sectorwatch: digital medicine · 2020-04-07 · 7 mile advisors appreciates the opportunity to...

Sectorwatch:Digital MedicineMarch 2020

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Digital MedicineMarch 2020

Sector Dashboard [4]

Public Basket Performance [5]

Operational Metrics [7]

Valuation Comparison [10]

Recent Deals [11]

Appendix [12]

7 Mile Advisors appreciates the opportunity to present this confidential information to the Company. This document is meant to be delivered only in conjunction with averbal presentation, and is not authorized for distribution. Please see the Confidentiality Notice & Disclaimer at the end of the document. All data cited in this document wasbelieved to be accurate at the time of authorship and came from publicly available sources. Neither 7 Mile Advisors nor 7M Securities make warranties or representations asto the accuracy or completeness of third-party data contained herein. This document should be treated as confidential and for the use of the intended recipient only. Pleasenotify 7 Mile Advisors if it was distributed in error.

3

Overview

7MA provides Investment Banking & Advisory Services to the Business Services and Technology Industries globally. We advise on M&A and private capital transactions, and provide market assessments and benchmarking. As a close knit team with a long history together and a laser focus on our target markets, we help our clients sell their companies, raise capital, grow through acquisitions, and evaluate new markets. We publish our sectorwatch, a review of M&A and operational trends in the industries we focus.

Dashboard• Summary metrics on the sector• Commentary on market momentum by

comparing the most recent 12-month performance against the last 3-year averages.

Public Basket Performance• Summary valuation and operating metrics

for a basket of comparable public companies

Valuation Comparison• Graphical, detailed comparison of

valuation multiples for the public basket

Recent Deals• The most recently announced deals in the

sector

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Dashboard

Operating Metrics

Revenue Growth

0.19 1 - year revenue growth compared to revenue

growth average for last 3 years

Pricing / Gross Margin

0.31% 1 - year gross profit % compared to gross profit

% average for last 3 years

Profitability

-0.95% 1 - year EBITDA % compared to EBITDA %

average for last 3 years

Current revenue growth rate exceeds the average of the last 3 years by

this amount, indicating that market momentum is increasing

Current gross profit margin exceeds the average of the last 3 years gross

profit margin by this amount, indicating supplier pricing power

Current EBITDA margin is less than the average of the last 3 years

EBITDA margins, which may signal further consolidation

(1.4%)

32.7%

50.3%

-10% 0% 10% 20% 30% 40% 50% 60%

Median LTM EBITDA Margin %

Median LTM Rev. Growth %

Median LTM GP Margin %

5

Public Basket

Company TEV $mLTM Rev

$m

Rev Growth

YoY GP %EBITDA

%TEV / Rev X

TEV / EBITDA

X # FTEsRev / FTE $k

Inovalon Holdings, Inc. 3,496 642 22% 74% 28% 5.4 18.3 2,371 271

HMS Holdings Corp. 2,349 626 5% 37% 22% 3.8 16.2 3,100 202

Livongo Health, Inc. 2,348 170 149% 73% -34% 13.8 N/A 615 277

Tabula Rasa HealthCare, Inc. 1,316 285 39% 36% 2% 4.6 135.0 1,286 221

Evolent Health, Inc. 733 846 35% 23% -7% 0.9 N/A 3,400 249

Phreesia, Inc. 687 118 33% 63% -4% 5.8 N/A 451 263

Average 1,821 448 47% 51% 1% 5.7 28.2 1,871 247

Median 1,832 456 34% 50% -1% 5.0 8.1 1,829 256

share price as of 31Mar20

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Public Basket Valuation Trends

Public EBITDA Multiples over Time

Public Revenue Multiples over Time 21.1x

4.8x

0x

5x

10x

15x

20x

25x

30x

35x

Mar-

15

Jun-1

5

Sep-1

5

Dec-1

5

Mar-

16

Jun-1

6

Sep-1

6

Dec-1

6

Mar-

17

Jun-1

7

Sep-1

7

Dec-1

7

Mar-

18

Jun-1

8

Sep-1

8

Dec-1

8

Mar-

19

Jun-1

9

Sep-1

9

Dec-1

9

Mar-

20

TEV/EBITDA - Median TEV/Revenue - Median

TEV/EBITDA - Average TEV/Revenue - Average

0x

5x

10x

15x

20x

25x

30x

35x

Mar-

15

Jun-1

5

Sep-1

5

Dec-1

5

Mar-

16

Jun-1

6

Sep-1

6

Dec-1

6

Mar-

17

Jun-1

7

Sep-1

7

Dec-1

7

Mar-

18

Jun-1

8

Sep-1

8

Dec-1

8

Mar-

19

Jun-1

9

Sep-1

9

Dec-1

9

Mar-

20

TEV/EBITDA - Median TEV/EBITDA - Average

0x1x2x3x4x5x6x7x8x9x

Mar-

15

Jun-1

5

Sep-1

5

Dec-1

5

Mar-

16

Jun-1

6

Sep-1

6

Dec-1

6

Mar-

17

Jun-1

7

Sep-1

7

Dec-1

7

Mar-

18

Jun-1

8

Sep-1

8

Dec-1

8

Mar-

19

Jun-1

9

Sep-1

9

Dec-1

9

Mar-

20

TEV/Revenue - Median TEV/Revenue - Average

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Operational Metrics

LTM Gross Profit Margin % LTM Revenue Growth %

- 20% 40% 60% 80%

Median

Evolent Health, Inc.

Tabula Rasa HealthCare,

Inc.

HMS Holdings Corp.

Phreesia, Inc.

Livongo Health, Inc.

Inovalon Holdings, Inc.

- 50% 100% 150%

Median

HMS Holdings Corp.


Phreesia, Inc.



Inc.


8

Operational Metrics

LTM Revenue per Full Time Employee x 000’sTEV / LTM Revenue

$- $100 $200 $300

Median

HMS Holdings Corp.


Inc.


Phreesia, Inc.



0x 5x 10x 15x

Median


HMS Holdings Corp.

Tabula Rasa

HealthCare, Inc.

Inovalon Holdings,

Inc.

Phreesia, Inc.


9

Operational Metrics

Accounts Receivable TurnoverAverage Days

Sales Outstanding

0x 2x 4x 6x 8x 10x 12x

Median

HMS Holdings Corp.



Tabula Rasa HealthCare, Inc.


0 30 60 90 120 150

Median


Tabula Rasa

HealthCare, Inc.


Inovalon Holdings,

Inc.

HMS Holdings Corp.

10

Valuation

Historical Valuation Multiples versus Gross Profit

Historical Valuation Multiples versus Revenue Growth Rate

1x

4x

5x 5x 6x 14x

23.3%

37.5%

36.3%

73.9%

63.2%

72.9%

0%

10%

20%

30%

40%

50%

60%

70%

80%

0x

2x

4x

6x

8x

10x

12x

14x

16x

LTM

GP%

Revenue(x

)

Revenue(x) LTM GP%

1x

4x

5x 5x 6x 14x

35.0%

4.7%

39.4% 21.7%

32.7%

148.7%

0%

20%

40%

60%

80%

100%

120%

140%

160%

0x

2x

4x

6x

8x

10x

12x

14x

16x

LTM

RG

R%

Revenue(x

)

Revenuje(x) LTM RGR%

11

Recent TransactionsDate Target Buyer / Investor

Total Transaction

Value Target

Revenue TEV /

Revenue TEV /

EBITDA

30Jan20 Snapworx, LLC Brightree LLC - - - -

22Jan20 VisionTree Software, Inc. Brainlab AG - - - -

13Jan20 Connected Care Business of NantHealth, Inc. Masimo Corporation 47.25 - - -

13Jan20 Intelligent InSites, Inc. Infor, Inc. - - - -

11Jan20 InTouch Technologies, Inc. Teladoc Health, Inc. 599.70 - - -

30Dec19 Evariant, inc. Healthgrades Operating Company, Inc. - - - -

12Dec19 SnapMD, Inc. VirTrial, LLC - - - -

10Dec19 Clinical Data Management, Inc. ESO Solutions, Inc. - - - -

5Dec19 TelaDietitian, Inc. Teladoc Health, Inc. - - - -

4Dec19 Recondo Technology, Inc. Waystar, Inc - - - -

27Nov19 3D4Medical Limited Elsevier B.V. 50.58 - - -

15Nov19 MEDarchon, Inc. XSOLIS, LLC - - - -

12Nov19 Medfusion, Inc. NextGen Healthcare, Inc. 43.00 - - -

28Oct19 GSI Health, LLC Medecision, Inc. - - - -

23Oct19 Health Navigators, LLC Amazon.com, Inc. - - - -

17Oct19 AbleVets LLC Cerner Corporation 75.01 - - -

4Oct19 Topaz Information, L.L.C NextGen Healthcare, Inc. 10.00 - - -

1Oct19 OpenBeds Inc. Appriss Inc. - - - -

30Sep19 Aptus Health, Inc. WebMD Health Corp. - - - -

16Sep19 VitreosHealth, Inc. HMS Holdings Corp. 36.50 - - -

11Sep19 Mango Health, Inc. TrialCard Incorporated - - - -

5Sep19 RMDY Health, Inc. OptimizeRx Corporation 46.00 2.37 19.4x NM

4Sep19 Assurance IQ, Inc. Prudential Financial, Inc. 3,500.00 - - -

20Aug19 Remedy Partners, Inc. Signify Health, LLC - - - -

8Aug19 My Health Direct, Inc. Experian Health, Inc. - - - -

1Aug19 MD Insider, Inc. Accolade, Inc. - - - -

1Aug19WRT Specialties, Inc./Easy PC Solutions, LLC/EasyMed Billing LLC/Systech Solutions, LLC

Doctors' Administrative Solutions, LLC - - - -

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APPENDIX:

Public Basket

Constituents

7 Mile Advisors appreciates the opportunity to present this confidential information to the Company. This document is meant to be delivered only in conjunction with averbal presentation, and is not authorized for distribution. Please see the Confidentiality Notice & Disclaimer at the end of the document. All data cited in this document wasbelieved to be accurate at the time of authorship and came from publicly available sources. Neither 7 Mile Advisors nor 7M Securities make warranties or representations asto the accuracy or completeness of third-party data contained herein. This document should be treated as confidential and for the use of the intended recipient only. Pleasenotify 7 Mile Advisors if it was distributed in error.

Digital MedicineMarch 2020

13

Public Basket


Inovalon Holdings, Inc., a technology company, providescloud-based platforms empowering data-driven healthcare.It operates the Inovalon ONE Platform, a cloud-basedplatform that interconnect with the healthcare ecosystem toaggregate and analyze data in real-time, as well asempowers the application in resulting insights. The companyalso operates myABILITY software platform, an integratedset of cloud-based applications for providers that offersconnectivity, administrative, clinical and quality analysis,management, and performance improvement capabilities toacute, post-acute, and ambulatory point-of-care providerfacilities. In addition, it offers advisory, implementation, andsupport services. The company serves health plans andprovider organizations, as well as pharmaceutical, medicaldevice, and diagnostics companies. Its platforms includeinformation of data pertaining to approximately 964,000physicians; 519,000 clinical facilities; and approximately 264million individuals and 42 billion medical events. InovalonHoldings, Inc. was founded in 1998 and is headquartered inBowie, Maryland.

0.0x

2.0x

4.0x

6.0x

8.0x

10.0x

12.0x

14.0x

Revenue Multiples - Inovalon Holdings, Inc.

TEV/Revenue Average

0x

10x

20x

30x

40xEBITDA Multiples - Inovalon Holdings, Inc.

TEV/EBITDA Average

0x

50x

100x

150x

200xP/E Multiples - Inovalon Holdings, Inc.

P/E Average

14

Public Basket

HMS Holdings Corp.

HMS Holdings Corp., through its subsidiaries, provides costcontainment solutions in the United States healthcaremarketplace. The company offers coordination of benefitsservices to government and commercial healthcare payersto ensure that the correct party pays the claim; andpopulation management solutions that provide risk-bearingorganizations with intelligence across their memberpopulations to identify risks, and enhance patientengagement and outcomes, as well as payment integrity,care management and consumer engagement, andanalytical solutions. It serves state Medicaid programs,commercial health plans, federal government healthagencies, government and private employers, children'shealth insurance program, and other healthcare payers, aswell as a subcontractor. The company was founded in 1974and is headquartered in Irving, Texas.

Date Key Development Headline12/22/19 HMS Holdings Corp. (NasdaqGS:HMSY) completed the

acquisition of West Claims Recovery Services, LLC from West Receivables Services, Inc.

11/20/19 HMS Holdings Corp. (NasdaqGS:HMSY) entered into a Membership Interest Purchase Agreement to acquire West Claims Recovery Services, LLC from West Receivables Services, Inc. for approximately $160 million.

9/15/19 HMS Holdings Corp. (NasdaqGS:HMSY) acquired VitreosHealth, Inc. for $36.5 million.

8/2/19 HMS To seek Acquisition

0x

1x

2x

3x

4x

5x

6xRevenue Multiples - HMS Holdings Corp.

TEV/Revenue Average

0x

5x

10x

15x

20x

25x

30xEBITDA Multiples - HMS Holdings Corp.

TEV/EBITDA Average

0x

20x

40x

60x

80x

100x

120x P/E Multiples - HMS Holdings Corp.

P/E Average

15

Public Basket


Livongo Health, Inc. provides an integrated suite of solutionsfor the healthcare industry in North America. It solutionspromote health behavior change based on real-time datacapture supported by intuitive devices and insights driven bydata science. The company offers a platform that providescellular-connected devices, supplies, informed coaching,data science-enabled insights, and facilitates access tomedications. Its products include Livongo for Diabetes,Livongo for Hypertension, Livongo for Prediabetes andWeight Management, and Livongo for Behavioral Health bymyStrength. The company was formerly known asEosHealth, Inc. and changed its name to Livongo Health,Inc. in 2014. Livongo Health, Inc. was incorporated in 2008and is headquartered in Mountain View, California.

0.0x

5.0x

10.0x

15.0x

20.0xRevenue Multiples - Livongo Health, Inc.

TEV/Revenue Average

Date Key Development Headline12/09/19 Livongo Health, Inc. has filed a Follow-on Equity Offering.

16

Public Basket

Tabula Rasa HealthCare, Inc.

Tabula Rasa HealthCare, Inc. operates as a healthcaretechnology company in the field of medication safety in theUnited States. The company’s proprietary Medication RiskMitigation Matrix delivers a multi-drug review, whichidentifies medication-related risks. Its cloud-based softwareapplications include EireneRx, a medication decision-supportand e-prescribing platform to access patients' medication-related information; and MedWise that provides medicationdecision support components for clients seeking to managetheir medication risk and improve medication outcomes, andpatient relationships by enhancing their existing systems.Tabula Rasa HealthCare, Inc. also offers clinical pharmacistcollaboration, prescription fulfillment and reminderpackaging, and pharmacy cost management services, aswell as health plan management services, including riskadjustment and third-party administrator services. As ofDecember 31, 2018, it served 224 healthcare organizations.The company offers its cloud-based software solutions toprescribers, pharmacists, and healthcare organizations formanaging the medication-related needs of their patients.Tabula Rasa HealthCare, Inc. was founded in 2009 and isheadquartered in Moorestown, New Jersey.

0.0x

2.0x

4.0x

6.0x

8.0x

10.0x

12.0xRevenue Multiples - Tabula Rasa HealthCare,

Inc.

TEV/Revenue Average

0x

50x

100x

150x

200x

250xEBITDA Multiples - Tabula Rasa HealthCare, Inc.

TEV/EBITDA Average

0x

10x

20x

30x

40x

50x

60x

70xP/E Multiples - Tabula Rasa HealthCare, Inc.

P/E Average

17

Public Basket


Evolent Health, Inc., through its subsidiary, Evolent HealthLLC, provides health care delivery and payment solutions inthe United States. The company operates through twosegments, Services and True Health. The Services segmentprovides value-based care services that include Identifi, aproprietary technology system that aggregates and analyzesdata, manages care workflows and engages patients;population health performance that delivers patient-centriccost-effective care; delivery network alignments; andintegrated cost and revenue management solutions. TheTrue Health segment operates a commercial health plan forsmall and large businesses in New Mexico. Evolent Health,Inc. was founded in 2011 and is headquartered in Arlington,Virginia.

Date Key Development Headline12/29/19 Evolent Health Inc. (NYSE:EVH) (‘Evolent’) completed the

acquisition of substantially all of the assets to assume substantially all of the liabilities of University Health Care Inc. (‘Passport’) and its subsidiary Passport Health Solutions LLC.

5/28/19 Evolent Health Inc. (NYSE:EVH) entered into an agreement to acquire substantially all of the assets to assume substantially all of the liabilities of University Health Care Inc. and its subsidiary Passport Health Solutions LLC.

5/9/19 Evolent Health Intends To Seek Acquisitions

0.0x

1.0x

2.0x

3.0x

4.0x

5.0x

6.0x

7.0x

8.0xRevenue Multiples - Evolent Health, Inc.

TEV/Revenue Average

18

Public Basket

Phreesia, Inc.

Phreesia, Inc. provides an integrated SaaS-based softwareand payment platform for the healthcare industry in theUnited States and Canada. The company’s Phreesia Platformoffers a suite of solutions to manage the patient intakeprocess and an integrated payments solution for processingof patient payments. It deploys its platform in a range ofmodalities, including through Phreesia Mobile, a patients’mobile device; Phreesia Dashboard, a Web-based dashboardfor providers; PhreesiaPads, which are self-service intaketablets; and Arrivals Stations that are on-site kiosks. Itserves patients, healthcare provider organizations, and lifesciences companies. The company was founded in 2005 andis headquartered in New York, New York.

Date Key Development Headline4/16/19 Phreesia, Inc. (NYSE:PHR) completed the acquisition of Vital

Score, Inc.

0.0x

1.0x

2.0x

3.0x

4.0x

5.0x

6.0x

7.0x

8.0x

Revenue Multiples - Phreesia, Inc.

TEV/Revenue Average

19

Contact Information7MA provides Investment Banking & Advisory Services to the Business Services and Technology Industries globally. We advise on M&A andprivate capital transactions, and provide market assessments and benchmarking. As a close-knit team with a long history together and a laserfocus on our target markets, we help our clients sell their companies, raise capital, grow through acquisitions, and evaluate new markets.Securities offered through 7M Securities LLC.

Leroy Davis, Partner 704.899.5962 [email protected]

Tripp Davis, Partner 704.899.5762 [email protected]

Andy Johnston, Partner 704.899.5961 [email protected]

Mark Landry, Managing Director 561.972.0609 [email protected]

Ben Lunka, Managing Director 704.496.2995 [email protected]

John Cooper, Director 704.973.3996 [email protected]

Tim Frye, Director 704.973.3994 [email protected]

Kristina Sergueeva, Director 704.899.5149 [email protected]

Ben Garber, Vice President 412.626.7898 [email protected]

Nicholas Prendergast, Vice President 704.973.3995 [email protected]

Garth Martin, Vice President 704.973.3997 [email protected]

Ariail Barker, Director, Sales & Marketing 704.981.2908 [email protected]

Emily Halstenberg, Marketing & Sales Coordinator 704.409.9912 [email protected]

Marty Johnson, Senior Associate 704.973.3999 [email protected]

Sydney Scadden, Senior Associate 704.973.3998 [email protected]

Steve Buffington, Associate 704.960.1828 [email protected]

Dennis Fox, Associate 704.706.9168 [email protected]

Daniel Kim, Associate 704.912.4584 [email protected]

Olufunke Abass, Associate 704.285.8171 [email protected]

Robin Siegel, Analyst 704.490.4714 [email protected]

sectorwatch: digital medicine · 2020-04-07 · 7 mile advisors appreciates the opportunity to...

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