10-Q 1 cnvy-20220331.htm 10-Q cnvy-20220331
000178764012/312022Q1FALSEone yearone yearone yearone yearone yearP10YP10Yhttp://fasb.org/us-gaap/2021-01-31#PropertyPlantAndEquipmentNet00017876402022-01-012022-03-3100017876402022-04-29xbrli:shares00017876402022-03-31iso4217:USD00017876402021-12-31iso4217:USDxbrli:shares0001787640us-gaap:ServiceMember2022-01-012022-03-310001787640us-gaap:ServiceMember2021-01-012021-03-310001787640us-gaap:ProductMember2022-01-012022-03-310001787640us-gaap:ProductMember2021-01-012021-03-3100017876402021-01-012021-03-310001787640us-gaap:CommonStockMember2021-12-310001787640us-gaap:AdditionalPaidInCapitalMember2021-12-310001787640us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-12-310001787640us-gaap:RetainedEarningsMember2021-12-310001787640us-gaap:AdditionalPaidInCapitalMember2022-01-012022-03-310001787640us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-01-012022-03-310001787640us-gaap:RetainedEarningsMember2022-01-012022-03-310001787640us-gaap:CommonStockMember2022-03-310001787640us-gaap:AdditionalPaidInCapitalMember2022-03-310001787640us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-03-310001787640us-gaap:RetainedEarningsMember2022-03-310001787640us-gaap:CommonStockMember2020-12-310001787640us-gaap:AdditionalPaidInCapitalMember2020-12-310001787640us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-12-310001787640us-gaap:RetainedEarningsMember2020-12-3100017876402020-12-310001787640us-gaap:AdditionalPaidInCapitalMember2021-01-012021-03-310001787640us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-01-012021-03-310001787640us-gaap:RetainedEarningsMember2021-01-012021-03-310001787640us-gaap:CommonStockMember2021-03-310001787640us-gaap:AdditionalPaidInCapitalMember2021-03-310001787640us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-03-310001787640us-gaap:RetainedEarningsMember2021-03-3100017876402021-03-3100017876402021-06-042021-06-04xbrli:pure00017876402021-06-040001787640cnvy:VotingCommonStockMember2021-06-040001787640us-gaap:NonvotingCommonStockMember2021-06-040001787640us-gaap:IPOMember2021-06-182021-06-180001787640us-gaap:IPOMember2021-06-180001787640cnvy:IPOCompanySharesMember2021-06-182021-06-180001787640cnvy:IPOSharesFromExistingShareholdersMember2021-06-182021-06-1800017876402021-06-180001787640us-gaap:CustomerConcentrationRiskMemberus-gaap:SalesRevenueNetMembercnvy:CustomerAMember2022-01-012022-03-310001787640us-gaap:CustomerConcentrationRiskMemberus-gaap:SalesRevenueNetMembercnvy:CustomerAMember2021-01-012021-03-310001787640us-gaap:CustomerConcentrationRiskMembercnvy:CustomerBMemberus-gaap:SalesRevenueNetMember2022-01-012022-03-310001787640us-gaap:CustomerConcentrationRiskMembercnvy:CustomerBMemberus-gaap:SalesRevenueNetMember2021-01-012021-03-310001787640us-gaap:AccountsReceivableMemberus-gaap:CustomerConcentrationRiskMembercnvy:CustomerAMember2022-03-310001787640us-gaap:AccountsReceivableMemberus-gaap:CustomerConcentrationRiskMembercnvy:CustomerAMember2021-12-310001787640us-gaap:AccountsReceivableMemberus-gaap:CustomerConcentrationRiskMembercnvy:CustomerAMember2022-01-012022-03-310001787640us-gaap:AccountsReceivableMemberus-gaap:CustomerConcentrationRiskMembercnvy:CustomerAMember2021-01-012021-12-310001787640us-gaap:AccountsReceivableMemberus-gaap:CustomerConcentrationRiskMembercnvy:CustomerBMember2022-03-310001787640us-gaap:AccountsReceivableMemberus-gaap:CustomerConcentrationRiskMembercnvy:CustomerBMember2021-12-310001787640us-gaap:AccountsReceivableMemberus-gaap:CustomerConcentrationRiskMembercnvy:CustomerBMember2022-01-012022-03-310001787640us-gaap:AccountsReceivableMemberus-gaap:CustomerConcentrationRiskMembercnvy:CustomerBMember2021-01-012021-12-310001787640us-gaap:FairValueInputsLevel3Member2021-12-310001787640us-gaap:FairValueInputsLevel3Membercnvy:EarnOutLiabilitiesMember2022-01-012022-03-310001787640us-gaap:FairValueInputsLevel3Membercnvy:HoldbackLiabilitiesMember2022-01-012022-03-310001787640us-gaap:FairValueInputsLevel3Member2022-03-310001787640us-gaap:FairValueInputsLevel3Member2020-12-310001787640us-gaap:FairValueInputsLevel3Membercnvy:HoldbackLiabilitiesMember2021-01-012021-03-310001787640us-gaap:FairValueInputsLevel3Membercnvy:EarnOutLiabilitiesMember2021-01-012021-03-310001787640us-gaap:FairValueInputsLevel3Member2021-03-3100017876402022-01-01cnvy:segment0001787640cnvy:TechnologyEnabledSolutionsMemberus-gaap:ProductMember2022-01-012022-03-310001787640cnvy:AdvisoryServicesMemberus-gaap:ProductMember2022-01-012022-03-310001787640cnvy:TechnologyEnabledSolutionsMemberus-gaap:HealthCareMember2022-01-012022-03-310001787640us-gaap:HealthCareMembercnvy:AdvisoryServicesMember2022-01-012022-03-310001787640us-gaap:HealthCareMember2022-01-012022-03-310001787640cnvy:TechnologyEnabledSolutionsMembercnvy:ConsultingMember2022-01-012022-03-310001787640cnvy:ConsultingMembercnvy:AdvisoryServicesMember2022-01-012022-03-310001787640cnvy:ConsultingMember2022-01-012022-03-310001787640cnvy:TechnologyEnabledSolutionsMemberus-gaap:TechnologyServiceMember2022-01-012022-03-310001787640us-gaap:TechnologyServiceMembercnvy:AdvisoryServicesMember2022-01-012022-03-310001787640us-gaap:TechnologyServiceMember2022-01-012022-03-310001787640cnvy:TechnologyEnabledSolutionsMembercnvy:DataAnalyticsMember2022-01-012022-03-310001787640cnvy:AdvisoryServicesMembercnvy:DataAnalyticsMember2022-01-012022-03-310001787640cnvy:DataAnalyticsMember2022-01-012022-03-310001787640cnvy:TechnologyEnabledSolutionsMember2022-01-012022-03-310001787640cnvy:AdvisoryServicesMember2022-01-012022-03-310001787640cnvy:TechnologyEnabledSolutionsMemberus-gaap:ProductMember2021-01-012021-03-310001787640cnvy:AdvisoryServicesMemberus-gaap:ProductMember2021-01-012021-03-310001787640cnvy:TechnologyEnabledSolutionsMemberus-gaap:HealthCareMember2021-01-012021-03-310001787640us-gaap:HealthCareMembercnvy:AdvisoryServicesMember2021-01-012021-03-310001787640us-gaap:HealthCareMember2021-01-012021-03-310001787640cnvy:TechnologyEnabledSolutionsMembercnvy:ConsultingMember2021-01-012021-03-310001787640cnvy:ConsultingMembercnvy:AdvisoryServicesMember2021-01-012021-03-310001787640cnvy:ConsultingMember2021-01-012021-03-310001787640cnvy:TechnologyEnabledSolutionsMemberus-gaap:TechnologyServiceMember2021-01-012021-03-310001787640us-gaap:TechnologyServiceMembercnvy:AdvisoryServicesMember2021-01-012021-03-310001787640us-gaap:TechnologyServiceMember2021-01-012021-03-310001787640cnvy:TechnologyEnabledSolutionsMembercnvy:DataAnalyticsMember2021-01-012021-03-310001787640cnvy:AdvisoryServicesMembercnvy:DataAnalyticsMember2021-01-012021-03-310001787640cnvy:DataAnalyticsMember2021-01-012021-03-310001787640cnvy:TechnologyEnabledSolutionsMember2021-01-012021-03-310001787640cnvy:AdvisoryServicesMember2021-01-012021-03-310001787640us-gaap:TransferredAtPointInTimeMembercnvy:DataAnalyticsMember2022-01-012022-03-310001787640us-gaap:TransferredAtPointInTimeMembercnvy:DataAnalyticsMember2021-01-012021-03-3100017876402022-04-012022-03-3100017876402023-01-012022-03-3100017876402024-01-012022-03-3100017876402025-01-012022-03-3100017876402026-01-012022-03-3100017876402027-01-012022-03-310001787640cnvy:PurchaseAgreementMember2022-01-090001787640cnvy:A2022IncrementalTermLoansMember2022-02-010001787640cnvy:DMSHoldingsIncMember2022-02-010001787640us-gaap:TradeNamesMembercnvy:DMSHoldingsIncMember2022-02-010001787640cnvy:DMSHoldingsIncMemberus-gaap:CustomerRelationshipsMember2022-02-010001787640cnvy:DMSHoldingsIncMember2022-02-012022-02-010001787640us-gaap:TradeNamesMember2022-01-012022-03-310001787640us-gaap:CustomerRelationshipsMember2022-01-012022-03-310001787640cnvy:DMSHoldingsIncMember2022-01-012022-03-310001787640cnvy:DMSHoldingsIncMember2022-03-310001787640srt:MinimumMemberus-gaap:MachineryAndEquipmentMember2022-01-012022-03-310001787640srt:MaximumMemberus-gaap:MachineryAndEquipmentMember2022-01-012022-03-310001787640us-gaap:MachineryAndEquipmentMember2022-03-310001787640us-gaap:MachineryAndEquipmentMember2021-12-310001787640srt:MaximumMemberus-gaap:LeaseholdImprovementsMember2022-01-012022-03-310001787640us-gaap:LeaseholdImprovementsMember2022-03-310001787640us-gaap:LeaseholdImprovementsMember2021-12-310001787640us-gaap:FurnitureAndFixturesMembersrt:MinimumMember2022-01-012022-03-310001787640us-gaap:FurnitureAndFixturesMembersrt:MaximumMember2022-01-012022-03-310001787640us-gaap:FurnitureAndFixturesMember2022-03-310001787640us-gaap:FurnitureAndFixturesMember2021-12-310001787640srt:MinimumMemberus-gaap:SoftwareDevelopmentMember2022-01-012022-03-310001787640us-gaap:SoftwareDevelopmentMembersrt:MaximumMember2022-01-012022-03-310001787640us-gaap:SoftwareDevelopmentMember2022-03-310001787640us-gaap:SoftwareDevelopmentMember2021-12-310001787640cnvy:AdvancedPlanAdministrationMember2022-03-310001787640cnvy:SupplementalBenefitsAdministrationMember2022-03-310001787640cnvy:ValueBasedAnalyticsMember2022-03-310001787640cnvy:AdvisoryServicesMember2022-03-310001787640cnvy:HealthSmartMember2022-03-310001787640cnvy:TechnologyEnabledSolutionsMember2022-03-310001787640srt:MinimumMember2022-03-310001787640srt:MaximumMember2022-03-310001787640us-gaap:TradeNamesMember2022-03-310001787640us-gaap:CustomerRelationshipsMember2022-03-310001787640us-gaap:TechnologyBasedIntangibleAssetsMember2022-03-310001787640us-gaap:SoftwareDevelopmentMember2022-03-310001787640us-gaap:TradeNamesMember2021-12-310001787640us-gaap:CustomerRelationshipsMember2021-12-310001787640us-gaap:TechnologyBasedIntangibleAssetsMember2021-12-310001787640us-gaap:SoftwareDevelopmentMember2021-12-310001787640cnvy:TradenamesCustomerRelationshipsAndTechnologyMember2022-01-012022-03-310001787640cnvy:TradenamesCustomerRelationshipsAndTechnologyMember2021-01-012021-03-310001787640us-gaap:SoftwareDevelopmentMember2022-01-012022-03-310001787640us-gaap:SoftwareDevelopmentMember2021-01-012021-03-310001787640cnvy:TermLoansMemberus-gaap:SecuredDebtMember2019-09-040001787640us-gaap:RevolvingCreditFacilityMemberus-gaap:LineOfCreditMember2019-09-040001787640cnvy:TermLoansMemberus-gaap:SecuredDebtMember2019-09-042019-09-040001787640us-gaap:RevolvingCreditFacilityMemberus-gaap:LineOfCreditMember2019-09-042019-09-0400017876402019-09-042019-09-040001787640us-gaap:SecuredDebtMember2019-09-042019-09-040001787640us-gaap:LineOfCreditMemberus-gaap:BridgeLoanMember2019-09-040001787640cnvy:A2020IncrementalTermLoanMemberus-gaap:SecuredDebtMember2020-04-080001787640cnvy:A2021IncrementalTermLoanMemberus-gaap:SecuredDebtMember2021-02-120001787640cnvy:A2022IncrementalTermLoansMemberus-gaap:SecuredDebtMember2022-02-010001787640us-gaap:LondonInterbankOfferedRateLIBORMember2022-01-012022-03-310001787640srt:MinimumMember2022-01-012022-03-310001787640srt:MaximumMember2022-01-012022-03-310001787640cnvy:CreditAgreementMembersrt:MinimumMemberus-gaap:LondonInterbankOfferedRateLIBORMember2022-01-012022-03-310001787640cnvy:CreditAgreementMembersrt:MaximumMemberus-gaap:LondonInterbankOfferedRateLIBORMember2022-01-012022-03-310001787640cnvy:CreditAgreementMembersrt:MinimumMemberus-gaap:BaseRateMember2022-01-012022-03-310001787640cnvy:CreditAgreementMembersrt:MaximumMemberus-gaap:BaseRateMember2022-01-012022-03-310001787640cnvy:CreditAgreementMembersrt:MinimumMemberus-gaap:EurodollarMember2022-01-012022-03-310001787640cnvy:CreditAgreementMembersrt:MaximumMemberus-gaap:EurodollarMember2022-01-012022-03-310001787640cnvy:UndrawnLetterOfCreditMember2022-03-310001787640cnvy:TermLoansMember2022-01-012022-03-310001787640cnvy:TermLoansMember2022-03-310001787640cnvy:TermLoansMember2021-12-310001787640cnvy:TermLoansMember2021-01-012021-03-310001787640us-gaap:RevolvingCreditFacilityMember2022-03-310001787640us-gaap:RevolvingCreditFacilityMember2021-12-310001787640us-gaap:RevolvingCreditFacilityMember2022-01-012022-03-310001787640us-gaap:RevolvingCreditFacilityMember2021-01-012021-03-310001787640us-gaap:SecuredDebtMember2022-01-012022-03-310001787640us-gaap:SecuredDebtMember2021-01-012021-03-310001787640us-gaap:SecuredDebtMember2021-12-310001787640us-gaap:SecuredDebtMember2022-03-310001787640cnvy:A2020IncrementalTermLoanMember2022-01-012022-03-310001787640cnvy:A2022IncrementalTermLoansMember2022-03-3100017876402020-01-230001787640cnvy:TermLoansMember2022-03-3100017876402021-02-280001787640cnvy:DividendsPaidOutstandingAndVestedOptionHoldersMember2021-02-012021-02-280001787640cnvy:DividendsPaidExistingShareholdersMember2021-02-012021-02-280001787640cnvy:A2021OmnibusIncentiveCompensationPlanMember2021-06-032021-06-030001787640cnvy:A2019EquityPlanMemberus-gaap:EmployeeStockOptionMember2021-03-012021-03-310001787640cnvy:A2019EquityPlanMemberus-gaap:EmployeeStockOptionMember2021-12-310001787640us-gaap:EmployeeStockOptionMember2021-03-012021-03-310001787640cnvy:A2021OmnibusIncentiveCompensationPlanMemberus-gaap:EmployeeStockOptionMember2021-06-012021-06-300001787640cnvy:A2021OmnibusIncentiveCompensationPlanMemberus-gaap:EmployeeStockOptionMember2021-06-300001787640cnvy:A2019EquityPlanMemberus-gaap:EmployeeStockOptionMember2021-06-012021-06-3000017876402021-06-012021-06-300001787640us-gaap:RestrictedStockUnitsRSUMember2021-06-300001787640us-gaap:EmployeeStockOptionMember2021-06-012021-06-300001787640us-gaap:RestrictedStockUnitsRSUMember2022-01-012022-03-310001787640cnvy:A2021OmnibusIncentiveCompensationPlanMemberus-gaap:EmployeeStockOptionMember2021-08-012021-08-310001787640cnvy:A2021OmnibusIncentiveCompensationPlanMemberus-gaap:EmployeeStockOptionMember2021-08-3100017876402021-08-012021-08-310001787640us-gaap:RestrictedStockUnitsRSUMember2021-08-310001787640cnvy:A2021EquityPlanMemberus-gaap:RestrictedStockUnitsRSUMember2022-03-012022-03-310001787640us-gaap:PerformanceSharesMembercnvy:A2021EquityPlanMember2022-03-012022-03-310001787640cnvy:A2021EquityPlanMemberus-gaap:EmployeeStockOptionMember2021-03-310001787640us-gaap:PerformanceSharesMember2021-06-012021-06-300001787640us-gaap:RestrictedStockUnitsRSUMember2021-06-012021-06-30cnvy:installment0001787640us-gaap:SellingGeneralAndAdministrativeExpensesMember2022-01-012022-03-310001787640us-gaap:SellingGeneralAndAdministrativeExpensesMember2021-01-012021-03-3100017876402021-02-1500017876402021-01-012021-12-310001787640us-gaap:EmployeeStockOptionMember2022-03-310001787640us-gaap:EmployeeStockOptionMember2022-01-012022-03-310001787640us-gaap:RestrictedStockUnitsRSUMember2021-12-310001787640us-gaap:RestrictedStockUnitsRSUMember2022-03-3100017876402020-03-012020-03-31cnvy:award0001787640cnvy:LongTermIncentiveAwardsMember2020-09-300001787640cnvy:LongTermIncentiveAwardsMember2022-01-012022-03-310001787640cnvy:LongTermIncentiveAwardsMember2021-12-310001787640cnvy:LongTermIncentiveAwardsMember2022-03-310001787640srt:AffiliatedEntityMember2022-03-310001787640srt:AffiliatedEntityMembercnvy:TPGManagementAndConsultingFeesMember2022-01-012022-03-310001787640srt:AffiliatedEntityMembercnvy:TPGManagementAndConsultingFeesMember2021-01-012021-03-310001787640cnvy:TPGTermLoanFeesMembersrt:AffiliatedEntityMember2022-01-012022-03-310001787640cnvy:TPGTermLoanFeesMembersrt:AffiliatedEntityMember2021-01-012021-03-310001787640cnvy:TPGTermLoanFeesMembersrt:AffiliatedEntityMember2021-06-012021-06-300001787640cnvy:TPGTermLoanFeesMembersrt:AffiliatedEntityMember2021-12-310001787640srt:AffiliatedEntityMembercnvy:EIRPartnersMonthlyConsultingAgreementMember2022-01-012022-03-310001787640cnvy:EIRPartnersConsultingAgreementMembersrt:AffiliatedEntityMember2022-01-012022-03-310001787640cnvy:EIRPartnersConsultingAgreementMembersrt:AffiliatedEntityMember2021-01-012021-03-31

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2022
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from  _ to _
Commission file number 001-40506
Convey Health Solutions Holdings, Inc.
(Exact name of registrant as specified in its charter)
Delaware84-2099378
(State or other jurisdiction of
 incorporation or organization)
(I.R.S. Employer Identification No.)
100 SE 3rd Avenue, 26th Floor, Fort Lauderdale, Florida
33394
(Address of Principal Executive Offices)(Zip Code)
(800) 559-9358
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.01 par value per shareCNVYNew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐ 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).     Yes  ☒   No  ☐ 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filer  Smaller reporting company
Emerging growth company



If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes   ☐     No  
As of April 29, 2022, the registrant had 73,194,171 shares of common stock, $0.01 par value per share, outstanding.


TABLE OF CONTENTS
3

PART I-FINANCIAL INFORMATION
Item 1. Financial Statements.
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, net36,408 14,060 
Prepaid expenses and other current assets10,809 16,569 
Total current assets140,790 132,253 
Property and equipment, net20,952 20,400 
Intangible assets, net247,993 220,014 
Goodwill482,558 455,206 
Operating lease right-of-use assets18,574  
Other assets5,667 2,030 
Total assets$916,534 $829,903 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Accounts payable$11,156 $13,868 
Accrued expenses30,038 48,558 
Operating lease liabilities, current portion5,605  
Finance lease obligations, current portion501 498 
Deferred revenue, current portion9,494 7,472 
Term loans, current portion780  
Total current liabilities57,574 70,396 
Operating lease liabilities, net of current portion18,623  
Finance leases obligations, net of current portion440 528 
Deferred taxes, net35,094 25,992 
Term loans, net of current portion264,483 189,643 
Other long-term liabilities2,475 5,595 
Total liabilities378,689 292,154 
Commitments and contingencies (Note 15)
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 capital571,516 570,252 
Accumulated other comprehensive income17 31 
Accumulated deficit(34,420)(33,266)
Total shareholders’ equity537,845 537,749 
Total liabilities and shareholders’ equity$916,534 $829,903 
See accompanying notes to unaudited condensed consolidated financial statements
4

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,
20222021
Net revenues:
Services$46,480 $43,527 
Products50,228 39,104 
Net revenues96,708 82,631 
Operating expenses:
Cost of services(1)
25,477 24,021 
Cost of products(1)
37,236 26,527 
Selling, general and administrative23,214 20,099 
Depreciation and amortization8,252 7,372 
Transaction related costs640 1,086 
Total operating expenses94,819 79,105 
Operating income (loss)1,889 3,526 
Other income (expense):
Interest expense(3,719)(5,467)
Total other expense, net(3,719)(5,467)
Income (loss) before income taxes(1,830)(1,941)
Income tax (expense) benefit676 1,007 
Net income (loss)$(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.
See accompanying notes to unaudited condensed consolidated financial statements
5

CONVEY HEALTH SOLUTIONS HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(in thousands, except for number of shares)
(unaudited)
Common stock
Additional
Paid-in Capital
Accumulated
Other
Comprehensive
Income
Accumulated
Deficit
Total
Shareholders’
Equity
SharesAmount
For the Three Months Ended March 31, 2022
December 31, 202173,194,171 $732 $570,252 $31 $(33,266)$537,749 
Share-based compensation— — 1,264 — — 1,264 
Foreign currency translation adjustments— — — (14)— (14)
Net loss— — — — (1,154)(1,154)
March 31, 202273,194,171 $732 $571,516 $17 $(34,420)$537,845 
Common stock
Additional
Paid-in Capital
Accumulated
Other
Comprehensive
Income
Accumulated
Deficit
Total
Shareholders’
Equity
SharesAmount
For the Three Months Ended March 31, 2021
December 31, 202061,321,424 $613 $492,747 $78 $(23,288)$470,150 
Share-based compensation— — 990 — — 990 
Foreign currency translation adjustments— — — (7)— (7)
Dividend— — (74,500)— — (74,500)
Net loss— — — — (934)(934)
March 31, 202161,321,424 $613 $419,237 $71 $24,222 $395,699 
See accompanying notes to unaudited condensed consolidated financial statements
6

CONVEY HEALTH SOLUTIONS HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
For the Three Months Ended March 31,
20222021
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 expense1,550 1,386 
Amortization expense6,702 5,986 
Write off capitalized software costs253  
Provision for bad debt 342 
Provision for inventory reserve90 399 
(Gain) loss from disposal of assets10  
Deferred income taxes(1,120)(963)
Amortization of debt issuance costs309 328 
Share-based compensation1,264 990 
Non-cash lease expense1,246  
Inventory step-up1,892  
Changes in operating assets and liabilities:
Accounts receivable(3,414)4,662 
Inventory(1,450)(3,207)
Prepaid expenses and other assets3,903 843 
Accounts payable and other accrued liabilities(26,222)(22,100)
Deferred revenue2,022 (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 debt78,000 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 activities75,283 515 
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 period38,811 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 


See accompanying notes to unaudited condensed consolidated financial statements
7

CONVEY HEALTH SOLUTIONS HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(in thousands)
(unaudited)
For the Three Months Ended March 31,
20222021
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 

See accompanying notes to unaudited condensed consolidated financial statements
8

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 1. BUSINESS AND BASIS OF PRESENTATION
Business
Convey Health Solutions Holdings, Inc. (collectively with its subsidiaries, which includes our main operating subsidiary, Convey Health Solutions, Inc., “we”, “us”, “our”, “Convey” or the “Company”) provides technology enabled solutions to payors within the large and growing government sponsored health plan market. Our platform combines proprietary modular technology and end-to-end solutions to serve as an extension of our clients’ operations and core systems. Our clients are primarily Medicare Advantage, Medicare Part D and Employer Group Waiver Plans, as well as Pharmacy Benefit Managers. Convey is a United States (“U.S.”) based holding company incorporated in Delaware. Our principal executive offices are located in Fort Lauderdale, Florida.
Acquisition
On February 1, 2022, Convey’s indirect wholly-owned subsidiary, D-M-S Holdings Parent, LLC (f/k/a Dragon Holdings Parent, LLC), a Delaware limited liability company, acquired all of the issued and outstanding capital stock of D-M-S Holdings, Inc. d/b/a HealthSmart International, a Delaware corporation (“HealthSmart”). HealthSmart provides a diverse portfolio of health, wellness and diagnostic products centered on home based care outcomes. See Note 4. Acquisitions for additional information.
Stock Split
Prior to the IPO (as defined below), in June 2021, Convey’s Board of Directors (the “Board”) and stockholders approved a forward split of shares of Convey’s common stock, par value $0.01 per share, on a 126-for-1 basis (the “Stock Split”), which became effective as of June 4, 2021. Prior to the Stock Split, we were authorized to issue 1,000,000 shares of common stock of which (i) 915,000 shares were designated as voting common stock and (ii) 85,000 shares were designated as non-voting common stock. In connection with the Stock Split, the total number of authorized shares of common stock was proportionately increased and the par value of the common stock was not adjusted as a result of the Stock Split. In addition, all authorized shares of common stock were designated voting common stock. All references to common stock, options to purchase common stock, per share data and related information contained in our condensed consolidated financial statements have been retrospectively adjusted to reflect the effect of the Stock Split.
Initial Public Offering
On June 18, 2021, we closed our initial public offering (“IPO”) of our common stock through an underwritten sale of 13,333,334 shares of our common stock at a price of $14.00 per share. In the offering, we sold 11,666,667 shares and a selling stockholder sold 1,666,667 shares. The aggregate net proceeds to us from the offering after deducting underwriting discounts and commissions and other offering expenses payable by us, were approximately $146.1 million. We used approximately $131.5 million of the net proceeds from the IPO to repay outstanding indebtedness under our credit agreement. We did not receive any of the proceeds from the sale by the selling stockholder.
Prior to the closing of the IPO, on June 17, 2021, our Second Amended and Restated Certificate of Incorporation (the “Charter”) and our Second Amended and Restated Bylaws, became effective. The Charter, among other things, provides that our authorized capital stock consists of 500,000,000 shares of common stock, par value $0.01 per share and 25,000,000 shares of preferred stock, par value $0.01 per share.
Basis of Presentation and Consolidation
The accompanying condensed consolidated financial statements are unaudited and include the accounts of Convey and our wholly-owned subsidiaries. They have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP” or “GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial information. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. Our condensed consolidated statements of operations and comprehensive income (loss), shareholders’ equity, and cash flows for the three months ended March 31, 2022, and 2021, and the condensed consolidated balance sheet as of March 31, 2022, reflect all adjustments that are of a normal recurring nature and that are considered necessary for a fair statement of the results for the periods shown.
9

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
Our condensed consolidated balance sheet as of December 31, 2021, has been derived from our audited consolidated financial statements as of that date. Our condensed consolidated financial statements should be read in conjunction with our consolidated financial statements and notes thereto for the year ended December 31, 2021, which include a complete set of footnote disclosures, including our significant accounting policies, and are included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, as filed with the SEC on March 23, 2022 (“Form 10-K”). The results for interim periods are not necessarily indicative of the results that may be expected for a full fiscal year or for any other future period. All significant intercompany balances and transactions have been eliminated in consolidation.
COVID-19 Pandemic
During the first quarter ended March 31, 2020, concerns related to the spread of novel coronavirus (“COVID-19”) began to create global business disruptions as well as disruptions in our operations. COVID-19 was declared a global pandemic by the World Health Organization on March 11, 2020. Governments at the national, state and local level in the U.S., and globally, have implemented varying measures in an effort to contain the virus, including social distancing, travel restrictions, border closures, limitations on public gatherings of people, work from home and supply chain logistical changes. While some of these actions have eased, escalating transmission rates (including of the Delta and Omicron variants of COVID-19), uneven vaccination and vaccination booster rates and further governmental guidance and orders may result in having to reimplement certain of these measures or implementing new and additional ones. The spread of COVID-19 has also caused significant volatility in the U.S. and international markets and has had and continues to have widespread, rapidly evolving and unpredictable impacts on global society, economics, financial markets and business practices. The impact of COVID-19 on our business has resulted in elongated sales cycles, postponement of customer contract renewals, and slower implementation of software solutions for our clients, as well as a reduction in billable hours in one of our reportable segments, the Advisory Services segment.
The full extent to which the COVID-19 pandemic and the various responses to the COVID-19 pandemic continues to impact our business, operations or financial condition will depend on numerous evolving factors that we may not be able to accurately predict, including, but not limited to, the duration, severity and scope of the COVID-19 pandemic (including due to new variants, such as Delta and Omicron); actions by governmental entities, businesses and individuals that have been and continue to be taken in response to the pandemic; the effect on our clients and demand by clients, clients and our clients’ members for and ability to pay for our solutions and services; and disruptions or restrictions on our employees’ ability to work and travel. The impact of these factors and others on our suppliers and clients could persist for some time after governments ease their restrictions and after the overall number of COVID-19 cases in the United States decreases.
We have assessed various accounting estimates and other matters, including those that require consideration of forecasted financial information, in context with the unknown future impacts of COVID-19 using information that is reasonably available to us at this time. While our current assessment of our estimates did not have a material impact on our condensed consolidated financial statements as of and for the three months ended March 31, 2022, as additional information becomes available to us, our future assessment of our estimates, including our expectations at the time regarding the duration, scope and severity of the pandemic, as well as other factors, could materially and adversely impact our consolidated financial statements in future reporting periods.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and judgments that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities. These estimates and judgments are based on historical information currently available to us and based on various other assumptions that we conclude to be reasonable under the circumstances. While management concludes that such estimates are reasonable when considered in conjunction with our condensed consolidated balance sheets and statements of operations and comprehensive income (loss) taken as a whole, actual results could differ materially from those estimates.
Acquisitions
We allocate the purchase consideration to the identifiable net assets acquired, including intangible assets and liabilities assumed, based on estimated fair values at the date of the acquisition. The excess of the fair value of the purchase consideration over the fair value of the identifiable assets and liabilities, if any, is recorded as goodwill. During the measurement period, which is up to one year from the acquisition date, we may adjust provisional amounts that were recognized at the acquisition
10

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
date to reflect new information obtained about facts and circumstances that existed as of the acquisition date. Upon the conclusion of the measurement period, any subsequent adjustments are recorded to the condensed consolidated statements of operations and comprehensive income (loss).
Determining the fair value of assets acquired and liabilities assumed requires significant judgment, including the selection of valuation methodologies which techniques include the royalty method, the multi-period excess earnings method, the cost approach, the market approach, and the probability weighted assessment method as considered necessary. Significant assumptions used in those methodologies include, but are not limited to, growth rates, discount rates, customer attrition rates, expected levels of revenues, earnings, cash flows and tax rates. The use of different valuation methodologies and assumptions is highly subjective and inherently uncertain and, as a result, actual results may differ materially from estimates.
Customer Concentrations
Revenue and Accounts receivable from our major customers are as follows:
Revenues
For the Three Months Ended
March 31,
(in thousands, except percentages)
20222021
Customer A
$27,108 $19,626 
    % of total revenue
28.0 %23.8 %
Customer B
$16,712 $16,766 
    % of total revenue
17.3 %20.3 %
Accounts Receivable
(in thousands, except percentages)
March 31, 2022December 31, 2021
Customer A$8,119 $13,161 
    % of total accounts receivable11.2 %21.0 %
Customer B$11,688 $15,174 
    % of total accounts receivable16.1 %24.2 %
Our customer base is highly concentrated. Revenue may significantly decline if we were to lose one or more of our major customers. However, our risk is reduced due to our significant customers having multiple product delivery solutions under separate contracts.
Contingent Consideration
We recognized an earn-out liability in connection with the November 2018 acquisition of HealthScape Advisors, LLC (“HealthScape Advisors”) and Pareto Intelligence LLC (“Pareto Intelligence”), which represented contingent consideration.
The initial fair value of the earn-out liability was determined by employing a Monte-Carlo simulation model. The underlying simulated variable was adjusted revenue discounted by the market price of risk embedded in the revenue metrics. The revenue volatility estimate was based on a study of historical asset volatility and implied volatility for a set of comparable public companies, adjusted by our operating leverage. The earn-out payments were calculated based on simulated revenue metrics and payment thresholds as set forth in the HealthScape Advisors and Pareto Intelligence purchase agreement. The calculated payments were further discounted back to present value using cost of debt reflecting our credit risk. The fair value of the earn-out liability at each reporting date subsequent to the acquisition was measured using a probability weighted approach. Any change in fair value was recognized in the condensed consolidated statements of operations and comprehensive income (loss).
On September 4, 2019, Cannes Parent, Inc. (“Cannes”), a direct subsidiary of Convey, entered into an agreement to acquire all of the outstanding stock of Convey Health Solutions, Inc. through the merger of Cannes Merger Sub, Inc. (“Merger Sub”) and Convey Health Parent, Inc. (“Parent”) (the “Merger”) with Parent surviving as a direct subsidiary of Cannes. The Merger principally occurred through an investment from TPG Cannes Aggregation, L.P., which is primarily funded by partners of TPG Partners VIII, L.P. and TPG Healthcare Partners, L.P. or any parallel fund or their alternative investment vehicles (collectively, “TPG”). In connection with the Merger, we recognized a holdback liability, which represented contingent consideration. The
11

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
initial fair value of the holdback liabilities and at each subsequent reporting date was measured using a probability weighted approach. Any change in fair value was recognized in the consolidated statements of operations and comprehensive income (loss).
In connection with the acquisition of HealthSmart in February 2022, we recognized an earn-out liability which represented contingent consideration. The initial fair value of the earn-out liability was determined by employing a Black-Scholes Merton model. The earn-out payments were calculated based on projected revenue metrics and payment thresholds as set forth in the HealthSmart purchase agreement. The calculated payments were further discounted back to present value using the cost of debt reflecting our credit risk.
The following table provides a reconciliation of our Level 3 earn-out and holdback liabilities for the three months ended March 31, 2022:
(in thousands)
Balance at December 31, 2021$ 
Fair value of contingent consideration in connection with the HealthSmart acquisition2,254 
Payments  
Change in fair value 
Balance at March 31, 2022$2,254 
The following table provides a reconciliation of our Level 3 earn-out and holdback liabilities for the three months ended March 31, 2021:
(in thousands)
Balance at December 31, 2020$20,538 
Payments 
Change in fair value 
Balance at March 31, 2021$20,538 
Net Income (Loss) Per Common Share
Basic income (loss) per share is computed by dividing net income (loss) attributable to common shareholders (the numerator) by the weighted average number of common shares outstanding for the period (the denominator). Diluted net income (loss) per common share attributable to common shareholders is computed by dividing net income (loss) by the weighted average number of common shares outstanding during the period adjusted for the dilutive effects of common stock equivalents. In periods when losses from operations are reported, the weighted-average number of common shares outstanding excludes common stock equivalents because their inclusion would be anti-dilutive.
For the Three Months Ended
March 31,
(in thousands, except per share data)20222021
Net income (loss) attributable to common shareholders
Net income (loss)$(1,154)$(934)
Net income (loss) attributable to common shareholders$(1,154)$(934)
Weighted-average common shares outstanding:
Basic and diluted73,194,171 61,321,424 
Net income (loss) per share:
Basic and diluted$(0.02)$(0.02)
For the three months ended March 31, 2022, and 2021, 9,534,119 and 5,690,664 of potentially dilutive share-based awards outstanding, respectively, were excluded from the computation of diluted net income (loss) per share related to common shareholders as their effect was anti-dilutive. See Note 11. Share-Based Compensation.
12

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
Recent Accounting Pronouncements
Recently Adopted Accounting Pronouncements
In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842), which supersedes the previous guidance for lease accounting, Leases (Topic 840). ASU 2016-02 requires lessees to recognize a right-of-use asset and a lease liability for virtually all of their leases except those which meet the definition of a short-term lease. For income statement purposes, the FASB retained a dual model, requiring leases to be classified as either operating or financing. Classification is based on criteria that are similar to those applied in previous lease accounting, but without explicit bright lines. The recognition of these lease assets and lease liabilities represents a change from previous U.S. GAAP requirements, which did not require lease assets and lease liabilities to be recognized for most leases. The recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee, have not significantly changed from previous U.S. GAAP requirements. The Company adopted the provisions of Topic 842 on January 1, 2022, using the modified retrospective approach. All comparative periods prior to January 1, 2022 are not adjusted and continue to be reported in accordance with Topic 840.
The Company elected to utilize the package of practical expedients permitted within the new standard, which among other things, allowed the Company not to reassess prior conclusions about lease identification, classification and initial direct costs of existing leases as of the date of adoption. The Company made an accounting policy election to keep leases with an initial term of 12 months or less off of the Company’s condensed consolidated balance sheet which resulted in recognizing those lease payments in the condensed consolidated statements of operations on a straight-line basis over the lease term.
Adoption of the new standard resulted in the recording of right-of-use assets and corresponding lease liabilities of $14.7 million and $20.7 million, respectively, as of January 1, 2022. The difference between the right-of-use assets and the lease liabilities was recorded to eliminate existing deferred rent balances and remaining balances of lease incentives recorded under Topic 840. The adoption of the new standard did not materially impact the Company's condensed consolidated statements of operations and had no impact on the Company's condensed consolidated statements of cash flows. See Note 18. Leases for further information.
Accounting Pronouncements Issued Not Yet Adopted
In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326) (“ASU 2016-13”). ASU 2016-13 changes the impairment model for most financial assets and certain other instruments. Entities will be required to use a model that will result in the earlier recognition of allowances for losses for trade and other receivables, held-to-maturity debt securities, loans, and other instruments. For available-for-sale debt securities with unrealized losses, the losses will be recognized as allowances rather than as reductions in the amortized cost of the securities. ASU 2016-13, as subsequently amended for various technical issues, is effective for emerging growth companies following private company adoption dates for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2022, with early adoption permitted. We are currently evaluating the new guidance to determine the impact it will have on our consolidated financial statements.
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848) (“ASU 2020-04”), subsequently clarified in January 2021 by ASU 2021-01, Reference Rate Reform (Topic 848) (“ASU 2021-01”). The main provisions of this update provide optional expedients and exceptions for contracts, hedging relationships, and other transactions that reference the London Inter-bank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued because of reference rate reform. The guidance in ASU 2020-04 and ASU 2021-01 was effective upon issuance and, once adopted, may be applied prospectively to contract modifications and hedging relationships through December 31, 2022. We are currently evaluating the new guidance to determine the impact ASU 2020-04 and ASU 2021-01 will have on our consolidated financial statements.
In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805) (“ASU 2021-08”). The new guidance creates an exception to the general recognition and measurement principle for contract assets and contract liabilities from contracts with customers acquired in a business combination. Under this exception, an acquirer applies Topic 606 to recognize and measure contract assets and contract liabilities on the acquisition date. Topic 805 generally requires the acquirer in a business combination to recognize and measure the assets it acquires and liabilities it assumes at fair value on the acquisition date. This generally will result in companies recognizing contract assets and contract liabilities at amounts consistent with those recorded by the acquiree immediately before the acquisition date. This new guidance is effective for emerging growth companies following private business adoption dates, for the fiscal years beginning after December 15, 2023, with early adoption permitted. We are currently evaluating the new guidance to determine the impact it will have on our consolidated financial statements.
13

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
NOTE 3. REVENUE FROM CONTRACTS WITH CUSTOMERS
We provide technology enabled solutions and advisory services to assist our clients with workflows across product developments, sales, member experience, clinical management, core operations and business intelligence and analytics. We generate our revenues through our two reporting segments: (i) Technology Enabled Solutions and (ii) Advisory Services.
Technology Enabled Solutions
We help health plans grow membership and revenue as well as operate more effectively and efficiently. We also assist our clients in managing the compliance and administrative requirements imposed under government sponsored health plans. Our technology solutions are primarily delivered through a web-based customizable application. This application is used to identify, track, and administer contractual services, or benefits provided under a client’s plan to its Medicare and Medicaid beneficiaries. We also provide analytics over healthcare data to capture and assess gaps in risk documentation, quality, clinical care, and compliance. With our technology enabled solutions, we offer the following services:
Health Plan Management provides technology-enabled plan administration services for government-sponsored health plans. Our service encompasses eligibility and enrollment processing, member services, premium billing, payment processing, reconciliation and other related services. In addition, we provide technology enabled services to manage supplemental benefits provided to members through their Medicare Advantage plans. Our services include benefit design and administration, member eligibility and engagement, analytics and reporting.
Software Services provide additional services to our clients for ad hoc enhancements on their existing software solutions.
Data Analytics provide payment tools and data analytics to improve revenue accuracy and identify gaps in quality, clinical care and compliance. Increasingly we are combining these analytics capabilities with our Health Plan Management offerings.
Supplemental Benefit Services include product fulfillment, as well as catalog development and product distribution. Many of these services are provided through our technology enabled solutions.
Advisory Services
We provide Advisory Services that complement our technology enabled solutions, including sales and marketing strategies, provider network strategies, compliance, Star ratings, quality, clinical, pharmacy, analytics and risk adjustment.
Revenue Recognition
We recognize revenue under ASC Topic 606, Revenue from Contracts with Customers. We recognize revenue when our customer obtains control of promised goods or services, in an amount that reflects the consideration that the entity expects to receive in exchange for those goods or services. To determine revenue recognition for contracts that are within the scope of the standard, we perform the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation.
Disaggregation of revenue
The following tables present disaggregated revenue by reporting segment:
(in thousands)For the Three Months Ended
March 31, 2022
Technology
Enabled
Solutions
Advisory
Services
Total
Supplemental Benefit Services$50,228 $ $50,228 
Health Plan Management25,862  25,862 
Consulting Services2,327 13,457 15,784 
Software Services2,191 85 2,276 
Data Analytics2,558  2,558 
Total$83,166 $13,542 $96,708 
14

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
(in thousands)For the Three Months Ended
March 31, 2021
Technology
Enabled
Solutions
Advisory
Services
Total
Supplemental Benefit Services$39,104 $ $39,104 
Health Plan Management23,942  23,942 
Consulting Services1,038 13,049 14,087 
Software Services2,730  2,730 
Data Analytics2,768  2,768 
Total$69,582 $13,049 $82,631 
The revenue recognition pattern, point in time or over time, is consistent within all revenue categories with the exception of Data Analytics which includes revenue recognized on both a point in time and over time basis. The amount of point in time revenue within Data Analytics was $0.6 million and $1.4 million during the three months ended March 31, 2022, and 2021, respectively.
Contract Balances
The timing of our revenue recognition, invoicing, and cash collections results in billed accounts receivable, unbilled receivables, and deferred revenue. Accounts receivable includes unbilled receivable balances of $17.4 million and $7.0 million as of March 31, 2022, and December 31, 2021, respectively.
Deferred revenue represents payments received from our customers in advance of recognition of revenue. Deferred revenue that will be recognized during the succeeding 12 months is recognized as current deferred revenue and the remaining portion is recognized as non-current deferred revenue within Other long-term liabilities. Revenue recognized during the three months ended March 31, 2022, and 2021 that was included in the deferred revenue balance at the beginning of the period was $4.4 million and $3.9 million, respectively.
Remaining Performance Obligations
Transaction price allocated to remaining performance obligations (“RPO”) represents contracted revenue that has not yet been recognized, which includes contract liabilities and non-cancelable amounts that will be invoiced and recognized as revenue in future periods.
The timing and amount of revenue recognition for our remaining performance obligations are influenced by several factors and therefore the amount of remaining obligations may not be a meaningful indicator of future results. Total RPO equaled $8.4 million as of March 31, 2022, of which we expect to recognize approximately $4.2 million over the next 12 months. The remaining $4.2 million is expected to be recognized in fiscal years 2023, 2024, 2025, 2026 and 2027 by $3.0 million, $1.1 million, $0.1 million, $7.5 thousand and $7.5 thousand, respectively.
NOTE 4. ACQUISITIONS
On January 9, 2022, Convey’s indirect wholly-owned subsidiary, D-M-S Holdings Parent, LLC (f/k/a Dragon Holdings Parent, LLC), a Delaware limited liability company (“Buyer”), entered into a Stock Purchase Agreement (the “Purchase Agreement”) with Briggs Medical Service Company, a Delaware corporation (“Seller”), and D-M-S Holdings, Inc. d/b/a HealthSmart International, a Delaware corporation (“Target”), pursuant to which, on the terms and subject to the conditions set forth in the Purchase Agreement, Buyer agreed to acquire from Seller all of the issued and outstanding capital stock of Target (the acquisition of such capital stock, the “Acquisition”). Target provides a diverse portfolio of health, wellness and diagnostic products centered on home based care outcomes, and the Company intends to leverage the Target’s supply chain and logistics expertise to get high quality products to members faster and at a lower cost.
On February 1, 2022, Buyer completed its acquisition of all of the issued and outstanding capital stock of the Target. The Acquisition was consummated pursuant to the Purchase Agreement.
Pursuant to the terms set forth in the Purchase Agreement, at closing Buyer paid to Seller cash in an amount equal to $74.7 million, subject to certain adjustments for, among other things, Target’s cash, indebtedness and net working capital (the “Closing Purchase Price”). If the Target achieves certain amounts of net revenue in calendar year 2022, Buyer will pay to Seller cash up to an additional $15 million. A portion of the Closing Purchase Price was deposited into an escrow account held by an
15

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
escrow agent and will be released to Buyer or Seller, as applicable, following the final determination of any purchase price adjustment.
In connection with the Purchase Agreement, CHS obtained a first lien incremental term loan facility under CHS’s existing First Lien Credit Agreement in an aggregate principal amount of $78 million, for the purpose of financing the Acquisition and paying fees and expenses related thereto. See Note 9. Credit Facility for additional information related to the incremental term loan facility.
The Acquisition was accounted for using the acquisition method of accounting under which assets and liabilities of the Target were recorded at their respective fair values including an amount for goodwill representing the difference between the acquisition consideration and the fair value of the identifiable net assets. A deferred tax liability has been recorded for the excess of financial statement basis over tax basis of the acquired assets and assumed liabilities with a corresponding increase to goodwill. The goodwill attributable to the Acquisition has been recorded as a non-current asset and is not amortized, but is subject to an annual review for impairment. Such goodwill, which is non-deductible for income tax purposes, is part of the Technology Enabled Solutions segment.
The Acquisition price was allocated to the tangible and identified intangible assets acquired and liabilities assumed as of the closing date. The fair values assigned to tangible and identifiable intangible assets acquired and liabilities assumed are based on management’s estimates and assumptions. The estimated fair values of assets acquired and liabilities assumed are considered preliminary and are based on the most recent information available. The Company believes that the information provides a reasonable basis for assigning the fair values of assets acquired and liabilities assumed. Thus, the provisional measurements of fair value set forth below are subject to change. The Company expects to finalize the valuation as soon as practicable, but not later than one year from the acquisition date.
The following table summarizes the Acquisition date fair value of the allocation of the purchase consideration assigned to each major class of assets acquired and liabilities assumed as of February 1, 2022, the acquisition date:
Estimated Fair Value
(in thousands)
ASSETS ACQUIRED
Cash $112 
Accounts receivable 6,481 
Inventories22,879 
Prepaid expenses and other current assets 1,840 
Property and equipment1,269 
Operating lease right-of-use-assets4,908 
Total identifiable assets acquired 37,489 
Fair value of intangible assets
Trade names 8,600 
Customer relationships 25,500 
Total fair value of intangible assets acquired 34,100 
Total assets acquired $71,589 
LIABILITIES ASSUMED
Accounts payable $2,937 
Accrued expenses 3,895 
Operating lease liabilities, current portion1,003 
Deferred taxes10,222 
Operating lease liabilities, net of current portion3,905 
Total liabilities assumed 21,962 
Net identifiable assets49,627 
Goodwill27,352 
Total consideration$76,979 
16

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
Indications of fair value of the intangible assets acquired in connection with the Acquisition were determined using either the income, market or replacement cost methodologies. The intangible assets are being amortized over periods which reflect the pattern in which economic benefits of the assets are expected to be realized. The trade names and customer relationships are being amortized on a straight-line basis over an estimated useful life of twenty years and seventeen years, respectively. The goodwill recognized is primarily attributable to synergies of the business and the acquisition of workforce knowledgeable of product development and supply chain expertise in the healthcare industry.
The following table summarizes the purchase consideration transferred in connection with the Acquisition and consists of the following:
(in thousands)March 31, 2022
Initial purchase price$74,725 
Earn-out (contingent consideration)2,254 
Total consideration$76,979 
Included in the condensed consolidated statement of operations and comprehensive income (loss) for the three months ended March 31, 2022, are net sales of $7.2 million and net loss of $1.6 million, related to the Target’s operations since the acquisition date of February 1, 2022.
Unaudited Supplemental Pro Forma Information
The following table presents the unaudited pro forma combined results of operations of the Company and Target for the three months ended March 31, 2022 and 2021, as if the acquisition had occurred on January 1, 2021. The pro forma information presented is for informational purposes only and is not indicative of results of operations that would have been achieved had the Acquisition taken place at the beginning of the period.
For the Three Months Ended
March 31
(in thousands)20222021
Net revenue101,174 97,567 
Net income (loss)205 (299)
NOTE 5. PREPAID EXPENSES AND OTHER CURRENT ASSETS
Prepaid expenses and other current assets consist of the following:
(in thousands)March 31, 2022December 31, 2021
Prepaid expenses and other advances$5,896 $6,904 
Software licenses828 2,547 
Insurance527 1,271 
Inventory purchase advances1,390 23 
Cloud computing subscription & implementation costs822 4,841 
Other current assets1,346 983 
Total prepaid expenses and other current assets$10,809 $16,569 
17

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
NOTE 6. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
(in thousands)
Estimated Life
(in years)
March 31, 2022December 31, 2021
Office and computer equipment
3 – 7 years
$16,399 $14,442 
Leasehold improvements
Up to 10 years
10,542 10,503 
Furniture and fixtures
3 – 7 years
4,064 4,054 
Software
35 years
2,366 2,277 
33,371 31,276 
Less: accumulated depreciation(12,419)(10,876)
Property and equipment, net$20,952 $20,400 
Depreciation expense for the three months ended March 31, 2022, and 2021 totaled $1.5 million and $1.4 million, respectively.
We lease various equipment and software under finance leases. The depreciation expense associated with the assets under finance leases for the three months ended March 31, 2022, and 2021, totaled $89 thousand and $0.1 million, respectively. Assets held under finance leases are included in property and equipment as follows:
(in thousands)March 31, 2022December 31, 2021
Office and computer equipment$1,682 $1,682 
Less: accumulated depreciation(742)(656)
Total financing leases included in property and equipment$940 $1,026 
NOTE 7. INTANGIBLE ASSETS AND GOODWILL
The activity for goodwill as of March 31, 2022 is as follows:
(in thousands)
Balance at December 31, 2021$455,206 
Measurement period adjustments  
Acquisitions (see Note 4)27,352 
Impairment  
Balance at March 31, 2022$482,558 
The carrying amount of goodwill by reporting unit as of March 31, 2022 is $88.9 million for Advanced Plan Administration (“APA”), $190.2 million for Supplemental Benefits Administration (“SBA”), $138.2 million for Value Based Payment Assurance (“VBPA”), $37.9 million for Advisory Services (“Advisory”) and $27.4 million for HealthSmart acquisition, respectively.
The goodwill allocated to the Technology Enabled Solutions and Advisory Services reportable segments is $444.7 million and $37.9 million, respectively as of March 31, 2022. Goodwill is assessed for impairment on an annual basis (on October 1 of each year) and on an interim basis when indicators of impairment exist.
As a result of the decline in our stock price since December 31, 2021, we performed an interim impairment test for goodwill for APA, SBA, VBPA and Advisory reporting units using the quantitative approach as of March 31, 2022. Since HealthSmart was recently acquired, no impairment test was performed on that reporting unit. Based on our evaluation performed, we determined the fair value of each of the reporting units exceeded its respective carrying amount, and therefore, we determined that goodwill was not impaired at any of our reporting units as of March 31, 2022. We define “headroom” as the percentage difference between the fair value of a reporting unit and its carrying value. For the interim impairment test, the headroom for the reporting units ranged between eight percent to sixty-five percent. Our SBA reporting unit and our VBPA reporting unit have headroom at the low-end of that range (8.4% for SBA and 12.5% for VBPA) and could experience
18

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
impairment in the future if we do not achieve our profitability projections, there is a change in key assumptions underlying the valuation or if we continue to experience a substantial decrease in our stock price.
Evaluation of goodwill for impairment requires judgment, including the identification of reporting units, assignment of assets, liabilities and goodwill to reporting units and determination of the fair value of each reporting unit. We estimate the fair value of our reporting units using a combination of an income approach, utilizing a discounted cash flow analysis, and a market approach, using market multiples. Under the income approach, we estimate projected future cash flows, the timing of such cash flows and long-term growth rates, and determine the appropriate discount rate that reflects the risk inherent in the projected future cash flows. The discount rate used is based on a market participant weighted-average cost of capital and may be adjusted for the relevant risk associated with business-specific characteristics and the uncertainty related to the reporting unit’s ability to execute on the projected future cash flows. Under the market approach, we estimate fair value based on market multiples of revenues and earnings derived from comparable publicly-traded companies with characteristics similar to the reporting unit. The estimates used to calculate the fair value of a reporting unit change from year to year based on operating results, market conditions and other factors. The assumptions and estimates used in determining the fair values of the reporting units contain uncertainties, and any changes to these assumptions and estimates could have a negative impact and result in a future impairment.
The carrying value of identifiable intangible assets consisted of the following as of March 31, 2022:
(in thousands)
Gross
Carrying
Amount
Accumulated
Amortization
Net Carrying
Amount
Amortized intangible assets
Trade names$35,900 $(3,830)$32,070 
Customer relationships214,500 (44,636)169,864 
Technology47,800 (12,348)35,452 
Capitalized software development costs13,026 (2,419)10,607 
Total intangible assets$311,226 $(63,233)$247,993 
The carrying value of identifiable intangible assets consisted of the following as of December 31, 2021:
(in thousands)
Gross
Carrying
Amount
Accumulated
Amortization
Net Carrying
Amount
Amortized intangible assets
Trade names$27,300 $(3,395)$23,905 
Customer relationships189,000 (40,091)148,909 
Technology47,800 (11,153)36,647 
Capitalized software development costs12,454 (1,901)10,553 
Total intangible assets$276,554 $(56,540)$220,014 
Amortization expense for Trade names, Customer relationships and Technology for the three months ended March 31, 2022, and 2021, totaled $6.2 million and $5.9 million, respectively.
Amortization expense for Capitalized software development costs for the three months ended March 31, 2022, and 2021, totaled $0.5 million and $0.1 million, respectively.
19

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
NOTE 8. ACCRUED EXPENSES
Accrued expenses and other current liabilities consist of the following:
(in thousands)March 31, 2022December 31, 2021
Incentive bonus$257 $15,214 
Employee related7,784 11,154 
Sales and use tax6,365 6,865 
Rebates2,372 4,276 
Accrued interest83 637 
Accrued professional fees5,538 7,046 
Refundable deposits4,626  
Other3,013 3,366 
Total accrued expenses$30,038 $48,558 
NOTE 9. CREDIT FACILITY
On September 4, 2019, we entered into the First Lien Credit Agreement (the “Credit Agreement”). The Credit Agreement provides for senior secured credit facilities consisting of (i) a $225.0 million closing date term loan (the “Term Facility”) and loans thereunder (the “Term Loans”) and (ii) a $40.0 million revolving credit facility (the “Revolving Facility”) (collectively, the “Credit Facility”). The Term Facility has a seven-year term which expires on September 4, 2026 and the Revolving Facility has a five-year term which expires on September 4, 2024. We paid debt issuance costs of approximately $6.1 million on the closing date of the Credit Facility, $5.2 million is being amortized over the life of the Term Facility (84 months) and $0.9 million is being amortized over the term of the Revolving Facility (60 months) on a straight-line method. The Revolving Facility includes a letter of credit sub-facility (subject to a sublimit not to exceed $10.0 million) and a swing line loan sub-facility (subject to a sublimit not to exceed $10.0 million).
On April 8, 2020, we amended the Credit Agreement to establish an incremental loan facility in an aggregate principal amount equal to $25.0 million for an incremental term loan request (the “2020 Incremental Term Loan”) bearing interest at the Eurodollar Rate (as defined in the Credit Agreement) expiring September 4, 2026. We capitalized debt issuance costs of approximately $1.1 million on the closing date of the 2020 Incremental Term Loan.
On February 12, 2021, we amended the Credit Agreement to establish an incremental term loan in an aggregate principal amount equal to $78.0 million (the “2021 Incremental Term Loan”) bearing interest at the Eurodollar Rate (as defined in the Credit Agreement) expiring September 4, 2026. We capitalized debt issuance costs of approximately $2.4 million on the closing date of the 2021 Incremental Term Loan.
On February 1, 2022, we further amended the Credit Agreement to establish an incremental term loan in an aggregate principal amount equal to $78.0 million (the “2022 Incremental Term Loan”) bearing interest at the Eurodollar Rate (as defined in the Credit Agreement) expiring September 4, 2026. We capitalized debt issuance costs of approximately $2.6 million on the closing date of the 2022 Incremental Term Loan, which is being amortized over the life of the 2022 Incremental Term Loan. The proceeds of the term loans borrowed under the 2022 Incremental Term Loan were used to finance the HealthSmart acquisition (see Note 4) and pay fees and expenses related thereto. The 2022 Incremental Term Loan was accounted for as a debt modification.
The Credit Agreement includes an uncommitted incremental facility, which provides that we have the right at any time to request term loan increases, additional term loan facilities, revolving commitment increases and/or additional revolving credit facilities, in an aggregate principal amount, together with the aggregate principal amount of permitted incremental equivalent debt under the Credit Agreement, not to exceed (a) the sum of the greater of (i) $46.9 million and (ii) 100.0% of Consolidated EBITDA (as defined in the Credit Agreement) of CHS and its restricted subsidiaries for the most recently ended period of four consecutive fiscal quarters of CHS (calculated on a pro forma basis), plus (b) certain additional amounts, including an unlimited amount subject to pro forma compliance with a leverage ratio test.
20

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
Interest Rate and Fees
Borrowings under the Credit Agreement (other than borrowings of swing line loans) bear interest at a rate per annum equal to, at our election, either (i) the LIBOR for the relevant interest period (subject to a floor of 1.00% per annum) plus an applicable margin, as defined in the Credit Agreement, or (ii) a base rate plus an applicable margin, as defined in the Credit Agreement. We elected to use the LIBOR rate for the Term Loans and the Revolving Facility. The Credit Agreement provides for the replacement of LIBOR with a successor or alternative index rate in the event LIBOR is phased-out.
In addition to paying interest on the outstanding principal of the Credit Facility, we are required to pay a commitment fee in respect of any unused commitments under the Revolving Facility at a rate that is subject to adjustment based upon the First Lien Net Leverage Ratio, as defined in the Credit Agreement (maximum debt to Earnings Before Interest, Income Tax, Depreciation and Amortization (“EBITDA”), as defined in the Credit Agreement) at such time and ranges from 0.375% to 0.500% per annum. We are also required to pay customary letter of credit fees and certain other agency fees.
On July 12, 2021, CHS entered into Amendment No. 4 to the Credit Agreement (“Amendment No. 4”). Amendment No. 4 amends the Credit Agreement to provide for, among other things, (i) the reduction of the Applicable Rate (as defined in the Credit Agreement) for Eurodollar Rate Loans (as defined in the Credit Agreement) from 5.25% to 4.75% and, for Base Rate Loans (as defined in the Credit Agreement), from 4.25% to 3.75%, and (ii) the reduction of the floor for the Eurodollar Rate (as defined in the Credit Agreement) from 1.00% to 0.75% for the Closing Date Term Loans (as defined in the Credit Agreement). Amendment No. 4 was accounted for as a debt modification.
Covenants
The Credit Facility contains a financial covenant that requires us to maintain as of the last day of each period of four consecutive quarters of the Company, a First Lien Net Leverage Ratio not to exceed 7.4 to 1.0 if, as of the last day of any fiscal quarter of the Company, there are outstanding revolving loans and letters of credit (excluding (i) undrawn letters of credit in an aggregate face amount up to $10.0 million and (ii) letters of credit (whether drawn or undrawn) to the extent reimbursed, cash collateralized or backstopped on terms reasonably acceptable to the applicable issuing bank on or prior to the date that is three business days following the end of the applicable period of four consecutive fiscal quarters of CHS in an aggregate principal amount exceeding 35% of the aggregate principal amount of the Revolving Facility at such time. We were in compliance with our debt covenants at March 31, 2022.
Prepayments and Mandatory Prepayment
Under the terms of the Credit Agreement, we are permitted to voluntarily prepay outstanding loans or commitments in whole or part without premium or penalty other than certain exceptions described in the Credit Agreement; however, the Credit Agreement requires us to prepay outstanding term loans, subject to certain exceptions and limitations with (i) 50% of our annual excess cash flow, subject to certain step-downs based upon the First Lien Net Leverage Ratio; (ii) 100% of the net cash proceeds of certain asset sales or casualty events; and (iii) 100% of the net cash proceeds of certain incurrences or issuances of indebtedness. We were not required to prepay outstanding term loans based on our 2021 results.
Scheduled Repayments
In connection with the prepayment noted under the “Extinguishment of Debt” below, no additional scheduled installments of principal are required on the Term Facility.
We are required to make scheduled quarterly payments on the 2022 Incremental Term Loan. We are required to make quarterly payments commencing with the quarter ending June 30, 2022, in an amount equal to 0.25% of the aggregate principal amount of the 2022 Incremental Term Loan outstanding on February 1, 2022 with the balance due upon maturity date.
Guarantees and Collateral
All obligations under the Credit Agreement are unconditionally guaranteed by Parent and certain subsidiaries. All obligations under the Credit Agreement are secured, subject to permitted liens and other exceptions and limitations, by first priority security interests in substantially all the assets of the Company and each guarantor (including all the equity interests of CHS).
21

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
Extinguishment of Debt
On June 18, 2021, $131.5 million from the IPO proceeds (see Note 1) were used to repay the principal balance, accrued but unpaid interest, and prepayment premium under the Credit Agreement. The 2020 Incremental Term Loan and the 2021 Incremental Term Loan were repaid in full and the remainder of the proceeds were used to repay a portion of the Term Facility. The prepayment for the Term Facility was applied to the remaining scheduled installments of principal.
Other Information
As of March 31, 2022, and December 31, 2021, unamortized deferred financing costs for the Term Loans totaled $5.4 million and $3.0 million, respectively. Amortization of deferred financing costs for the three months ended March 31, 2022, and 2021, totaled $0.3 million and $0.9 million, respectively.
As of March 31, 2022, and December 31, 2021, unamortized deferred financing costs associated with the Revolving Facility totaled $0.5 million for each period, and were included in Other assets in the condensed consolidated balance sheets. Amortization of deferred financing costs was approximately $50 thousand for each of the three months ended March 31, 2022, and 2021.
Amortization of deferred financing costs is included within Interest expense in the condensed consolidated statement of operations and comprehensive income (loss).
For the three months ended March 31, 2022, and 2021, the average interest rate for the Term Facility was 5.5% and 6.3%, respectively. As of March 31, 2022, and December 31, 2021, the aggregate principal balance was $192.6 million for each period.
For the three months ended March 31, 2022, the average interest rate for the 2022 Incremental Term Loan was 5.5%. As of March 31, 2022, the aggregate principal balance was $78.0 million.
For the three months ended March 31, 2022, and 2021, the average interest rate for the Revolving Facility was 2.75% for each period. As of March 31, 2022, and December 31, 2021, the available balance was $39.4 million. On January 23, 2020, we established an irrevocable transferable letter of credit (“LOC”) in the favor of a lessor totaling $0.5 million. The LOC expired on January 31, 2021, however, per the terms of the agreement, the LOC automatically extends for a one year period upon the expiration date and each anniversary thereafter, unless at least 60 days prior to such expiration date or anniversary written notice is provided that we elect not to extend the LOC. The LOC was automatically extended for a one year period on January 31, 2022.
Debt consists of the following as of March 31, 2022, and December 31, 2021:
(in thousands)March 31, 2022December 31, 2021
Term loans$270,631 $192,631 
Less: deferred financing costs(5,368)(2,988)
Term loans, net of deferred financing costs265,263 189,643 
Less: current portion(780) 
$264,483 $189,643 
22

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
Debt Maturities Schedule
The required principal payments for Term Loans for each of the five years and thereafter following the balance sheet date are as follows:
(in thousands)
For the nine months ending December 31, 2022$585 
2023780 
2024780 
2025780 
2026267,706 
Total $270,631 
NOTE 10. SHAREHOLDERS’ EQUITY
As of March 31, 2022, we are authorized to issue 500,000,000 shares of common stock, par value $0.01 per share and 25,000,000 shares of preferred stock, par value $0.01 per share. See Note 1 for additional information related to the Stock Split and IPO.
In February 2021, our Board, through a unanimous written consent, adopted a written resolution declaring a special dividend of $1.18 per share of common stock totaling $74.5 million in cash (“Special Dividend”) ultimately to be distributed to the shareholders of Convey. Of the Special Dividend, $72.2 million was paid to existing shareholders and $2.3 million was paid to outstanding and vested stock option holders. The Special Dividend was paid out during the three months ended March 31, 2021.
NOTE 11. SHARE-BASED COMPENSATION
On September 4, 2019, our Board adopted the Cannes Holding Parent, Inc. 2019 Equity Incentive Plan (the “2019 Equity Plan”). The 2019 Equity Plan was terminated and replaced and superseded by the 2021 Plan (as defined below) on the effective date of the 2021 Plan and no further grant of awards under the 2019 Equity Plan have been made since such effective date. Outstanding awards granted under the 2019 Equity Plan remain in effect pursuant to their terms.
On June 4, 2021, in connection with the IPO, the Company adopted the Convey Holding Parent, Inc. 2021 Omnibus Incentive Compensation Plan (the “2021 Plan”). The 2021 Plan has a term of ten years.
In March 2021, pursuant to the 2019 Equity Plan, Convey issued option awards to acquire 69,300 shares of Convey’s common stock with an exercise price of $9.92 per share and a term of ten (10) years. The awards were comprised of time-vesting options which vest 25% on each anniversary date from the vesting commencement date.
In June 2021, in connection with the IPO and pursuant to the 2021 Plan, Convey issued option awards to acquire 497,321 shares of Convey’s common stock with an exercise price of $14.00 per share and a term of ten (10) years. In addition, Convey issued 198,929 restricted stock units (“RSUs”) with a grant date fair value of $13.00 per unit. The option awards and RSUs are time-vesting awards which vest 25% on the first anniversary of the commencement date, and the remainder will vest in 12 equal 3-month installments over the following three years.
In August 2021, pursuant to the 2021 Plan, Convey issued option awards to acquire 20,380 shares of Convey’s common stock with an exercise price of $9.20 per share and a term of five (5) years. In addition, Convey issued 8,152 RSUs with a grant date fair value of $9.20 per unit. The option awards and RSUs were fully vested as of the date of the grant.
In March 2022, pursuant to the 2021 Plan, the Company issued 2,500,459 RSUs and 1,243,220 performance restricted stock units (“PSUs”) with a grant date fair value of $6.70 per unit. The grants are time-vesting awards which vest 25% on the first anniversary of the commencement date, and the remainder will vest in 12 equal 3-month installments over the following three years. The PSUs have a performance condition that affects vesting and is subject to the Company meeting certain annual Adjusted Earnings Before Interest, Income Tax, Depreciation and Amortization (“Adjusted EBITDA”) target.
23

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
The following table summarizes the total share-based compensation expense included in the condensed consolidated statements of operations and comprehensive income (loss):
For the Three Months Ended
March 31,
(in thousands)20222021
Selling, general and administrative$1,264 $990 
Total stock-based compensation expense$1,264 $990 
Stock Option Modification
On February 15, 2021, our Board approved a stock option award modification (the “Modification”) whereby the exercise price of certain previously granted and still outstanding unvested stock option awards held by current employees and certain executives were reduced by $1.18 per award, which represented the cash payment made for the vested awards as part of the Special Dividend. No other terms of the repriced stock options were modified, and the modified stock options will continue to vest according to their original vesting schedules and will retain their original expiration dates. As a result of the Modification, 3,653,837 unvested stock options outstanding with an original exercise price of $7.94 were modified.
There was no incremental stock-based compensation expense as there was no incremental fair value generated as a result of the Modification.
Stock Option Grants
Stock option activity and information about stock options outstanding are summarized in the following table:
Stock Option Awards
Weighted Average Exercise Price
Weighted Average Remaining Contractual Life (Years)
Outstanding at December 31, 20215,636,154 $7.68 8.29
Granted  — 
Exercised  — 
Forfeited  — 
Outstanding at March 31, 20225,636,154 7.68 7.99
Vested or expect to vest as of March 31, 20225,636,154 7.68 7.99
Vested and Exercisable as of March 31, 20222,876,085 7.53 7.88
The stock options are equity-based awards and their aggregate intrinsic value outstanding and exercisable at March 31, 2022, is $0.
As of March 31, 2022, there was approximately $9.4 million total unrecognized compensation cost related to non-vested stock options, which is expected to be recognized over a weighted average period of 2.11 years.
We estimate the fair value of the time-vesting stock option awards on the date of grant using the Black-Scholes Merton model. The time-vesting options have a service condition. Option valuation models, including the Black-Scholes Merton model, require the input of certain assumptions that involve judgment. Changes in the input assumptions can materially affect the fair value estimates and, ultimately, how much we recognize as stock-based compensation expense.
24

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
Restricted Stock Units
Activity and information about non-vested RSUs outstanding are summarized in the following table:
Restricted Stock Units
Weighted Average Grant Date Fair Value (in thousands)
Outstanding at December 31, 2021154,286 $2,006 
Granted3,743,679 25,083 
Vested  
Forfeited  
Outstanding at March 31, 20223,897,965 $27,089 
One