#1010010 001010011001 inovalon T TOETSTOO1001100101001010 STOOTTOON 101018018100.49 1001010011001 00110010100 00101001001 Fourth Quarter & Full Year 2016 February 22, 2017 Earnings Presentation Supplement#2Note Regarding Forward-Looking Statements inovalon This presentation contains forward-looking statements. All statements other than statements of historical facts contained in this presentation, including, but not limited to, statements regarding future results of the operations and financial position of Inovalon Holdings, Inc. ("Inovalon"), and its financial targets, business strategy, and plans and objectives for future operations, are forward-looking statements. The words "believe," "may," "see", "will," "target," "estimate," "continue," "anticipate," "intend," "expect," "growth" and variations of these words or similar expressions are intended to identify forward-looking statements. Inovalon has based these forward-looking statements on its estimates of its financial results and its current expectations and projections about future events and financial trends that it believes may affect its financial condition, results of operations, business strategy, short-term and long-term business operations and objectives, and financial needs as of the date of this presentation. These forward-looking statements are subject to a number of significant business, economic, regulatory and competitive risks, uncertainties and contingencies, many of which are beyond the control of Inovalon and its management, and are based upon assumptions with respect to future events or decisions, which are subject to change. Moreover, because Inovalon operates in a very competitive and rapidly changing environment, new risks emerge from time to time. It is not possible for Inovalon's management to predict all risks, nor can Inovalon assess the impact of all factors on its business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this presentation may not occur and actual results, including, but not limited to, the timing of and investment in technological advancements and developments, as well as Inovalon's ability to enter into new agreements with existing or new platforms, products and solutions in the timeframes expected, or at all, could differ materially and adversely from those anticipated or implied in the forward-looking statements. For a discussion of the risks and uncertainties that may cause Inovalon's actual results, performance or achievements to differ materially from those expressed or implied by forward-looking statements, you should read Inovalon's most recent Annual Report on Form 10-K, including the sections entitled "Risk Factors" and "Special Note Regarding Forward Looking Statements," as well as the other documents that Inovalon may file from time to time in the future with the Securities and Exchange Commission. You should not rely upon forward-looking statements as predictions of future events. Although Inovalon believes that the expectations reflected in the forward-looking statements are reasonable, Inovalon cannot guarantee and provides no assurance that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur. In addition, certain information included in this presentation is presented strictly for illustrative or educational purposes, and such information should not be viewed as a representation regarding management's expectations or actual results. Management's expectations and actual results could differ materially from information presented solely for illustrative or educational purposes. Except as required by law, Inovalon undertakes no obligation to update publicly any forward-looking statements for any reason after the date of this presentation, to conform these statements to actual results or to changes in Inovalon's expectations, and nothing in this presentation should be regarded as a representation by any person that any financial targets, business strategy or plans and objectives for future operations suggested by any forward-looking statements will be achieved or realized. In addition, this presentation may include certain non-GAAP financial measures. These non-GAAP measures are in addition to, not a substitute for or necessarily superior to, measures of financial performance prepared in accordance with U.S. GAAP. The GAAP financial measure most directly comparable to each non-GAAP financial measure used or discussed, and a reconciliation of the differences between each non-GAAP financial measure and the comparable GAAP financial measure, is available herein and within our public filings with the Securities and Exchange Commission, available on the Company's investor website at http://investors inovalon.com. INOV Q4 2016 Earnings Presentation Supplemental (2.22.17) 1.0.0 2 © 2017 by Inovalon. All rights reserved.#3Contents inovalon This deck is provided as a supplement to the 2016 Q4 and Full Year Earnings Results release announced by Inovalon on February 22, 2017. The following outlines the content of this supplemental presentation: • MORE² Registry® Dataset Expansion Connectivity Expansion • Value-Based Provider Platform D ● · Revenue Growth Guidance & Trending Seasonality Trends - Revenue Revenue Guidance Bridge Adjusted EBITDA Margin Expansion Appendix INOV Q4 2016 Earnings Presentation Supplemental (2.22.17) 1.0.0 3 © 2017 by Inovalon. All rights reserved.#4Proprietary Datasets Expansion inovalon Through its extensive healthcare industry connectivity, integration technologies and expanding client base, Inovalon maintains one of the industry's largest, proprietary datasets empowering its capabilities and the unparalleled value delivered to its clients. At the end of Q4 2016, Inovalon's MORE² Registry® dataset contained more than 150 million unique patients and 13.3 billion medical events, representing year-over-year increases of 15% and 21%, respectively, the fastest growth rates for these metrics since the third quarter of 2014. MORE² REGISTRYⓇ GROWTH Patient Count (millions) 150 140 130 120 110 100 90 80 70 60 30 20 10 0 2000 2001 Patient Count 2002 2003 2004 Medical Event Count 1.1 2005 2006 2007 Numbers are increasing at a rate of approximately 2.8% compounding monthly, or 38,8% annually, INOV Q4 2016 Earnings Presentation Supplemental (2.22.17) 1.0.0 2008 Year 4 2009 2010 2011 2012 2013 2014 2015 2016 انيا 13 12 11 2 Medical Event Count (billions) N 1 0 © 2017 by Inovalon. All rights reserved.#5Connectivity Expansion inovalon Inovalon's direct EHR connectivity with providers is expanding at a tremendous rate, with growth in connections exceeding 400% on a year-over-year basis and more than 150% sequentially in Q4 2016. Enrollment by Provider 100,000 80,000 60,000 40,000 20,000 0 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 (1) Q4 2016 figure is as of January 1, 2017. 446% Year-over-Year Expansion (4Q 2016 vs. 4Q 2015)¹ INOV Q4 2016 Earnings Presentation Supplemental (2.22.17) 1.0.0 5 3Q16 4Q16 © 2017 by Inovalon. All rights reserved.#6Value-Based Provider Platform inovalon Inovalon's Value-Based Provider Platform brings together massive scales of disparate data sources into one common data lake. Participating organizations can contribute internally-derived analytics and select from a wide array of Inovalon analytics to be applied with highly granular patient-level detail in real-time to empower a sophisticated approach to value-based care arrangements between payors and providers. Payor Engaged in At-Risk Value-Based Arrangements 40010001110000001001000011 2:0010001110000001001000011 200011001000101111000001110 Am 111010010 1101001010 111010010 Quality Metrics & Trend Analysis Cost & Utilization Performance MORE² Registry® 9001001000 Clinical Operations Management 0100011100000 Comparative Analytics INOV Q4 2016 Earnings Presentation Supplemental (2.22.17) 1.0.0 Analytics 6 Providers Engaged in At-Risk Value-Based Arrangements Physicians & Practice Groups 4000100011100000010010000110000010001101000 10001001000011 111100000111000 Provider Networks Hospital Groups 0010001101000 Medical Utilization & Diagnosis Patterns Pharmacy Cost & Prescribing Patterns VOD 1000000 Individual & Group Performance ACOS # Risk and Quality Gaps © 2017 by Inovalon. All rights reserved.#7Revenue Growth Guidance and Trending inovalon The headwinds previously discussed by the Company are winding down as anticipated, resulting in a first-half 2017 revenue decline of approximately 6% on a reported basis (down approximately 11% on an organic basis). Thereafter, in the absence of these headwinds, the Company is seen returning materially towards historical growth rates in the second half of 2017, with growth of approximately 17% on a reported basis (approximately 11% on an organic basis). 9.6% 01 16 One-off ACA-Related Impacts 5.3% 02 16 Delayed Sales & Marketing Ramp (0.5%) Inovalon Revenue Growth Rate Trending Guidance Range 2016 2017 03 16 Full Impact of 2016 Headwinds and Bottoming Out of Growth Declines CARA Product Transition Impact 04 16 (20.3%) -2017 Guidance Low Range Solid Line indicates known events. Dotted lines indicates ongoing events. Graphic intended to display principal forces (i.e., not intended to be all inclusive) INOV Q4 2016 Earnings Presentation Supplemental (2.22.17) 1.0.0 7 -1% 01 17 02 17 2017 Guidance Range High -19%) (14%) 1H17 Midpoint YtY Growth *(6%) 1H17 Midpoint YTY Organic Growth (11%) -14% 11% 0317 04 17 2H17 Midpoint YtY Growth *17% 2H17 Midpoint VTY Organic Growth -1 © 2017 by Inovalon. All rights reserved.#8Seasonality Trends - Revenue With the introduction of multiple new platform products and the expansion into several market adjacencies (e.g. provider and pharma), Inovalon continues to work towards a dampening of seasonality. 24.0% -22.9% to -23.2% 21.4% Q1 29.0% INOV Q4 2016 Earnings Presentation Supplemental (2.22.17) 1.0.0 26.9% -24.3% to -24.9% 2015 Q2 -2016 -25.9% to -26.5% 8 24.6% 24.0% 2017 Guidance Q3 www inovalon 27.6% -25.9% to -26.5% 22.5% Q4 Percentages represent the portions of actual or projected revenue in each quarter. 2017 guidance range is provided for illustrative purposes only to depict a shift from Q1 to Q4, consistent with historical trends- actual results may vary. © 2017 by Inovalon. All rights reserved.#9Revenue Guidance Bridge inovalon The combination of materially different fiscal halves of 2017 yields full year revenue guidance of $440.5M to $455.0M, or revenue growth between 3% and 6% on an as reported basis. $427.6 2016 Actual Revenue Full Year 2016 vs. 2017 Guidance Revenue Growth Range 3% to 6% -(6 pts) Chum -(7 pts) CARA Transition Wrap-up The above table is for illustrative purposes only. -7 pts Account Growth INOV Q4 2016 Earnings Presentation Supplemental (2.22.17) 1.0.0 5 pts - 6 pts New Client Sales 5 pts - 6 pts $440.5 $455.0 2017 Revenue Guidance 9 • Client revenue churn of approximately 6 pts in 2017 is consistent with historical norms. The impact of transitioning the CARA offering to a more flexible and modular platform is nearing completion with a headwind (of 7 pts in 2017) materially resolved by the end of Q2 2017. Revenue growth from up-sell, cross- sell and new clients (signed in 2016 and seen continuing in 2017), spurred by the introduction of new product platform offerings and added sales capacity. © 2017 by Inovalon. All rights reserved.#10Adjusted EBITDA Margin Expansion inovalon Inovalon's investments in innovation are driving increased platform efficiency, while also enabling the introduction of new platform products with higher margins. Altogether, these forces are enabling a 50 to 150 basis point expansion in annual Adjusted EBITDA margin. 23.4% 50 to 150 Basis Point Year-to-Year Improvement (200-500 bps) FY2016 Adj. EBITDA Margin % The above table is for illustrative purposes only. Investment Initiatives (200-400 bps) 300-600 bps Unit Price Changes Represents -450 bps of Gross Profit Margin Expansion YEY INOV Q4 2016 Earnings Presentation Supplemental (2.22.17) 1.0.0 200-400 bps Platform Mix Changes Platform Efficiencies 23.9% 24.9% FY 2017 Adj EBITDA Margin% 10 Continued commitment to investments in innovation, sales capacity expansion and efficiency initiatives • Typical unit price changes more than offset by an increasing mix of higher margin platform products Efficiency initiatives spanning connectivity, automation and integration drive strong operating leverage yielding Gross Profit Margin expansion of 450 bps YtY © 2017 by Inovalon. All rights reserved.#11inovalon ปลา SING healthcare empowered ==== Appendix#12Reconciliation of Forward-Looking Guidance Adjusted EBITDA inovalon Inovalon defines Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (Adjusted EBITDA) as net income calculated in accordance with GAAP, adjusted for the impact of depreciation and amortization, realized losses on short-term investments, gain on disposal of equipment, interest expense, interest income, provision for income taxes, stock-based compensation, acquisition costs, tax on equity exercises, and other non- comparable items. Adjusted EBITDA margin is defined as Adjusted EBITDA as a percentage of revenue. A reconciliation of forward-looking net income to Adjusted EBITDA guidance follows: (In millions) Reconciliation of Forward-Looking Guidance Net Income to Adjusted EBITDA: Net income Depreciation and amortization Interest expense Interest income Provision for income taxes (1) (3) EBITDA Stock-based compensation Acquisition costs: Transaction costs Contingent consideration Other non-comparable items (2) Adjusted EBITDA Adjusted EBITDA Margin Guidance Range Twelve Months Ending December 31, 2017 Low High $ $ 20 48 5 (5) 13 81 10 2 8 4 105 23.9% $ $ 24 48 5 (5) 16 88 11 2 8 4 113 24.9% A 40% tax rate is assumed in order to approximate the Company's effective corporate tax rate. Other "non-comparable items include items that are not comparable across reporting periods or items that do not otherwise relate to the Company's ongoing financial results, such as certain employee related expenses attributable to advancements in automation and operational efficiencies. Non-comparable items are excluded from Adjusted EBITDA in order to more effectively assess the Company's period over period and on going operating performance. 12 INOV Q4 2016 Earnings Presentation Supplemental (2.22.17) 1.0.0 © 2017 by Inovalon. All rights reserved.#13Reconciliation of Forward-Looking Guidance Non-GAAP Net Income inovalon Inovalon defines Non-GAAP net income as net income calculated in accordance with GAAP, adjusted to exclude tax-affected stock-based compensation expense, acquisition costs, amortization of acquired intangible assets, tax on equity exercises and other non-comparable items. A reconciliation of net income to Non-GAAP net income follows: (In millions, except per share amounts) Reconciliation of Forward-Looking Guidance Net Income to Non-GAAP net income: Net income Stock-based compensation Acquisition costs: Transaction costs Contingent consideration Amortization of acquired intangible assets Other non-comparable items (1) Tax impact of add-back items (2) Non-GAAP net income GAAP diluted net income per share Non-GAAP diluted net income per share Guidance Range Twelve Months Ending December 31, 2017 Low High (0) $ $ $ $ 20 10 2 8 14 4 (16) 42 0.13 0.28 $ $ $ $ 24 11 2 तळ चुक 8 14 4 (16) 47 0.16 0.31 Other "non-comparable items include items that are not comparable across reporting periods or items that do not otherwise relate to the Company's ongoing financial results, such as certain employee related expenses attributable to advancements in automation and operational efficiencies. Non-comparable items are excluded from Non-GAAP net income in order to more effectively assess the Company's period over period and on going operating performance. (2) A 40% tax rate is assumed in order to approximate the Company's effective corporate tax rate. 13 INOV Q4 2016 Earnings Presentation Supplemental (2.22.17) 1.0.0 © 2017 by Inovalon. All rights reserved.#14W↓↓↓↓↓↓ inovalon® healthcare empowered