EX-99.1 2 tm2210195d1_ex99-1.htm EXHIBIT 99.1

 

Exhibit 99.1

 

Convey Health Solutions Announces Fourth Quarter and Record Full Year 2021 Financial Results

 

Provides 2022 Guidance

 

Fourth Quarter 2021 Highlights

 

·Net revenues of $97.3 million, up 12% compared to Q4 2020
·Net income of $0.4 million, compared to net income of $8.1 million in Q4 2020 which included a one-time benefit of $10.8 million due to the valuation of certain earn-out payments
·Adjusted EBITDA or AEBITDA of $19.9 million, up 3% compared to Q4 2020. Q4 2021 included previously announced one-time implementation costs related to a new client win

 

Full Year 2021 Highlights

 

·Net revenues of $337.6 million, up 19% compared to prior year
·Net loss of $10.0 million which included $18.0 million of one-time costs related to the IPO, compared to net loss of $6.5 million in prior year which included a one-time benefit of $10.8 million due to the valuation of certain earn-out payments
·Adjusted EBITDA of $69.2 million, up 34% compared to prior year

  

Full Year 2022 Guidance

 

·Net revenues of $390 million to $410 million, the midpoint of which represents 18% growth over prior year
·Adjusted EBITDA of $80 million to $84 million, the midpoint of which represents 18% growth over prior year1

 

Fort Lauderdale, Florida, March 23, 2022 – 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 fourth quarter and year ended December 31, 2021.

 

“We achieved new records in terms of net revenues and AEBITDA for the year, which we believe demonstrate the strength of our customer relationships, the recurring nature of our business, the value of our technology, and the commitment of our team.” said Stephen Farrell, CEO of Convey. “We saw solid results in each of our three core offerings in our Technology Segment as well as our Advisory Segment. Additionally, we are pleased to announce full year 2022 guidance, which represents 18% growth in both net revenues and AEBITDA.”

 

Mr. Farrell continued, “In 2021, we helped our health plan clients drive membership growth, increase member engagement, and reduce payor costs by leveraging Convey’s proprietary technology and tech-enabled services. Specifically, analyzing over 250,000 over-the-counter (“OTC”) beneficiaries across a three-year period, we found that users of Convey’s OTC program who had diabetes, cardiovascular disease, or a history of slip and fall accidents had between 6% and 8% lower medical costs than members with similar conditions who did not use our OTC offering. Additionally, this past year, Medicare Advantage (“MA”) plans offering OTC benefit programs saw average membership growth of 11% vs. a 6% average membership decline for MA plans excluding such a benefit. Leveraging the 3.1 billion automated transactions and 29 million member touchpoints that Convey facilitated in 2021, our OTC program helps health plans contain member costs by addressing key social determinants of health.”

 

 

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.

 

 

 

 

Mr. Farrell concluded, “In addition to strong execution across our existing business lines, we believe our acquisition of HealthSmart, completed earlier this year, strengthens Convey’s value proposition for our health plan clients. The acquisition helps ensure that health plan members have access to high quality consumer healthcare products, which have been shown to improve their health outcomes. Also, we further strengthened our supplemental benefits offering by partnering with InComm Payments. This partnership will allow health plan members to use their OTC benefit across InComm’s network of 65,000 retail locations, as well as through our existing home delivery channel. We can now provide what we believe is the best-in-class supplemental benefits solution as we are able to offer a health plan the option of allowing its members to access their supplemental benefits through the retail setting using a single cash card or through the home delivery channel, or a combination of the two. As a result, we believe Convey is now even better positioned for go-forward growth.”

 

Tim Fairbanks, CFO of Convey, said “Convey continued its growth trajectory in 2021, driven by strong execution and one of the strongest secular trends in U.S. healthcare – the growth of the MA population. We believe our proprietary technology and tech-enabled services continue to deliver a strong value proposition for our health plan customers, and by doing so, provide attractive revenue growth opportunities for Convey. Further, Convey ended 2021 with a solid balance sheet, which allowed us to complete our first tuck-in acquisition as a public company without shareholder dilution. We are excited to continue this momentum in 2022 and look forward to another strong year.”

 

Fourth Quarter 2021 Financial Results

 

·Net revenues of $97.3 million, up 12% compared to $87.1 million in the fourth quarter of 2020. Fourth quarter revenue growth was driven by Technology Enabled Solutions (TES) segment revenue of $84.4 million, up 13% year over year from $74.5 million in fourth quarter 2020, and $12.9 million of revenue in our Advisory Services segment, which was up 2% year over year from $12.6 million in fourth quarter 2020.
·Net income was $0.4 million compared to net income of $8.1 million for the fourth quarter of 2020.
·Adjusted EBITDA of $19.9 million increased 3% year over year from $19.3 million in the fourth quarter of 2020. Q4 2021 included previously announced one time implementation costs related to a new client win
·As of December 31, 2021, Convey had cash and cash equivalents of $38.8 million and $39.4 million available on the Company’s revolver. Total debt, excluding unamortized cost of $3.0 million, was $192.6 million.

 

Year Ended December 31, 2021 Financial Results

 

·For the year ended December 31, 2021, net revenues of $337.6 million were up 19% compared to $282.9 million for the year ended December 31, 2020.
·Net loss in 2021 was $10.0 million compared to net loss of $6.5 million for the year ended December 31, 2020. Net loss for 2021 included $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 the one-time termination of the management service agreement with TPG.
·Adjusted EBITDA for the year ended December 31, 2021 was $69.2 million, up 34% year over year from $51.5 million for the year of 2020.

 

Full Year 2022 Guidance

 

·Net revenues of $390 million to $410 million, the midpoint of which represents 18% growth over prior year
·Adjusted EBITDA of $80 million to $84 million, the midpoint of which represents 18% growth over prior year2

 

 

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. Please see “Use of Non-GAAP Financial Measures” for additional information.

 

 

 

 

Fourth Quarter and Full Year 2021 Conference Call

 

Convey will host a conference call to discuss fourth quarter and year end 2021 results on March 23, 2022 at 5:00 p.m. Eastern Time. The conference call can be accessed by dialing (844) 200-6205 for U.S. participants or +1 (929) 526-1599 for international participants, and referencing conference ID 637508; 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 Health Solutions' administrative solutions for government-sponsored health plans help to optimize member interactions, ensure compliance, and support end-to-end Medicare processes. By combining its best-in-class, built-for-purpose technology platforms with dedicated and flexible business process solutions, Convey Health Solutions creates better business results and better healthcare consumer experiences on behalf of business customers and partners. Convey Health Solutions' clients include some of the nation's leading health insurance plans and pharmacy benefit management firms. Their healthcare-focused teams help several million Americans each year to navigate the complex Medicare Advantage and Part D landscape. To learn more about Convey Health Solutions, please visit www.ConveyHealthSolutions.com.

 

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 2022 financial guidance, our belief that the acquisition of HealthSmart strengthens Convey’s value proposition for our health plan clients, our belief that Convey is now even better positioned for go-forward growth, and are excited for another strong year in 2023, our belief that our proprietary technology and tech-enabled services continue to deliver a strong value proposition for our health plan customers, and by doing so, provide attractive revenue growth opportunities for Convey, that we are excited to continue this momentum in 2022 and look forward to another strong year, 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, and sell additional solutions and services to our 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; risks related to acquisitions of other businesses or technologies and other significant transactions; 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; recent and future developments in the Medicare Advantage market or the healthcare industry generally, including with respect to changing laws and regulations; security breaches or incidents, failures and other disruptions of the information technology systems used in our business operations and of the sensitive information we collect, process, transmit, use and store; disruptions in service, and other software and systems failures, affecting us and 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; identified material weaknesses in our internal control over financial reporting and a failure to remediate these material weaknesses, and the effectiveness of our internal control 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 September 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. 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 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 HEALTH SOLUTIONS HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data) (unaudited)

 

   December 31,
2021		   December 31,
2020		 
ASSETS        ​ 
Current assets   ​    ​ 
Cash and cash equivalents  $38,811   $45,366 
Accounts receivable, net of allowance for doubtful accounts of $69 and $610 as of December 31,
2021, and December 31, 2020, respectively		   62,813    50,589 
Inventories, net   14,060    11,094 
Prepaid expenses and other current assets   16,569    15,220 
Restricted cash   —    3,560 
Total current assets   132,253    125,829 
Property and equipment, net   20,400    20,667 
Intangible assets, net   220,014    238,842 
Goodwill   455,206    455,206 
Restricted cash   —    160 
Other assets   2,030    2,364 
Total assets  $829,903   $843,068 
LIABILITIES AND SHAREHOLDERS’ EQUITY   ​    ​ 
Current liabilities   ​    ​ 
Accounts payable  $13,868   $21,308 
Accrued expenses   48,558    67,159 
Capital lease obligations, current portion   498    361 
Deferred revenue, current portion   7,472    6,466 
Term loans, current portion   —    2,500 
Total current liabilities   70,396    97,794 
Capital leases obligations, net of current portion   528    1,129 
Deferred taxes, net   25,992    26,561 
Term loans, net of current portion   189,643    239,290 
Other long-term liabilities   5,595    8,144 
Total liabilities   292,154    372,918 
Commitments and contingencies   ​    ​ 
Shareholders’ equity   ​    ​ 
Preferred stock, $0.01 par value; 25,000,000 shares authorized and no shares issued or outstanding as of December 31, 2021 and no shares authorized, issued or outstanding as of December 31, 2020   —    — 
Common stock, $0.01 par value; 500,000,000 and 126,000,000 shares authorized as of December 31, 2021, and December 31, 2020, respectively; 73,194,171 and 61,321,424 shares issued and outstanding as of December 31, 2021, and December 31, 2020, respectively   732    613 
Additional paid-in capital   570,252    492,747 
Accumulated other comprehensive income   31    78 
Accumulated deficit   (33,266)   (23,288)
Total shareholders’ equity   537,749    470,150 
Total liabilities and shareholders’ equity  $829,903   $843,068 

 

 

 

CONVEY HEALTH SOLUTIONS HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(in thousands, except per share amounts) (unaudited)

 

​  For the Three Months Ended December 31,   For the Year Ended
December 31,		 
   2021   2020   2021   2020 
Net revenues:  ​   ​   ​   ​ 
Services  $47,573   $42,377   $177,575   $147,191 
Products   49,733    44,704    160,021    135,723 
Net revenues   97,306    87,081    337,596    282,914 
Operating expenses:   ​    ​    ​    ​ 
Cost of services(1)   26,442    24,425    92,241    84,144 
Cost of products(1)   30,033    26,510    103,080    87,153 
Selling, general and administrative   23,109    21,068    94,093    79,955 
Depreciation and amortization   7,812    7,323    30,480    28,032 
Transaction related costs   2,924    3,672    5,894    3,949 
Change in fair value of contingent consideration   —    (10,770)   96    (10,770)
Total operating expenses   90,320    72,228    325,884    272,463 
Operating income (loss)   6,986    14,853    11,712    10,451 
Other income (expense):   ​    ​    ​    ​ 
Interest income   18    —    18    7 
Loss on extinguishment of debt   —    —    (5,015)   — 
Interest expense   (2,168)   (5,381)   (17,312)   (18,860)
Total other expense, net   (2,150)   (5,381)   (22,309)   (18,853)
Income (loss) from continuing operations before income taxes   4,836    9,472    (10,597)   (8,402)
Income tax (expense) benefit   (4,423)   (1,368)   619    1,904 
Net income (loss) from continuing operations   413    8,104    (9,978)   (6,498)
Income (loss) from discontinued operations, net of tax   —    —    —    36 
Net income (loss)  $413   $8,104   $(9,978)  $(6,462)
Income (loss) per common share – Basic and diluted   ​    ​    ​    ​ 
Continuing operations   0.01    0.13    (0.15)   (0.11)
Discontinued operations   —    —    —    — 
Net income (loss) per common share  $0.01   $0.13   $(0.15)  $(0.11)
                     
Net income (loss)  $413   $8,104   $(9,978)  $(6,462)
Foreign currency translation adjustments   (2)   10    (47)   57 
Comprehensive income (loss)  $411   $8,114   $(10,025)  $(6,405)

 

 

(1)Excludes amortization of intangible assets and depreciation, which are separately stated below.

 

 

 

CONVEY HEALTH SOLUTIONS HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands) (unaudited)

 

   For the Years Ended December 31, 
   2021   2020 
Cash flows from operating activities  ​   ​ 
Net ( loss) income  $(9,978)  $(6,462)
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:   ​    ​ 
Depreciation expense   5,603    4,192 
Amortization expense   24,877    23,840 
Loss on extinguishment of debt   5,015    — 
Provision for bad debt   (202)   542 
Provision for inventory reserve   639    — 
Gain from disposal of assets   28    397 
Deferred income taxes   (569)   (2,317)
Write-off of capitalized software costs   —    69 
Amortization of debt issuance costs   1,082    1,056 
Change in fair value of contingent consideration   96    (10,770)
Share-based compensation   4,380    6,682 
Changes in operating assets and liabilities:   ​    ​ 
Accounts receivable   (12,021)   (2,031)
Inventory   (3,605)   (7,796)
Prepaid expenses and other assets   (1,195)   (4,653)
Accounts payable and other accrued liabilities   (7,686)   29,659 
Deferred revenue   1,550    (845)
Payment on contingent consideration   (10,329)   — 
Net cash (used in) provided by operating activities   (2,315)   31,563 
Cash flows from investing activities   ​    ​ 
Acquisition, net of cash received   —    (3,758)
Purchases of property and equipment, net   (6,435)   (5,159)
Capitalized software development costs   (5,894)   (4,355)
Net cash used in investing activities   (12,329)   (13,272)
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)   (2,438)
Payment on capital leases   (464)   (118)
Proceeds from issuance of common stock to Board of Director   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)   — 
Proceeds from capitalization   —    — 
Payment on contingent consideration   (10,303)   (11,867)
Exercise of vested stock options   1,358    — 
Dividend   (74,500)   — 
Net cash provided by (used in) financing activities   4,413    9,429 

 

 

 

 

CONVEY HEALTH SOLUTIONS HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(in thousands) (unaudited)

 

​  For the Years Ended December 31, 
   2021   2020 
Effect of exchange rate changes on cash   (44)   20 
Net (decrease) increase in cash and cash equivalents and restricted cash   (10,275)   27,740 
Cash, cash equivalents and restricted cash at beginning of period   49,086    21,346 
Cash, cash equivalents and restricted cash at end of period  $38,811   $49,086 
           
Cash, cash equivalents and restricted cash as of the end of period          
Cash and cash equivalents  $38,811   $45,366 
Restricted cash   —    3,560 
Restricted cash, non-current   —    160 
Cash, cash equivalents and restricted cash  $38,811   $49,086 
           
Supplemental disclosures of cash flow information:   ​    ​ 
Cash paid for taxes  $1,412   $50 
Cash paid for interest  $18,517   $15,288 
Non-cash investing and financing activities:   ​    ​ 
Capitalized software and property and equipment, net included in accounts payable  $1,918   $3,672 

 

 

 

 

CONVEY HEALTH SOLUTIONS HOLDINGS, INC. AND ITS SUBSIDIARIES

SEGMENT REVENUES AND ADJUSTED EBITDA

 

Presented in the tables below is revenue and Segment Adjusted EBITDA by reportable segment:

 

   For the Three Months Ended
December 31, 2021		   For the Year Ended
December 31, 2021		 
(in thousands)  Technology
Enabled
Solutions		   Advisory
Services		   Technology
Enabled
Solutions		   Advisory
Services		 
Revenue  $84,423   $12,883   $284,619   $52,977 
Segment Adjusted EBITDA  $17,245   $3,071   $69,214   $16,232 

 

 

   For the Three Months Ended
December 31, 2020		   For the Year Ended
December 31, 2020		 
(in thousands)  Technology
Enabled
Solutions		   Advisory
Services		   Technology
Enabled
Solutions		   Advisory
Services		 
Revenue  $74,486   $12,595   $241,336   $41,578 
Segment Adjusted EBITDA  $21,848   $4,137   $66,043   $8,204 

 

 

 

 

The following table presents a reconciliation of Segment Adjusted EBITDA to the consolidated U.S. GAAP net income (loss) from continuing operations:

 

    For the Three Months Ended
December 31,		    For the Years Ended
December 31, 		 
(in thousands)   2021    2020    2021    2020 
Technology Enabled Solutions Segment Adjusted EBITDA  $17,245   $21,848   $69,214   $66,043 
Advisory Services Segment Adjusted EBITDA   3,071    4,137    16,232    8,204 
Total  $20,316   $25,985   $85,446   $74,247 
Unallocated(1)  $(3,156)  $(2,609)  $(11,819)  $(9,024)
Adjustments to reconcile to U.S. GAAP net income (loss) from continuing operations                    
Depreciation and amortization   (7,812)   (7,323)   (30,480)   (28,032)
Interest, net   (2,150)   (5,381)   (17,294)   (18,853)
Income tax provision   (4,423)   (1,368)   619    1,904 
Change in fair value of contingent consideration   —    10,770    96    10,770 
Cost of COVID-19(2)   (770)   (2,402)   (3,827)   (10,174)
Consultant lower utilization due to COVID-19 (3)   —    (197)   —    (2,062)
Sales and use tax   3,232    (2,618)   (2,569)   (8,194)
Non-cash stock compensation expense   (1,214)   (1,011)   (4,380)   (6,682)
Transaction related costs   (2,924)   (3,672)   (5,894)   (3,949)
Acquisition bonus expense – HealthScape and Pareto acquisition   (186)   (513)   (667)   (1,989)
Loss on extinguishment of debt   —    —    (5,015)   — 
Director and officer prior act liability insurance policy(4)   —    —    (7,861)   — 
Other(5)   (500)   (1,557)   (6,333)   (4,460)
Net income (loss) from continuing operations  $413   $8,104   $(9,978)  $(6,498)

 

 

(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)Consultant lower utilization due to COVID-19 reflects the decreased productivity of the Advisory segment in connection with the COVID-19 pandemic. The average utilization for consultants in the Company’s Advisory Services segment declined during the COVID-19 pandemic as compared to pre-pandemic comparable periods. The utilization variance was multiplied by the average consultant cost to derive the cost absorbed by the Company. This change in utilization represents consultants’ idle time that otherwise would have been billed to clients if the consulting arrangements would have materialized. In addition, we chose not to reduce our headcount as we expected the lower utilization to be temporary in nature.
   
(4)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 Accounting Standard Codification (“ASC”) 720-20-25, “Retrospective Contracts,” we expensed the premium of $7.9 million in June 2021.
   
(5)These adjustments include individual adjustments related to legal 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 our Enterprise Resource Planning 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 on 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 arrangement fees paid to TPG in connection with obtaining the incremental term loans.

 

Adjusted EBITDA Margin is defined as Adjusted EBITDA divided by net revenues.

 

The following table presents a reconciliation of net income (loss) to EBITDA and Adjusted EBITDA for the periods presented: 

 

(in thousands)   For the Three
Months Ended
December 31,
2021		     For the Three
Months Ended
December 31,
2020		     For the Year
Ended
December 31,
2021		     For the Year
Ended
December 31,
2020		  
Net income (loss)   $ 413     $ 8,104     $ (9,978 )   $ (6,462 )
Less income (loss) from discontinued operations, net of tax     —       —       —       36  
Net income (loss) from continuing operations     413       8,104       (9,978 )     (6,498 )
Interest, net     2,150       5,381       17,294       18,853  
Income tax expense (benefit)     4,423       1,368       (619 )     (1,904 )
Depreciation and amortization expense     7,812       7,323       30,480       28,032  
EBITDA     14,798       22,176       37,177       38,483  
Change in fair value of contingent consideration(1)     —       (10,770 )     96       (10,770 )
Cost of Covid-19(2)     770       2,402       3,827       10,174  
Non-cash stock compensation expense(3)     1,214       1,011       4,380       6,682  
Transaction related costs(4)     2,924       3,672       5,894       3,949  
Acquisition bonus expense – HealthScape and Pareto acquisition(5)     186       513       667       1,989  
Loss on extinguishment of debt(6)     —       —       5,015       —  
Director and officer prior act liability insurance policy(7)     —       —       7,861       —  
Other(8)     —       313       4,316       986  
Adjusted EBITDA   $ 19,892     $ 19,317     $ 69,233     $ 51,493  
Adjusted EBITDA as a percentage of net revenues     20 %     22 %     21 %     18 %

 

 

 

 

 

 

(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, LLC (“HealthScape Advisors”), and Pareto Intelligence, LLC (“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 year ended December 31, 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. These expenses are not expected to be an adjustment in the calculation of Adjusted EBITDA after 2021.

 

(3)Represents non-cash stock-based compensation expense in connection with the stock awards that have been granted to employees and non-employees. The expense is included in Selling, general and administrative expenses on our statements of operations and comprehensive income (loss).

 

(4)Transaction related costs primarily consist of public company readiness costs, expenses for corporate development, such as mergers and acquisitions activity, and due diligence costs.

 

(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 were expensed on a monthly basis and funded through an escrow account which was established on the closing date and was 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

 

Source: Convey Health Solutions