FORT LAUDERDALE, Fla.,
Nov. 10, 2021 /PRNewswire/ --
Third Quarter 2021 Highlights
- Net revenues of $82.4 million, up
19% compared to Q3 2020
- Net income of $3.7 million,
compared to $1.7 million net loss in
Q3 2020
- Adjusted EBITDA of $18.3 million,
up 21% compared to Q3 2020
- Expect full year 2021 net revenues of $335 million to $340
million
- Expect Adjusted EBITDA of $67
million to $69 million
(1)
Convey Health Solutions Holdings, Inc. (NYSE: CNVY) (the
"Company" or "Convey"), a leading healthcare technology and
services company in the U.S., announced today financial results for
the third quarter ended September 30,
2021.
"We achieved excellent third quarter financial and operating
results across both of our business segments. Our advisory business
is performing well as health plans are looking for competitive
advantages that our advisory team can help drive, and our
technology team is busy onboarding new members and clients during
the Medicare Annual Election Period that extends until December 7th," said Stephen Farrell, CEO of Convey.
Mr. Farrell continued, "This past quarter, our Value-Based
Analytics business, powered by data on over 28 million health plan
members, provided some new and exciting insights on beneficiaries
of our Supplemental Benefit Administration program. Analyzing over
250,000 over-the-counter (OTC) beneficiaries across a three-year
period, we found a high correlation between usage of our OTC
offering and lower medical costs. More specifically, users of the
Convey OTC program who had diabetes, cardiovascular disease, or a
history of slip and fall accidents had between 6 and 8 percent
lower medical costs than members with similar conditions who did
not use our OTC offering. Although the cause and effect is hard to
determine, it stands to reason that there is some meaningful cause
and effect as our engagement with members naturally makes them more
proactive with their health which in turn improves outcomes. We are
excited to continue leveraging data-driven insights to help new and
existing health plan customers keep improving member outcomes as
they become more focused on value-based care."
Tim Fairbanks, Convey's CFO, said
"During the third quarter, our revenue grew 19% year over year
leading to $18.3 million of Adjusted
EBITDA, $16.3 million of net cash
provided by operating activities and $3.7
million of net income. This strong performance allows us to
increase the midpoint of our full year 2021 net revenues and
Adjusted EBITDA guidance ranges, which now represents 19% and 32%
year over year growth, respectively, as compared to 2020.
Additionally, our liquidity and modest levels of debt position us
well for both new product development and strategic M&A
initiatives."
Third Quarter 2021 Financial Results
- Net revenues of $82.4 million, up
19% compared to $69.5 million in the
third quarter of 2020. Third quarter revenue growth was driven by
Technology Enabled Solutions (TES) segment revenue of $69.2 million, up 15% year over year from
$60.1 million in third quarter 2020,
and $13.2 million of revenue in our
Advisory Services segment, which was up 39% year over year from
$9.5 million in third quarter
2020.
- Net income was $3.7 million
compared to a net loss of $1.7
million for the third quarter of 2020.
- Adjusted EBITDA of $18.3 million
increased 21% year over year from $15.0
million in the third quarter of 2020.
- As of September 30, 2021, Convey
had cash and cash equivalents of $36.4
million and $39.5 million
available on the Company's revolver. Total debt, excluding
unamortized cost of $3.1 million, was
$192.6 million.
Nine Months Ended September 30,
2021 Financial Results
- For the nine months ended September 30,
2021, net revenues of $240.3
million was up 23% compared to $195.8
million for the first nine months of 2020.
- Net loss was $10.4 million
compared to a net loss of $14.6
million for the nine months ended September 30, 2020. Net loss for the nine months
ended September 30, 2021 includes
$18.0 million of one-time costs
attributed to our IPO consisting of $7.9
million for prior acts D&O insurance premium,
$5.0 million expense related to the
June 2021 extinguishment of debt,
$2.8 million of public company
readiness costs, and $2.3 million
related to one-time termination of the management service agreement
with TPG.
- Adjusted EBITDA for the nine months ended September 30, 2021 was $49.3 million, up 53% year over year from
$32.2 million for the first nine
months of 2020.
2021 Financial Guidance
For the full year 2021, Convey is updating the following
financial guidance ranges.
- Net revenues of $335 million to
$340 million (previously $330 million to $340
million)
- Adjusted EBITDA (2) of $67
million to $69 million
(previously $66 million to
$68 million)
The midpoints of these guidance ranges represent a 19% year over
year increase in net revenues and a 32% year over year increase in
Adjusted EBITDA.
Third Quarter 2021 Conference Call
Convey will host a conference call to discuss third quarter 2021
results on November 10, 2021 at
5:00 p.m. Eastern Time. The
conference call can be accessed by dialing (844) 200-6205 for U.S.
participants or +44 208-0682-558 for international participants,
and referencing conference ID 273613; or via a live audio webcast
that will be available online at
https://ir.conveyhealthsolutions.com. A replay of the call will be
available via webcast for on-demand listening shortly after the
completion of the call, at the same web link, and will remain
available for approximately 90 days.
About Convey Health Solutions
Convey Health Solutions is a specialized healthcare technology
and services company that is committed to providing clients with
healthcare-specific, compliant member support solutions utilizing
technology, engagement, and analytics. Convey's administrative
solutions for government-sponsored health plans help to optimize
member interactions, ensure compliance, and support end-to-end
Medicare processes. By combining its purpose-built technology
platforms with dedicated and flexible business process solutions,
Convey creates better business results and better healthcare
consumer experiences on behalf of business customers and partners.
Convey's clients include some of the nation's leading health
insurance plans and pharmacy benefit management firms. Convey's
healthcare-focused teams help millions of Americans navigate the
complex Medicare Advantage and Part D landscape.
Effective November 4, 2021, Convey
Holding Parent, Inc., changed its name to Convey Health Solutions
Holdings, Inc.
Forward-Looking Statements
This press release contains "forward-looking statements." These
statements are made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. Forward-looking
statements are neither historical facts nor assurances of future
performance. Instead, they are based on our current beliefs,
expectations, and assumptions regarding the future of our business,
future plans and strategies and other future conditions. Such
forward-looking statements may include, without limitation,
statements about future opportunities for us and our products and
services, our future operations, financial or operating results,
including our 2021 financial guidance, our excitement to continue
leveraging data-driven insights to help new and existing health
plan customers keep improving member outcomes as they become more
focused on value-based care, that our liquidity and modest levels
of debt position us well for both new product development and
strategic M&A initiatives, anticipated business levels, our
ability to create value for our clients and serve their business
objectives, future earnings, planned activities, anticipated
growth, market opportunities and our expectations with respect to
the growth of the markets in which we compete, including the
Medicare Advantage market, trends in the markets in which we
compete, strategies, competitions and other expectations and
targets for future periods. In some cases, you can identify
forward-looking statements because they contain words such as
"anticipate," "believe," "estimate," "expect," "intend," "may,"
"predict," "project," "target," "potential," "seek," "will,"
"would," "could," "should," continue," contemplate," "plan" and
other words and terms of similar meaning. Forward-looking
statements are subject to known and unknown risks and
uncertainties, many of which may be beyond our control. We caution
you that forward-looking statements are not guarantees of future
performance or outcomes and that actual performance and outcomes
may differ materially from those made in or suggested by the
forward-looking statements contained in this press release. In
addition, even if our results of operations, financial condition
and cash flows, and the development of the markets in which we
operate, are consistent with the forward-looking statements
contained in this press release, those results or developments may
not be indicative of results or developments in subsequent periods.
New factors emerge from time to time that may cause our business
not to develop as we expect, and it is not possible for us to
predict all of them. Factors that could cause actual results and
outcomes to differ from those reflected in forward-looking
statements include, among others, the following: our ability to
retain our existing clients or attract new clients; our dependence
on a small number of clients for a substantial portion of our total
revenue; limitations of our clients' growth prospects, and the
failure of the size of the total addressable markets in which we
compete or expect that we may compete in the future to grow at
rates currently expected; increases in labor costs, including due
to changing minimum wage laws, and an overall tightening of the
labor market; an economic downturn or volatility, including as a
result of the ongoing COVID-19 pandemic; developments in the
Medicare Advantage market or the healthcare industry generally,
including with respect to changing laws and regulations; security
breaches, failures or other disruptions of the information
technology systems used in our business operations or by our
vendors; our ability to obtain, maintain, protect and enforce our
intellectual property and proprietary rights; our ability to
operate our business without infringing, misappropriating or
otherwise violating the intellectual property or proprietary rights
of third parties; our substantial indebtedness, and the
restrictions imposed by our indebtedness on our subsidiaries; a
material weakness in our internal control over financial reporting
and a failure to remediate a material weakness, and the
effectiveness of our internal controls over financial reporting;
and the significant influence our principal stockholder, TPG, has
over us. For a further discussion of these and other factors that
could impact our future results, performance or transactions, see
the section Part II, Item 1A "Risk Factors" included in our Form
10-Q for the period ended June 30,
2021 and our other filings with the SEC. Given these
uncertainties, you should not place undue reliance on these
forward-looking statements. It is not possible for us to predict
all risks, nor can we assess the impact of all factors on our
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 we may make. We qualify
all of the forward-looking statements in this press release by
these cautionary statements. Except as required by law, we
undertake no obligation to publicly update any forward-looking
statements, whether as a result of new information, future events
or otherwise.
Use of Non-GAAP Financial Measures
This press release includes the presentation and discussion of
certain financial information that differs from what is reported
under accounting principles generally accepted in the United States ("GAAP"). EBITDA, Adjusted
EBITDA, and Adjusted EBITDA Margin are non-GAAP financial measures
and are presented in order to supplement investors' and other
readers' understanding and assessment of the financial performance
of the Company. We use EBITDA, Adjusted EBITDA, and Adjusted EBITDA
Margin to assess our financial performance and also for internal
planning and forecasting purposes. We believe EBITDA, Adjusted
EBITDA, and Adjusted EBITDA Margin provide investors with useful
information because such metrics offer a consistent and comparable
overview of our operations across historical financial periods. In
evaluating EBITDA, Adjusted EBITDA, and Adjusted EBITDA Margin, you
should be aware that in the future we may incur expenses similar to
those eliminated in the presentation.
Non-GAAP measures should be considered as a supplement to, and
not as a substitute for, or superior to, the corresponding measures
calculated in accordance with GAAP. There are limitations to the
use of the non-GAAP financial measures presented in this press
release. For example, our non-GAAP financial measures may not be
comparable to similarly titled measures of other companies. Other
companies, including companies in our industry, may calculate
non-GAAP financial measures differently than we do, limiting the
usefulness of those measures for comparative purposes.
The non-GAAP financial measures we present are not meant to be
considered as indicators of performance in isolation from or as a
substitute for measures prepared in accordance with GAAP, and
should be read only in conjunction with financial information
presented on a GAAP basis. Reconciliations of each of these
non-GAAP measures to the most directly comparable GAAP financial
measure are presented below. We encourage you to review our
financial information in its entirety, not to rely on any single
financial measure and to view the reconciliations in conjunction
with the presentation of the non-GAAP financial measures for each
of the periods presented. In future periods, we may exclude such
items, may incur income and expenses similar to these excluded
items, and include other expenses, costs, and non-recurring
items.
|
___________________________
|
|
1 Convey
is not providing forward-looking guidance for U.S. GAAP reported
financial measures (other than net revenues) or a quantitative
reconciliation of forward-looking non-GAAP financial measures.
Please see "Use of Non-GAAP Financial Measures" for additional
information.
|
|
|
2 Convey
is not providing forward-looking guidance for U.S. GAAP reported
financial measures (other than net revenues) or a quantitative
reconciliation of forward-looking non-GAAP financial measures to
the most directly comparable U.S. GAAP measure due to the inherent
difficulty in forecasting and quantifying certain amounts that are
necessary for such reconciliations, including net (loss) income and
adjustments that could be made for COVID-19 related costs, income
tax expense/benefits, contract termination costs, and
extinguishment of debt in its reconciliation of historic numbers.
These items are uncertain, depend on various factors, and could
have a material impact on U.S. GAAP reported results for the
guidance period.
|
|
CONVEY HOLDING
PARENT, INC. AND ITS SUBSIDIARIES
|
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
|
(in thousands,
except share and per share data) (unaudited)
|
|
|
September
30,
2021
|
|
December
31,
2020
|
|
ASSETS
|
|
|
|
|
Current
assets
|
|
|
|
|
Cash and cash
equivalents
|
$
|
36,441
|
|
$
|
45,366
|
|
|
Accounts receivable,
net of allowance for doubtful accounts of $275 and $610 as of
September 30, 2021, and December 31, 2020,
respectively
|
46,798
|
|
50,589
|
|
|
Inventories,
net
|
13,860
|
|
11,094
|
|
|
Prepaid expenses and
other current assets
|
12,894
|
|
15,220
|
|
|
Restricted
cash
|
3,560
|
|
3,560
|
|
|
Total current
assets
|
113,553
|
|
125,829
|
|
|
Property and
equipment, net
|
19,318
|
|
20,667
|
|
|
Intangible assets,
net
|
224,554
|
|
238,842
|
|
|
Goodwill
|
455,206
|
|
455,206
|
|
|
Restricted
cash
|
—
|
|
160
|
|
|
Other
assets
|
1,725
|
|
2,364
|
|
|
Total
assets
|
$
|
814,356
|
|
$
|
843,068
|
|
|
LIABILITIES AND
SHAREHOLDERS' EQUITY
|
|
|
|
|
Current
liabilities
|
|
|
|
|
Accounts
payable
|
$
|
11,864
|
|
$
|
21,308
|
|
|
Accrued
expenses
|
41,969
|
|
67,159
|
|
|
Capital lease
obligations, current portion
|
494
|
|
361
|
|
|
Deferred revenue,
current portion
|
4,662
|
|
6,466
|
|
|
Term loans, current
portion
|
—
|
|
2,500
|
|
|
Total current
liabilities
|
58,989
|
|
97,794
|
|
|
Capital leases
obligations, net of current portion
|
660
|
|
1,129
|
|
|
Deferred taxes,
net
|
21,417
|
|
26,561
|
|
|
Term loans, net of
current portion
|
189,482
|
|
239,290
|
|
|
Other long-term
liabilities
|
7,683
|
|
8,144
|
|
|
Total
liabilities
|
278,231
|
|
372,918
|
|
|
Commitments and
contingencies
|
|
|
|
|
Shareholders'
equity
|
|
|
|
|
Preferred
stock
|
—
|
|
—
|
|
|
Common
stock
|
733
|
|
613
|
|
|
Additional paid-in
capital
|
569,038
|
|
492,747
|
|
|
Accumulated other
comprehensive income
|
33
|
|
78
|
|
|
Accumulated
deficit
|
(33,679)
|
|
(23,288)
|
|
|
Total shareholders'
equity
|
536,125
|
|
470,150
|
|
|
Total liabilities and
shareholders' equity
|
$
|
814,356
|
|
$
|
843,068
|
|
|
CONVEY HOLDING
PARENT, INC. AND ITS SUBSIDIARIES
|
|
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(LOSS)
|
|
(in thousands,
except per share amounts)
|
|
(unaudited)
|
|
|
For the Three
Months Ended
September
30,
|
|
For the Nine
Months Ended
September
30,
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
Net
revenues:
|
|
|
|
|
|
|
|
|
Services
|
$
|
44,191
|
|
|
$
|
37,207
|
|
|
$
|
130,002
|
|
|
$
|
104,814
|
|
|
Products
|
38,220
|
|
|
32,321
|
|
|
110,288
|
|
|
91,019
|
|
|
Net
revenues
|
82,411
|
|
|
69,528
|
|
|
240,290
|
|
|
195,833
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
Cost of
services(1)
|
20,993
|
|
|
20,077
|
|
|
65,799
|
|
|
59,719
|
|
|
Cost of
products(1)
|
24,221
|
|
|
21,226
|
|
|
73,047
|
|
|
60,643
|
|
|
Selling, general and
administrative
|
21,296
|
|
|
18,784
|
|
|
70,986
|
|
|
58,886
|
|
|
Depreciation and
amortization
|
7,473
|
|
|
6,918
|
|
|
22,667
|
|
|
20,710
|
|
|
Transaction related
costs
|
328
|
|
|
80
|
|
|
2,969
|
|
|
277
|
|
|
Change in fair value
of contingent consideration
|
—
|
|
|
—
|
|
|
96
|
|
|
—
|
|
|
Total operating
expenses
|
74,311
|
|
|
67,085
|
|
|
235,564
|
|
|
200,235
|
|
|
Operating income
(loss)
|
8,100
|
|
|
2,443
|
|
|
4,726
|
|
|
(4,402)
|
|
|
Other income
(expense):
|
|
|
|
|
|
|
|
|
Interest
income
|
—
|
|
|
—
|
|
|
—
|
|
|
7
|
|
|
Loss on extinguishment
of debt
|
—
|
|
|
—
|
|
|
(5,015)
|
|
|
—
|
|
|
Interest
expense
|
(3,283)
|
|
|
(4,561)
|
|
|
(15,144)
|
|
|
(13,478)
|
|
|
Total other expense,
net
|
(3,283)
|
|
|
(4,561)
|
|
|
(20,159)
|
|
|
(13,471)
|
|
|
Income (loss) from
continuing operations before income taxes
|
4,817
|
|
|
(2,118)
|
|
|
(15,433)
|
|
|
(17,873)
|
|
|
Income tax (expense)
benefit
|
(1,131)
|
|
|
472
|
|
|
5,042
|
|
|
3,272
|
|
|
Net income (loss)
from continuing operations
|
3,686
|
|
|
(1,646)
|
|
|
(10,391)
|
|
|
(14,601)
|
|
|
Income (loss) from
discontinued operations, net of tax
|
—
|
|
|
(6)
|
|
|
—
|
|
|
37
|
|
|
Net income
(loss)
|
$
|
3,686
|
|
|
$
|
(1,652)
|
|
|
$
|
(10,391)
|
|
|
$
|
(14,564)
|
|
|
Income (loss) per
common share – Basic and diluted
|
|
|
|
|
|
|
|
|
Continuing
operations
|
0.05
|
|
|
(0.03)
|
|
|
(0.16)
|
|
|
(0.24)
|
|
|
Discontinued
operations
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Net income (loss) per
common share
|
$
|
0.05
|
|
|
$
|
(0.03)
|
|
|
$
|
(0.16)
|
|
|
$
|
(0.24)
|
|
|
|
|
|
|
|
|
|
|
Net income
(loss)
|
$
|
3,686
|
|
|
$
|
(1,652)
|
|
|
$
|
(10,391)
|
|
|
$
|
(14,564)
|
|
|
Foreign currency
translation adjustments
|
(33)
|
|
|
28
|
|
|
(45)
|
|
|
47
|
|
|
Comprehensive income
(loss)
|
$
|
3,653
|
|
|
$
|
(1,624)
|
|
|
$
|
(10,436)
|
|
|
$
|
(14,517)
|
|
|
________________________
|
|
(1)
|
Excludes amortization
of intangible assets and depreciation, which are separately stated
below.
|
|
CONVEY HOLDING
PARENT, INC. AND ITS SUBSIDIARIES
|
|
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)
(unaudited)
|
|
|
For the Nine
Months Ended
September
30,
|
|
2021
|
|
2020
|
|
Cash flows from
operating activities
|
|
|
|
|
Net loss
|
$
|
(10,391)
|
|
|
$
|
(14,564)
|
|
|
Adjustments to
reconcile net loss to net cash (used in) provided by operating
activities:
|
|
|
|
|
Depreciation
expense
|
4,155
|
|
|
2,933
|
|
|
Amortization
expense
|
18,512
|
|
|
17,777
|
|
|
Loss on extinguishment
of debt
|
5,015
|
|
|
—
|
|
|
Provision for bad
debt
|
(125)
|
|
|
79
|
|
|
Provision for
inventory reserve
|
941
|
|
|
25
|
|
|
Deferred income
taxes
|
(5,144)
|
|
|
(4,182)
|
|
|
Amortization of debt
issuance costs
|
876
|
|
|
783
|
|
|
Change in fair value
of contingent consideration
|
96
|
|
|
—
|
|
|
Share-based
compensation
|
3,166
|
|
|
5,671
|
|
|
Changes in operating
assets and liabilities:
|
|
|
|
|
Accounts
receivable
|
3,916
|
|
|
9,782
|
|
|
Inventory
|
(3,707)
|
|
|
(6,522)
|
|
|
Prepaid expenses and
other assets
|
2,830
|
|
|
3,092
|
|
|
Accounts payable and
other accrued liabilities
|
(13,145)
|
|
|
12,483
|
|
|
Deferred
revenue
|
(1,489)
|
|
|
(3,042)
|
|
|
Payment on contingent
consideration
|
(10,329)
|
|
|
—
|
|
|
Net cash (used in)
provided by operating activities
|
(4,823)
|
|
|
24,315
|
|
|
Cash flows from
investing activities
|
|
|
|
|
Acquisition, net of
cash received
|
—
|
|
|
(3,758)
|
|
|
Purchases of property
and equipment, net
|
(4,713)
|
|
|
(3,385)
|
|
|
Capitalized software
development costs
|
(4,051)
|
|
|
(2,960)
|
|
|
Net cash used in
investing activities
|
(8,764)
|
|
|
(10,103)
|
|
|
Cash flows from
financing activities
|
|
|
|
|
Proceeds from issuance
of debt
|
78,000
|
|
|
25,000
|
|
|
Payment of debt
issuance cost
|
(2,133)
|
|
|
(1,148)
|
|
|
Principal payment on
term loan
|
(132,368)
|
|
|
(1,813)
|
|
|
Payment on capital
leases
|
(336)
|
|
|
(73)
|
|
|
Proceeds from issuance
of common stock to a board of directors member
|
250
|
|
|
—
|
|
|
Proceeds from issuance
of common stock in initial public offering, net of issuance
costs
|
146,136
|
|
|
—
|
|
|
Prepayment premium on
early repayment of term loan
|
(1,563)
|
|
|
—
|
|
|
Payment on contingent
consideration
|
(10,303)
|
|
|
(11,010)
|
|
|
Exercise of vested
stock options
|
1,359
|
|
|
—
|
|
|
Dividend
|
(74,500)
|
|
|
—
|
|
|
Net cash provided by
financing activities
|
4,542
|
|
|
10,956
|
|
|
Effect of exchange
rate changes on cash
|
(40)
|
|
|
51
|
|
|
Net (decrease)
increase in cash and cash equivalents and restricted
cash
|
(9,085)
|
|
|
25,219
|
|
|
Cash, cash
equivalents and restricted cash at beginning of period
|
49,086
|
|
|
21,346
|
|
|
Cash, cash
equivalents and restricted cash at end of period
|
$
|
40,001
|
|
|
$
|
46,565
|
|
|
Cash, cash
equivalents and restricted cash as of the end of the
period
|
|
|
|
|
Cash and cash
equivalents
|
$
|
36,441
|
|
|
$
|
41,230
|
|
|
Restricted
cash
|
3,560
|
|
|
1,615
|
|
|
Restricted cash,
non-current
|
—
|
|
|
3,720
|
|
|
Cash, cash
equivalents and restricted cash
|
$
|
40,001
|
|
|
$
|
46,565
|
|
|
CONVEY
HOLDING PARENT, INC. AND ITS SUBSIDIARIES
|
|
SEGMENT REVENUES
AND ADJUSTED EBITDA
|
|
(in thousands)
(unaudited)
|
|
|
Presented in the
tables below is revenue and Segment Adjusted EBITDA by reportable
segment:
|
|
|
For the Three
Months Ended
September 30,
2021
|
|
For the Nine
Months Ended
September 30,
2021
|
|
(in
thousands)
|
Technology
Enabled
Solutions
|
|
Advisory
Services
|
|
Technology
Enabled
Solutions
|
|
Advisory
Services
|
|
Revenue
|
$
|
69,248
|
|
|
$
|
13,163
|
|
|
$
|
200,196
|
|
|
$
|
40,094
|
|
|
Segment Adjusted
EBITDA
|
$
|
19,786
|
|
|
$
|
4,559
|
|
|
$
|
52,038
|
|
|
$
|
13,159
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three
Months Ended
September 30,
2020
|
|
For the Nine
Months Ended
September 30,
2020
|
|
(in
thousands)
|
Technology
Enabled
Solutions
|
|
Advisory
Services
|
|
Technology
Enabled
Solutions
|
|
Advisory
Services
|
|
Revenue
|
$
|
60,056
|
|
|
$
|
9,472
|
|
|
$
|
166,850
|
|
|
$
|
28,983
|
|
|
Segment Adjusted
EBITDA
|
$
|
19,088
|
|
|
$
|
1,799
|
|
|
$
|
44,196
|
|
|
$
|
4,068
|
|
The following table presents a reconciliation of Segment
Adjusted EBITDA to the condensed consolidated U.S. GAAP net income
(loss) from continuing operations:
|
(in
thousands)
|
For the Three
Months Ended
September
30,
|
|
For the Nine
Months Ended
September
30,
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
Technology Enabled
Solutions Segment Adjusted EBITDA
|
$
|
19,786
|
|
|
$
|
19,088
|
|
|
$
|
52,038
|
|
|
$
|
44,196
|
|
|
Advisory Services
Segment Adjusted EBITDA
|
4,559
|
|
|
1,799
|
|
|
13,159
|
|
|
4,068
|
|
|
Total
|
$
|
24,345
|
|
|
$
|
20,887
|
|
|
$
|
65,197
|
|
|
$
|
48,264
|
|
|
Unallocated(1)
|
$
|
(3,742)
|
|
|
$
|
(2,086)
|
|
|
$
|
(8,731)
|
|
|
$
|
(6,410)
|
|
|
Adjustments to
reconcile to U.S. GAAP net income (loss) from continuing
operations
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
(7,473)
|
|
|
(6,918)
|
|
|
(22,667)
|
|
|
(20,710)
|
|
|
Interest,
net
|
(3,283)
|
|
|
(4,561)
|
|
|
(15,144)
|
|
|
(13,471)
|
|
|
Income tax
provision
|
(1,131)
|
|
|
472
|
|
|
5,042
|
|
|
3,272
|
|
|
Cost of
COVID-19(2)
|
(746)
|
|
|
(3,254)
|
|
|
(3,057)
|
|
|
(7,772)
|
|
|
Sales and use
tax
|
(1,734)
|
|
|
(2,122)
|
|
|
(5,802)
|
|
|
(5,577)
|
|
|
Non-cash stock
compensation expense
|
(1,093)
|
|
|
(1,745)
|
|
|
(3,166)
|
|
|
(5,671)
|
|
|
Transaction related
costs
|
(328)
|
|
|
(80)
|
|
|
(2,969)
|
|
|
(277)
|
|
|
Acquisition bonus
expense – HealthScape and Pareto acquisition
|
(192)
|
|
|
(481)
|
|
|
(481)
|
|
|
(1,476)
|
|
|
Loss on extinguishment
of debt
|
—
|
|
|
—
|
|
|
(5,015)
|
|
|
—
|
|
|
Director and officer
prior act liability insurance policy(3)
|
—
|
|
|
—
|
|
|
(7,861)
|
|
|
—
|
|
|
Other(4)
|
(937)
|
|
|
(1,758)
|
|
|
(5,737)
|
|
|
(4,773)
|
|
|
Net income (loss)
from continuing operations
|
$
|
3,686
|
|
|
$
|
(1,646)
|
|
|
$
|
(10,391)
|
|
|
$
|
(14,601)
|
|
|
________________________
|
|
(1)
|
Represents certain
corporate costs associated with the executive compensation, legal,
accounting, finance and other costs not specifically attributable
to the segments.
|
|
(2)
|
Expenses incurred due
to the COVID-19 pandemic are primarily related to higher pricing
from vendors due to supply chain disruptions and product shortages
and higher employee costs due to hazard pay for our
employees.
|
|
(3)
|
In connection with
the IPO, we made a $7.9 million one-time payment on a 3-year
director and officer prior act liability insurance policy. We
deemed this policy to be a retroactive insurance policy and in
accordance with ASC 720-20-25, "Retrospective Contracts," we
expensed the premium of $7.9 million in June 2021.
|
|
(4)
|
These adjustments
include individual adjustments related to fees associated with
obtaining the incremental loans, management fees, management
service agreement termination fee, board of directors related fees,
and consulting costs for the selection of ERP solution.
|
Non-GAAP Reconciliations
EBITDA, Adjusted EBITDA, and Adjusted EBITDA
Margin
We define EBITDA as net income (loss) less income (loss) from
discontinued operations adjusted for interest, net, income tax
expense (benefit), and depreciation and amortization expense. We
define Adjusted EBITDA as EBITDA further adjusted for certain items
of a significant or unusual nature, including but not limited to,
change in fair value contingent consideration, COVID-19 cost
impacts, non-cash stock compensation, transaction related costs,
acquisition bonus expense, loss of extinguishment of debt, director
and officer prior act liability insurance policy and other costs.
Other includes costs such as contract termination fees, management,
and board of directors' fees, and costs associated with obtaining
the incremental term loans.
Adjusted EBITDA Margin is defined as Adjusted EBITDA divided by
net revenues.
The following table reconciles EBITDA and Adjusted EBITDA for
the three and nine months ending September
30, 2021 and 2020 to net income (loss), the most directly
comparable GAAP measure:
|
|
For the
Three
Months
Ended
September 30,
2021
|
|
For the
Three
Months
Ended
September 30,
2020
|
|
For the
Nine
Months
Ended
September 30,
2021
|
|
For the
Nine
Months
Ended
September 30,
2020
|
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
Net income
(loss)
|
|
$
|
3,686
|
|
|
$
|
(1,652)
|
|
|
$
|
(10,391)
|
|
|
$
|
(14,564)
|
|
|
Less income (loss)
from discontinued operations, net of tax
|
|
—
|
|
|
(6)
|
|
|
—
|
|
|
37
|
|
|
Net income (loss)
from continuing operations
|
|
3,686
|
|
|
(1,646)
|
|
|
(10,391)
|
|
|
(14,601)
|
|
|
Interest,
net
|
|
3,283
|
|
|
4,561
|
|
|
15,144
|
|
|
13,471
|
|
|
Income tax expense
(benefit)
|
|
1,131
|
|
|
(472)
|
|
|
(5,042)
|
|
|
(3,272)
|
|
|
Depreciation and
amortization expense
|
|
7,473
|
|
|
6,918
|
|
|
22,667
|
|
|
20,710
|
|
|
EBITDA
|
|
15,573
|
|
|
9,361
|
|
|
22,378
|
|
|
16,308
|
|
|
Change in fair value of
contingent consideration(1)
|
|
—
|
|
|
—
|
|
|
96
|
|
|
—
|
|
|
Cost of
Covid-19(2)
|
|
746
|
|
|
3,254
|
|
|
3,057
|
|
|
7,772
|
|
|
Non-cash stock
compensation expense(3)
|
|
1,093
|
|
|
1,745
|
|
|
3,166
|
|
|
5,671
|
|
|
Transaction related
costs(4)
|
|
328
|
|
|
80
|
|
|
2,969
|
|
|
277
|
|
|
Acquisition bonus
expense – HealthScape and Pareto
acquisition(5)
|
|
192
|
|
|
481
|
|
|
481
|
|
|
1,476
|
|
|
Loss on extinguishment
of debt(6)
|
|
—
|
|
|
—
|
|
|
5,015
|
|
|
—
|
|
|
Director and officer
prior act liability insurance policy(7)
|
|
—
|
|
|
—
|
|
|
7,861
|
|
|
—
|
|
|
Other(8)
|
|
338
|
|
|
124
|
|
|
4,316
|
|
|
673
|
|
|
Adjusted
EBITDA
|
|
$
|
18,270
|
|
|
$
|
15,045
|
|
|
$
|
49,339
|
|
|
$
|
32,177
|
|
|
________________________
|
|
(1)
|
Change in fair value
of contingent consideration is composed of two components: earn-out
liability and holdback liability. The earn-out liability resulted
from the HealthScape Advisors and Pareto Intelligence acquisition
that closed on November 16, 2018. The holdback liability
resulted from the merger with TPG that closed on September 4,
2019. The earn-out liability and holdback liability were
re-measured to fair value at each reporting date until the
contingency was resolved. During the nine months ended
September 30, 2021, we made a final payment of $13.1 million
related to the holdback liability and a $7.5 million final payment
related to the earn-out liability due to HealthScape
Advisors.
|
|
(2)
|
Due to significant
volatility to the markets, as well as business and supply chain
disruptions, we incurred several additional expenses due to the
COVID-19 pandemic, including: (i) higher pricing from vendors due
to supply chain disruptions, product shortages and increases in
shipping costs, (ii) higher employee costs due to premium pay and
hazard pay for our employees and enhanced sick pay due to illness
and quarantine protocols, (iii) costs related to early hiring of
employees due to social distancing and work at home protocols, (iv)
COVID-19 training costs, (v) overtime costs for IT personnel to
setup eligible employees to work from home and temporary resources,
(vi) IT costs due to the change in the work environment and (vii)
janitorial costs due to enhanced COVID-19 protocols. The expenses
are included in cost of services and cost of products on our
statements of operations and comprehensive income (loss). During
2021, to a lesser extent, we have continued to incur these
expenses.
|
|
(3)
|
Represents non-cash
stock-based compensation expense in connection with the stock
awards that have been granted to employees and non-employees. It is
included in selling, general and administrative expenses on our
statements of operations and comprehensive income
(loss).
|
|
(4)
|
Transaction related
expenses primarily consist of public company readiness costs as
well as expenses for corporate development, such as mergers and
acquisitions activity that did not proceed.
|
|
(5)
|
In conjunction with
the HealthScape Advisors and Pareto Intelligence acquisitions, the
previous shareholders set aside funds for an incentive compensation
plan for employees who remained post acquisition. The costs are
expensed on a monthly basis and funded through an escrow account
which was established on the closing date and is included in
restricted cash on our consolidated balance sheets. The expense is
included in selling, general and administrative expenses on our
statements of operations and comprehensive income
(loss).
|
|
(6)
|
The loss on
extinguishment of debt was recognized for the prepayment of
outstanding indebtedness.
|
|
(7)
|
In connection with
the IPO, we made a $7.9 million one-time payment on a 3-year
director and officer prior act liability insurance policy. We
deemed this policy to be a retroactive insurance policy and in
accordance with ASC 720-20-25, "Retrospective Contracts," we
expensed the premium of $7.9 million in June 2021.
|
|
(8)
|
Other includes other
individual adjustments related to legal fees associated with
obtaining the incremental loans, severance costs incurred as a
result of eliminating certain positions, management service
agreement termination fee and management fees. All costs are
included in selling, general and administrative expenses on our
statements of operations and comprehensive income
(loss).
|
Investor Contacts
Kevin Ellich
ICR Westwicke
ConveyHealthIR@westwicke.com
Media Contact
Tom Pelegrin
Senior Vice President & Chief Revenue Officer
mediarelations@conveyhs.com
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SOURCE Convey Health Solutions