First Quarter 2022 Highlights
- Net revenues of $96.7 million, up
17% compared to Q1 2021 of $82.6
million
- Net loss of $1.2 million, which
includes $1.6 million of HealthSmart
purchase accounting and acquisition related expenses, compared to
Q1 2021 net loss of $0.9 million
- Adjusted EBITDA of $15.3 million,
compared to Q1 2021 of $15.9
million
FORT
LAUDERDALE, Fla., May 10, 2022
/PRNewswire/ -- 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 first quarter ended March 31,
2022.
"We achieved solid first quarter financial and operating results
across both of our reporting segments. Our technology team
implemented and welcomed new clients and members during the first
quarter and our advisory business continued to experience high
demand in the first quarter as health plans sought competitive
advantages," said Stephen Farrell,
CEO of Convey.
Mr. Farrell continued, "Convey's strong revenue growth in Q1
2022 underscores that we continue to deliver meaningful value for
our health plan clients, who in turn have rewarded us with new
business. While increased demand in our Supplemental Benefits
business along with supply chain challenges created some pressure
on EBITDA margins during Q1 2022, we are very pleased with Convey's
Q1 2022 operating and financial results, and are taking steps to
mitigate the go-forward impact of the increased costs experienced
in the first three months of the year."
First Quarter 2022 Financial Results
- Net revenues of $96.7 million, up
17% compared to $82.6 million in the
first quarter of 2021. First quarter revenue growth was driven by
$83.2 million of revenue in our
Technology Enabled Solutions segment, up 20% year over year from
$69.6 million in the first quarter
2021, and $13.5 million of revenue in
our Advisory Services segment, up 4% year over year from
$13.0 million in the first quarter
2021.
- Net loss of $1.2 million, which
includes $1.6 million of purchase
accounting and acquisition related expenses with respect to our
February 2022 acquisition of
HealthSmart International ("HealthSmart"), compared to Q1 2021 net
loss of $0.9 million.
- Adjusted EBITDA of $15.3 million
decreased 3% year over year from $15.9
million in the first quarter of 2021.
- As of March 31, 2022, Convey had
cash and cash equivalents of $20.9
million and $39.4 million
available on the Company's revolver. Total debt, excluding
unamortized cost of $5.4 million, was
$270.6 million.
First Quarter 2022 Conference Call
Convey will host a conference call to discuss first quarter 2022
results on May 10, 2022 at
4:30 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,
referencing access code 105506; or via a live audio webcast that
will be available on Convey's Investor Relations website at
https://ir.conveyhealthsolutions.com. The earnings release and
related materials will also be available on this website.
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,
anticipated business levels, future earnings, planned activities,
anticipated growth, market opportunities, strategies, competitions
and other expectations and targets for future periods, including
that we believe our clients continue to see our value proposition
and are rewarding us with new business that offsets the margin
decline and that we continue to execute on our vision to help
health plans increase revenue and reduce costs and are confident in
our ability to continue to grow revenue and adjusted EBITDA. 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; our ability to achieve or maintain
profitability; Federal reductions in Medicare Advantage funding;
significant consolidation in the healthcare industry, and decisions
by clients to perform internally some of the same solutions or
services we offer; the limited operating history we have with
certain of our solutions; a failure to deliver high-quality member
management services to our clients' members; the competition we
face from healthcare services and technology companies; 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; the long and unpredictable sales and integration
cycles for our solutions; an economic downturn or volatility,
including as a result of the ongoing COVID-19 pandemic; our ability
to achieve market acceptance of new or updated solutions and
services; our reliance on third parties for certain components of
our business; significant fluctuations in our quarterly results of
operations due to seasonality; our ability to achieve or maintain
adequate utilization and suitable billing rates for our
consultants, and our ability to deliver our services to our
clients; recent and future developments in the Medicare Advantage
market or the healthcare industry generally, including with respect
to changing laws and regulations; our ability to comply with
applicable laws, regulations and standards relating to data privacy
and security; 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 Part I,
Item 1A "Risk Factors" of our Annual Report on Form 10-K for the
year ended December 31, 2021, as
filed with the SEC on March 23, 2022,
and our other filings with the U.S. Securities and Exchange
Commission. Given these uncertainties, you should not place undue
reliance on these forward-looking statements. Moreover, we operate
in a very competitive and rapidly changing environment, and new
risks emerge from time to time. 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. In light
of these risks, uncertainties and assumptions, the future events
and trends discussed in this press release may not occur and actual
results could differ materially and adversely from those
anticipated or implied in the forward-looking statements. In
addition, statements that "we believe" and similar statements
reflect our beliefs and opinions on the relevant subject. These
statements are based upon information available to us as of the
date of this press release, and, while we believe such information
forms a reasonable basis for such statements, such information may
be limited or incomplete, and our statements should not be read to
indicate that we have conducted an exhaustive inquiry into, or
review of, all potentially available relevant information. 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, 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
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands,
except share and per share data) (unaudited)
|
|
|
March 31,
2022
|
|
December 31,
2021
|
|
ASSETS
|
|
|
|
|
Current
assets
|
|
|
|
|
Cash and
cash equivalents
|
$
20,866
|
|
$
38,811
|
|
Accounts
receivable, net of allowance for doubtful accounts of $69 as of
March 31, 2022, and December 31, 2021
|
72,707
|
|
62,813
|
|
Inventories, net
|
36,408
|
|
14,060
|
|
Prepaid
expenses and other current assets
|
10,809
|
|
16,569
|
|
Total current assets
|
140,790
|
|
132,253
|
|
Property
and equipment, net
|
20,952
|
|
20,400
|
|
Intangible assets, net
|
247,993
|
|
220,014
|
|
Goodwill
|
482,558
|
|
455,206
|
|
Operating
lease right-of-use assets
|
18,574
|
|
—
|
|
Other
assets
|
5,667
|
|
2,030
|
|
Total assets
|
$
916,534
|
|
$
829,903
|
|
LIABILITIES AND
SHAREHOLDERS' EQUITY
|
|
|
|
|
Current
liabilities
|
|
|
|
|
Accounts
payable
|
$
11,156
|
|
$
13,868
|
|
Accrued
expenses
|
30,038
|
|
48,558
|
|
Operating
lease liabilities, current portion
|
5,605
|
|
—
|
|
Finance
lease obligations, current portion
|
501
|
|
498
|
|
Deferred
revenue, current portion
|
9,494
|
|
7,472
|
|
Term
loans, current portion
|
780
|
|
—
|
|
Total current liabilities
|
57,574
|
|
70,396
|
|
Operating
lease liabilities, net of current portion
|
18,623
|
|
—
|
|
Finance
leases obligations, net of current portion
|
440
|
|
528
|
|
Deferred
taxes, net
|
35,094
|
|
25,992
|
|
Term
loans, net of current portion
|
264,483
|
|
189,643
|
|
Other
long-term liabilities
|
2,475
|
|
5,595
|
|
Total
liabilities
|
378,689
|
|
292,154
|
|
Commitments and
contingencies
|
|
|
|
|
Shareholders'
equity
|
|
|
|
|
Preferred
stock, $0.01 par value; 25,000,000 shares authorized and no shares
issued or outstanding as of March 31, 2022 and no shares
authorized, issued or outstanding as of December 31,
2021
|
—
|
|
—
|
|
Common
stock, $0.01 par value; 500,000,000 shares authorized as of March
31, 2022, and December 31, 2021; 73,194,171 shares issued and
outstanding as of March 31, 2022, and December 31, 2021
|
732
|
|
732
|
|
Additional paid-in capital
|
571,516
|
|
570,252
|
|
Accumulated other comprehensive income
|
17
|
|
31
|
|
Accumulated deficit
|
(34,420)
|
|
(33,266)
|
|
Total shareholders'
equity
|
537,845
|
|
537,749
|
|
Total liabilities and
shareholders' equity
|
$
916,534
|
|
$
829,903
|
|
CONVEY HEALTH
SOLUTIONS HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(LOSS)
(in thousands, except per share amounts)
(unaudited)
|
|
|
For the Three
Months
Ended March 31,
|
|
2022
|
|
2021
|
|
Net
revenues:
|
|
|
|
|
Services
|
$
46,480
|
|
$
43,527
|
|
Products
|
50,228
|
|
39,104
|
|
Net revenues
|
96,708
|
|
82,631
|
|
Operating
expenses:
|
|
|
|
|
Cost of
services(1)
|
25,477
|
|
24,021
|
|
Cost of
products(1)
|
37,236
|
|
26,527
|
|
Selling, general
and administrative
|
23,214
|
|
20,099
|
|
Depreciation and
amortization
|
8,252
|
|
7,372
|
|
Transaction
related costs
|
640
|
|
1,086
|
|
Total
operating expenses
|
94,819
|
|
79,105
|
|
Operating income
(loss)
|
1,889
|
|
3,526
|
|
Other income
(expense):
|
|
|
|
|
Interest
expense
|
(3,719)
|
|
(5,467)
|
|
Total
other expense, net
|
(3,719)
|
|
|
|
Income (loss) before
income taxes
|
(1,830)
|
|
(1,941)
|
|
Income tax (expense)
benefit
|
676
|
|
1,007
|
|
Net income
(loss)
|
$
(1,154)
|
|
$
(934)
|
|
Income (loss) per
common share – Basic and diluted
|
|
|
|
|
Net income (loss) per
common share
|
$
(0.02)
|
|
$
(0.02)
|
|
|
|
|
|
Net income
(loss)
|
$
(1,154)
|
|
$
(934)
|
|
Foreign currency
translation adjustments
|
(14)
|
|
(7)
|
|
Comprehensive
income (loss)
|
$
(1,168)
|
|
$
(941)
|
|
|
|
|
|
|
|
|
(1)
|
Excludes amortization
of intangible assets and depreciation, which are separately stated
below.
|
|
CONVEY HEALTH
SOLUTIONS HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
|
|
|
For the Three Months Ended
March 31,
|
|
2022
|
|
2021
|
|
Cash flows from
operating activities
|
|
|
|
|
Net
loss
|
$
(1,154)
|
|
$
(934)
|
|
Adjustments to
reconcile net loss to net cash (used in) provided by operating
activities:
|
|
|
|
|
Depreciation expense
|
1,550
|
|
1,386
|
|
Amortization expense
|
6,702
|
|
5,986
|
|
Write off
capitalized software costs
|
253
|
|
—
|
|
Provision
for bad debt
|
—
|
|
342
|
|
Provision
for inventory reserve
|
90
|
|
399
|
|
(Gain)
loss from disposal of assets
|
10
|
|
—
|
|
Deferred
income taxes
|
(1,120)
|
|
(963)
|
|
Amortization of debt issuance costs
|
309
|
|
328
|
|
Share-based compensation
|
1,264
|
|
990
|
|
Non-cash
lease expense
|
1,246
|
|
—
|
|
Inventory
step-up
|
1,892
|
|
—
|
|
Changes in operating
assets and liabilities:
|
|
|
|
|
Accounts
receivable
|
(3,414)
|
|
4,662
|
|
Inventory
|
(1,450)
|
|
(3,207)
|
|
Prepaid expenses
and other assets
|
3,903
|
|
843
|
|
Accounts payable
and other accrued liabilities
|
(26,222)
|
|
(22,100)
|
|
Deferred
revenue
|
2,022
|
|
(358)
|
|
Operating lease
liabilities
|
(1,541)
|
|
—
|
|
Net cash (used in) provided by operating activities
|
(15,660)
|
|
(12,626)
|
|
Cash flows from
investing activities
|
|
|
|
|
Acquisition, net
of cash received
|
(74,613)
|
|
—
|
|
Purchases of
property and equipment, net
|
(1,836)
|
|
(3,063)
|
|
Capitalized
software development costs
|
(1,105)
|
|
(1,287)
|
|
Net cash used in investing activities
|
(77,554)
|
|
(4,350)
|
|
Cash flows from
financing activities
|
|
|
|
|
Proceeds from
issuance of debt
|
78,000
|
|
78,000
|
|
Payment of debt
issuance cost
|
(2,631)
|
|
(2,133)
|
|
Principal
payment on term loan
|
—
|
|
(821)
|
|
Payment on
finance leases
|
(86)
|
|
(31)
|
|
Dividend
|
—
|
|
(74,500)
|
|
Net cash provided by financing activities
|
75,283
|
|
515
|
|
Effect of exchange rate
changes on cash
|
(14)
|
|
(7)
|
|
Net (decrease) increase
in cash and cash equivalents and restricted cash
|
(17,945)
|
|
(16,468)
|
|
Cash, cash equivalents
and restricted cash at beginning of period
|
38,811
|
|
49,086
|
|
Cash, cash equivalents
and restricted cash at end of period
|
$
20,866
|
|
$
32,618
|
|
Cash, cash equivalents
and restricted cash as of the end of the period
|
|
|
|
|
Cash and cash
equivalents
|
$
20,866
|
|
$
28,938
|
|
Restricted
cash
|
—
|
|
3,560
|
|
Restricted cash,
non-current
|
—
|
|
120
|
|
Cash, cash equivalents
and restricted cash
|
$
20,866
|
|
$
32,618
|
|
CONVEY HEALTH
SOLUTIONS HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(in
thousands) (unaudited)
|
|
|
For the Three Months Ended
March 31,
|
|
2022
|
|
2021
|
|
Supplemental
disclosures of cash flow information:
|
|
|
|
|
Cash paid for
taxes
|
$
250
|
|
$
216
|
|
Cash paid for
interest
|
$
3,986
|
|
$
4,961
|
|
Non-cash investing and
financing activities:
|
|
|
|
|
Capitalized
software and property and equipment, net included in accounts
payable
|
$
672
|
|
$
471
|
|
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
March 31, 2022
|
|
(in
thousands)
|
Technology
Enabled
Solutions
|
|
Advisory
Services
|
|
Revenue
|
$
83,166
|
|
$
13,542
|
|
Segment Adjusted
EBITDA
|
$
12,370
|
|
$
5,323
|
|
|
For the Three Months
Ended
March 31, 2021
|
|
(in
thousands)
|
Technology
Enabled
Solutions
|
|
Advisory
Services
|
|
Revenue
|
$
69,582
|
|
$
13,049
|
|
Segment Adjusted
EBITDA
|
$
16,307
|
|
$
3,338
|
|
|
The following table
presents a reconciliation of Segment Adjusted EBITDA to the
condensed consolidated U.S. GAAP net income (loss) from
operations:
|
|
|
(in
thousands)
|
For the Three Months
Ended
March 31,
|
|
2022
|
|
2021
|
|
Technology
Enabled Solutions Segment Adjusted EBITDA
|
$
12,370
|
|
$
16,307
|
|
Advisory
Services Segment Adjusted EBITDA
|
5,323
|
|
3,338
|
|
Total
|
$
17,693
|
|
$
19,645
|
|
Unallocated(1)
|
$
(2,377)
|
|
$
(2,048)
|
|
Adjustments to
reconcile to U.S. GAAP net income (loss)
|
|
|
|
|
Depreciation and
amortization
|
(8,252)
|
|
(7,372)
|
|
Interest,
net
|
(3,719)
|
|
(5,467)
|
|
Income tax
provision
|
676
|
|
1,007
|
|
Cost of
COVID-19(2)
|
(274)
|
|
(1,185)
|
|
Sales and use
tax
|
—
|
|
(1,498)
|
|
Non-cash stock
compensation expense
|
(1,264)
|
|
(990)
|
|
Transaction
related costs
|
(640)
|
|
(1,086)
|
|
Acquisition
bonus expense
|
(58)
|
|
(192)
|
|
Inventory
step-up(3)
|
(1,892)
|
|
—
|
|
Other(4)
|
(1,047)
|
|
(1,748)
|
|
Net income
(loss)
|
$
(1,154)
|
|
$
(934)
|
|
|
|
|
|
|
|
|
(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.
While we had previously expected that these costs would not be an
adjustment in the calculation of Segment Adjusted EBITDA after
2021, the COVID-19 pandemic has not subsided and during 2022, to a
lesser extent, we have continued to incur higher product costs due
to higher pricing from vendors for certain items (e.g., masks and
other similar high demand products). We now expect that these
expenses will not be an adjustment in the calculation of Segment
Adjusted EBITDA after 2022.
|
|
|
|
(3)
|
Incremental cost of
products associated with the step-up of inventory recognized in
purchase accounting for the HealthSmart acquisition.
|
|
|
|
(4)
|
These adjustments
include individual adjustments related to management and board of
directors fees and fees associated with obtaining the incremental
term loans.
|
Non-GAAP Reconciliations
EBITDA, Adjusted EBITDA, and Adjusted EBITDA Margin
We define EBITDA as net income (loss) 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, COVID-19 cost impacts, non-cash stock
compensation expense, transaction related costs, acquisition bonus
expense, inventory step-up and other costs. Other includes costs
such as management fees and fees associated 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)
|
|
Three Months
Ended March
31, 2022
|
|
Three Months
Ended March
31, 2021
|
|
Net income
(loss)
|
|
$
(1,154)
|
|
$
(934)
|
|
Interest,
net
|
|
3,719
|
|
5,467
|
|
Income tax
expense (benefit)
|
|
(676)
|
|
(1,007)
|
|
Depreciation and
amortization expense
|
|
8,252
|
|
7,372
|
|
EBITDA
|
|
10,141
|
|
10,898
|
|
Cost of
Covid-19(1)
|
|
274
|
|
1,185
|
|
Non-cash stock
compensation expense(2)
|
|
1,264
|
|
990
|
|
Transaction
related costs(3)
|
|
640
|
|
1,086
|
|
Acquisition
bonus expense
|
|
58
|
|
192
|
|
Inventory
step-up(4)
|
|
1,892
|
|
—
|
|
Other(5)
|
|
1,047
|
|
1,517
|
|
Adjusted
EBITDA
|
|
$
15,316
|
|
$
15,868
|
|
|
|
|
|
|
|
|
(1)
|
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) COVID-19 training costs, (iv)
overtime costs for IT personnel to setup eligible employees to work
from home and temporary resources and (v) 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). While we had previously expected that
these costs would not be an adjustment in the calculation of
Adjusted EBITDA after 2021, the COVID-19 pandemic has not subsided
and during 2022, to a lesser extent, we have continued to incur
higher product costs due to higher pricing from vendors for certain
items (e.g., masks and other similar high demand products). We now
expect that these expenses will not be an adjustment in the
calculation of Adjusted EBITDA after 2022.
|
|
|
|
(2)
|
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).
|
|
|
|
(3)
|
Transaction related
costs primarily consist of public company readiness costs, expenses
for corporate development, such as mergers and acquisitions
activity, and due diligence costs.
|
|
|
|
(4)
|
Incremental cost of
products associated with the step-up of inventory recognized in
purchase accounting for the HealthSmart acquisition.
|
|
|
|
(5)
|
Other includes other
individual adjustments related to management fees and fees
associated with obtaining the incremental term loans. All costs are
included in selling, general and administrative expenses on our
statements of operations and comprehensive income
(loss).
|
Investor Relations Contact
Gene Mannheimer
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