We haven't seen that behavior correlation. But I mean, I think, without those - Brad can probably speak to this a little more clearly. But without those - without that volume coming out, I think we'd have felt pretty good about the growth. Because we had same-store growth, we had new and expansion growth, et cetera, so it was just offset.
Yes. So when I kind of think about the components of the PCA change quarter-over-quarter, certainly, the new business and expansion saw good progress there as new clients coming on and then expansions of existing clients. This membership decline in some portions that Doug just talked about kind of takes you the other way. And then really, around the margin, we talked about these adjustments that we had. Last quarter - and I'd say, in Q1,it's kind of around the margin, slightly negative on the adjustments and compared to a quarter last year in 2017, where they were probably slightly favorable. But when you're comparing the two periods, that makes a difference and so a couple of million on each side when you're looking at these two periods compared to each other. I mean, that is unfortunately part of the story, but - so there's nothing systematic. It's just what happens in any one time. And we're making assessments and judgments and - across a lot of clients. And again, just when comparing the 2 periods, that does make a difference and influence the comparison.
Got it. Helpful color. One follow-up on - or a separate question on the EBITDA margin. The cost of sales came in favorably. The other G&A was higher, so that offset it a bit. How are you thinking about the progression of margin for this year? And will you maintain margins? Or are - you talked at one point about reinvesting in software development. And will there be margin expansion possibility going forward?
Sure. I mean, implied in the guidance - the bottom end of the revenue didn't change. The top end came down a little bit, and our EBITDA guidance stayed the same. So - and that would get you to an implied margin rate that's higher than where we were in the first quarter. So some seasonality in the first quarter, and we do - we'll get scale on the business over time and still feel good about doing that. And as I mentioned earlier, I mean, certainly, our ability to control costs and manage that, pace that over time, we feel better about that.
The next question will be from Matthew Gillmor of Robert W. Baird.
I wanted to follow up on some of the PCA discussions and, in particular, understanding the ramp from the large opportunities that you talked about with Ryan. Once these large clients have turned on the PCA system, do they have a roadmap established for the policies that they intend to implement, which can give you a sense for the future revenue opportunity? Or do you need to go back to them and sell them on which policies to adopt?
I would say, in general, and specifically, on the large ones, there is a fairly deep discussion around a roadmap, both in terms of the rollout of additional claim volume, perhaps by line of business and categories of it - of the policy. Though as - like any large organization, they also are very intense so they're very intentional about making sure that they don't have any unintended consequence. So it gets into very, very detailed discussions. So we have a roadmap, but, ultimately, the revenue will be based on the degree that we follow that roadmap, could be higher, could be lower. But I mean, we have - in one client's case, we have a PCA roadmap that spans multiple platforms, multiple markets and high-level policy adoption that will roll out over several years.
Okay. And one other question just on kind of general growth expectations, and I suspect you'll probably decline to answer at least parts of this. At the time of the IPO, I guess, you talked about kind of 10% to 12% growth at least for the first year, and last year was sort of 8%. And I think you're kind of guiding this year as sort of 8% on an organic basis. Are - the PCA commentary that you've talked about, is that enough to get you sort of back to a double digit? Or do you think this is more of a new normal for the business in terms of high single digit?
I think we are - we still feel like it's a double-digit growth opportunity. And I think what we've shared before is, over a period of time, that should normalize. I mean, if you think about the comments that we've made this morning specifically on PCA and these very large opportunities that are going to - they're going to be deliberate and somewhat slow but also worth it. Because when that all happens, we - I hope - we didn't ever mean to suggest that we would be exactly a certain percent on every quarter or every year, but over a period of time, we see so much opportunity in the business that we're very excited about it.
The next question will be from Eric Percher of Nephron Research.
This is Dolph Warburton on for Eric. My first question is on the guidance. The delta to net income looks like it was $35 million; the RAC adjustments was $45 million. I realize there was a change to interest and stock compensation. But even accounting for like the change in tax, it seems like there's a little bit more missing - that, I guess, is hard to account for given some of those items are tax effected. And I'm just wondering if there's any change above the line or - that we're missing there on the guidance.
No. I mean, there's a reconciliation in the deck we gave, and, I mean, I think you highlighted the components. I mean, EBITDA is the same. Certainly, the RAC item impacted net income. Interest expense, just with the change of LIBOR that I talked about, brought that up slightly. And then stock comp, changed that slightly - up as well. But really, those are the drivers.
Okay. And then if I can just have one follow-up. The investments that you made in tech and analytics and the go to market, when can we expect that to kind of level out or start kind of being less of a headwind on margin?
Yes. I mean, again, when you look at our guidance, I mean, we do see margin expansion. Certainly, we are investing in those areas and feel like we're seeing - feel like there's a lot more benefit in the future but start seeing it. I mean, we talked about what's happening in the clinical charts business and how that shows itself. We are effectively keeping cost of revenue flat but seeing the revenue grow. So we'll continue to do those things, invest over time. But I think some expectation of margin expansion - modest margin expansion over time, is reasonable. And that's kind of the expectation that we've set.
[Operator Instructions] The next question will be from Stephanie Demko of Citi.
So two for you. The first one, just given the different growth rates that you are seeing in your Healthcare segment and some of the shifting market dynamics, have you seen any preference in demand from clients towards RCA or PCA?
We - it doesn't seem to be a trend from something new or different. So just a couple of generalities is PCA is a more intense implementation, working with clients' operating data, which is very sensitive to them. And particularly on these large-volume clients, they need to make sure that they're comfortable with our speed and effectiveness and putting the - effectively the recommendation back into their system. So it is a bigger decision from the standpoint of resourcing at the client, and it's a more intense process. RCA is data coming from the data warehouse. We get the data, interrogate it with algorithms, et cetera, and then have returns to clients.
They typically have resource intensity at that stage when we're bringing it back. So that has to be well planned as well. And they work on different cycles. So in general, PCA has a lower - I mean, RCA has a lower intensity to get started and probably more intensity for the client as it scales. PCA has a higher intensity to get started, but then it's a very effective program for the client as it scales. And we basically don't steer it. We go to a client and say we have these capabilities. We evaluate them - their data and see what their needs are, and then ask the question, where would you like to get started based on your resource allocation and your ability to prioritize?
Understood. And you're seeing no client preference for one way or the other, just given where we are in the cycle near term?
At a new business - I guess, new business would be the place that, that would happen. I don't think we see - if we had 10, we might have 6 one way; 4, the other. We wouldn't have 9 one way; 1, of the other. I think a lot of the business, that was driven by cross-selling in our current world. And if they're already running with one or the other, it's pretty obvious which one they would prioritize.
All right. Understood. And a quick follow-up. Just given - you mentioned it already in your comment, but just given you will have kind of a more intensive ramp but a less labour-intensive mix once ramped, how should we think about these new PCA implementations with respect to margin?
Well, I'll answer the first part of that and ask Brad to answer the margin pieces. Just before - I was speaking about the clients' resource intensity. And then I don't think we - you want to -
Yes. I mean, on the margin, I think our expectations are built into the guidance with how that works out over time. And kind of similar to the comments - or building on the comments I made earlier just about - I mean, we do expect to be able to get scale over time, kind of modest as we reinvest in certain areas and kind of change the dimensions of our workforce. But - so I think that is consistent with what we've said in the past.
The next question will be from Sandy Draper of SunTrust.
Most of my questions have been asked, but maybe rephrasing one of the earlier questions about sort of the longer-term growth, Doug. And Brad, feel free to chime in as well. I'm not sure this is a question but maybe an observation, and I'd love to hear your thoughts. One way - when I look at it, you guys did the merger spent a year integrating the merger and then came out and did a fantastic job. And you got a lot of - there's a lot of momentum. And sometimes, there's low-hanging fruit from a merger, and so the growth rates were very, very strong.
But now as you're getting to sort of more normal business choppiness, sometimes good on the upside, and we've seen it maybe in PCA - or RCA, and then maybe downside in PCA. Why would it not be better to think about this as longer-term a high single-digit grower with the potential to do higher? But - in any given year, probably a baseline is high single digits. And then when things go right, like they did in '16, you can do double digits. Is there - [indiscernible] the market opportunities change, your general execution has changed. It's just there are some things that are out of your control that are causing you to maybe be a little bit lower than previously, so why not factor that in? Is that an unfair way to sort of look at it right now?
Sandy, I think we're probably going to double-team on this answer. But just back to your framing hypothesis. Directionally, a lot of that was right. I would probably just color it a little. We came together in the middle of '14, and at that time, the Connolly Commercial and the iHealth Technologies were in the process - the pipeline and the implementations were the largest growth that either company had experienced, and we needed to make sure that we captured that. So we really spent the first 12 months really integrating back office, accounting, finance, HR, et cetera, and executing on business capture in the market.
And then in mid-'15, we brought - we integrated the go-to-market team and began the foundational work of cross-selling, which started in '16 and '17. And we're probably in the early to mid-innings of that. Part of what we have seen though is that, particularly in RCA, our history was in the very, very large clients. And that is effectively new volume for PCA. But those are - if we look back over time, it took a lot of years to get implemented on RCA across some of these large clients, and we shouldn't necessarily expect that it would happen in a year or two in PCA. So that, coupled with the investment significance in - primarily in '16 and '17 around technology and analytics, we are seeing benefits from that, but we're seeing the very early stages of it. So...
Yes. So obviously, we're not giving long-term guidance. We give annual guidance. But our expectations and the assessment of the opportunity really hasn't changed. I mean, I think we're as excited as we have been. I feel - as Doug just kind of indicated where we are on the journey, we feel like there's big opportunities with our clients going in, also going in other directions, just what we can do with technology and more data, like the RowdMap database. I mean, so there's just a lot of things that we can do. And so again, I'm not going to say what it is over the long term, but I feel like we're as comfortable as we ever have been about the opportunity ahead.
Great. That's helpful commentary. And maybe one quick follow-up for you, Brad. Just can you remind me in terms of - I know I could probably look it up in the K, just, what exactly your exposure is? How much of the debt is exposed to a floating LIBOR rate? And how we should think about - if there is a simple sensitivity of 10 or 25 basis point change in LIBOR, has an X impact to interest expense.
Yes. So there's a cap that we had at like 3% on, I think, $450 million of it. Is that right? So in that range, I mean. So I think there's some math you can do around that. But yes, that's where - we've done some hedging, and that's where it comes in.
And ladies and gentlemen, this will conclude our question-and-answer session. I would like to turn the conference back over to Doug Williams for his closing remarks.
Thank you, everyone, for your participation in the call this morning. If you have any follow-up questions on the quarter or our discussion of today, please contact Jennifer. Thank you.
Thank you, Mr. Williams. The conference has now concluded. Thank you for attending today's presentation. At this time, you may disconnect your lines.