S-1/A 1 tm2037461-12_s1a.htm S-1/A tm2037461-12_s1a - block - 36.6099269s
As filed with the Securities and Exchange Commission on June 7, 2021.
Registration No. 333-256370
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 2
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
Convey Holding Parent, Inc.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
7389
(Primary Standard Industrial
Classification Code Number)
84-2099378
(I.R.S. Employer
Identification No.)
100 SE 3rd Avenue, 26th Floor
Fort Lauderdale, FL 33394
(800) 559-9358
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
Stephen C. Farrell
Convey Holding Parent, Inc.
100 SE 3rd Avenue, 26th Floor
Fort Lauderdale, FL 33394
(800) 559-9358
(Name, address, including zip code, and telephone number, including area code, of agent for service)
Copies to:
William V. Fogg
Michael E. Mariani
Cravath, Swaine & Moore LLP
Worldwide Plaza
825 Eighth Avenue
New York, NY 10019
(212) 474-1000
Michael Kaplan
Derek J. Dostal
Davis Polk & Wardwell LLP
450 Lexington Avenue
New York, NY 10017
(212) 450-4000
Approximate date of commencement of proposed sale to the public: As soon as practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. ☐
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
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 filer ☐ Accelerated 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 7(a)(2)(B) of the Securities Act. ☐
Calculation of Registration Fee
Title of Each Class of Securities to be Registered
Amount to be
Registered(1)(2)
Proposed Maximum
Offering Price
Per Share
Proposed Maximum
Aggregate Offering
Price(1)(2)
Amount of
Registration Fee(3)
Common Stock, par value $0.01 per share
15,333,334 $ 16.00 $ 245,333,344 $ 26,765.87
(1)
Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(a) under the Securities Act of 1933.
(2)
Includes 2,000,000 additional shares of our common stock that the underwriters have the option to purchase from the selling stockholder.
(3)
The registrant previously paid $10,910 of the registration fee in connection with a prior filing of this Registration Statement.
The registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until this Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

The information in this preliminary prospectus is not complete and may be changed. We and the selling stockholder may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED JUNE 7, 2021
PRELIMINARY PROSPECTUS
13,333,334 Shares
[MISSING IMAGE: lg_convey-4clr.jpg]
Convey Holding Parent, Inc.
Common Stock
$     per share
This is an initial public offering of shares of the common stock of Convey Holding Parent, Inc. We are offering 11,666,667 shares of our common stock to be sold in this offering. The selling stockholder identified in this prospectus is offering an additional 1,666,667 shares of our common stock. We will not receive any of the proceeds from the sale of the shares being sold by the selling stockholder, including any shares the selling stockholder may sell pursuant to the underwriters’ option to purchase additional shares of our common stock.
Prior to this offering, there has been no public market for shares of our common stock. We estimate that the initial public offering price per share will be between $14.00 and $16.00. We have applied to list our shares of common stock on the New York Stock Exchange (the “NYSE”) under the symbol “CNVY.”
Upon the completion of this offering, we will be a “controlled company” as defined in the corporate governance rules of the NYSE, and, therefore, will qualify for, and intend to rely on, exemptions from certain governance requirements. See “Management — Controlled Company.”
We are an “emerging growth company” as that term is defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) and, under applicable Securities and Exchange Commission (“SEC”) rules, we have elected to comply with certain reduced public company reporting and disclosure requirements.
Investing in shares of our common stock involves risks. See “Risk Factors” beginning on page 22 to read about factors you should consider before buying shares of our common stock.
Neither the SEC nor any state securities commission or other regulatory body has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.
Per Share
Total
Initial public offering price
$        $       
Underwriting discounts and commissions(1)
$ $
Proceeds to us, before expenses
$ $
Proceeds to selling stockholder, before expenses
$ $
(1)
See “Underwriting (Conflicts of Interest)” for a description of compensation to be paid to the underwriters.
To the extent that the underwriters sell more than 13,333,334 shares of our common stock, the selling stockholder has granted the underwriters the option for a period of 30 days from the date of this prospectus to purchase up to an additional 2,000,000 shares of our common stock from the selling stockholder at the initial public offering price less the underwriting discounts and commissions.
The underwriters expect to deliver the shares of common stock against payment in New York, New York on            , 2021.
BofA Securities
Goldman Sachs & Co. LLC
J.P. Morgan
Barclays
TPG Capital BD, LLC
Truist Securities
Canaccord Genuity
AmeriVet Securities
Siebert Williams Shank
Prospectus dated            , 2021.

 
TABLE OF CONTENTS
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F-1
Neither we, the selling stockholder nor any of the underwriters have authorized anyone to provide you with any information or to make any representations other than those contained in this prospectus or in any free writing prospectuses we have prepared. We, the selling stockholder and the underwriters take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. This prospectus is an offer to sell only the shares offered hereby, but only under circumstances and in jurisdictions where it is lawful to do so.
The information contained in this prospectus is current only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of our common stock. Our business, financial condition, results of operations and prospects may have changed since that date.
For investors outside of the United States, neither we, the selling stockholder nor any of the underwriters have done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. Persons outside the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, this offering of the shares of our common stock and the distribution of this prospectus outside the United States.
Through and including            , 2021 (25 days after the date of this prospectus), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This delivery is in addition to a dealer’s obligation to deliver a prospectus when acting as an underwriter and with respect to an unsold allotment or subscription.
 
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BASIS OF PRESENTATION
In this prospectus, unless the context otherwise requires, “Convey Health,” the “Company,” “we,” “us” and “our” refer to Convey Holding Parent, Inc. (formerly known as Cannes Holding Parent, Inc.) and its consolidated subsidiaries, which includes our main operating subsidiary, Convey Health Solutions, Inc.
Convey Holding Parent, Inc. (formerly known as Cannes Holding Parent, Inc.) was formed on June 13, 2019 for the purpose of acquiring Convey Health Solutions, Inc. On September 4, 2019, Cannes Parent, Inc., a direct subsidiary of Convey Holding Parent, Inc. (formerly known as Cannes Holding Parent, Inc.), entered into a merger agreement to acquire all of the outstanding stock of Convey Health Solutions, Inc. through the merger of Cannes Merger Sub, Inc. and Convey Health Parent, Inc. (the “Merger”), with Convey Health Parent, Inc. surviving the merger as a direct subsidiary of Cannes Parent, Inc. 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. In this prospectus, unless the context otherwise requires, “TPG” and “our principal stockholder” refer to investment funds affiliated with TPG Global, LLC, including TPG Cannes Aggregation, L.P.
The Merger resulted in a new accounting basis. The consolidated financial statements and related notes thereto presented elsewhere in this prospectus are presented on a Successor and Predecessor basis. The period from January 1, 2019 to September 3, 2019 reflects the historical financial information for Convey Health Parent, Inc. and its subsidiaries prior to the closing of the Merger (the “Predecessor”). The period from June 13, 2019 to December 31, 2019 and the year ended December 31, 2020 reflects the historical financial information for Convey Holding Parent, Inc. (formerly known as Cannes Holding Parent, Inc.) and its subsidiaries (the “Successor”). The Predecessor and Successor consolidated financial information presented elsewhere in this prospectus is not comparable due to the impacts of the Merger, including the application of acquisition accounting in the Successor financial statements as of September 4, 2019.
Effective April 21, 2021, Cannes Holding Parent, Inc. amended its certificate of incorporation to change its corporate name to “Convey Holding Parent, Inc.” The amendment was approved by our Board of Directors and was effected by the filing of a Certificate of Amendment with the Delaware Secretary of State.
 
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PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this prospectus and does not contain all of the information that you should consider before deciding to invest in shares of our common stock. Before investing in shares of our common stock, you should carefully read this entire prospectus, including our consolidated financial statements and the related notes thereto and the information set forth under the sections “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in each case included in this prospectus. In this prospectus, unless the context otherwise requires, “Convey Health,” the “Company,” “we,” “us” and “our” refer to Convey Holding Parent, Inc. (formerly known as Cannes Holding Parent, Inc.) and its consolidated subsidiaries, which includes our main operating subsidiary, Convey Health Solutions, Inc.
Our Mission
Our mission is to drive health plan growth and member engagement by leveraging proprietary technology and processes.
Our core values — integrity, teamwork, and regulatory compliance — are the foundation upon which we approach the market.
Business Overview
Convey Health is a leading healthcare platform that utilizes technology and processes to improve government-sponsored health plans, including Medicare Advantage (“MA”). We are a trusted solutions-oriented partner to payors and deliver purpose-built technology and services to enhance our clients’ mission-critical workflows. Our solutions address health plan needs, including product development and sales, member experience management, clinical management, core operations, business intelligence and analytics. Leveraging our technology and expert advisory services, we serve as a unified and integrated extension of our clients’ core health plan operations. Our proprietary, modular technology and end-to-end solutions replace or supplement our clients’ existing systems and processes, enabling us to help health plans attract and retain members, improve revenue accuracy, drive cost savings, facilitate regulatory compliance, and enhance operational effectiveness.
Since our inception, we have created and continuously refined our technology solutions to best serve government-sponsored health plans. Our clients are primarily Medicare Advantage plans, Medicare Part D plans (“PDP”) including Employer Group Waiver plans (“EGWP”) and pharmacy benefit managers (“PBM”). As of December 31, 2020, our solutions managed over 2.5 million MA members and 1.6 million PDP members. Additionally, our value-based analytics, which are powered by our 28 million member data set, provided actionable insights for nearly 2.1 million MA members in 2020. In total, our solutions addressed over 19% of MA lives.
We foster long-term collaborative partnerships as evidenced by our average relationship with our top 10 clients of over eight years, and we serve as a partner to eight of the nation’s top 10 MA payors by lives covered. We believe that we have significant opportunity to grow within our existing client base as the majority of our clients currently subscribe to only a subset of our overall solutions and services. Moreover, we believe we have significant opportunity to grow by winning new clients in the MA market, by selling more products to our existing clients, by expanding into adjacent markets such as Medicaid and commercial insurance, and through complimentary strategic acquisitions.
Our clients face significant and constantly evolving challenges managing their Medicare health plans:

Increasingly Competitive Environment for Medicare Plans:   Effective benefit design and sales are critical to retaining and growing members during the Medicare annual enrollment period. Once members are enrolled in a plan, effective member engagement and supplemental benefits administration are paramount to ensuring strong satisfaction and retention. Moreover, the proliferation of value-based reimbursement models such as MA requires effective member management and broad ecosystem coordination, which fall outside the core competencies of many health plans.

Compliance with Centers for Medicare and Medicaid Services (“CMS”) Requirements:   Constantly evolving CMS and client requirements result in hundreds of modifications per year that inhibit the
 
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operational effectiveness and capabilities of health plans. Our purpose-built government sector technology platform addresses these constantly evolving requirements.

Complex and Highly Regulated Medicare Market:   Many health plans enter the government plan market by simply adapting their existing systems designed for the commercial insurance market. As a result, the technology they employ often lacks the sophistication and design needed to effectively maintain and administer benefits tailored for the complex and highly regulated Medicare market.
Health plans increasingly recognize the need for specialized solutions like ours to help them overcome these challenges and drive superior performance. We believe our proprietary technology and processes facilitate member engagement, health plan growth and operational efficiencies:

We Drive Member Engagement and Health Plan Growth in the Highly Attractive Medicare Advantage Market
MA is a highly attractive and fast-growing market, with membership expected to increase by 38% from 2020 to 2025, according to the Kaiser Family Foundation. This outsized growth is supported by higher member satisfaction, lower costs, and better member outcomes of managed plans as compared to traditional Medicare plans. Moreover, MA lives are attractive to health plans as they provide a higher value per covered person than commercial lives. Between 2016 and 2018, the annual gross margin per covered person in the MA market averaged $1,608.00, approximately double the annual gross margin per covered person in the commercial insurance market. According to the U.S. Census Bureau, the population of U.S. seniors is expected to grow to 73.1 million by 2030, up from 56.1 million in 2020, and to increase as a percentage of the population from 17% to 21% during the same time period.
We help MA plans compete by improving benefit design, managing the member experience and core operations, administering supplemental benefits, empowering data-driven insights, and providing expert advisory services. For example, we were an early pioneer in over-the-counter (“OTC”) supplemental benefit administration, as we recognized that health plans who offered supplemental benefits could gain a competitive advantage over health plans that did not. MA plans offering OTC benefits grew their membership by 15% in 2021 compared to membership growth of only 4% for plans that did not offer such benefits. We believe we are a leader in providing technology-enabled solutions for the government-sponsored market and are well positioned to help our MA clients deliver differentiated plan offerings and drive sustained above-market growth.

We Drive Operational Efficiencies in a Highly Complex and Regulated Government Plan Market
We help health plans improve operational effectiveness and enhance regulatory compliance. Through our advanced plan administration and supplemental benefit administration solutions, we handle critical processes on behalf of our clients, including eligibility and enrollment, member services, order processing and fulfillment, premium billing administration, premium payment processing, utilization management, payment integrity, and regulatory compliance. We have dedicated compliance and quality-control teams that monitor evolving healthcare regulations and partner with our clients to facilitate compliance with the ever-changing set of government requirements.
Moreover, leveraging our large proprietary datasets and applied analytics, we yield actionable insights through our value-based payment assurance solutions that resolve gaps in care, improve member risk scoring, and enhance payment integrity.
In addition, our technology and processes remove friction, streamline workflows, and increase the effectiveness of each member interaction. For example, because our Advanced Plan Administration platform is a single integrated system that communicates seamlessly, we are able to improve member experience and core operations by reducing the time for a member to complete an address change with potential disenrollment by 75% and to complete a premium billing credit card transaction by 47%.
We operate in two segments: Technology Enabled Solutions (“TES”), in which we provide technology and support solutions to our clients, and Advisory Services (“Advisory”), in which we provide project-based consulting services through our long-tenured subject matter experts. Our TES and Advisory teams work
 
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collaboratively to identify new market and cross-sell opportunities, develop new technologies and solutions, and solve client challenges. We believe that our combination of technology-enabled solutions and expert advisory services gives us a competitive advantage in the government-sponsored health plan market. Our TES segment comprised approximately 85% of our consolidated revenue for the year ended December 31, 2020.
We have a highly predictable and recurring revenue model with strong cash flow from operations. We typically charge a recurring subscription or per member fee or a re-occurring utilization-based fee, which, coupled with our long-term contracts and high client revenue retention, have historically provided us with strong revenue predictability and visibility. Our TES segment historically has been highly predictable, as most of our revenue in any given year is under contract or otherwise visible by the prior year end. We evaluate client retention primarily on a revenue retention basis, and we monitor two key metrics to evaluate client retention: Gross Dollar Retention (“GDR”) and Net Dollar Retention (“NDR”). GDR measures the performance of existing solutions on an existing client basis by taking our Annual Contracted Revenue (“ACR”) at the beginning of the fiscal period and reducing it by dollar attrition during the fiscal period. Our GDR was 98% and 99% in 2020 and 2019, respectively. Our high client retention, as measured on a revenue retention basis, demonstrates the predictability of our revenue and that our existing solutions are deeply embedded in our clients’ core operations. NDR measures the performance rate of existing clients in total and before new client wins by adding cross-sell and upsell initiatives to GDR. Our NDR was 135% and 142% in 2020 and 2019, respectively, exhibiting the strength of our platform and growth of our existing client base.
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We generated $82.6 million, $282.9 million, $80.4 million, and $140.7 million in revenues for the three months ended March 31, 2021, the year ended December 31, 2020, the Successor period, and the Predecessor period, respectively. We had net (loss) income of $(0.9) million, $(6.5) million, $(16.8) million, and $3.6 million for the three months ended March 31, 2021, the year ended December 31, 2020, the Successor period, and the Predecessor period, respectively. We generated Adjusted EBITDA of $15.9 million, $51.5 million, $14.0 million, and $27.5 million for the three months ended March 31, 2021, the year ended December 31, 2020, the Successor period, and the Predecessor period, respectively. See “ — Summary Consolidated Financial and Operating Data” for information regarding our use of Adjusted EBITDA, which is a non-GAAP financial measure, and a reconciliation of Adjusted EBITDA to its most directly comparable financial measure calculated in accordance with GAAP. In addition, as of March 31, 2021, we had $324.2 million total aggregate principal amount of outstanding indebtedness.
 
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Our Solutions
Technology Enabled Solutions
Our Technology Enabled Solutions Platform is Purpose-built to Comprehensively Address our Clients’ Needs
We are a solutions-oriented partner to health plans, helping them attract and retain members, improve revenue accuracy, drive cost savings, facilitate regulatory compliance, and enhance operational effectiveness. We have built a flexible architecture that enables deep and broad-based integration with client and third party systems and allows us to meet our clients’ core operational, regulatory, financial, and clinical needs.
The Backbone of our Offerings is our Proprietary Technology Platform, Miramar
Miramar reduces the number of systems that health plans need to maintain, providing a seamless, unified user experience for our clients and their members. Our clients often depend exclusively on Miramar to manage mission-critical workflows, which entrenches our client relationships and provides opportunities to both cross-sell additional offerings and develop new technologies in partnership with them. Miramar’s agile infrastructure enables us to rapidly deploy and scale new and innovative offerings. In 2020, Miramar processed over 2.2 billion automated transactions through integrated processes with health plans, members, employer groups, government entities, provider organizations, PBMs, and financial institutions. In that same time period, we facilitated over 23 million touchpoints with members on behalf of our clients.
Miramar consists of three core end-to-end solutions in addition to ancillary modular solutions:

Advanced Plan Administration (“APA”) Solutions:   We provide technology-based plan administration services for government-sponsored health plans. Our solution encompasses eligibility and enrollment processing, member services, premium billing and payment processing, reconciliation, and other related services.

Supplemental Benefit Administration (“SBA”) Solutions:   We provide technology and services to manage supplemental benefits provided to members through their MA plans. This solution is currently focused on the OTC benefit, and we expect to extend our platform into additional supplemental benefits. Our SBA solutions include benefit design and administration, member eligibility and engagement, product fulfillment, and analytics and reporting.

Value-Based Payment Assurance (“Value-Based”) Solutions:   We provide payment tools and data analytics to improve revenue accuracy and identify gaps in quality, clinical care, and compliance.
Advisory Services
Our Advisory Services Team Supports Payor Operations and Drives Business Model Evolution
We provide Advisory Services that complement our technology-enabled solutions in sales and marketing strategies, provider network strategies, compliance, operations, Star Ratings, quality, clinical, pharmacy, analytics and risk adjustment. We believe the trust our subject matter experts have earned with our clients gives us unique insights into, and differentiated access to, marketplace opportunities.
 
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The Impact of Our Platform and Solutions
Utilizing our technology-enabled solutions and advisory services, we administer and support a comprehensive range of mission-critical workflows on behalf of our health plan clients across product development and sales, member engagement and core operations, clinical health outcomes, and business intelligence and analytics:
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Industry Backdrop
We primarily operate within the government-sponsored health plan market, which continues to benefit from strong secular tailwinds. According to U.S. Census data, the 65-and-older population in the U.S. grew by over 33% during the past decade, which has resulted in an increasingly large Medicare population base. MA enrollment grew by a 7% compound annual growth rate from 2015 to 2020 and is expected to grow at that same 7% growth rate from 2020 to 2025. In addition, MA enrollment as a percentage of total Medicare enrollment is expected to grow from 38.7% in 2020 to 46.5% in 2025. Moreover, there is increasing focus by recent presidential administrations to grow government-sponsored healthcare. In addition, CMS has embraced supplemental benefits through its MA programs as a mechanism to improve care by addressing social determinants of health through offerings like over the counter products, vision, hearing, dental, and meals. The holistic approach that MA plans can now take through supplemental benefits expansion is improving the plans’ value proposition to seniors.
 
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Medicare Advantage Enrollment Trend
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Sources: Milliman, Congressional Budget Office, Kaiser Family Foundation, and CMS.
We believe we will continue to see long-term demand for our end-to-end platform solutions driven by the following industry tailwinds:

Continued growth in Medicare-eligible beneficiaries and Medicare Advantage enrollment

Increasing need and reliance on specialized third-party partners to manage core workflows to deliver a differentiated health plan offering amid growing competition among Medicare plans

Ongoing shift to Value-Based Care (“VBC”) systems like Medicare Advantage driving need for aligned benefit design, effective member management and broad ecosystem coordination

Increased prevalence of supplemental benefits as a means to enhance clinical outcomes and attract and retain new members

Increasingly complex and evolving government health plan market driving need for specialized solutions to help navigate the regulatory environment and facilitate compliance with ever-changing government requirements
Value Proposition
We believe we achieve success because we are a trusted, solutions-oriented partner to our health plan clients. We help our clients drive superior membership growth and retention, optimize revenue capture, drive cost savings, facilitate regulatory compliance, and enhance operational effectiveness.
Value to Health Plans

We Help Drive Superior Financial Results:   We provide solutions that help health plans increase revenue by attracting and retaining members, improving revenue accuracy and delivering cost savings.

Attracting and Retaining Members:   We help health plans enhance plan offerings by managing the member experience and core operations, administering supplemental benefits, empowering
 
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data-driven insights, and providing expert advisory services, which together increase the competitiveness of plans and drive strong membership growth and retention.

Improving Revenue Accuracy:   We harmonize disparate clinical claims and social determinants of health (“SDOH”) data and utilize sophisticated applied analytics to drive meaningful insights. We help our clients identify opportunities to enhance member risk scoring, improve clinical outcomes, increase Star Ratings, and achieve greater revenue accuracy.

Delivering Cost Savings:   We help health plans achieve tangible cost savings through leveraging our specialized end-to-end technology solutions and government health plan market expertise, resulting in efficient, cost-effective workflow management.

We Improve Quality, Compliance and Operational Effectiveness:   Our end-to-end technology platform and broad healthcare ecosystem integrations enable us to design and deploy tailor-made solutions rapidly to enhance regulatory compliance and improve operational effectiveness for our health plan clients.

Enhancing Regulatory Compliance:   We help health plans adhere to an ever-changing set of government requirements by leveraging our technology and our dedicated compliance, advisory, and quality control teams that monitor evolving healthcare rules and regulations.

Providing Complex Operational Support:   We help health plans improve operational effectiveness by utilizing technology-enabled solutions to manage mission-critical workflows and providing advisory services to improve operating model design.
Value to Members

We Deliver a Superior Member Experience:   Our clients depend on our member engagement solutions to deliver an outstanding member experience. Our APA and SBA solutions deliver a unified member experience and enhance member access to their benefits.

Delivering a Unified Member Experience:   We deliver an integrated member experience by allowing members to optimize their plan selection, effectively navigate their benefits, readily gain access to the appropriate medical care, prescription medication and over-the-counter products, and efficiently resolve their inquiries and issues. In addition, our supplemental benefits program addresses SDOH and provides meaningful value to members.

Enhancing Utilization of Valued Benefits:   We help drive appropriate utilization of member benefits by making it easy for members to access their benefits through our expanding suite of supplemental benefit solutions. Our omni-channel supplemental benefits management offering enables members to fully access these benefits to which they are entitled.
Competitive Strengths
Comprehensive Payor Services Platform Based on Differentiated, Solutions-Oriented Partnership Model
We believe our success is predicated on our comprehensive capabilities and track record of fostering long-term collaborative partnerships with our clients. We have strategically developed our portfolio of technology-enabled solutions and advisory services to address our clients’ mission-critical workflows. We engage closely with our health plan clients to help them attract and retain members, improve revenue accuracy, drive cost savings, facilitate regulatory compliance, and enhance operational effectiveness. Moreover, our active dialogue with our clients through our advisory team enables us to easily identify new opportunities to deploy additional solutions and services.
We serve as a solutions-oriented partner to the largest and most sophisticated clients, including eight of the top 10 MA payors in the U.S. We believe our unwavering commitment to delivering innovative and effective solutions for our clients, our comprehensive capabilities, and domain expertise have earned us our reputation as a trusted partner to the nation’s largest payors.
 
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Purpose-Built, Scalable and Integrated Technology and Analytics Platform
We believe our proprietary technology, rich dataset, and advanced applied analytics capabilities enable us to deliver meaningful value as a partner to our health plan clients, members, and partner constituents. Our Miramar technology platform enables us to provide a seamless, unified user experience for our clients and their members. Miramar’s unified infrastructure enables us to rapidly deploy and scale new integrated solutions and services and has been a mainstay of our continued innovation. Miramar supports broad ecosystem integrations with health plans, employers groups, government bodies, provider organizations, PBMs, and financial institutions, which enables us to ingest and harmonize data from multiple sources. Our value-based payment assurance solutions integrate disparate clinical, claims, and SDOH data, and utilize sophisticated applied analytics to help our clients optimize value-based revenue and payment integrity. Our purpose-built solutions allow us to help our clients navigate the constantly evolving regulatory environment and more efficiently engage their members.
Attractive Operating Model with Contractually Recurring Revenues and High Financial Visibility
As of December 31, 2020, we had 162 clients that purchased our solutions and services. Our solutions managed over 2.5 million MA members and 1.6 million PDP members. Additionally, our value-based analytics, which are powered by our 28 million member data set, provided actionable insights for nearly 2.1 million MA members in 2020. In total, our solutions addressed more than 19% of MA lives. As the MA payor market is relatively concentrated, we expect to continue to derive a substantial portion of our total revenue from a limited number of key clients. For the year ended December 31, 2020, our two largest clients, when aggregating all the solutions and services utilized by such clients across separate contracts with multiple product delivery solutions, represented 28.6% and 17.8% of our total revenue, respectively, or collectively 46.4% of our total revenue during this period. Our two largest clients are two of the top 10 MA payors in the U.S. While we have client concentration, our longest client relationships are among our two largest clients at 16 years and 10 years, respectively, and we generally have long-term contracts with our other clients as well. In addition, we have many different contractual relationships with, and provide many different solutions to, each of our top clients. The multiple solutions we provide to our clients, the length of our contracts and the established long-term relationships we have developed with our top clients reduces the overall risk of concentration to our business.
We have generated a substantial portion of our revenue from clients on a recurring or re-occurring fee basis, which, coupled with our multi-year contracts and historically high client revenue retention, have provided high revenue predictability and visibility. We focus on maintaining long-standing relationships with our clients and serve as a strategic partner across mission-critical workflows. We believe our focus on collaborative innovation with our clients, in conjunction with the expansive set of mission-critical solutions and services we provide, results in a highly loyal client base as evidenced by our GDR of 98% and 99% in 2020 and 2019, respectively. Our high client retention, as measured on a revenue retention basis, demonstrates the predictability of our revenue and that our solutions are deeply embedded in our clients’ core operations. Our NDR was 135% and 142% in 2020 and 2019, respectively, exhibiting the strength of our platform and growth of our existing client base.
Unmatched Expertise and Breadth of Solutions for Government-Sponsored Health Plans
Based, in part, on our extensive experience and history working with many of the nation’s largest payors, we believe we have unmatched expertise and an established leadership position in government plan administration. Our TES solutions and Advisory services position us at the forefront of emerging trends across payor strategies. We believe our platform, which embodies years of research, innovation, iterations and enhancements, is a leading platform for the administration of government plans demonstrated by the fact that we serve eight of the top 10 MA payors in the U.S. Our comprehensive capabilities, extensive healthcare ecosystem integrations, and highly specialized expertise in the complex government health plan market enable us to deliver innovative solutions and superior clinical, operational, compliance, and financial outcomes for our clients.
Outstanding Management and Advisory Team with Proven Track Record of Success
Our long-tenured executive leadership team has extensive experience across the healthcare, technology, and consulting sectors and has delivered a compound annual growth rate in revenue from continuing
 
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operations of 29% from 2011 to 2020. Our CEO and CFO have a combined experience of over 28 years with Convey Health and extensive experience managing publicly traded companies. Our executive officers have on average 23 years of experience with the government health plan market. We approach the market competitively and believe that we win, in part, because of our commitment to dedicate the resources required to accomplish the goals of our clients. We believe that our Advisory team brings us closer to the market so that we remain at the forefront of trends and drive further innovation in the market. As a result of this powerful combination of services and technology, we believe that we have a strong competitive position and can adapt more rapidly to any changing conditions. Further, we believe that our innovative combination of technology and advisory expertise has transformed Convey Health into the preeminent payor solutions platform.
Growth Strategy
Cross-Sell and Upsell Existing Solutions
Our technology-enabled solutions expand regularly, and our clients often utilize more solutions over time. The flexibility of our platform and our consultative approach allow us to cross-sell more products and solutions to existing clients and expand our share of wallet with the nation’s top health plans. We also benefit from plan membership growth within existing clients, many of which are growing and gaining market share.
We believe we have significant remaining opportunity to continue our growth within our existing client base. For example, approximately 77% of our TES client base uses only one of our three core technology-enabled solutions. Additionally, approximately 39% of our clients use only Advisory services today and currently utilize none of our TES solutions. Consequently, we believe our existing client base continues to be a significant channel in which to sell both our existing technologies and any additional solutions or services.
Expand Existing Solutions and Introduce New Solutions
We believe there is substantial opportunity to expand existing solutions and introduce new solutions. In particular, we believe our supplemental benefits offering will continue to expand due to growing prevalence of plans offering supplemental benefits, increasing member enrollment trends in such benefits, rising spend allocated to supplemental benefits, and increasing member utilization of such benefits. Further, our clients are increasingly looking to expand their offerings with leading third party platforms, and we expect to extend our technology offering to allow Miramar to be a single portal for multiple supplemental benefits. This could entail offerings and support for food and grocery, meals, transportation, in-home services, hearing, vision and dental, which are all gaining in popularity. As more supplemental benefits are designed to address SDOH, we believe our solutions will help drive improved health outcomes. We also see Managed Medicaid and the commercial insurance market as adjacent opportunities.
There are several additional technology solutions that we are considering strategically, including, but not limited to, clinical management, member marketing, member acquisition, provider data and network management, claims administration, health risk assessments, home health, and SDOH. In addition, we believe our domain expertise from Advisory accelerates our technology development and allows us to develop leading solutions. We have a successful history of growing our solutions and services through internal innovation and will continue to actively invest in expanding our platform capabilities.
Win New Technology Clients
Our technology platform serves large national and regional health plans as well as PBMs. We believe we have a significant opportunity to sell technology solutions, as approximately 39% of our clients use only Advisory services today and currently utilize none of our TES solutions. In addition, 46% of insurance carriers that offer MA plans are not our clients. Over time, we expect to leverage our Advisory relationships to implement technology solutions to address their needs. Our reputation as a long-term strategic partner, combined with our comprehensive solutions set and specialized market expertise, has enabled us to win 33
 
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new TES clients since 2017. Given the increasing importance health plans are placing on growing their MA business, we believe we are well positioned to demonstrate value at multiple touchpoints to align to their business objectives.
Targeted Expansion in New Markets
We are continuously evaluating new markets to deploy our broad set of solutions. We have identified Managed Medicaid, commercial health insurance payors, and risk-bearing providers as adjacent markets that we believe are good candidates for our TES solutions. Our value-based payment assurance solutions have already been deployed to several risk-bearing providers.
Strategic and Highly Disciplined Acquisitions
We have a demonstrated history of continuously expanding our relationships with clients through the addition of new solutions to our platform, both organically and through acquisitions. This includes the successful acquisition and integration of Gorman Health Group, HealthScape Advisors, and Pareto Intelligence. Our differentiated partnership model and collaborative approach enable us to gain critical insights into our clients’ evolving needs. We intend to complement our internal innovation and strong organic growth opportunities with acquisitions of complementary technology solutions and services to continue to better serve our clients. Potential targets could include, among others, companies that would further strengthen our platform and technologies in clinical management, member marketing, provider data, and network management, claims administration, as well as expansion of supplemental benefits management.
Impact of COVID-19 on Our Operations
Our operations have been impacted by the spread of the novel coronavirus (“COVID-19”) since March 2020. During March and April 2020, we obtained approval from our clients for a work-at-home model, though not all required approval, and transitioned most of our employees to the home environment so that they could work more safely. COVID-19 created a hardship for many of our employees. We worked during 2020 to care for our employees by periodically implementing temporary premium pay and temporary paid sick leave programs which provided additional financial resources for our employees, as well as partial pay for those employees who contracted the virus or had to care for a family member who was affected. We are also providing compensation to employees who worked with us for more than six months so that they can take time off to be vaccinated. In addition, we increased cleaning protocols throughout our facilities. Certain of these measures have resulted in increased costs.
COVID-19 negatively impacted our 2020 revenue in our Advisory segment as our health plan clients closed their offices, which impacted the ability of our advisory team to meet in person with health plan clients as was customary prior to the COVID-19 pandemic. Since our Technology Enabled Solutions segment generally has longer contracts and a longer selling cycle than our Advisory segment, COVID-19 had negligible adverse impact on 2020 Technology Enabled Solutions revenue.
In connection with the impact of COVID-19 on our business, 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 consolidated financial statements as of and for the three months ended March 31, 2021, or as of and for the year ended December 31, 2020, 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.
For more information regarding the impact of COVID-19 on our business, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Key Factors Affecting Our Performance — COVID-19 Pandemic” and “Risk Factors — Risks Related to Our Business and Industry — An economic downturn or volatility, including as a result of the coronavirus (“COVID-19”) pandemic, could have a material adverse impact on our business, results of operations or financial condition.”
 
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Summary Risk Factors
Our business is subject to a number of risks, including risks that may prevent us from achieving our business objectives or may adversely affect our business, results of operations or financial condition, which could cause the trading price of our common stock to decline and could result in a partial or total loss of your investment. You should consider these and other risks before making a decision to invest in shares of our common stock. These and other risks are discussed more fully in the “Risk Factors” section of this prospectus. The following is a summary of some of the principal risks we face.
Risks Related to Our Business and Industry

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.

Our growth prospects may be limited if our clients’ growth prospects are limited or if the size of the total addressable markets in which we compete or expect that we may compete in the future contract or grow at materially lower rates than are currently expected.

Our ability to achieve or maintain profitability in light of our history of net losses and our anticipation that we will increase expenses in the future.

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 limiting operating history we have with certain of our solutions, particularly in light of our recent history of expanding our business through acquisitions.

A failure to deliver high-quality member management services to our clients’ members.

The significant 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.

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.

Our quarterly results of operations may fluctuate significantly 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.
Risks Related to Governmental Regulation

Recent and future developments in the Medicare Advantage market or the healthcare industry generally, including with respect to changing laws and regulations.

The actual or perceived failure by us to comply with applicable laws, regulations and standards relating to data privacy and security.
Risks Related to Information Technology, Data Privacy and Intellectual Property

Security breaches, failures or 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.
 
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Our ability to operate our business without infringing, misappropriating or otherwise violating the intellectual property or proprietary rights of third parties.
Risks Related to Our Capital Structure, Indebtedness and Capital Requirements

Our substantial indebtedness could adversely affect our financial condition.

The terms of our indebtedness restrict our current and future subsidiaries.
Risks Related to Our Common Stock and This Offering

We have identified material weaknesses in our internal control over financial reporting and we may fail to remediate these material weaknesses, and our internal controls over financial reporting may not be effective.

We will be a “controlled company” following the completion of this offering and our principal stockholder, TPG, will continue to have significant influence over us.
Implications of Being an Emerging Growth Company
We are an “emerging growth company” as defined in the JOBS Act. An emerging growth company may take advantage of specified exemptions from various requirements that are otherwise applicable generally to public companies in the United States. These provisions include:

presenting only two years of audited financial statements in addition to any required unaudited interim financial statements with correspondingly reduced “Management’s Discussion and Analysis of Financial Condition and Results of Operations” disclosure in this prospectus;

reduced disclosure about our executive compensation arrangements;

an exemption from the requirements to hold non-binding advisory votes on executive compensation and golden parachute payments;

an exemption from the auditor attestation requirement in the assessment of our internal control over financial reporting; and

an exemption from compliance with any requirement that the Public Company Accounting Oversight Board may adopt regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements.
We will remain an emerging growth company until the earliest to occur of:

the last day of the fiscal year in which we have annual gross revenues of $1.07 billion or more;

the date on which we have issued more than $1.0 billion in non-convertible debt in the previous three years;

the date we qualify as a “large accelerated filer” under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which would occur at the end of the fiscal year in which we have filed an annual report and if the market value of our common stock that is held by non-affiliates exceeded $700 million or more as of the prior June 30; and

the last day of the fiscal year ending after the fifth anniversary of our initial public offering.
We have elected to take advantage of certain of the reduced disclosure obligations in this prospectus and may elect to take advantage of other reduced reporting requirements in future filings. As a result, the information that we provide to our investors may be different from the information you might receive from other public reporting companies that are not emerging growth companies in which you hold equity interests.
In addition, the JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. This allows an emerging growth company to delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to avail ourselves of this exemption and, therefore,
 
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while we are an emerging growth company, we will not be subject to new or revised accounting standards at the same time that they become applicable to other public companies that are not emerging growth companies.
Our History and Principal Stockholder
Convey Health was founded in 2001 and, following its acquisition by Millstream Acquisition Corporation in 2004, was known as NationsHealth, Inc. NationsHealth, Inc. operated as a public company until its acquisition by a wholly-owned subsidiary of ComVest Investment Partners III, L.P. in 2009. NationsHealth, Inc. was subsequently renamed to Convey Health Solutions, Inc. and acquired by an entity affiliated with New Mountain Capital, L.L.C. in 2016.
Convey Holding Parent, Inc. (formerly known as Cannes Holding Parent, Inc.) was formed on June 13, 2019 for the purpose of acquiring Convey Health Solutions, Inc. On September 4, 2019, Cannes Parent, Inc., a direct subsidiary of Convey Holding Parent, Inc., entered into a merger agreement to acquire all of the outstanding stock of Convey Health Solutions, Inc. (the “Merger”). 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. The consideration paid for the Merger was approximately $702.1 million. For more information about the Merger, see Note 4. Acquisitions. to the notes accompanying our audited consolidated financial statements located elsewhere in this prospectus.
In connection with the Merger, Convey entered into the Credit Agreement (as defined in “Description of Certain Indebtedness”), which provided for senior secured credit facilities consisting of (1) a term loan facility in an aggregate principal amount equal to $225.0 million and (2) a revolving credit facility in an aggregate principal amount equal to $40.0 million. Following the Merger, we amended the Credit Agreement in each of April 2020 and February 2021 to establish incremental term loan facilities in an aggregate principal amount equal to $25.0 million and $78.0 million, respectively. As of March 31, 2021, we had $324.2 million face value of outstanding indebtedness under the Credit Agreement, in addition to $39.5 million of undrawn commitments under the Credit Agreement. For more information regarding our indebtedness, see “Description of Certain Indebtedness.”
Following the Merger, TPG has continued to own substantially all of our outstanding equity interests. In this prospectus, unless the context otherwise requires, “TPG” and “our principal stockholder” refer to investment funds affiliated with TPG Global, LLC, including TPG Cannes Aggregation, L.P.
Our only material assets are the shares of the equity of Cannes Parent, Inc., which is the holder of 100% of the equity of Convey Health Parent, Inc., which is the holder of 100% of the equity of Convey Health Solutions, Inc. We do not conduct any operations other than with respect to our direct and indirect ownership of our subsidiaries and we conduct all of our business through our main operating subsidiary, Convey Health Solutions, Inc., and its subsidiaries.
TPG is a leading global alternative asset firm founded in 1992 with more than $91 billion of assets under management as of December 31, 2020 and offices in Beijing, Fort Worth, Hong Kong, London, Luxembourg, Melbourne, Mumbai, New York, San Francisco, Seoul, Singapore and Washington, DC. TPG’s investment platforms are across a wide range of asset classes, including private equity, growth equity, impact investing, real estate, secondaries, and public equity. TPG aims to build dynamic products and options for its investors while also instituting discipline and operational excellence across the investment strategy and performance of its portfolio.
 
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Corporate Information and Structure
Our principal executive offices are located at 100 SE 3rd Avenue, 26th Floor, Fort Lauderdale, FL 33394 and our telephone number is (800) 559-9358. Our website address is www.conveyhealthsolutions.com. The information contained on, or that can be accessed through, our website is not part of, and is not incorporated into, this prospectus, and you should not rely on any such information in making the decision whether to purchase shares of our common stock. We have included our website address only as an inactive textual reference and do not intend it to be an active link to our website.
The following diagram shows our simplified organizational structure immediately following the completion of this offering, assuming no exercise of the underwriters’ option to purchase additional shares of our common stock from the selling stockholder. This diagram is for illustrative purposes only and does not represent all legal entities affiliated with the entities depicted.
[MISSING IMAGE: tm2037461d12-fc_stockbw.jpg]
 
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THE OFFERING
Common stock offered by us
11,666,667 shares.
Common stock offered by the selling stockholder
1,666,667 shares (or 3,666,667 shares if the underwriters exercise in full their option to purchase additional shares of common stock from the selling stockholder).
Underwriters’ option to purchase additional shares of common stock from the selling stockholder
2,000,000 shares.
Common stock to be outstanding immediately after this offering
73,013,291 shares.
Use of proceeds
We estimate that the net proceeds to us from this offering will be approximately $157.0 million based on the assumed initial public offering price of $15.00 per share, which is the midpoint of the estimated price range set forth on the cover page of this prospectus, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.
We intend to use a portion of the net proceeds from this offering to repay outstanding indebtedness under the Credit Agreement (as defined in “Description of Certain Indebtedness”), to pay a one-time fee to TPG upon the termination of our management services agreement with TPG, which will terminate upon the completion of this offering, and the remainder of the net proceeds for general corporate purposes. We will not receive any of the proceeds from the sale of shares by the selling stockholder, including any shares the selling stockholder may sell pursuant to the underwriters’ option to purchase additional shares of our common stock. See “Use of Proceeds.”
Conflicts of interest
An affiliate of TPG Capital BD, LLC, an underwriter in this offering, will own in excess of 10% of our issued and outstanding shares of common stock following this offering. As a result of the foregoing relationship, TPG Capital BD, LLC is deemed to have a “conflict of interest” within the meaning of Rule 5121 (“Rule 5121”) of the Financial Industry Regulatory Authority, Inc. (“FINRA”). Accordingly, this offering will be made in compliance with the applicable provisions of Rule 5121. Pursuant to Rule 5121, the appointment of a qualified independent underwriter is not necessary in connection with this offering. In accordance with paragraph (c) of Rule 5121, no sales of the shares will be made to any discretionary account over which TPG Capital BD, LLC exercises discretion without the prior specific written approval of the account holder. See “Underwriters (Conflicts of Interest).”
Dividend policy
We do not currently anticipate declaring or paying regular cash dividends on shares of our common stock in the near term. Any future declaration and payment of cash dividends or other distributions of capital will be at the discretion of our Board of Directors and will depend on our financial condition, earnings, cash needs, capital requirements (including requirements of our subsidiaries), contractual, legal, tax and regulatory restrictions, and
 
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any other factors that our Board of Directors deems relevant in making such a determination. See “Dividend Policy.”
Controlled company
Upon the completion of this offering, our principal stockholder will control approximately 74.9% of the voting power of our outstanding common stock. As a result, we will be a “controlled company” under the corporate governance standards of the NYSE. Under these standards, a company of which more than 50% of the voting power is held by an individual, a group or another company is a “controlled company” and may elect not to comply with certain corporate governance standards. See “Management — Controlled Company.”
Risk factors
You should read the “Risk Factors” section beginning on page 22 and the other information included in this prospectus for a discussion of factors that you should consider before deciding to invest in shares of our common stock.
Proposed listing and symbol
We have applied to list our common stock on the NYSE under the trading symbol “CNVY.”
The number of shares of our common stock that will be outstanding after this offering is based on 61,346,624 shares of common stock outstanding as of May 31, 2021 and excludes:

5,690,664 shares of our common stock issuable upon exercise of options to purchase shares of our common stock outstanding under our 2019 Equity Incentive Plan as of May 31, 2021, with a weighted-average exercise price of $7.18 per share;

9,250,000 shares of our common stock reserved for future issuance under our 2021 Omnibus Equity Incentive Plan, of which an aggregate of 649,833 shares of our common stock would underlie restricted stock units and stock options expected to be granted immediately following the pricing of this offering (assuming an initial public offering price of $15.00 per share of common stock, which is the midpoint of the estimated price range set forth on the cover page of this prospectus), as described under “Executive Compensation — Post-Offering Compensation — IPO Grants”; and

1,500,000 shares of our common stock reserved for future issuance under our Employee Stock Purchase Plan.
Unless otherwise indicated, all information in this prospectus:

gives effect to a 126-for-1 stock split on our common stock effected on June 4, 2021;

assumes an initial public offering price of $15.00 per share of common stock, which is the midpoint of the estimated price range set forth on the cover page of this prospectus;

does not reflect the issuance of 649,833 shares of our common stock which would underlie restricted stock units and stock options expected to be granted immediately following the pricing of this offering (assuming an initial offering price of $15.00 per share of common stock, which is the midpoint of the estimated price range set forth on the cover page of this prospectus), as described under “Executive Compensation — Post-Offering Compensation — IPO Grants”;

assumes the filing and effectiveness of our amended and restated certificate of incorporation and the adoption of our amended and restated bylaws, forms of which have been filed as exhibits to the registration statement of which this prospectus is a part, which will occur immediately prior to the completion of this offering; and

assumes no exercise by the underwriters of their option to purchase up to an additional 2,000,000 shares of our common stock from the selling stockholder.
 
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SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA
The following summary consolidated financial and operating data are derived from the consolidated financial statements and the accompanying notes that are included elsewhere in this prospectus. The year ended December 31, 2020 and the period from June 13, 2019 to December 31, 2019 (“Successor”) reflects the audited financial information for Convey Holding Parent, Inc. (formerly known as Cannes Holding Parent, Inc.) and its subsidiaries. The period from January 1, 2019 to September 3, 2019 reflects the audited financial information for Convey Health Parent, Inc. and its subsidiaries prior to the closing of the Merger (“Predecessor”). The Successor period and the Predecessor period summary consolidated financial and operating data is not comparable due to the impacts of the Merger, including the application of acquisition accounting in the Successor financial statements as of September 4, 2019. The three months ended March 31, 2021 and the three months ended March 31, 2020 reflects the unaudited financial information for Convey Holding Parent, Inc. (formerly known as Cannes Holding Parent, Inc.) and its subsidiaries.
The unaudited consolidated statement of income data and summary cash flow data for the three months ended March 31, 2021, and 2020, and the unaudited consolidated balance sheet data as of March 31, 2021, have been derived from our interim condensed consolidated financial statements included elsewhere in this prospectus.
The interim condensed consolidated financial statements as of March 31, 2021 were prepared on the same basis as our annual consolidated financial statements. In our opinion, such financial statements include all normal and recurring adjustments considered necessary for a fair statement of the financial information set forth in those statements.
The historical results presented below are not necessarily indicative of financial results to be achieved in future periods. The summary consolidated financial and operating data should be read together with the sections entitled “Selected Historical Consolidated Financial Information” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and the related notes included elsewhere in this prospectus.
 
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($ in thousands, except per share amounts)
Consolidated Statement of Operations Data:
Three Months Ended March 31,
Year Ended
December 31,
2020
Period from
June 13, 2019
(date of inception) to
December 31, 2019
Period from
January 1, 2019 to
September 3, 2019
2021
2020
(Successor)
(Predecessor)
Net revenues:
Services
$ 43,527 $ 34,484 $ 147,191 $ 51,153 $ 92,445
Products
39,104 30,259 135,723 29,262 48,293
Net revenues
82,631 64,743 282,914 80,415 140,738
Operating expenses:
Cost of services
24,021 19,575 84,144 28,844 48,196
Cost of products
26,527 20,988 87,153 17,841 29,210
Selling, general and administrative
20,099 21,120 79,955 21,753 40,521
Depreciation and amortization
7,372 6,842 28,032 9,188 13,359
Transaction related costs
1,086 145 3,949 14,784 2,511
Change in fair value of contingent consideration
(10,770)  —  19,671
Total operating expenses
79,105 68,670 272,463 92,410 153,468
Operating income (loss)
3,526 (3,927) 10,451 (11,995) (12,730)
Other income (expense):
Interest income
6 7  —   — 
Interest expense
(5,467) (4,270) (18,860) (5,762) (6,213)
Total other expense, net
(5,467) (4,264) (18,853) (5,762) (6,213)
Loss from continuing operations before income taxes
(1,941) (8,191) (8,402) (17,757) (18,943)
Income tax benefit
1,007 1,263 1,904 858 23,288
Net (loss) income from continuing operations
(934) (6,928) (6,498) (16,899) 4,345
Income (loss) from discontinued operations, net of tax
36 36 73 (696)
Net (loss) income
$ (934) $ (6,892) $ (6,462) $ (16,826) $ 3,649
(Loss) income per common share – Basic:
Continuing operations
$ (0.02) $ (0.11) $ (0.11) $ (0.47) $ 3.04
Discontinued operations
(0.49)
(Loss) income per common share
$ (0.02) $ (0.11) $ (0.11) $ (0.47) $ 2.55
(Loss) income per common share – Diluted:
Continuing operations
$ (0.02) $ (0.11) $ (0.11) $ (0.47) $ 2.81
Discontinued operations
(0.49)
(Loss) income per common share
$ (0.02) $ (0.11) $ (0.11) $ (0.47) $ 2.32
Net (loss) income
$ (934) $ (6,892) $ (6,462) $ (16,826) $ 3,649
Foreign currency translation adjustments
(7) (2) 57 21 (15)
Comprehensive (loss) income
$ (941) $ (6,894) $ (6,405) $ (16,805) $ 3,634
Weighted-average common shares outstanding – Basic and Diluted
61,321,424 61,321,424 61,321,424 35,821,422 1,543,774
Assumed shares sold in the IPO sufficient to pay the dividend in excess of current year earnings (unaudited)
4,966,651 4,966,651
Weighted-average common shares used to compute pro forma loss per common share (unaudited)
66,288,075 66,288,075
Pro forma loss per common share (unaudited) — Basic and Diluted
$ (0.01) $ (0.10)
March 31,
2021
December 31,
Consolidated Balance Sheet Data (at end of period):
2020
2019
Cash and cash equivalents
$ 28,938 $ 45,366 $ 15,971
Total assets
$ 818,021 $ 843,068 $ 816,780
Long-term debt
$ 313,838 $ 239,290 $ 217,250
Total shareholders’ equity
$ 395,699 $ 470,150 $ 469,873
 
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Consolidated Statement of Cash Flows Data:
Three Months
Ended
March 31,
Year Ended
December 31, 2020
Period from
June 13, 2019
(date of inception) to
December 31, 2019
Period from
January 1, 2019 to
September 3, 2019
2021
2020
(Successor)
(Predecessor)
Net cash provided by (used in) operating
activities
$ (12,626) $ 5,937 $ 31,563 $ (14,391) $ 25,247
Net cash used in investing activities
$ (4,350) $ (5,114) $ (13,272) $ (629,850) $ (12,287)
Net cash provided by (used in) financing
activities
$ 515 $ (592) $ 9,429 $ 665,566 $ (1,329)
Other Financial Data:
Segment Revenue
Technology Enabled Solutions
$ 69,582 $ 54,690 $ 241,336 $ 66,530 $ 109,932
Advisory Services
$ 13,049 $ 10,053 $ 41,578 $ 13,885 $ 30,806
EBITDA(a) $ 10,898 $ 2,915 $ 38,483 $ (2,807) $ 629
Adjusted EBITDA(a)
$ 15,867 $ 7,797 $ 51,493 $ 14,024 $ 27,462
Year Ended December 31,
($ in millions)
2020
2019
Other Operating Data:
Technology Client Gross Dollar Retention(b)
98%
99%
Technology Net Dollar Retention(c)
135%
142%
Advisory Revenue Per Headcount(d)
$0.32
$0.40
(a)
We define EBITDA as net (loss) income less (loss) income from discontinued operations adjusted for interest expense, income tax benefit and depreciation and amortization. We define Adjusted EBITDA as EBITDA further adjusted for certain items of a significant or unusual nature, including but not limited to, change in fair value of contingent consideration, COVID-19 cost impacts, non-cash stock compensation expense, and transaction-related costs such as transaction bonuses, merger & acquisition costs, and contract termination costs.
We use certain non-GAAP financial measures to supplement financial information presented on a GAAP basis. We believe that excluding certain items from our GAAP results allows management to better understand our consolidated financial performance from period to period and better project our future consolidated financial performance as forecasts are developed at a level of detail different from that used to prepare GAAP-based financial measures. Moreover, we believe these non-GAAP financial measures provide investors with useful information to help them evaluate our operating results by facilitating an enhanced understanding of our operating performance and enabling them to make more meaningful period to period comparisons. However, 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 prospectus. 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.
 
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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. The following table presents a reconciliation of net loss to EBITDA and Adjusted EBITDA for the periods presented:
For the three
months ended
March 31, 2021
For the three
months ended
March 31, 2020
For the
year ended
December 31,
2020
Period from
June 13, 2019
(date of inception)
to December 31,
2019
Period from
January 1, 2019 to
September 3, 2019
($ in thousands)
(Successor)
(Predecessor)
Net (loss) income
$ (934) $ (6,892) (6,462) (16,826) 3,649
Less (loss) income from discontinued
operations, net of tax
(36) (36) (73) 696
(Loss) income from continuing operations
(934) (6,928) (6,498) (16,899) 4,345
Interest expense, net
5,467 4,264 18,853 5,762 6,213
Income tax benefit
(1,007) (1,263) (1,904) (858) (23,288)
Depreciation and amortization expense
7,372 6,842 28,032 9,188 13,359
EBITDA
10,898 2,915 38,483 (2,807) 629
Change in fair value of contingent consideration(1)
(10,770) 19,671
Cost of Covid-19(2)
1,185 864 10,174
Non-cash stock compensation expense(3)
990 3,223 6,682 300
Transaction related costs(4)
1,086 145 3,949 14,784 2,511
Acquisition bonus expense – HealthScape and Pareto acquisition(5)
192 481 1,989 1,663 3,685
Other(6)
1,517 170 986 385 666
Adjusted EBITDA
$ 15,868 $ 7,798 $ 51,493 $ 14,025 $ 27,462
(1)
Change in fair value of contingent consideration is composed of two components: earn-out liability and holdback liability. The earn-out liability resulted from the HealthScape Advisors and Pareto Intelligence acquisition on November 16, 2018. A portion of the purchase price was in the form of a contingent consideration payable to the sellers based on certain adjusted revenue performance targets for the years ended December 31, 2019 and December 31, 2020. On September 4, 2019, in connection with the TPG acquisition, the agreement included provisions to pay to the sellers if the payments relating to the earn-outs assumed in the acquisition fall below a certain threshold. The maximum holdback payments are $7.5 million and $17.5 million for HealthScape Advisors and Pareto Intelligence, respectively. The earn-out liability and holdback liabilities are re-measured to fair value at each reporting date until the contingency is resolved. During the period ended December 31, 2020, the Pareto Intelligence earn-out payment targets were ultimately not met, partly due to the COVID-19 impact. This resulted in a $21.1 million reduction in earn-out liabilities and an increase of $10.3 million to the holdback liabilities owed to Convey Health’s previous shareholders. There was no change in fair value as of March 31, 2021.
(2)
Due to significant volatility to the markets, as well as business and supply chain disruptions, we incurred several additional expenses due to the COVID-19 pandemic. Higher pricing from vendors due to supply chain disruptions, product shortages and increases in shipping costs were $0.7 million and $0.2 million for the three months ended March 31, 2021 and 2020, respectively, and
 
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$2.9 million for the year ended December 31, 2020. Higher employee costs due to hazard pay for our employees, enhanced sick pay due to illness and quarantine protocols were $0.3 million and $0.5 million, for the three months ended March 31, 2021 and 2020, respectively, and $2.8 million for the year ended December 31, 2020. Costs related to early hiring employees due to social distancing and work at home protocols were $3.2 million for the year ended December 31, 2020. COVID-19 training costs were $0.1 million for the year ended December 31, 2020. Overtime costs for IT personnel to setup eligible employees to work from home and temporary resources were $0.1 million for the three months ended March 31, 2021 and $0.2 million for the year ended December 31, 2020. IT costs due to the change in the work environment were $0.1 million for the three months ended March 31, 2020 and $0.5 million for the year ended December 31, 2020. Janitorial costs due to enhanced COVID-19 protocols were $0.1 million and $0.05 million for the three months ended March 31, 2021 and 2020, respectively, and $0.5 million for the year ended December 31, 2020. The expenses are included in cost of services and cost of products on our statements of operations and comprehensive (loss) income. See “Management’s Discussion and Analysis of Financial Condition and Operations — Key Factors Affecting Our Performance — COVID-19 Pandemic” for additional information related to these expenses.
(3)
Represents non-cash stock-based compensation expense in connection with the stock options that have been granted to employees and non-employees. It is included in selling, general, and administrative expenses on our statements of operations and comprehensive (loss) income.
(4)
Transaction-related expenses primarily consist of buyer’s costs and professional services incurred in connection with the TPG acquisition, as well as expenses for corporate development such as mergers and acquisitions activity that did not proceed. Expenses associated with the preparation for this offering are also included in transaction related costs.
(5)
In conjunction with the HealthScape Advisors and Pareto Intelligence acquisition, the previous shareholders set aside funds for an incentive compensation plan for employees who remain post acquisition. The costs are expensed on a monthly basis and funded through an escrow account which was established on the closing date and is included in restricted cash on our consolidated balance sheets. The expense is included in selling, general, and administrative expenses on our statements of operations and comprehensive (loss) income.
(6)
Other includes other individual immaterial adjustments related to legal fees associated with obtaining the incremental loans, contract termination costs assessed upon the early termination of a facility lease, severance costs incurred as a result of eliminating certain positions, management fees, and professional fees for assistance in the implementation of ASU 2014-09 (Topic 606), Revenue from Contracts with Customers (“ASC 606”). All costs are included in selling, general, and administrative expenses on our statements of operations and comprehensive (loss) income. For the three months ended March 31, 2021, approximately $1.4 million represents fees associated with obtaining incremental term loans in February 2021.
(b)
We use Technology Client Gross Dollar Retention (“GDR”) to measure the performance of existing solutions on an existing client basis, as it represents the gross retention of our existing client engagements. Technology Annual Contracted Revenue (“ACR”) at the beginning of the fiscal period is equal to the prior year total revenue for our reported TES segment. ACR GDR is calculated by taking our ACR, which represents the annual revenue generated from the performance of our technology solutions as contracted by our clients, at the beginning of the fiscal period, and deducting from ACR the dollar attrition during the fiscal period. The difference is Technology Client Gross Retention. We then divide Technology Client Gross Retention by Beginning Technology ACR to calculate GDR.
(c)
We use Technology Net Dollar Retention (“NDR”) to measure the performance rate of existing clients in total and before new client wins by adding cross-sell and upsell initiatives to GDR. NDR is calculated by taking GDR and adding existing client cross-sell (the additional solutions provided to existing clients) and net upsell (increased volume from current engagements with existing clients) to Technology GDR. We then divide Technology Net Retention by Beginning Technology ACR to calculate NDR.
(d)
We use Advisory Revenue per Headcount to evaluate the revenue generation of our Advisory Services segment. We calculate Advisory Revenue per Headcount by dividing Advisory revenue by the total headcount in our Advisory segment. Headcount is calculated based on the average headcount during the calendar year.
 
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RISK FACTORS
Investing in our common stock involves significant risks. You should carefully consider the following risks and other information in this prospectus, including our financial statements and the related notes thereto, before you decide to purchase shares of our common stock. Additional risks and uncertainties of which we are not presently aware or that we currently deem immaterial could also affect our business, results of operations or financial condition. If any of these risks actually occur, our business, results of operations or financial condition could be materially affected. As a result, the trading price of shares of our common stock could decline and you could lose part or all of your investment. Some statements in this prospectus, including statements in the following risk factors, constitute forward-looking statements. Please refer to “Special Note Regarding Forward-Looking Statements.”
Risks Related to Our Business and Industry
If we are unable to retain our existing clients or attract new clients, and sell additional solutions and services to our clients, our business, results of operations or financial condition would be adversely affected.
Our success depends substantially upon the retention of the existing clients that utilize our solutions and services, which include technology-based solutions and software advisory and analytics services, the attraction of new clients and our ability to sell additional solutions and services to our clients. We may not be able to retain our existing clients, attract new clients or sell additional solutions and services to our clients, if we are unable to provide solutions and services that existing or prospective clients believe address the key challenges they face in effectively managing their health plans or if our clients find our solutions and services unnecessary, unattractive or cost-ineffective. Our success in retaining and attracting clients will also depend, in part, on our ability to innovate successfully and be responsive to changes in the healthcare industry, technological developments, pricing pressures and changing business models.
To remain competitive in the evolving healthcare technology services markets, we must continuously upgrade our existing solutions and services and develop and introduce new and innovative solutions and services on a timely basis. Future advances in healthcare technology services could lead to new technologies, products or services that are competitive with our existing solutions and services, resulting in pricing pressures or rendering such solutions and services obsolete or otherwise not competitive. In addition, our ability to integrate these software solutions into clients’ existing health plan infrastructures could be challenged, which may impair our ability to retain clients and harm our reputation with existing and prospective clients. We also may not be able to retain or attract clients if our solutions contain errors or otherwise fail to perform properly, if our pricing structure is not competitive or if we are unable to renegotiate client contracts upon expiration.
Our revenue depends, in part, on our ability to maintain high client revenue retention rates and our future growth depends, in part, on attracting new clients and selling additional solutions and services to our clients. In addition, the costs associated with generating revenue can vary by the solution and, depending on the solution or service, or mix of solutions or services, utilized by particular clients, there may be substantial variation in the gross margins across our client base. If we are unable to maintain client retention rates, attract new clients or sell additional solutions and services to our clients, our business, results of operations or financial condition would be adversely affected.
Our client base is highly concentrated and we currently depend on a small number of clients for a substantial portion of our total revenue, and this concentration exposes us disproportionately to effects from altered contracts with these clients.
We derive a large portion of our total revenue from a limited number of key clients. For the three months ended March 31, 2021, our two largest clients, when aggregating all the solutions and services utilized by such clients across separate contracts with multiple product delivery solutions, represented 23.8% and 20.3% of our total revenue, respectively, or collectively 44.1% of our total revenue during this period. During this same period, these two clients accounted for 6.9% and 10.4% of our total accounts receivable, respectively, or collectively 17.3% of our total accounts receivable. For the fiscal year ended December 31, 2020, these same clients, when aggregating all the solutions and services utilized by such clients across separate contracts with multiple product delivery solutions, represented 28.6% and 17.8% of our total
 
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revenue, respectively, or collectively 46.4% of our total revenue during this period. During this same period, these two clients accounted for 15.0% and 6.8% of our total accounts receivable, respectively, or collectively 21.8% of our total accounts receivable.
We typically enter into a master service agreement with clients in our Technology Enabled Solutions segment, which provides a framework for services that is then supplemented by statements of work, which specify the particulars of each individual engagement. Contracts with our top clients in our Technology Enabled Solutions segment, including our top two clients, typically have stated terms of one to six years, and many of our contracts with these clients renew automatically. However, our clients, including our top two clients, have no obligation to renew such contracts, and may seek to renegotiate terms less advantageous to us in advance of renewal, may renew with a reduced scope of services, may choose to discontinue one or more services under an existing contract, may exercise flexibilities within their contracts or may terminate their agreements (with or without cause) prior to such agreements’ expiration dates, generally without penalty. The occurrence of any of these events could reduce our revenue from these clients. In addition, our clients must adhere to extensive and oftentimes changing regulatory requirements and may from time to time be subject to sanctions or other penalties from the CMS or other government entities for failure to maintain compliance with all applicable requirements. Sanctions and other penalties levied on our clients from CMS or other government entities may negatively impact our clients’ business practices and our clients’ businesses generally, which could impact our relationships with these clients and reduce our revenue from these clients. Furthermore, some of our top clients are, and may in the future be, involved in litigation relating to the administration of their health plans or otherwise relating to their business practices. This type of litigation could have a material impact on some of our clients’ businesses and, as a result, may negatively impact our relationships with our clients and the demand for our services.
We expect to continue to derive a substantial portion of our total revenue from a limited number of key clients. The concentration of a substantial portion of our business with a limited number of clients exposes us disproportionately to effects resulting from altered contracts with these clients or fewer client relationships (whether as a result of the termination of client relationships, client consolidation, impacts stemming from changed business practices at our clients as a result of sanctions, penalties or litigation or for other reasons). If we become dependent on altered contracts with clients, or fewer client relationships, we may become more vulnerable to adverse changes in our relationships with clients, and our business, results of operations or financial condition may suffer.
Our growth prospects may be limited, and our business, results of operations or financial condition may be adversely affected, if our clients’ growth prospects are limited or if the size of the total addressable markets in which we compete or expect that we may compete in the future contract or grow at materially lower rates than are currently expected.
The future growth and success of our business depends, in part, on the ability of our key clients to grow their businesses. If our clients do not continue to grow their businesses, whether as a result of factors affecting the healthcare industry in general or reasons specific to any of our clients, such as a decision by our clients to reduce the number of benefits available to their members, overall demand for our solutions and services could decrease, which would have an adverse effect on our business, results of operations or financial condition.
In addition, the future growth and success of our business depends, in part, on the size of the total addressable markets in which we compete or expect that we may compete in the future. For example, we have primarily tailored our business and the solutions and services we offer to the Medicare Advantage market, which has recently experienced strong growth and enrollment trends. U.S. government and third-party industry sources have projected that Medicare Advantage will continue to see increased member enrollment due to many factors, including the growing share of individuals in the U.S. eligible for Medicare enrollment, the increasing tendency for these individuals to choose Medicare Advantage plans over traditional Medicare plans and a shift in the healthcare industry towards a value-based care model and away from a fee-for-service model. However, market size estimates and growth forecasts related to the Medicare Advantage and other markets are subject to significant uncertainty and are based on assumptions and estimates that may prove to be inaccurate. For more information regarding our estimates of market opportunity and the forecasts of market growth included in this prospectus, see “Business  — Market Opportunity.” If these or other
 
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assumptions related to the size of the Medicare Advantage market and other markets in which we compete or expect we may compete in the future and the forecasted growth in such markets prove inaccurate, our growth prospects may be limited, and our business, results of operations or financial condition would be adversely affected. Further, even if the markets in which we compete meet our size estimates and forecasted growth, our business could fail to grow at rates similar to those at which it has historically grown, if at all.
We have a history of net losses, we anticipate increasing expenses in the future, and we may not be able to achieve or maintain profitability.
We have incurred net losses during our history. We incurred net losses of $(0.9) million for the three months ended March 31, 2021, $(6.5) million for the year ended December 31, 2020, and $(16.8) million for the Successor period, respectively. Our accumulated deficit as of March 31, 2021 was $24.2 million.
We have encountered and will continue to encounter risks and difficulties frequently experienced by growing companies in rapidly changing industries, including increasing expenses as we continue to grow our business. We anticipate our losses may continue as we expect to invest in increasing our platform capabilities, expanding our operations, hiring additional employees and operating as a public company. These efforts may prove more costly than we currently anticipate, and we may not succeed in increasing our revenue sufficiently to offset these higher expenses. To date, we have financed our operations principally from revenue from our solutions and services and the incurrence of indebtedness. Although our cash flow from operations was positive for the three months ended March 31, 2021, the year ended December 31, 2020, and for the Predecessor period, we may not generate positive cash flow from operations or profitability in any given period, and our limited operating history may make it difficult for you to evaluate our current business and future prospects.
Investments in our business may be more costly than we expect, and, if we do not achieve the benefits anticipated from these investments, or if the realization of these benefits is delayed, they may not result in increased revenue or growth in our business. If our growth rate were to decline significantly or become negative, it could adversely affect our business, results of operations or financial condition. If we are not able to achieve or maintain positive cash flow in the long term, we may require additional financing, which may not be available on favorable terms or at all or which would be dilutive to our stockholders. If we are unable to successfully address these risks and challenges as we encounter them, our business, results of operations or financial condition would be adversely affected. Our failure to achieve or maintain profitability could negatively impact the value of our common stock.
Federal reductions in Medicare Advantage funding could adversely affect our business, results of operations or financial condition.
The majority of our revenues are derived from our contractual arrangements with health plan clients who participate in the government subsidized Medicare Advantage program. Medicare Advantage is a federally-administered program financed by federal funds. Medicare Advantage spending has increased rapidly in recent years, becoming a significant component of the federal budget. This, combined with slower state revenue growth, has led the federal government to institute measures aimed at controlling the growth of healthcare spending, including Medicare Advantage spending, and in some instances reducing aggregate healthcare spending, including Medicare Advantage spending. For example, Medicare remains subject to the automatic spending reductions imposed by the Budget Control Act of 2011 and the American Taxpayer Relief Act of 2012 (“sequestration”), subject to a 2% cap, which was extended by the Bipartisan Budget Act of 2018 for an additional two years through 2027. In addition, future levels of funding for Medicare Advantage may be affected by continuing government efforts to contain healthcare costs and may further be affected by federal budgetary constraints. Congress periodically considers reducing or reallocating the amount of money it spends for healthcare programs, including the Medicare Advantage program. Adverse economic conditions may put pressures on federal budgets as tax and other federal revenues decrease while the population that is eligible to participate in Medicare Advantage programs increases, creating more need for funding. This may require CMS to find funding alternatives, which may result in reductions in funding for the Medicare Advantage program or contraction of covered benefits. Reductions in funding for the Medicare Advantage program may impact our health plan clients’ business operations, and may lead our health plan clients to reduce the number of Medicare Advantage health plans and the variety and level of
 
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benefits offered through such plans. Reductions in funding may also lead to decreased membership in Medicare Advantage health plans, or cause membership to grow at lower levels than we currently expect. Changes to our clients’ business operations stemming from reductions in Medicare Advantage funding, including if such changes result in decreased health plan membership or reduced benefits levels, could adversely affect our business, results of operations or financial condition.
Significant consolidation in the healthcare industry, and decisions by clients to perform internally some of the same solutions or services that we offer, could adversely alter our relationships with clients and harm our business, results of operations or financial condition.
The healthcare industry in the United States has experienced significant consolidation in recent years. Many healthcare organizations, including some of our clients, have consolidated to create larger enterprises with greater market power. This consolidation trend could give the resulting enterprises greater bargaining power, which may lead to downward price pressure on our solutions or services, or less demand for them, or both. Consolidation in the health insurance industry, particularly involving any of our key clients, could cause a loss of, or changes in, our relationship with that client and may reduce or eliminate our revenue from that client if our solutions and services are no longer utilized by that client at all or in the same capacity as they were utilized prior to the consolidation. For example, if one of our existing clients combines with another healthcare organization that does not use our services, we generally will be required to compete to retain our existing client’s business. In the future, due to this consolidation, we may be faced with a reduced number of potential clients and derive a greater portion of our revenue from a more concentrated number of clients as our business and the healthcare industry evolve. Any of these effects could harm our business, results of operations or financial condition.
In addition, we face substantial competition from many healthcare services and technology companies, including the growing presence of large technology companies entering the healthcare market. See “— We face significant competition, which may harm our business, results of operations or financial condition.” Some of our existing clients compete with us, or may do so in the future by electing to perform internally any of the business processes our solutions address, either because they believe they can provide such processes more efficiently internally or otherwise. As a result, we may lose such clients, or the volume of our business with such clients may be reduced, which could harm our business, results of operations or financial condition.
Our revenue would be adversely affected if we are unable to maintain currently existing levels of business with any of our key clients and if we are unable to offset any loss of business with alternative clients. We expect to continue to derive a substantial portion of our total revenue from a limited number of key clients, and any impairment of our relationship with, or the material financial impairment of, these clients could adversely affect our business, results of operations or financial condition. See “— Our client base is highly concentrated and we currently depend on a small number of clients for a substantial portion of our total revenue, and this concentration exposes us disproportionately to effects from altered contracts with these clients.”
We have significantly expanded our business in recent years and, as such, have a limited operating history with certain of our solutions, which makes it difficult to predict our future results of operations.
We have significantly expanded our business in recent years, including the solutions and services we offer to clients. Our acquisition of Gorman Health Group in October 2017 followed by our acquisition of HealthScape Advisors in November 2018 created the foundation of our Advisory Services business, and our acquisition of Pareto Intelligence in November 2018 expanded the analytics capabilities of our TES business. As a result of our limited operating history with the capabilities obtained through each of these acquisitions, as well as additional solutions and services developed through our organic growth since the completion of these acquisitions, our ability to accurately forecast our future results of operations is limited and subject to a number of uncertainties, including our ability to plan for and model future growth. Our historical revenue and growth trends should not be considered indicative of our future performance. If our assumptions regarding the value proposition of our solutions and our ability to be able to cross-sell and up-sell our solutions, particularly to clients currently served by our Advisory Segment business that do not currently utilize any of the solutions offered by our TES business, prove incorrect or change based on any numbers of factors, our business, results of operations or financial condition could differ materially from our expectations.
 
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A failure to deliver high-quality member management services to our clients’ members could adversely affect our reputation and our relationship with our clients and could harm our business, results of operations or financial condition.
Our clients depend on us to directly implement technological solutions and services that improve the health plan member experience, including with respect to optimizing members’ health plan selections, assisting members to effectively navigate available benefits, obtain appropriate care, and efficiently resolve members’ clinical and non-clinical inquiries. Delivering comprehensive and high-quality member management services requires that our professional staff have technical, healthcare, compliance and other relevant knowledge and expertise. Because we act as a partner to health plans and are trusted to engage directly with health plan members, particularly in connection with our supplemental benefits program, our reputation is highly dependent on, among other things, the quality of the member management services we offer to our clients’ health plan members and our ability to effectively engage with them relating to their healthcare and benefits needs. We may be unable to accurately predict our clients’ or their health plan members’ demand for certain services or accommodate short-term increases in demand for certain services, and we may experience issues with the third parties on which we rely that impact our clients’ members for reasons that are beyond our control. See “— Third parties on which we rely, including to procure inventory for our supplemental benefits solution and to deliver products to health plan members, may not perform satisfactorily or at all, and our reliance on any third party for the distribution of supplemental benefits carries material risks.” A failure to offer high-quality and effective direct services, or a market perception that we do not offer high-quality and effective direct services, would harm our reputation and our relationship with clients, which could harm our business, results of operations or financial condition.
We face significant competition, which may harm our business, results of operations or financial condition.
We face substantial competition primarily from healthcare services and technology companies, including the growing presence of large technology companies entering the healthcare market. We also compete in some cases with certain of our customers who themselves provide some of the same solutions that we offer or who may decide to perform internally some of the same solutions that we provide. This vigorous competition requires us to provide high quality, innovative products at a competitive price. These competitive threats will likely remain or expand in the future. Our TES solutions compete with:

healthcare information system vendors that support providers or payors in their administration of Medicare Advantage (including the administration of supplemental benefits), Medicare Part D Prescription Drug Plan and Employer Group Waiver Plans;

healthcare insurance companies, pharmacy benefit management and pharmacy benefit administrator companies, hospital management companies and pharmacies that provide or are developing electronic transaction and payment distribution services for use by providers or by their members and customers;

healthcare payments and communication solutions providers, including financial institutions and payment processors that have invested in healthcare data management assets; and

healthcare payment accuracy companies; and providers of other data products and data analytics solutions, including healthcare risk adjustment, quality, economic statistics and other data; and other data and analytics solutions.
Our Advisory Services offerings compete with:

National management consulting firms (including, but not limited to, Deloitte Touche Tohmatsu Limited, Accenture plc, McKinsey & Company and other similar firms);

Boutique consulting firms; and

Internal consulting departments within our clients.
In addition, certain major software, hardware, information systems and business process outsourcing companies, both with and without healthcare companies as their partners, may seek to offer competitive software and services. We cannot fully anticipate whether or when companies in adjacent or other product, service or technology areas may launch competitive products, and any such entry may lead to product
 
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obsolescence, loss of market share or erosion of prices. The extent of this competition varies by the size of companies, geographical coverage and scope and breadth of products and services offered. Within certain of the markets in which we operate, our competitors are significantly larger and have greater financial or other resources and have established reputations for success. In addition, many large and well-funded technology companies are pursuing opportunities to enter the healthcare market, and consolidation activity through strategic mergers, acquisitions and joint ventures may result in new competitors that can offer a broader range of products and services or may have greater scale or a lower cost structure.
Additionally, the pace of change in the healthcare technology and information systems market is rapid, and there are frequent new solution introductions, solution enhancements and evolving industry standards and requirements. We cannot guarantee that we will be able to upgrade our existing solutions or services, or introduce new solutions or services at the same rate as our competitors, or at all, nor can we guarantee that such upgrades or new solutions or services will achieve market acceptance over or among competitive offerings, or at all. Competitors may also commercialize products, services or technologies that render our solutions obsolete or less marketable.
These competitive pressures could have a material adverse impact on our business, results of operations or financial condition.
Acquisitions of other businesses or technologies and other significant transactions, including dispositions, involve many risks and such acquisitions could disrupt our business and harm our results of operations or financial condition.
We have in the past acquired businesses, such as Gorman Health Group in October 2017 and Pareto Intelligence and HealthScape Advisors in November 2018, and may in the future decide to acquire other businesses, products and technologies or enter into strategic alliances or joint ventures (a “Transaction”). Strategic Transactions could require significant capital infusions and involve many risks, including the following:

a Transaction may require us to incur unanticipated costs or liabilities or may cause adverse tax consequences, substantial depreciation or deferred compensation charges;

a Transaction undertaken for strategic business purposes may negatively impact our results of operations;

we may encounter difficulties in assimilating and integrating the acquired business, including the technologies, products, personnel or operations of the acquired company, particularly if key personnel of the acquired company decide not to work for us;

a Transaction may disrupt our ongoing business, divert resources, increase our expenses and distract our management;

we may be required to implement or improve internal controls, procedures and policies appropriate for a public company at a business that prior to the acquisition lacked these controls, procedures and policies;

the acquired businesses may have unexpected liabilities that we will be forced to assume;

the acquired businesses, products or technologies may not generate sufficient revenue to offset acquisition costs or to maintain our financial results; and

a Transaction may involve the entry into geographic or business markets in which we have little or no prior experience.
In addition, a significant portion of the purchase price of companies we acquire may be allocated to goodwill and other intangible assets, which must be assessed for impairment at least annually. In the future, if our acquisitions do not yield expected returns, we may be required to take charges to our operating results based on this impairment assessment process, which could adversely affect our results of operations. We may use shares of our common stock and equity-linked securities as consideration for acquisitions, and, as a result, we may issue additional shares of our common stock to pay for future acquisitions and a decline in the market price of our common stock may inhibit our ability to successfully pursue future acquisitions.
 
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In addition, we may divest assets or otherwise discontinue businesses that are no longer a part of our strategy. For example, on February 9, 2018, we announced a plan to abandon our Business Processing Outsourcing unit, and all run off operations associated with our Business Processing Outsourcing unit ceased in the first quarter of 2020. For more information regarding this discontinued operation, see Note 17. Discontinued Operations, to the notes accompanying our audited consolidated financial statements located elsewhere in this prospectus. Divestitures or other similar strategic endeavors require significant investment of time and resources, may disrupt our business and distract management from other responsibilities and may result in losses on disposition or continued financial involvement in the divested business, including through indemnification or other financial arrangements, for a period following the transaction, which could adversely affect our business, results of operations or financial condition.
We cannot assure you that we will be able to identify or consummate any future Transaction on favorable terms, or at all. If we do pursue a Transaction, it is possible that we may not realize the anticipated benefits from the Transaction or that the financial markets or investors will negatively view the Transaction. Even if we successfully complete a Transaction, it could disrupt our business or harm our results of operations or financial condition.
Increases in labor costs, including wages, could adversely affect our business, results of operations or financial condition.
The labor costs associated with our business are subject to several external factors, including unemployment levels, prevailing wage rates, minimum wage laws, potential collective bargaining arrangements, health insurance costs and other insurance costs and changes in employment and labor legislation or other workplace regulation. From time to time, including following the 2020 U.S. presidential election, legislative proposals are made or otherwise discussed to increase the federal minimum wage in the United States, as well as the minimum wage in a number of individual states and municipalities, and to reform entitlement programs, such as health insurance and paid leave programs. These proposals and discussions have become increasingly common in the current political environment. If we are unable to mitigate wage rate increases through automation and other labor savings initiatives, our labor costs may increase, which could have an adverse effect on our business, results of operations or financial condition.
As minimum wage rates increase, we may need to increase not only the wage rates of our minimum wage employees, but also the wages paid to our other hourly employees as well. Further, should we fail to increase our wages competitively in response to increasing wage rates, the quality of our workforce could decline, causing certain aspects of our business, such as our client service, to suffer. Increases in labor costs could force us to increase our fees, which could adversely impact sales of our solutions and services to existing clients and prospects and the attractiveness of our solutions and services to existing clients and prospects. If we are unable to hire and retain employees capable of performing at a high level, such as by providing a high level of client service, or if mitigating measures we take in response to increased labor costs, such as utilizing increased automation in how we deliver certain of our solutions and services to clients, have unintended negative effects, including on client service, our business would be adversely affected. If competitive pressures or other factors prevent us from offsetting increased labor costs, our profitability may decline and could have an adverse effect on our business, results of operations or financial condition.
In addition, increases in the minimum wage driven by changes in state law may cause increases in costs other than those directly attributable to the increased wage, including costs related to moving certain of our operations to different states and hiring and training new work forces in these areas. An increase in these types of costs may have an adverse effect on our business, results of operations or financial condition.
Long and unpredictable sales and integration cycles for our solutions may adversely impact our business, results of operations or financial condition.
Our sales process entails planning discussions with our clients or prospective clients, analyzing their existing health plan infrastructure, including the solutions and services utilized from their existing partners, and identifying how these potential clients can use and benefit from our solutions. The sales cycle for a new client, from the time of prospect qualification to the completion of the first sale is subject to significant variation, and can take from as short as one month or extend beyond one year. We spend substantial time, effort and money in our sales efforts without any assurance that our efforts will result in the sale of our
 
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solutions. Implementing, replacing or expanding a health plan administrative partner is a major decision for the client or prospective client. Many of our solutions require a substantial capital investment and time commitment by the client. Clients may choose to maintain their existing plan administration services providers to avoid the financial cost and time commitment of switching to our solutions. When a client decides to use our services, additional time is required to integrate our solutions into the client’s health plan infrastructure. If the integration process is not executed successfully or is delayed, our relationship with the client may be adversely affected. Our ability to grow our business depends, in part, on expanding the use of our solutions with new clients and deepening our relationships with existing clients. Any decision by our existing clients or prospective clients to delay purchasing decisions or not to utilize our solutions at all, or unanticipated difficulties with integrating our solutions with clients’ existing infrastructure, would adversely impact our business, results of operations or financial condition.
An economic downturn or volatility, including as a result of the ongoing coronavirus (“COVID-19”) pandemic, could have a material adverse impact on our business, results of operations or financial condition.
Our business has been and may continue to be affected by a number of factors beyond our control, such as general geopolitical, economic and business conditions and conditions in the financial markets. The U.S. and world economies have experienced significant economic uncertainty and volatility during recent years and that uncertainty and volatility has become more acute due to the ongoing global COVID-19 pandemic. As a result of such economic uncertainty and volatility in the United States and other countries, we may experience the negative effects of increased financial pressures on our clients, which could reduce the demand for our solutions and services by causing clients to terminate, or elect not to renew, existing contracts with us or to not enter into new contracts with us. If we are not able to timely and appropriately adapt to changes resulting from an uncertain or volatile economic environment, our business, results of operations or financial condition could be materially adversely affected.
In particular, the COVID-19 pandemic is having widespread, rapidly evolving and unpredictable impacts on global society, economies, financial markets and business practices. Federal, state and local governments have implemented varying measures in an effort to contain the virus, including social distancing, travel restrictions, border closures, limitations on public gatherings, work from home and supply chain logistical changes. We remain focused on protecting the health and well-being of our employees, our clients and our clients’ members while assuring the continuity of our business operations. The COVID-19 impact on our business 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, Advisory Services. For more information related to the impact of the COVID-19 on our Advisory Services segment, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Key Factors Affecting Our Performance — COVID-19 Pandemic” and Note 18. Segment Information, to the notes accompanying our financial statements located elsewhere in this prospectus.
We have developed and implemented a range of measures to address the risks, uncertainties, and operational challenges associated with operating in a COVID-19 environment. We have also increased our interaction with our vendors to continue to monitor and manage inventory levels and are updating our systems regularly to provide current availability information to members. We have taken and will continue to take, proactive measures to provide for the well-being of our workforce while continuing to safely run our operations. We have implemented alternative working practices, which include, modified work schedules, shift rotation and work at home abilities for appropriate employees to best ensure adequate social distancing. In addition, we increased cleaning protocols throughout our facilities. Certain of these measures have resulted in increased costs. Our business, results of operations or financial condition could be further impacted by delays in payments from clients, supply chain interruptions, extended “shelter in place” orders or advisories, warehouse or facility COVID-19 outbreaks or closures or for other reasons related to the pandemic.
The full extent to which the COVID-19 pandemic and the various responses to the COVID-19 pandemic impact our business, operations or financial condition will depend on numerous evolving factors that we may not be able to accurately predict, including: the duration and scope of the pandemic; 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
 
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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. Although the overall impact of COVID-19 on our business has been limited so far, such effects, if they continue for a prolonged period, may have a material adverse effect on our business, results of operations or financial condition. To the extent the COVID-19 pandemic adversely affects our business, results of operations or financial condition, it may also have the effect of heightening many of the other risks described in this “Risk Factors” section.
Achieving market acceptance of new or updated solutions and services is necessary in order for such solutions and services to become profitable and will likely require significant efforts and expenditures.
The market for healthcare in the United States is in the early stages of structural change and is evolving towards a more value-based model, and increased technological innovation and adoption in the healthcare industry is transforming the healthcare industry’s business models. Our success depends, in part, on our ability to keep pace with technological developments, satisfy increasingly sophisticated and changing client and health plan member requirements and expectations and achieve market acceptance of new or updated solutions and services. Achieving market acceptance for new or updated solutions and services is likely to require substantial technological and sales and marketing efforts and the expenditure of significant funds to create awareness and demand by existing and prospective clients of our solutions and services. We may not be successful in responding to technological and regulatory developments or changing client needs. If we are unable to predict client preferences or industry changes, or if we are unable to modify our existing and future services on a timely or cost-effective basis, we may lose clients and our business, results of operations or financial condition may be adversely affected.
In addition, regulatory, operational or client-imposed requirements may impact the profitability of particular solutions and client engagements. The pace of change in the markets served by us is rapid, and there are frequent new solution and service introductions by competitors. If we do not respond successfully to technological and regulatory changes, as well as evolving industry standards and client demands, our solutions and services may become obsolete. Technological changes also may result in the offering of competitive solutions and services at lower prices than we currently charge for our solutions and services, which could result in us losing sales unless we lower the prices we charge or provide additional efficiencies or capabilities to the client. If we lower our prices on some of our solutions or services, we will need to increase margins on other solutions or services in order to achieve and maintain overall profitability. The failure to demonstrate to existing and potential clients the benefits of our existing and future services and the failure to achieve market acceptance of new or updated solutions for any reason could have a material adverse impact on our business, results of operations or financial condition.
Third parties on which we rely, including to procure inventory for our supplemental benefits solution and to deliver products to health plan members, may not perform satisfactorily or at all, and our reliance on any third party for the distribution of supplemental benefits carries material risks.
We rely on third parties in several components of our business, including in connection with administering our supplemental benefits solution. Our general reliance on third parties in the supply chain entails many risks, including: reliance on the third party for regulatory compliance and quality assurance, the possible breach of the agreement with the third party, the possible termination or nonrenewal of the agreement by the third party at a time that is costly or inconvenient for us and disruptions to the operations of our manufacturers or suppliers caused by conditions unrelated to our business or operations, including the bankruptcy of the manufacturer or supplier or a catastrophic event affecting our manufacturers or suppliers. Additionally, even if we are party to an agreement pursuant to which a third party is contractually obligated to indemnify us for any costs incurred as a result of the breach of an agreement by a third party, the indemnifying party may be unable or otherwise unwilling to uphold its contractual obligations.
Certain of our health plan clients depend on us to procure inventory for our supplemental benefits solution and to deliver products to their members. Any changes in, or disruptions to, our ability to procure this inventory or in the shipping arrangements we use to deliver products to health plan members could adversely affect our business, results of operation or financial condition. We currently rely on third-party providers to deliver the supplemental benefits products that we offer. If we are not able to negotiate acceptable
 
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pricing and other terms with these providers, or if these providers experience performance problems or other difficulties in processing our orders or delivering our products to our clients’ members, it could negatively impact our results of operations and the experience of our clients’ members. For example, changes to the terms of our shipping arrangements may adversely impact our margins and profitability. In addition, our ability to receive inbound inventory efficiently and ship products to clients’ members may be negatively affected by factors beyond our and these providers’ control, including inclement weather, fire, flood, power loss, earthquakes, acts of war or terrorism, pandemics, including the COVID-19 pandemic, or other events specifically impacting our or other shipping partners, such as labor disputes, financial difficulties, system failures and other disruptions to the operations of the shipping companies on which we rely. Although we do not manufacture supplemental benefits products ordered by our clients’ members, including OTC medications and other medical products, these items may be defective, faulty or may otherwise cause harm to the members receiving and using such OTC medications or other medical products. If OTC medications or other medical products ordered by members through our supplement benefits offerings are defective, faulty or otherwise cause harm to members, we may be subject to litigation, including involving product liability claims, or our reputation may be adversely affected among our clients or our clients’ health plan members.
We are also subject to risks of damage or loss during delivery by our shipping vendors. Additionally, competitors or prospective competitors may offer low-cost or free shipping, fast shipping times, favorable return policies and other features that could be difficult for us to match, or could be a reason our clients’ members choose not to buy supplemental benefits from us. If the products ordered by our clients’ members are not delivered in a timely fashion or are damaged or lost during the delivery process, our clients’ members could become dissatisfied and cease buying supplemental benefits products through us, which would adversely affect our business, results of operations or financial condition.
Our quarterly results of operations may fluctuate significantly due to seasonality.
We believe there are significant seasonal factors that may cause us to record higher revenue in some quarters compared with others. We typically generate outsized revenue in the fourth quarter primarily due to increased member utilization of supplemental benefits within our Technology Enabled Solutions segment. The supplemental benefit programs, including products, we support may include an in-year roll-over provision, in which benefits not used during the calendar year accumulate and are available for members to use prior to the end of the following calendar year. Similarly, we typically incur outsized expenses in the fourth quarter, driven by the increased member utilization of supplemental benefits described above, as well as increased costs related to our advanced plan administration solutions, that are within our Technology Enabled Solutions segment, for managing the Medicare annual election period. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Key Factors Affecting Our Performance — Seasonality.”
The seasonality of our business could cause the market price of our common stock to fluctuate as the results of an interim financial period may not be indicative of our full year results. Seasonality also impacts relative revenue and profitability of each quarter of the year, both on a quarter-to-quarter basis and year-over-year basis. This seasonality could change in the future due to other factors, including as a result of changes in timing of health plan enrollment periods and changes in the laws and regulations that govern the sale of health insurance. We may not be able to timely adjust to changes in the seasonality of our business. If the timing of the enrollment periods for health insurance changes, we may not be able to timely adapt to changes in client demand. If we are not successful in responding to changes in the seasonality of our business, our business, results of operations or financial condition would be adversely affected.
Our financial results could suffer if we are unable to achieve or maintain adequate utilization and suitable billing rates for our consultants, or if we are unable to deliver our services due to factors that disrupt travel to our client sites.
Our profitability depends, in part, on the utilization and billing rates of the professionals in our Advisory Services segment. Utilization of our professionals is affected by a number of factors, including:

the number and size of our engagements;
 
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the timing of the commencement, completion and termination of engagements, which in many cases is unpredictable;

our ability to transition our consultants efficiently from completed engagements to new engagements;

the hiring of additional consultants because there is generally a transition period for new consultants that results in a temporary drop in our utilization rate;

unanticipated changes in the scope of client engagements;

our ability to forecast demand for our services; and

conditions affecting the industries in which we practice as well as general economic conditions.
The billing rates of our consultants that we are able to charge are also affected by a number of factors, including:

our clients’ perception of our ability to add value through our services;

the market demand for the services we provide;

introduction of new services by us or our competitors;

our competition and the pricing policies of our competitors; and

current economic conditions.
If we are unable to achieve and maintain adequate overall utilization as well as maintain or increase the billing rates for our consultants in our Advisory Services segment, our financial results could suffer. In addition, our consultants oftentimes perform services at the physical locations of our clients. If there are natural disasters, widespread outbreaks of contagious disease (including the continuation of the COVID-19 pandemic), disruptions to travel and transportation or problems with communications systems, our ability to perform services for, and interact with, our clients at their physical locations may be negatively impacted, which could have an adverse effect on our business, results of operations or financial condition.
Our Advisory Services segment in particular relies on a combination of fixed-fee engagements and performance-based engagements, the profitability of which can be unpredictable.
We have entered into and expect to continue to enter into fixed-fee engagements, particularly with our Advisory Services clients. The profitability of our fixed-fee engagements may not meet our expectations if we underestimate the cost of these engagements. When making proposals for fixed-fee engagements, we estimate the costs and timing for completing the engagements. These estimates reflect our best judgment regarding the efficiencies of our methodologies and consultants as we plan to deploy them on engagements. Any increased or unexpected costs or unanticipated delays in connection with the performance of fixed-fee engagements, including delays caused by factors outside of our control or for the scope of fixed-fee engagements to extend beyond what had initially been contemplated without a corresponding increase in the fees charged, could make these types of contracts less profitable or unprofitable, which could have an adverse effect on our results of operations.
In addition, we have entered into and may in the future enter into engagement agreements with clients pursuant to which our fees include a significant performance-based component. Revenues from our performance-based engagements are difficult to predict, and the timing and extent of recovery of our costs is uncertain. Performance-based fees are contingent on the achievement of specific measures, such as our clients meeting cost-saving or other contractually-defined goals. The achievement of these contractually-defined goals may be subject to acknowledgment by the client and is often impacted by factors outside of our control, such as the actions of the client or other third parties. To the extent that any revenue is contingent upon the achievement of a performance target, we recognize such revenue using a process that requires us to make significant management judgments, estimates and assumptions. While we believe that the estimates and assumptions we have used for revenue recognition are reasonable, subsequent changes could have an impact on our future financial results. The percentage of our revenues derived from performance-based fee arrangements may result in increased volatility in our working capital requirements and greater variations in our quarter-to-quarter results, which could affect the price of our common stock. In addition, an increase
 
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in the proportion of performance-based fee arrangements may temporarily offset the positive effect on our operating results from an increase in our utilization rate until the related revenues are recognized.
Operating and growing our business may require additional capital, and, if capital is not available to us, our business, results of operations or financial condition may suffer.
Operating and growing our business may require further investments in our business. We may be presented with opportunities that we want to pursue, and unforeseen challenges may present themselves, any of which could cause us to require additional capital. Our business model does not require us to hold a significant amount of cash and cash equivalents at any given time and, if our cash needs exceed our expectations or we experience rapid growth, we could experience strain in our cash flow, which could adversely affect our operations in the event we are unable to obtain other sources of liquidity. If we seek to raise funds through equity or debt financing, those funds may prove to be unavailable, may only be available on terms that are not acceptable to us or may result in significant dilution to you or higher levels of leverage. If we are unable to obtain adequate financing or financing on terms satisfactory to us, when we require it, our ability to continue to pursue our business objectives and to respond to business opportunities, including potential acquisitions, challenges or unforeseen circumstances could be significantly limited, and our business, results of operations or financial condition could be materially adversely affected.
If we fail to manage future growth effectively, our business, results of operations or financial condition could be harmed.
We have expanded our operations significantly, including through acquisitions, and anticipate that further expansion may be required in order for us to grow our business. Our growth has placed and could continue to place increasing and significant demands on our management, our operational and financial systems and infrastructure and our other resources. If we do not effectively manage our growth, the quality of our services could suffer, which could harm our business, results of operations or financial condition. In order to manage future growth, we will need to hire, integrate and retain highly skilled and motivated employees. We may not be able to hire new employees quickly enough to meet our needs. If we fail to effectively manage our hiring needs and successfully integrate our new hires, our efficiency and ability to meet our forecasts and our employee morale, productivity and retention could suffer, and our business, results of operations or financial condition could be harmed. We will also be required to continue to improve our existing systems for operational and financial management, including our reporting systems, procedures and controls. These improvements may require significant capital expenditures and could place increasing demands on our management. We may not be successful in managing or expanding our operations or in maintaining adequate financial and operating systems and controls. If we do not successfully implement improvements in these areas, our business, results of operations or financial condition could be harmed.
If we are unable to attract, train, motivate and retain senior management and other qualified personnel, our business, results of operations or financial condition could be negatively affected.
Our success depends in large part on our ability to attract and retain senior management personnel, as well as technically qualified and highly skilled technical, operational, sales, consulting, finance and marketing personnel. It could be difficult, time consuming and expensive to identify, recruit, and onboard any key management member or other critical personnel. Competition for highly skilled personnel is often intense. If we are unable to attract and retain qualified individuals, our ability to compete in the markets for our solutions would be adversely affected, which would have a negative impact on our business, results of operations or financial condition. Our competitors may be successful in recruiting and hiring members of our management team or other key employees, including key employees obtained through our acquisitions, and it may be difficult for us to find suitable replacements on a timely basis, on competitive terms or at all.
Changes in management or other critical personnel may be disruptive to our business and might also result in our loss of unique skills, loss of knowledge about our business and the departure of other existing employees. The loss of one or more of our key employees could significantly harm our business. If we are unable to attract, integrate, or retain the qualified and highly skilled personnel required to fulfill our current or future needs, our business, results of operations or financial condition could be harmed.
 
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Effective succession planning is also important to the long-term success of our business. If we fail to ensure the effective transfer of knowledge and smooth transitions involving key employees, it could hinder our strategic planning and execution. The loss of senior management or any ineffective transitions in management could significantly delay or prevent the achievement of our development and strategic objectives, which could adversely affect our business, results of operations or financial condition.
Our international operations subject us to additional risks which could have an adverse effect on our business, results of operations or financial condition.
We have certain business operations located in the Philippines. Countries outside of the United States may be subject to relatively higher degrees of political and social instability and may lack the infrastructure to withstand political unrest or natural disasters. These risks and challenges include, but are not limited to:

difficulties and costs of staffing and managing foreign operations, including any impairment to relationships with employees caused by a reduction in force;

restrictions imposed by local labor practices and laws on our business and operations;

exposure to different business practices and legal standards;

unexpected changes in regulatory requirements;

political, social and economic stability and the risk of war, terrorist activities or other international incidents;

the failure of telecommunications and connectivity infrastructure;

natural disasters and public health emergencies, including the ongoing COVID-19 pandemic; and

potentially adverse tax consequences, including the possible imposition of increased withholding taxes.
The factors set forth above could interfere with work performed by labor sources in these areas or could result in our having to replace or reduce these labor sources.
The practice of utilizing labor based in foreign countries has come under increased scrutiny in the United States. Governmental authorities, including CMS, could seek to impose financial costs or restrictions on foreign companies providing services to clients or companies in the United States. Governmental authorities may attempt to prohibit or otherwise discourage us from sourcing services from offshore labor. In addition, clients may require us to use labor based in the United States for regulatory or other reasons. To the extent that we are required to use labor based in the United States, we may face increased costs as a result of higher-priced United States-based labor.
The Foreign Corrupt Practices Act of 1977, as amended, and other applicable anti-corruption laws and regulations prohibit certain types of payments by our employees, vendors and agents. Any violation of the applicable anti-corruption laws or regulations by us, our subsidiaries or our local agents could expose us to significant penalties, fines, settlements, costs and consent orders that may curtail or restrict our business as it is currently conducted and could have an adverse effect on our business, results of operations or financial condition.
Contractual relationships with private insurers that are funded by government programs may impose special burdens on us and provide special benefits to those clients.
A large portion of our revenue comes from private insurers that are funded by government programs. Our contracts with private insurers may be subject to some or all of the following:

termination when appropriated funding for the current fiscal year is exhausted;

termination for the governmental client’s convenience, subject to a negotiated settlement for costs incurred and profit on work completed, along with the right to place contracts out for bid before completion of the full contract term, as well as the right to make unilateral changes in contract requirements, subject to negotiated price adjustments;
 
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compliance and reporting requirements related to, among other things, agency-specific policies and regulations, information security, subcontracting requirements, equal employment opportunity, affirmative action for veterans and workers with disabilities and accessibility for the disabled;

broad audit rights;

ownership of inventions made with federal funding under the Bayh-Dole Act; and

specialized remedies for breach and default, including setoff rights, risk allocation, retroactive price adjustments and civil or criminal fraud penalties, re-procurement expenses, as well as mandatory administrative dispute resolution procedures instead of state contract law remedies.
In addition, certain violations of federal and state law may result in termination of our contracts with private insurers, and, under certain circumstances, suspension or debarment from future such contracts.
We face inspections, reviews, audits and investigations from health plans. These audits could have adverse findings that may negatively affect our business, results of operations or financial condition.
Because we support our health plan clients’ participation in Medicare and other government-sponsored healthcare programs, we are subject to inspections, reviews, audits and investigations by them to verify our compliance with these programs, applicable laws and regulations and contractual requirements. We also periodically conduct internal audits and reviews of our regulatory compliance. An adverse inspection, review, audit or investigation could result in:

refunding amounts or paying penalties assessed by the health plans;

state or federal agencies imposing fines, penalties and other sanctions on us;

decertification or exclusion from participation in one or more health plan networks;

self-disclosure of violations to applicable regulatory authorities;

damage to our reputation; and

loss of certain rights under, or termination of, our contracts with health plans.
The outcome of any current or future inspection, review, audit or investigation cannot be accurately predicted, nor can we predict any of the results noted above. Nevertheless, it is possible that any such outcome of an adverse inspection, review, audit or investigation could be substantial, and the outcome of these matters may have a material adverse effect on our business, results of operations or financial condition. Furthermore, the legal and other costs associated with complying with these inspections, reviews, audits or investigations, including costs associated with maintaining related security and compliance controls, could be significant.
Our ability to use our net operating losses to offset future taxable income may be subject to certain limitations.
Our net operating loss (“NOL”) carryforwards could expire unused and be unavailable to offset future income tax liabilities because of their limited duration or because of restrictions under U.S. tax law. NOLs generated in taxable years beginning before January 1, 2018 are permitted to be carried forward for only 20 taxable years under applicable U.S. federal income tax law. Under the Tax Cuts and Jobs Act, or the Tax Act, as modified by the Coronavirus Aid, Relief, and Economic Security Act, or the CARES Act, NOLs arising in taxable years beginning after December 31, 2017, and before January 1, 2021, may be carried back to each of the five tax years preceding the tax year of such loss, and NOLs arising in tax years beginning after December 31, 2020 may not be carried back. Moreover, under the Tax Act as modified by the CARES Act, NOLs generated in taxable years beginning after December 31, 2017 may be carried forward indefinitely, but the deductibility of such NOLs generally will be limited in taxable years beginning after December 31, 2020 to 80% of current year taxable income. The extent to which state income tax law will conform to the Tax Act and CARES Act is uncertain.
In general, under Section 382 of the Internal Revenue Code of 1986, as amended to the date hereof (the “Code”), a corporation that undergoes an “ownership change” ​(as defined under Section 382 of the Code (“Section 382”) and applicable Treasury Regulations) is subject to limitations on its ability to utilize
 
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its pre-change NOLs to offset future taxable income. As a result of the Merger, an analysis was completed in accordance with Section 382 to determine the limitations associated with our use of preexisting NOL carryforwards in future periods. The annual limitation is based on a number of factors including the value of our stock (as defined for tax purposes) on the date of the ownership change, our net unrealized built in gain position on that date and the effect of any subsequent ownership changes, if any. We retained a third party to complete the required Section 382 analysis who determined that at September 4, 2019 approximately $66.9 million of the NOL carryforwards will be available to future tax periods in varying increments annually. As of December 31, 2020, the Company had $50.0 million of federal NOL carryforwards which begin to expire in 2023 and $52.6 million of combined NOL carryforwards in various states which will begin to expire in 2023.
Risks Related to Governmental Regulation
Recent and future developments in the healthcare industry could have a material adverse impact on our business, results of operations or financial condition.
All of our revenue is derived from the healthcare industry, which is highly regulated and subject to changing political, legislative, regulatory and other influences. The results of the 2020 U.S. presidential and congressional elections have created further uncertainty, including with respect to the U.S. government’s role, in the U.S. healthcare industry. As a result of such elections, there are renewed calls for health insurance reform, which could lead to significant changes in the U.S. healthcare market. We cannot predict with certainty what form any potential health insurance reform may take and the impact of any such reform on our clients’ businesses and on our business, but such changes could impose new or more stringent regulatory requirements on the activities of our clients, which in turn could negatively impact our business, results of operations or financial condition.
Federal healthcare program spending continues to be a major political and legislative issue in the United States and the federal government continues to consider deficit reduction measures and other changes to government healthcare programs. In recent years, legislative and regulatory changes have limited, and in some cases reduced, the levels of payment that healthcare payors receive for various services under Medicare, Medicaid and other federal healthcare programs. For example, the Budget Control Act requires automatic spending reductions to the federal deficit, and the Patient Protection and Affordable Care Act (the “ACA”) provides for significant federal healthcare program spending reductions, including reductions in Medicare payments to most healthcare providers and Medicare Advantage plans. See “— Risks Related to our Business and Industry — Federal reductions in Medicare Advantage funding could adversely affect our business, results of operations or financial condition.”
The ACA has also changed how healthcare services are covered, delivered and reimbursed. The ACA mandates that substantially all U.S. citizens maintain health insurance coverage, expands health insurance coverage through a combination of public program expansion and private sector reforms, reduces Medicare program spending and promotes value-based purchasing. However, efforts by certain lawmakers to repeal or make significant changes to the ACA, our implementation or our interpretation have cast uncertainty onto the future of the law. We are unable to predict the full impact of the ACA and other health reform initiatives on our operations in light of the uncertainty regarding whether, when and how the ACA will be further changed, what alternative reforms (including single payer proposals), if any, may be enacted, the timing of enactment and implementation of alternative provisions and the impact of alternative provisions on various healthcare industry participants. While many of the provisions of the ACA and other health reform initiatives may not be directly applicable to us, such initiatives affect the businesses of our clients. For example, as a result of Medicare payment reductions and other reimbursement changes mandated under the ACA, our clients may attempt to seek price concessions from us or reduce their use of our solutions, especially if provisions expanding coverage are repealed without eliminating the payment reductions or other reimbursement changes. Additionally, because many of our solutions are designed to assist clients in effectively navigating the shift to value-based healthcare, the elimination of, or significant revisions to, various value-based healthcare initiatives may adversely impact our business. Thus, the ACA may result in a reduction of expenditures by clients or potential clients in the healthcare industry, which could have a material adverse impact on our business, results of operations or financial condition.
 
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Moreover, there are currently numerous federal, state and private initiatives seeking to increase the use of technology in healthcare as a means of improving care and reducing costs. For example, the Health Information Technology for Economic and Clinical Health (“HITECH”) Act, which was enacted in 2009, and the 21st Century Cures Act (the “Cures Act”), which was enacted in 2016, contain incentives and penalties to promote the use of Electronic Health Records (“EHR”) technology and the efficient exchange of health information electronically. Further, the Cures Act provides for penalties to be imposed on healthcare technology developers, health information exchanges or networks and health providers that are found to improperly block the exchange of health information. These and other initiatives may result in additional or costly legal or regulatory requirements that are applicable to us and our clients, may encourage more companies to enter our markets, may provide advantages to our competitors and may result in the development of technology solutions that compete with us. Any such initiatives also may result in a reduction of expenditures by existing or potential clients, which could have a material adverse impact on our business, results of operations or financial condition.
In addition to cost containment efforts at the federal and state levels, general reductions in expenditures by healthcare industry constituents could have a material adverse impact on our business, results of operations or financial condition. Such reductions could result from, among other things, government regulation or private initiatives that affect the manner in which providers interact with patients, payors or other healthcare industry constituents, including changes in pricing or means of delivery of healthcare solutions. Even if general expenditures by healthcare industry constituents remain the same or increase, other developments in the healthcare industry may result in reduced spending on healthcare technology and services or in some or all of the specific markets we serve or are planning to serve. In addition, our clients’ expectations regarding pending or potential healthcare industry developments also may affect their budgeting processes and spending plans with respect to the types of solutions we provide. For example, use of our solutions could be affected by, among other things:

changes in the design of health insurance plans;

changes in the contracting methods payors use in their relationships with providers; and

implementation of government programs that streamline and standardize eligibility enrollment processes, which could result in decreased pricing or demand for our eligibility and enrollment solutions.
The healthcare industry has changed significantly in recent years, and we expect that significant changes will continue to occur. The timing and impact of developments in the healthcare industry are difficult to predict. We cannot be sure that the markets for our solutions will continue to exist at their current levels, will not change in ways that adversely affect us or that we will have adequate technical, financial and marketing resources to react to changes in those markets.
We are subject to complex, stringent and evolving laws, regulations and standards relating to data privacy and security (including the collection, storage, use, transfer, and processing of personally identifiable information), including protected health information, and any actual or perceived failure by us to comply with such laws, regulations or standards, or our own information security policies or contractual or other obligations relating to data privacy and security, could adversely affect our business, including our reputation among clients.
We collect, receive, generate, use, process, and store significant and increasing volumes of sensitive information, such as employee, client and individual protected health information and other personally identifiable information. We are subject to a variety of federal, state and local laws, directives and regulations, as well as contractual obligations, relating to the collection, use, storage, retention, security, disclosure, transfer, return, destruction and other processing of protected health information, other personally identifiable information, and other data. In many jurisdictions, enforcement actions and consequences for noncompliance with such laws, directives and regulations are rising, and the regulatory framework for privacy, data protection and data transfers is complex and rapidly evolving and is likely to remain uncertain for the foreseeable future. As required by applicable laws, we publicly post documentation regarding our privacy practices concerning the collection, processing, use and disclosure of certain data. The publication of our privacy policy and other documentation that provide promises and assurances about privacy and security can subject us to potential state and federal action if they are found to be deceptive, unfair, or misrepresentative
 
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of our actual practices. In addition, although we endeavor to comply with our published policies and documentation, individuals could allege we have failed to do so, or we may at times actually fail to do so despite our efforts. Any failure by us, our vendors or other parties with whom we do business to comply with this documentation or with laws or regulations applicable to our business could result in proceedings against us by governmental entities or others. Such a failure could adversely affect our business, including our reputation among clients.
The U.S. federal and various state government bodies and agencies have adopted or are considering adopting laws and regulations limiting, or laws and regulations regarding the collection, distribution, use, disclosure, storage and security of, personally identifiable information, including protected health information. For example, the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) establishes a set of national privacy and security standards for the protection of protected health information by health plans, healthcare clearinghouses and certain healthcare providers, referred to as covered entities, and the business associates with whom such covered entities contract for services, including administrative provisions directed at simplifying electronic data interchange through standardizing transactions, establishing uniform healthcare provider, payor, and employer identifiers and seeking protections for confidentiality and security of patient data. Compliance with HIPAA requires significant systems enhancements, training and administrative effort. HIPAA can also expose us to additional liability for violations by our business associates.
HIPAA imposes mandatory penalties for certain violations, and a single breach incident can result in violations of multiple standards. HIPAA also authorizes state attorneys general to file suit on behalf of their residents. Courts may award damages, costs and attorneys’ fees related to violations of HIPAA in such cases. While HIPAA does not create a private right of action allowing individuals to sue in civil court for violations of HIPAA, its standards have been used as the basis for duty of care in state civil suits such as those for negligence or recklessness in the misuse or breach of protected health information or personally identifiable information. Moreover, many state laws do create state-specific private rights of action for conduct that would otherwise violate HIPAA or state law obligations. Class action lawsuits are becoming an expected and more common occurrence in cases of breaches.
In addition, HIPAA mandates that the Secretary of the Department of Health and Human Services (“HHS”) conduct periodic compliance audits of HIPAA-covered entities and business associates for compliance with HIPAA’s privacy and security standards. It also tasks HHS with establishing a methodology whereby harmed individuals who were the victims of breaches of unsecured protected health information may receive a percentage of the civil monetary penalty fine paid by the violator.
HIPAA further requires that members be notified of any unauthorized acquisition, access, use or disclosure of their unsecured protected health information that compromises the privacy or security of such information, with certain exceptions related to unintentional or inadvertent use or disclosure by employees or authorized individuals. HIPAA specifies that such notifications must be made “without unreasonable delay and in no case later than 60 calendar days after discovery of the breach.” If a breach affects 500 patients or more, it must be reported to HHS without unreasonable delay, and HHS will post the name of the breaching entity on its public website. Breaches affecting 500 patients or more in the same state or jurisdiction must also be reported to the local media. If a breach involves fewer than 500 people, the covered entity must record it in a log and notify HHS at least annually.
In addition to HIPAA, numerous other federal and state laws and regulations designed to protect the collection, distribution, use, disclosure, storage and security of protected health information and other types of personally identifiable information have been enacted. For example, in June 2018 California enacted the California Consumer Privacy Act (“CCPA”), which became effective on January 1, 2020 and, among other things, requires covered companies to provide certain disclosures to California residents and afford such residents data protection rights, including the ability to opt out of certain sales of personally identifiable information. The CCPA provides for civil penalties for violations, as well as a private right of action for certain data breaches that result in the loss of personally identifiable information that may increase data breach litigation. Additionally, a new California ballot initiative, the California Privacy Rights Act (“CPRA”), was passed in November 2020. Effective beginning on January 1, 2023, the CPRA imposes additional obligations on companies covered by the legislation and will significantly modify the CCPA, including by expanding California residents’ rights with respect to certain sensitive personally identifiable information. The CPRA
 
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also creates a new state agency that will be vested with authority to implement and enforce the CCPA and the CPRA. While the CCPA may not apply to certain protected health information, the interpretation and enforcement of the CCPA remain unclear, and the effects of the CCPA potentially are significant and still may require us to modify our data practices and policies and to incur substantial costs and expenses in an effort to comply and increase our potential exposure to regulatory enforcement and sanctions and litigation.
In the United States, many state legislatures, government bodies and regulatory agencies have adopted legislation and regulations that regulate how businesses operate online, including measures relating to privacy, data security and data breaches. Additionally, some statutory and regulatory requirements in the United States, such as HIPAA, include obligations for companies to notify individuals of security breaches involving particular personally identifiable information, which could result from breaches experienced by us or our service providers. Laws in all 50 states and other U.S. territories require businesses to provide notice to individuals whose personally identifiable information has been disclosed as a result of a data breach. Such laws are not always consistent, and compliance in the event of a widespread data breach is costly and may be challenging. States are also constantly amending existing laws, requiring attention to frequently changing requirements, and we expect these changes to continue.
In addition to government regulation, privacy advocates and industry groups may propose self-regulatory standards from time to time. These and other industry standards may legally or contractually apply to us, or we may elect to comply with such standards or to facilitate our clients’ compliance with such standards. We expect that there will continue to be new proposed laws and regulations concerning privacy, data protection and information security, and we cannot yet determine the impact such future laws, regulations, and standards may have on our business. New laws, amendments to or re-interpretations of existing laws and regulations, industry standards, contractual and other obligations may require us to incur additional costs and restrict our business operations. Because the interpretation and application of laws, standards, contractual and other obligations relating to privacy and data protection are still uncertain and changing, it is possible that these laws, standards, contractual and other obligations may be interpreted and applied in a manner that is inconsistent with our data management practices, our privacy, data protection or data security policies or procedures or the features of our technology. If so, in addition to the possibility of fines, lawsuits, regulatory investigations, imprisonment of company officials and public censure, other claims and penalties, significant costs for remediation and damage to our reputation, we could be required to fundamentally change our business activities and practices or modify our technology, any of which could adversely affect our business. We may be unable to make such changes or modifications in a commercially reasonable manner, or at all, and our ability to develop new software or provide new services could be limited. Any inability to adequately address privacy, data protection or information security-related concerns, even if unfounded, or to successfully negotiate privacy, data protection or information security-related contractual terms with clients, or to comply with applicable laws and regulations, or our policies relating to privacy, data protection, and information security, could result in additional cost and liability to us and harm our reputation and brand. Any of the foregoing could materially and adversely affect our business, results of operations or financial condition.
We are unable to predict what changes to laws, regulations and other requirements, including related to contractual obligations, might be made in the future or how those changes could affect our business and the costs of compliance.
We have attempted to structure our operations to comply with laws, regulations and other requirements applicable to us directly and to our clients, but we cannot assure you that our operations will not be challenged or impacted by enforcement initiatives. We have been, and in the future may become, involved in governmental investigations, audits, reviews and assessments. Certain of our businesses are subject to review, including for compliance with various legal, regulatory or other requirements. Any determination by a court or agency that our solutions violate, or cause our clients to violate, applicable laws, regulations or other requirements could subject us or our clients to civil or criminal penalties. Such a determination also could require us to modify or terminate portions of our business, disqualify us from serving clients that do business with government entities or cause us to refund some or all of our service fees or otherwise compensate our clients. In addition, failure to satisfy laws, regulations or other requirements could adversely affect demand for our solutions and could force us to expend significant capital, research and development and other resources to address the failure. Even an unsuccessful challenge by regulatory and other authorities
 
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or private whistleblowers could be expensive and time-consuming, could result in loss of business, exposure to adverse publicity and injury to our reputation and could adversely affect our ability to retain and attract clients. Laws, regulations and other requirements impacting our operations include, but are not limited to, the following:

the federal beneficiary inducement civil monetary laws, which generally prohibit giving something of value to an individual if the remuneration is likely to influence that beneficiary’s choice of a particular provider, supplier or practitioner for services covered by applicable federal healthcare programs. There are a number of exceptions, such as, remuneration that “promotes access to care and poses a low risk of harm to patients and federal healthcare programs.” A violation of this statute includes fines or exclusion from federal healthcare programs;

HIPAA, which created additional federal criminal statutes that prohibit, among other things, knowingly and willfully executing, or attempting to execute, a scheme to defraud or to obtain, by means of false or fraudulent pretenses, representations or promises, any money or property owned by, or under the control or custody of, any healthcare benefit program, including private third-party payors, willingly obstructing a criminal investigation of a healthcare offense, and knowingly and willfully falsifying, concealing or covering up by trick, scheme or device, a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services. Like the federal Anti-Kickback Statute, a person or entity need not have actual knowledge of the statute or specific intent to violate it in order to have committed a violation;

the Telephone Consumer Protection Act, as amended (“TCPA”), subjects us and our vendors to various rules regarding contacting our clients and our clients’ patients via telephone, fax or text message and may impact our operations. Prior express consent, and, in the case of marketing calls, prior express written consent, of consumers may be required to override certain activities prohibited under the TCPA. Because our solutions need and rely upon various messaging components to achieve successful outcomes for us and our clients, our ability to communicate with our clients and their patients may be affected by the TCPA, its implementing regulations and litigation pursuant to the TCPA. In addition, because the scope and interpretation of the TCPA, and other laws that are or may be applicable to making calls and delivering text messages to consumers, continue to evolve and develop, we or our vendors inadvertently could fail to comply or be alleged, with or without merit, to have failed to comply with the TCPA or other similar laws, and consequently be subject to significant liability and statutory damages, negative publicity associated with class action litigation or costs associated with modifying our solutions and business strategies;

the Controlling the Assault of Non-Solicited Pornography and Marketing Act, which regulates commercial email messages and specifies penalties for the transmission of commercial email messages that do not comply with certain requirements, such as providing an opt-out mechanism for stopping future emails from senders; and

analogous state laws and regulations, such as state anti-kickback and false claims laws, which may be more restrictive and may apply to healthcare items or services reimbursed by non-governmental third-party payors, including private insurers, or by the patients themselves.
We also may be impacted by non-healthcare laws, industry standards and other requirements. For example, laws and regulations governing how we communicate with our clients and our clients’ members may impact our operations and, if not followed, would result in fines, penalties and other liabilities and adverse publicity and injury to our reputation. Compliance with future laws and regulations or the applicable regulators’ interpretations of the laws and regulations may require us to change our practices at an undeterminable, and possibly significant, initial and annual expense. These additional monetary expenditures may increase future overhead, which could harm our business.
Changes in tax rules and regulations, or in interpretations thereof, may materially adversely affect our effective tax rates.
We have operations in many states in the United States as well as the Philippines. Accordingly, we are subject to taxation in many jurisdictions with increasingly complex tax laws, the application of which can be uncertain.
 
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Unanticipated changes in our tax rates could affect our future results of operation or financial condition. Our future effective tax rates could be unfavorably affected by changes in the tax rates in jurisdictions where our income is earned and taxed, by changes in tax rules and regulations, or in interpretations thereof, in the jurisdictions in which we do business, by increases in expenses not deductible for tax purposes including impairments of goodwill, by changes in GAAP or other applicable accounting standards or by changes in the valuation of our deferred tax assets and liabilities.
In addition, we are subject to the continual examination of our income tax returns by the U.S. Internal Revenue Service (“IRS”) and other domestic and international tax authorities. Tax authorities in various jurisdictions may disagree with and subsequently challenge the amount of profits taxed in their state or country, which may result in increased tax liability, including accrued interest and penalties, which would cause our tax expense to increase. We regularly assess the likelihood of outcomes resulting from these examinations to determine the adequacy of our provision for income taxes and have reserved for potential adjustments that may result. We cannot assure you that the final determination of any of these examinations will not have a material adverse effect on our results of operations or financial condition.
Risks Related to Information Technology, Data Privacy and Intellectual Property
Security breaches or incidents, failures and other disruptions of the information technology (“IT”) systems used in our business operations, including the Internet and related systems of our vendors, and the security measures protecting them, and the sensitive information we collect, process, transmit, use and store, may adversely impact our business, results of operations or financial condition.
Our business relies on sophisticated, commercial off-the-shelf and customized IT systems to obtain, process, store, analyze and manage data and other sensitive information, and to develop, distribute and deliver products and services. Further, our business relies to a significant degree upon the secure collection, transmission, use, storage and other processing of sensitive information, including protected health information and other personally identifiable information, financial information, including payment card data, and other confidential information and data within these systems. To the extent our or our vendors’ IT systems are not successfully protected or fail, our business, results of operations or financial condition may be adversely affected. Our business, results of operations or financial condition may also be adversely affected if a vendor servicing our IT systems does not perform satisfactorily, or if the IT systems are interrupted or damaged by unforeseen events, including the actions of third parties.
To protect our systems and the information stored thereon, we seek to implement commercially reasonable security measures and maintain information security policies and procedures informed by requirements under applicable law and recommended practices, in each case, as applicable to the data received, used, stored, processed and transmitted. Despite our security management efforts with respect to administrative, physical and technical safeguards, employee training, vendor (and sub-vendor) controls and contractual relationships, our infrastructure, data or other operations centers and systems used in connection with our business operations, including the Internet and related systems of our vendors (including vendors to which we outsource data hosting, storage and processing functions) are vulnerable to a security breach, interruption of system or the threat of a breach or other security incident. For example, we and our vendors have experienced, and from time to time in the future may experience, unauthorized access to, misuse, modification, loss or destruction of and disclosure of our or our clients’ (or their members’ and patients’) confidential or personal information or data due to cyberattacks and other data security incidents, power or telecommunications failures, employee or insider malfeasance or improper employee or contractor conduct, computer viruses and other malware, programming errors and other human errors, phishing schemes, threats of ransomware events and denial-of-service attacks. In the future, we may experience such unauthorized access or disclosures for these reasons or due to other disruptive problems, including, but not limited to, physical break-ins, hackers and other breaches by insiders or third parties due to criminal conduct, ransomware events, fraud, natural disasters, terrorist attacks and other unanticipated events. We may be required to expend significant capital and other resources to protect against, and alleviate problems caused by, such incidents, regardless of whether they affect our systems or networks, or the systems or networks of our third-party service providers.
It is not possible to prevent all security threats to our systems and data or to predict all the ways in which such security threats may materialize. Techniques used to obtain unauthorized access, disable or
 
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degrade services or sabotage systems are becoming increasingly complex and sophisticated and change frequently, which can make such events difficult to detect for long periods of time. Further, defects in the design or manufacture of the hardware, software or applications we procure from third parties to develop our products and services could compromise our IT systems. These events, including unauthorized access, misappropriation, disclosure or loss of sensitive information (including personally identifiable information, protected health information or financial information) or a significant disruption of our network generally, expose us to risks, including an inability to provide our solutions and fulfill contractual demands, and could cause management distraction and the obligation to devote significant financial and other resources to mitigate such problems, which would increase our future information security costs, including through organizational changes, deploying additional personnel, reinforcing administrative, physical and technical safeguards, further training of employees, changing vendor (and sub-vendor) control practices and engaging third-party subject matter experts and consultants.
Moreover, unauthorized access, use or disclosure of certain sensitive information in our possession or our failure to satisfy legal requirements, including requirements relating to safeguarding protected health information under HIPAA, payment card data under the Payment Card Industry Data Security Standard and personally identifiable information under applicable state data privacy laws, as discussed above, could result in litigation, disputes, indemnity obligations and other liabilities and regulatory investigations, enforcement, orders and actions, which could result in potential fines and penalties, as well as costs relating to investigation of an incident or breach, corrective actions, required notifications to regulatory agencies and clients, credit monitoring services and other necessary expenses. In addition, actual or perceived breaches of our security management efforts can cause existing clients to terminate their relationship with us and deter existing or prospective clients from using or purchasing our solutions in the future. These events can have a material adverse impact on our business, results of operations, financial condition or reputation.
Because our solutions involve the collection, processing, storage, use and transmission of personally identifiable information of consumers, we and other industry participants have been and expect to routinely be the target of attempted cyber and other security threats by outside third parties, including technically sophisticated and well-resourced bad actors attempting to access or steal the data we store, process or transmit. Vendor, insider or employee cyber and security threats also occur and are a significant concern for all companies, including us. In recent years there have been a number of well-publicized data breaches involving the improper dissemination of personally identifiable information of individuals both within and outside of the healthcare industry and such breaches can result in significant losses. These breaches have resulted in lawsuits and governmental investigations or enforcement actions that have sought or obtained significant fines and penalties, and have required companies to enter into agreements with government regulators that impose ongoing obligations and requirements, including internal and external (third-party) monitorship for five years or more. Most states require holders of personally identifiable information to maintain safeguards and take certain actions in response to a data breach, such as providing prompt notification of the breach to affected individuals or the state’s attorney general. In some states, these laws are limited to electronic data, but states increasingly are enacting or considering stricter and broader requirements. Additionally, HIPAA imposes certain notification requirements on both covered entities and business associates. In certain circumstances involving large breaches, requirements may even involve notification to the media. A non-permitted use or disclosure of protected health information is presumed to be a breach under HIPAA unless the covered entity or business associate establishes that there is a low probability the information has been compromised consistent with requirements enumerated in HIPAA. Further, the Federal Trade Commission has prosecuted certain data breach cases as unfair and deceptive acts or practices under the Federal Trade Commission Act. In addition, by regulation, the Federal Trade Commission requires creditors, which may include some of our clients, to implement identity theft prevention programs to detect, prevent and mitigate identity theft in connection with client accounts. Although Congress passed legislation that restricts the definition of “creditor” and exempts many healthcare providers from complying with this identity theft prevention rule, we may be required to apply additional resources to our existing processes to assist our affected clients in complying with this rule.
While we maintain liability insurance coverage, including coverage for errors and omissions and cyber-liability, claims may not be sufficiently covered or could exceed the amount of our applicable insurance coverage, if any, or such coverage may not continue to be available on acceptable terms or in sufficient amounts. We also cannot ensure that any limitation of liability or indemnity provisions in our contracts,
 
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including with vendors and service providers, for a security lapse or breach or other security incident would be enforceable or adequate or would otherwise protect us from any liabilities or damages with respect to any particular claim. Any of the foregoing could adversely affect our business, results of operations or financial condition.
Disruptions in service or damages to our and our vendors’ data center colocation and hosting facilities, public and private cloud subscriptions, distribution centers or other operations centers, or other software or systems failures, could have a material adverse impact on our business, results of operations or financial condition.
Our data center colocation and hosting facilities, public and private cloud subscriptions, distribution centers and other operations centers are essential to our business. Our business operations depend on our and our vendors’ ability to maintain and protect our network and computer systems, many of which are located in our primary data center colocation facilities and operations centers that we lease or subscribe to and operate, some of which are outsourced to certain third-party hosting and cloud service providers. We have consolidated several hosting environments and currently plan to continue such consolidation. We also provide application hosting and managed services that involve operating both our infrastructure and software, as well as the software of vendors for our clients. The ability to access the systems, applications and data that we host and on demand support is important to our clients.
Our operations, cloud service providers and data center colocation and hosting facilities are vulnerable to interruption or damage from a number of sources, many of which are beyond our control, including, without limitation: power loss and telecommunications failures, fire, flood, hurricane, tornado and other natural disasters, software and hardware errors, failures or crashes , spikes in consumer usage, negligence, infrastructure changes, human or software errors, hardware failures, terrorist attacks, improper operation, cyber and ransomware attacks, computer viruses, hacking, break-ins, sabotage, fraud, intentional acts of vandalism and other similar disruptive problems. The occurrence of any of these events could result in interruptions, delays or cessations in service to users of our solutions, which could impair or prohibit our ability to provide our solutions, reduce the competitive advantages of our solutions to our clients, damage our reputation and otherwise have a material adverse impact on our business, results of operations or financial condition. In addition, if clients’ access to our solutions is interrupted because of problems in our operations, facilities or cloud service providers, we could be in breach of our agreements with clients or exposed to significant claims, particularly if the access interruption is associated with problems in the timely delivery of medical care.
We attempt to mitigate these risks through various means, including disaster recovery and business continuity plans, penetration testing, vulnerability scans, patching and other information security procedures and cybersecurity and ransomware measures, insurance against fires, floods, other natural disasters, cyber-liability and general business interruptions, and client and employee training and awareness, but our precautions cannot protect against all risks. Any significant instances of system downtime could negatively affect our reputation and ability to provide our solutions or remote hosting services, which could have a material adverse impact on our business, results of operations or financial condition.
We also rely on a number of vendors, such as cloud service providers, data center colocation and hosting providers and call center technology providers, to provide us with a variety of solutions and services necessary for our transaction services and processing functions. We also utilize contractors and sub-contractors, including, but not limited to, software developers, for the development and maintenance of certain software products we use to provide our solutions, as well as infrastructure, security and IT service management. As a result, our disaster recovery and business continuity plans may rely, in part, upon vendors of related services, which increases our vulnerability to problems with the services they provide. We exercise limited control over these vendors, and our review processes for such vendors may be insufficient to identify, prevent or mitigate adverse events. Our vendors are ultimately responsible for maintaining their own network security, disaster recovery and system management procedures, and, if these vendors do not fulfill their contractual obligations, have system failures, choose to discontinue their products or services or otherwise suffer any type of cybersecurity incident, our business and operations could be disrupted and our brand and reputation, including with our clients and partners, could be harmed. Any of the foregoing could adversely affect our business, results of operations or financial condition.
 
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Interruptions and limitations of the IT systems used in our business operations could have a material adverse impact on our business, results of operations or financial condition.
Our ability to deliver our solutions and services is dependent on the development and maintenance of the infrastructure of the Internet and other telecommunications services by third parties. This includes maintenance of a reliable network connection with the necessary speed, data capacity and security for providing reliable Internet access and services and reliable telephone and facsimile services. Our services are designed to operate without interruption in accordance with our service level commitments.
However, we have experienced limited interruptions of our IT systems in the past, including infrastructure failures that temporarily slow down the performance of our solutions, and we may experience similar or more significant interruptions in the future, as discussed above. Interruptions of these systems, whether due to system failures, computer viruses, physical or electronic break-ins or other catastrophic events, could affect the security or availability of our solutions and services and prevent or inhibit the ability of our clients to access our solutions and services. In the event of any errors, failures, interruptions or delays with respect to our IT systems or those of our vendors, we may experience an extended period of system unavailability, which could result in substantially costs to remedy the problem or negatively impact our relationships with our clients and partners and adversely affect our business and could expose us to liabilities. Although we maintain insurance for our business, the coverage under our policies may not be adequate to compensate us for all losses that may occur, and we cannot provide assurance that we will continue to be able to obtain adequate insurance coverage at an acceptable cost.
In addition, as a result of the complexity of the issues facing our clients and the inherent complexity of our solutions to such issues, our clients depend on our support organization to resolve any technical issues relating to our offerings. Our ability to deliver our products and solutions is dependent on our software development lifecycle management processes, including with respect to our change management processes, which impact our ability to effectively identify, track, test, manage and implement changes to our software. As a result, our IT systems require an ongoing commitment of significant resources to maintain and enhance existing systems and develop new systems in order to keep pace with continuing changes in information technology, emerging cybersecurity risks and threats, evolving industry and regulatory standards and changing preferences of our clients. In addition, our sales process is highly dependent on the quality of our offerings, on our business reputation and on strong recommendations from our existing clients. Any failure to maintain high-quality and highly responsive technical support, or a market perception that we do not maintain high-quality and highly responsive support, including as a result of our inability to respond quickly enough to accommodate short-term increases in client demand for certain technical support services, particularly as we increase the size of our client base, could harm our reputation, adversely affect our ability to sell our offering to existing and prospective clients, and harm our business, results of operations or financial condition.
The protection of our intellectual property and proprietary rights requires substantial resources, and protections of our intellectual property and proprietary rights may not be adequate. Any failure to obtain, maintain, protect and enforce our intellectual property and proprietary rights, or failure of our intellectual property and proprietary rights to be sufficiently broad, could harm our business, results of operations or financial condition.
Our success is dependent, in part, upon our ability to protect our intellectual property and proprietary technology. We rely upon a combination of trade secret, trademark, patent and copyright laws, license agreements, confidentiality policies and procedures, contractual provisions (e.g., intellectual property assignment agreements), nondisclosure agreements and technical measures of varying duration designed to establish, maintain and protect the intellectual property and proprietary information and commercially valuable confidential information and data used in our business. However, the steps we have taken to obtain, maintain, protect and enforce our proprietary rights and intellectual property may not be adequate, protect against our competitors or other third parties independently developing products or services that are equivalent or superior to our solutions or otherwise allow us to maintain any competitive advantage.
For instance, we have not sought to register our intellectual property outside of the United States and we may not be able to secure trademark or service mark registrations for marks in the United States or take similar steps to secure patents for our proprietary processes, methods and technologies. Even if we are successful in obtaining patent, trademark or other intellectual property rights or registrations, any of these
 
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rights and registrations may lapse, be abandoned, be circumvented by others or may be opposed or otherwise challenged or invalidated by a third party through administrative process or litigation.
Third parties also may infringe upon, misappropriate or otherwise violate our trademarks, service marks, patents and other intellectual property and proprietary rights. If we believe a third party has infringed, misappropriated or otherwise violated our intellectual property or proprietary rights, litigation may be necessary to enforce and protect those rights or to determine the validity and scope of the rights of others, which would divert management resources, would be expensive and time-consuming and may not effectively protect our intellectual property and proprietary rights, regardless of whether we are successful or not. In addition, our efforts may be met with defenses and counterclaims challenging the validity and enforceability of our intellectual property rights or may result in a court determining that our intellectual property rights are unenforceable. Even if we establish infringement, misappropriation or other violation, a court may decide not to grant an injunction against further infringing activity and instead award only monetary damages, which may or may not be an adequate remedy. Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during litigation. There could also be public announcements of the results of hearings, motions or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it could have a material adverse effect on the price of shares of our common stock. Moreover, we cannot assure you that we will have sufficient financial or other resources to file and pursue such claims, which typically last for years before they are concluded. Even if we ultimately prevail in such claims, the monetary cost of such litigation and the diversion of the attention of our management and scientific personnel could outweigh any benefit we receive as a result of the proceedings. As a result, if we fail to obtain, maintain, protect or enforce adequate intellectual property protection or if a third party infringes, misappropriates or otherwise violates our intellectual property and proprietary rights, it may have a material adverse impact on our business, results of operations or financial condition.
Our currently pending or future patent applications may not result in issued patents, or be approved on a timely basis, if at all. Similarly, any term extensions that we seek may not be approved on a timely basis, if at all. In addition, our issued patents, or any patents that may be issued in the future, may not contain claims sufficiently broad to protect us against third parties with similar technologies or solutions or provide us with any competitive advantage, including exclusivity in a particular area, or may be successfully challenged by third parties, which could result in them being narrowed in scope or declared invalid or unenforceable. In addition, if we are unable to maintain our existing license agreements or other agreements pursuant to which third parties grant us rights to intellectual property, including because such agreements terminate, our business, results of operations or financial condition could be materially adversely affected.
Patent law reform in the United States may also weaken our ability to enforce our patent rights, or make such enforcement financially unattractive. For instance, in September 2011, the United States enacted the Leahy-Smith America Invents Act, which permits enhanced third-party actions for challenging patents and implements a “first-to-file” system for deciding which party should be granted a patent when two or more patent applications are filed by different parties claiming the same invention. These reforms could result in increased uncertainties and costs to protect our intellectual property or limit our ability to obtain and maintain patent protection for our solutions in these jurisdictions.
Our trademarks, logos and brands may provide us with a competitive advantage in the market as they may be known or trusted by clients. In order to maintain the value of such brands, we must be able to obtain, maintain, enforce and defend our trademarks. We have pursued, and will pursue, the registration of trademarks, logos and service marks in the United States; however, enforcing rights against those who knowingly or unknowingly dilute or infringe our brands can be difficult. We may be unable to obtain trademark protection for our services and brands, and our existing trademark registrations and applications, and any trademarks that may be used in the future, may not sufficiently distinguish our products, services and brands from those of our competitors. In addition, our trademarks may be contested or found to be unenforceable or invalid, and we may not be able to prevent third parties from infringing or otherwise violating them. We cannot assure you that the steps we have taken and will take to protect our proprietary rights in our brands and trademarks will be adequate or that third parties will not infringe, dilute or misappropriate our brands, trademarks, trade dress or other similar proprietary rights.
 
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While we generally seek to enter into proprietary information agreements with our employees and third parties engaged in the development of intellectual property on our behalf which assign intellectual property rights to us, these agreements may not be honored or may not effectively assign intellectual property or proprietary rights to us under the local laws of some countries or jurisdictions. We also cannot guarantee that we have entered into such agreements with each applicable party. We therefore cannot be certain that a competitor or other third party does not have or will not obtain rights to intellectual property that may prevent us from developing or marketing certain of our solutions, regardless of whether we believe such intellectual property rights are valid and enforceable or we believe we would otherwise be able to develop a more commercially successful solution. Any of the foregoing could materially and adversely affect our business, results of operations or financial condition.
If we are unable to protect the confidentiality of our trade secrets, know-how and other proprietary and internally-developed information, the value of our technology could be adversely affected.
Many of our solutions are based on or incorporate proprietary information. We actively seek to protect our proprietary information, including our trade secrets and proprietary know-how, by generally requiring our employees, consultants, other advisors and other third parties who have access to such information to execute proprietary information and confidentiality agreements upon the commencement of their employment, engagement or other relationship. Despite these efforts and precautions, such agreements may not be sufficient in scope or enforceable, we cannot guarantee that we have entered into such agreements with each person or entity that may have or have had access to our trade secrets or proprietary information, and such agreements can be breached. Enforcing a claim that another party illegally disclosed or obtained and is using any of our trade secrets or proprietary information could be difficult, expensive and time-consuming, and the outcome would be unpredictable. We may therefore be unable to prevent a third party from copying or otherwise obtaining and using our trade secrets or our other intellectual property without authorization and legal remedies may not adequately compensate us for the damages caused by such unauthorized use. Moreover, third parties may independently develop similar or equivalent proprietary information. Any of the foregoing could materially and adversely affect our business, results of operations or financial condition.
We may be subject to claims that our employees, consultants or independent contractors have wrongfully used or disclosed trade secrets or other confidential information of third parties.
We have received confidential and proprietary information from third parties. In addition, we may employ individuals who were previously employed at other healthcare companies or other companies, including our competitors. Although we try to ensure that our employees, consultants and independent contractors do not use the confidential or proprietary information, trade secrets or know-how of others in their work for us, we may be subject to claims that we or our employees, consultants or independent contractors have, inadvertently or otherwise, improperly used or disclosed confidential or proprietary information, trade secrets or know-how of former employers or other third parties. Further, we may be subject to ownership disputes in the future arising, for example, from conflicting obligations of consultants or others who are involved in developing our solutions. We may also be subject to claims that former employees, consultants, independent contractors or other third parties have an ownership interest in our intellectual property. Litigation may be necessary to defend against these and other claims challenging our right to and use of confidential and proprietary information. In addition to paying monetary damages, if we fail in defending against any such claims we may lose our rights therein, which could have a material adverse effect on our business, results of operations or financial condition. Even if we are successful in defending against these claims, litigation could result in substantial costs, result in reputational harm and be a distraction to our management and employees.
Third parties may claim that we or our licensors are infringing, misappropriating or otherwise violating their intellectual property or proprietary rights, and we could suffer significant litigation, the outcome of which would be uncertain, incur licensing expenses or be prevented from selling certain products and solutions.
Our commercial success depends, in part, on our ability to develop and commercialize our products and solutions and use our technology without infringing, misappropriating or otherwise violating the intellectual property or proprietary rights of third parties. We or our licensors could be subject to claims
 
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that we are misappropriating, infringing or otherwise violating intellectual property (including patents, trademarks, trade dress, copyrights, trade secrets and domain names) or other proprietary rights of others. We may become subject to preliminary or provisional rulings in the course of any such litigation, including potential preliminary injunctions requiring us to cease some or all of our operations. Similarly, if any litigation to which we are a party is resolved adversely, we may be subject to an unfavorable judgment that may not be reversed upon appeal. These claims, even if not meritorious, could be expensive to defend and divert management’s attention from our operations, and even if we believe we do not infringe, misappropriate or otherwise violate validly existing third-party rights we may choose to license such rights. If we or our licensors become liable to third parties for infringing, misappropriating or otherwise violating such third-party rights, we could be required to pay a substantial damage award, including treble damages and attorneys’ fees if we are found to have willfully infringed a patent or other intellectual property right. We could also be required to develop non-infringing technology, stop activities or services that use or contain the infringing intellectual property, or obtain a license, which may not be available on commercially reasonable terms and may require us to pay substantial license, royalty or other payments. We may be unable to develop non-infringing solutions or obtain a license on commercially reasonable terms, or at all. Any license may also be non-exclusive, which would potentially allow other parties, including our competitors, to access the same technology.
It may be necessary for us to initiate administrative proceedings or other litigation in order to determine the scope, enforceability or validity of third-party intellectual property or proprietary rights. We may also decide to settle or otherwise resolve such proceedings or litigation on terms that are unfavorable to us. Regardless of whether third-party claims have merit, litigation can be expensive and time-consuming, and could divert management’s attention. Some third parties may be able to sustain the costs of complex litigation more effectively than we can because they have substantially greater resources. There could also be public announcements of the results of hearings, motions or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it could have a material adverse effect on the price of shares of our common stock. We also may be required to indemnify our clients if they become subject to third-party claims relating to the infringement, misappropriation or other violation of a third party’s intellectual property rights that we license or otherwise provide to them, which could be costly. Any of the foregoing could materially and adversely affect our business, results of operations or financial condition.
Our solutions depend, in part, on intellectual property and technology licensed from third parties.
Much of our business and many of our software and solutions rely on key technologies or content developed or licensed by third parties. For example, many of our software offerings are developed using software components or other intellectual property licensed from third parties, including both proprietary and open source licenses. These third-party software components may become obsolete, defective or incompatible with future versions of our solutions, or our relationship with the third-party licensors may deteriorate, or our contracts with the third-party licensors may expire or be terminated. We may also face legal or business disputes with licensors that may threaten or lead to the disruption of inbound licensing relationships.
In order to remain in compliance with the terms of our licenses, we must carefully monitor and manage our use of third-party software components, including both proprietary and open source license terms that may require the licensing or public disclosure of our intellectual property without compensation or on undesirable terms. Because the availability and cost of licenses from third parties depends upon the willingness of third parties to deal with us on the terms we request, there is a risk that third parties — including those who license to our competitors — either will refuse to license to us at all or refuse to license to us on terms equally favorable to those granted to our competitors or other third parties. Consequently, we may lose a competitive advantage with respect to these intellectual property rights or we may be required to enter into costly arrangements in order to terminate or limit these rights. Additionally, some of these licenses may not be available to us in the future on terms that are acceptable or that allow our solutions to remain competitive. In addition, it is possible that, as a consequence of a merger or acquisition, third parties may obtain licenses to some of our intellectual property rights or our business may be subject to certain restrictions that were not in place prior to such transaction. Any of the foregoing could materially and adversely affect our business, results of operations or financial condition.
 
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Our use of open source software could impose limitations on our ability to commercialize our solutions, require substantial resources to monitor compliance with applicable licenses and protect our intellectual property and proprietary rights, subject us to possible litigation and otherwise adversely affect our business.
Our software and solutions incorporate open source software components that are licensed to us under various open source public domain licenses. Some open source software licenses require users who distribute open source software as part of their own software to publicly disclose all or part of the source code to such software or make available any modifications or derivative works of the open source code on unfavorable terms or at no cost.
The terms of many open source licenses have not been interpreted by U.S. or foreign courts and therefore the potential impact of such licenses on our business is not fully known or predictable. There is a risk that such licenses could be construed in a manner that imposes unanticipated conditions or restrictions on our ability to market our solutions.
While we monitor our use of open source software and endeavor to ensure that none is used in a manner that would require us to disclose our proprietary source code or that would otherwise breach the terms of an open source license, such use could inadvertently occur, or could be claimed to have occurred, in part because open source license terms are often ambiguous, and we cannot assure or be certain that we have in all cases incorporated open source software in our solutions in a manner that is consistent with the applicable open source license terms and inclusive of all available updates or security patches. As a result, we may be required to publicly release our proprietary source code, pay damages for breach of contract, re-code or re-engineer one or more of our offerings, discontinue sales of one or more of our solutions in the event re-engineering cannot be accomplished on a timely basis or at all or take other remedial action that may divert resources away from our development efforts, any of which could cause us to breach obligations to our clients, harm our reputation, result in client losses or claims, increase our costs or otherwise materially adversely affect our business, results of operations or financial condition. A release of our proprietary code could also allow our competitors to create similar offerings with lower development effort and time and ultimately could result in a loss of our competitive advantages.
Furthermore, use and distribution of open source software may entail greater risks than use of third-party commercial software, as open source licensors generally do not provide support, warranties, indemnification or other contractual protections regarding infringement claims or the quality of the code. Any of the foregoing could materially and adversely affect our business, results of operations or financial condition.
We may be obligated to disclose our proprietary source code to our clients, which may limit our ability to protect our intellectual property and proprietary rights and could reduce the renewals of our services.
Certain of our agreements with our clients contain, and may in the future contain, provisions permitting the client to become a party to, or a beneficiary of, a source code escrow agreement under which we place the proprietary source code for our applicable solutions in escrow with a third party. Under these escrow agreements, the source code to the applicable solution may be released to the client, to be used in accordance with the license granted to the client in the applicable services agreement, upon the occurrence of specified events, such as in situations of our bankruptcy or insolvency, our aggregate cash balances not exceeding a specified threshold or the discontinuance of our ability to offer, support or maintain the applicable services.
Disclosing the content of our source code may limit the intellectual property protection we can obtain or maintain for our source code or our software and solutions containing that source code, and may facilitate intellectual property infringement, misappropriation or other violation claims against us. It also could permit a client to which a solution’s source code is disclosed to support and maintain that software or solution without being required to purchase our services. In addition, we cannot be certain that clients will comply with any applicable restrictions on their use or disclosure of the source code and we may be unable to monitor and prevent unauthorized use or disclosure of such source code. Any increase in the number of people familiar with our source code as a result of any such release may also increase the risk of a successful hacking attempt. Each of these could materially adversely affect our business, results of operations or financial condition.
 
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Risks Related to Our Capital Structure, Indebtedness and Capital Requirements
Despite our level of indebtedness, we are able to incur more debt and undertake additional obligations. Incurring such debt or undertaking such additional obligations could further exacerbate the risks our indebtedness poses to our financial condition.
As of March 31, 2021, we had $324.2 million face value of outstanding indebtedness, in addition to $39.5 million of undrawn commitments under the Credit Agreement. Despite our level of indebtedness, we, including our subsidiaries, may be able to incur significant additional indebtedness in the future. Although the Credit Agreement contains restrictions on the incurrence of additional indebtedness, these restrictions are subject to a number of qualifications and exceptions, and any indebtedness incurred in compliance with these restrictions could be substantial. These restrictions also will not prevent our subsidiaries from incurring obligations that do not constitute indebtedness and, if our subsidiaries refinance existing indebtedness, such refinancing indebtedness may contain fewer restrictions on our subsidiaries’ activities. To the extent new indebtedness is added to our and our subsidiaries’ currently anticipated indebtedness levels, the related risks that we and our subsidiaries face could intensify. While the Credit Agreement also contains restrictions on making certain loans and investments, these restrictions are subject to a number of qualifications and exceptions, and the investments incurred in compliance with these restrictions could be substantial.
We may not be able to generate sufficient cash to service all of our indebtedness and may be forced to take other actions to satisfy our obligations under our indebtedness, which may not be successful.
Our ability to make scheduled payments on or to refinance our debt obligations and to fund our planned capital expenditures, acquisitions and other ongoing liquidity needs depends on our financial condition and operating performance, which is subject to prevailing economic and competitive conditions and to certain financial, business and other factors beyond our control. We cannot assure you that we will maintain a level of cash flows from operating activities or that future borrowings will be available to Convey or its subsidiaries under the Credit Agreement or otherwise in an amount sufficient to permit us to pay the principal, premium, if any, and interest on our indebtedness and fund our planned capital expenditures, acquisitions and other ongoing liquidity needs.
Restrictions imposed by the Credit Agreement may limit our ability to operate our business and to finance our future operations or capital needs or to engage in other business activities.
The Credit Agreement restricts Convey and its restricted subsidiaries from engaging in specified types of transactions. Subject to exceptions specified in the Credit Agreement, these covenants restrict the ability of Convey and its restricted subsidiaries, among other things, to:

incur liens;

incur indebtedness;

make investments and loans;

engage in mergers, acquisitions and asset sales;

declare dividends or other distributions, redeem or repurchase equity interests or make other restricted payments;

alter the businesses Convey and its restricted subsidiaries conduct;

enter into agreements restricting distributions by Convey’s restricted subsidiaries;

modify certain terms of certain junior indebtedness; and

engage in certain transaction with affiliates.
These covenants will limit our ability to engage in activities that may be in our long-term best interest, such as limiting our flexibility in planning for, or reacting to, changes in our operations or business, restricting us from making strategic acquisitions, engaging in development activities, introducing new technologies or exploiting business opportunities. Our failure to comply with these covenants could result in an event of
 
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default under the Credit Agreement which, if not cured or waived, could result in the acceleration of substantially all of our indebtedness.
We are a holding company and will depend on dividends, distributions and other payments from our subsidiaries to meet our obligations.
We are a holding company that does not conduct any business operations of our own. As a result, we are largely dependent upon cash dividends and other transfers from our subsidiaries to meet our obligations. The agreements governing the indebtedness of our subsidiaries impose restrictions on our subsidiaries’ ability to pay dividends or other distributions to us. The deterioration of the earnings from, or other available assets of, our subsidiaries for any reason also could limit or impair their ability to pay dividends or other distributions to us.
Changes in the method for determining LIBOR or the elimination of LIBOR could affect our business, results of operations or financial condition.
Our Credit Agreement provides that interest may be indexed to the London Interbank Offered Rate (“LIBOR”), which is a benchmark rate at which banks offer to lend funds to one another in the international interbank market for short term loans. On July 27, 2017, the United Kingdom Financial Conduct Authority, which regulates LIBOR, announced its intention to stop persuading or compelling banks to submit LIBOR quotations by the end of 2021. In 2020, ICE Benchmark Administration, which administers LIBOR publication, issued a consultation requesting feedback on its intention to continue publication of overnight and one-, three-, six- and 12-month USD LIBOR rates through June 30, 2023 (the “IBA Announcement”). There were concurrent announcements by the United Kingdom Financial Conduct Authority, U.S. bank regulators, the Federal Reserve Board and the Alternative Reference Rates Committee supporting the IBA Announcement and, among other things, encouraging banks to stop entering into new LIBOR-based contracts by the end of 2021. We cannot predict the impact of any changes in the methods by which LIBOR is determined or any regulatory activity related to a potential phase out of LIBOR on our Credit Agreement and interest rates. While our Credit Agreement provides for the use of an alternative rate to LIBOR in the event LIBOR is phased out, uncertainty remains as to any such replacement rate and any such replacement rate may be higher or lower than LIBOR may have been. At this time, no consensus exists as to what rate or rates will become accepted alternatives to LIBOR, although The U.S. Federal Reserve, in conjunction with the Alternative Reference Rates Committee, is considering replacing LIBOR with the Secured Overnight Financing Rate, or SOFR, a newly created index, calculated with a broad set of short-term repurchase agreements backed by treasury securities. It is not possible to predict the effect of these changes, other reforms or the establishment of alternative reference rates in the United States or elsewhere. The establishment of alternative reference rates or implementation of any other potential changes may materially and adversely affect our business, results of operations or financial condition.
Risks Related to Our Status as an Emerging Growth Company
We are an emerging growth company and because we have decided to take advantage of certain exemptions from various reporting and other requirements applicable to emerging growth companies, our common stock could be less attractive to investors.
For as long as we remain an “emerging growth company,” as defined in the JOBS Act, we will have the option to take advantage of certain exemptions from various reporting and other requirements that are applicable to other public companies that are not emerging growth companies, including presenting only two years of audited financial statements in addition to any required unaudited interim financial statements with correspondingly reduced “Management’s Discussion and Analysis of Financial Condition and Results of Operations” disclosure in this prospectus, reduced disclosure obligations regarding executive compensation in our registration statements, periodic reports and proxy statements, not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), being permitted to have an extended transition period for adopting any new or revised accounting standards that may be issued by the Financial Accounting Standards Board (“FASB”) or the SEC, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. It is
 
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unclear whether investors will find our common stock less attractive because we may rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.
We will remain an emerging growth company until the earliest of (1) the last day of the fiscal year in which we have annual gross revenues of $1.07 billion or more; (2) the date on which we have issued more than $1.0 billion in non-convertible debt in the previous three years; (3) the date we qualify as a “large accelerated filer” under the Exchange Act, which would occur if the market value of our common stock that is held by non-affiliates is $700 million or more; and (4) the last day of the fiscal year ending after the fifth anniversary of our initial public offering.
We have elected to take advantage of certain of the reduced disclosure obligations in this prospectus and may elect to take advantage of other reduced reporting requirements in future filings. As a result, the information that we provide to our investors may be different from the information you might receive from other public reporting companies that are not emerging growth companies in which you hold equity interests. In addition, we have elected to avail ourselves of the extended transition period for complying with new or revised accounting standards. As a result, the information that we provide to stockholders will be less comprehensive than what you might receive from other public companies.
Because we have elected to use the extended transition period for complying with new or revised accounting standards for an “emerging growth company” our financial statements may not be comparable to companies that comply with these accounting standards as of the public company effective dates.
We have elected to use the extended transition period for complying with new or revised accounting standards under Section 7(a)(2)(B) of the Securities Act of 1933, as amended (the “Securities Act”). This election allows us to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies. As a result of this election, our financial statements may not be comparable to companies that comply with these accounting standards as of the public company effective dates. Consequently, our financial statements may not be comparable to companies that comply with public company effective dates. Because our financial statements may not be comparable to companies that comply with public company effective dates, investors may have difficulty evaluating or comparing our business, performance or prospects in comparison to other public companies, which may have a negative impact on the value and liquidity of our common stock. We cannot predict if investors will find our common stock less attractive because we plan to rely on this exemption. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.
Risks Related to Our Common Stock and This Offering
We have identified material weaknesses in our internal control over financial reporting, and the failure to remediate these material weaknesses may adversely affect our business, investor confidence in our company, our financial results and the market value of our common stock.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. In connection with our audits of the consolidated financial statements presented elsewhere in this prospectus, we identified the following material weaknesses in our internal control over financial reporting:

We did not design or maintain an effective control environment commensurate with the financial reporting requirements of an SEC registrant. Additionally, we did not design control activities to adequately address identified risks or operate at a sufficient level of precision that would identify material misstatements to our financial statements and did not design and maintain formal documentation of accounting policies and procedures nor did we maintain sufficient evidence to support the operation of key control procedures. Specifically, we did not design and maintain controls to ensure (i) the appropriate segregation of duties within our financial reporting function, including the preparation and review of journal entries and (ii) account reconciliations and balance sheet and income statement fluctuation analyses were reviewed at the appropriate level of precision.
 
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We did not design and maintain effective controls over information technology (“IT”) general controls for information systems that are relevant to the preparation of our financial statements. Specifically, we did not design and maintain: (i) program change management controls to ensure that information technology program and data changes affecting financial IT applications and underlying accounting records are identified, tested, authorized and implemented appropriately; (ii) user access controls to ensure appropriate segregation of duties and that adequately restrict user and privileged access to financial applications, programs, and data to appropriate Company personnel.
These IT deficiencies did not result in a material misstatement to the financial statements, however, the deficiencies, when aggregated, could impact maintaining effective segregation of duties, as well as the effectiveness of IT-dependent controls (such as automated controls that address the risk of material misstatement to one or more assertions, along with the IT controls and underlying data that support the effectiveness of system-generated data and reports) that could result in misstatements potentially impacting all financial statement accounts and disclosures that would not be prevented or detected. Accordingly, management has determined these deficiencies in the aggregate constitute a material weakness.
These material weaknesses resulted in adjustments primarily related to revenues recognized from contracts with customers that were recognized in the improper periods, the accrual of certain compensation related costs, and the misstatement of income tax benefits related to the treatment of certain deferred tax positions. The material weaknesses described above could result in misstatements of our account balances or disclosures that would result in misstatements of our annual or interim financial statements that would not be prevented or detected.
We are currently in the process of developing a remediation plan to address the material weaknesses described above, and we plan to implement measures designed to improve our internal control over financial reporting, including those intended to address the underlying causes of the control deficiencies in order to remediate the material weaknesses.
While we believe the remedial efforts we will take will improve our internal controls and address the underlying causes of the material weaknesses, such material weaknesses will not be remediated until a remediation plan has been fully developed and implemented and we have concluded that our controls are operating effectively for a sufficient period of time. We cannot be certain that the steps we will take following the development and implementation of a remediation plan will be sufficient to remediate the control deficiencies that led to our material weaknesses in our internal control over financial reporting or prevent future material weaknesses or control deficiencies from occurring. While we will work to remediate the material weaknesses as timely and efficiently as possible, at this time we cannot provide an estimate of costs expected to be incurred in connection with the development and implementation of a remediation plan, nor can we provide an estimate of the time it will take to complete a remediation plan. Neither our management nor an independent registered public accounting firm has performed an evaluation of our internal control over financial reporting in accordance with the provisions of the Sarbanes-Oxley Act because no such evaluation has been required.
If we fail to effectively remediate the material weaknesses in our internal control over financial reporting described above, we may be unable to accurately or timely report our financial condition or results of operations. Such failure may adversely affect our business, investor confidence in our company, our financial condition and the market value of our common stock.
We are not currently required to comply with SEC rules that implement Section 404 of the Sarbanes-Oxley Act and are therefore not required to make a formal assessment of the effectiveness of our internal controls over financial reporting for that purpose. Upon becoming a public company, we will be required to comply with the SEC’s rules implementing Sections 302 and 404 of the Sarbanes-Oxley Act, which will require management to certify financial and other information in our quarterly and annual reports and provide an annual management report on the effectiveness of internal control over financial reporting. Although we will be required to disclose changes that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting on a quarterly basis, we will not be required to make our first annual assessment of our internal control over financial reporting pursuant to Section 404 until at least our second annual report required to be filed with the SEC, and we will not be required to have
 
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our independent registered public accounting firm formally assess our internal controls for as long as we remain an “emerging growth company” as defined in the JOBS Act.
When formally evaluating our internal controls over financial reporting, we may identify material weaknesses that we may not be able to remediate in time to meet the applicable deadline imposed upon us for compliance with the requirements of Section 404 of the Sarbanes-Oxley Act. In addition, if we fail to achieve and maintain the adequacy of our internal controls, as such standards are modified, supplemented or amended from time to time, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal controls over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act. We cannot be certain as to the timing of completion of our evaluation, testing and any remediation actions or the impact of the same on our operations. If we are not able to implement the requirements of Section 404 of the Sarbanes-Oxley Act in a timely manner or with adequate compliance, our independent registered public accounting firm may issue an adverse opinion due to ineffective internal controls over financial reporting, and we may be subject to sanctions or investigation by regulatory authorities, such as the SEC. As a result, there could be a negative reaction in the financial markets due to a loss of confidence in the reliability of our financial statements. Any such action could have a significant and adverse effect on our business and reputation, which could negatively affect our results of operations or cash flows. In addition, we may be required to incur additional costs in improving our internal control system and the hiring of additional personnel.
Our common stock has no prior public market, and we cannot assure you that an active trading market for our common stock will develop.
Prior to this offering, there has been no public market for our common stock. Although we have applied for listing on the NYSE, an active trading market for shares of our common stock may never develop or be sustained following this offering. If an active trading market does not develop, you may have difficulty selling your shares of our common stock at an attractive price, or at all. The price for shares of our common stock in this offering will be determined by negotiations among us, the selling stockholder and representatives of the underwriters, and it may not be indicative of prices that will prevail in the open market following the completion of this offering. Consequently, you may not be able to sell your shares of our common stock at or above the initial public offering price or at any other price, or at the time that you would like to sell. An inactive market may also impair our ability to raise capital by selling shares of our common stock, our ability to motivate our employees through equity incentive awards, and our ability to acquire other companies, products or technologies by using our common stock as consideration for such acquisitions.
The price of our common stock may be volatile and may be affected by market conditions beyond our control, and the market price of our common stock may drop below the price you pay to acquire shares of our common stock in this offering.
Our quarterly results of operations are likely to fluctuate in the future as a publicly traded company. In addition, securities markets worldwide have experienced, and are likely to continue to experience, significant price and volume fluctuations. This market volatility, as well as general economic, market or political conditions, could subject the market price of our shares of common stock to wide price fluctuations regardless of our operating performance, which could cause a decline in the value of your investment. You should also be aware that price volatility may be greater if the public float and trading volume of shares of our common stock is low. Some factors that may cause the market price of our common stock to fluctuate, in addition to the other risks mentioned in this section of the prospectus, include:

our operating and financial performance and prospects;

our announcements or our competitors’ announcements regarding new products or services, enhancements, significant contracts, acquisitions or strategic investments;

changes in earnings estimates or recommendations by securities analysts who cover our common stock;

fluctuations in our quarterly financial results or, in the event we provide it from time to time, earnings guidance, or the quarterly financial results or earnings guidance of companies perceived by investors to be similar to us;
 
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changes in our capital structure, such as future issuances of securities, sales of large blocks of common stock by our stockholders, including our principal stockholder, or the incurrence of additional debt;

departure of key personnel;

reputational issues;

changes in general economic and market conditions, including related to the COVID-19 pandemic;

changes in industry conditions or perceptions or changes in the market outlook for the healthcare industry; and

changes in applicable laws, rules or regulations or regulatory actions affecting us or our clients and other dynamics.
These and other factors may cause the market price for shares of our common stock to fluctuate substantially, which may limit or prevent investors from readily selling their shares of our common stock and may otherwise negatively affect the liquidity of our common stock. In addition, in the past, when the market price of a stock has been volatile, holders of that stock sometimes have instituted securities class action litigation against the company that issued the stock. Securities litigation against us, regardless of the merits or outcome, could result in substantial costs and divert the time and attention of our management from the business, which could significantly harm our business, results of operation, financial condition or reputation.
Our principal stockholder, TPG, will continue to have significant influence over us following the completion of this offering, and its interests could conflict with those of our other stockholders.
Assuming an initial public offering price of $15.00 (the midpoint of the estimated price range set forth on the cover page of this prospectus), and no exercise by the underwriters of their option to acquire additional shares of our common stock, immediately following this offering, our principal stockholder, TPG, will hold approximately 74.9% of our common stock. As a result, our principal stockholder will continue to be able to influence matters requiring approval by our stockholders, including the election of directors and the approval of mergers or other extraordinary transactions. See “Management — Composition of our Board of Directors” for more detail. Our principal stockholder may also have interests that differ from yours and may vote in a way with which you disagree and which may be adverse to your interests. The concentration of ownership may also have the effect of delaying, preventing or deterring a change of control of the Company, could deprive our stockholders of an opportunity to receive a premium for shares of their common stock as part of a sale of our Company and might ultimately affect the market price of our common stock.
As long as our principal stockholder, TPG, owns a majority of the shares of our common stock, we may rely on certain exemptions from the corporate governance requirements of the NYSE available for “controlled companies.”
Upon the completion of this offering, we will be a “controlled company” within the meaning of the corporate governance listing requirements of the NYSE because TPG will continue to own more than 50% of our outstanding shares of common stock. A controlled company may elect not to comply with certain corporate governance requirements of the NYSE. Accordingly, our Board of Directors will not be required to have a majority of independent directors and our Compensation Committee and Nominating and Governance Committee will not be required to meet the director independence requirements to which we would otherwise be subject until such time as we cease to be a “controlled company.” We intend to take advantage of certain of these exemptions following the completion of this offering. Accordingly, you will not have certain of the protections afforded to stockholders of companies that are subject to all of the corporate governance requirements of the NYSE. See “Management — Controlled Company” for more detail.
If you purchase shares of our common stock in this offering, you will suffer immediate and substantial dilution of our investment.
The initial public offering price of our common stock is substantially higher than the net tangible book (deficit) per share of our common stock. Therefore, if you purchase shares of our common stock in this
 
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offering, you will pay a price per share that substantially exceeds our net tangible book (deficit) per share after this offering. Based on the assumed initial public offering price of $15.00 per share, which is the midpoint of the estimated price range set forth on the cover page of this prospectus, you will experience immediate dilution of $16.90 per share, representing the difference between our pro forma net tangible book (deficit) per share after giving effect to this offering and the initial public offering price. In addition, purchasers of common stock in this offering will have contributed approximately 22.8% of the aggregate price paid by all purchasers of our stock but will own only approximately 18.3% of our common stock outstanding after this offering, assuming no exercise of the underwriters’ option to purchase additional shares of our common stock from the selling stockholder. See “Dilution” for more detail.
Your percentage ownership in us may be diluted by future issuances of capital stock, which could reduce your influence over matters on which stockholders vote.
Pursuant to our amended and restated certificate of incorporation and amended and restated bylaws as will be in effect upon the completion of this offering, our Board of Directors has the authority, without action or vote of our stockholders, to issue all or any part of our authorized but unissued shares of common stock, including shares issuable upon the exercise of options, or shares of our authorized but unissued preferred stock. Issuances of shares of common stock or shares of voting preferred stock would reduce your influence over matters on which our stockholders vote and, in the case of issuances of shares of preferred stock, would likely result in your interest in us being subject to the prior rights of holders of that preferred stock.
Future sales of a substantial number of shares of our common stock may depress the price of our shares.
If our stockholders sell a large number of shares of our common stock, or if we issue a large number of shares of our common stock in connection with future acquisitions, financings or other circumstances, the market price of shares of our common stock could decline significantly. Moreover, the perception in the public market that our stockholders might sell shares of our common stock could depress the market price of those shares. In addition, sales of a substantial number of shares of our common stock by our principal stockholder could adversely affect the market price of our common stock.
All the shares sold in this offering will be freely tradable without restriction, except for shares acquired by any of our “affiliates,” as defined in Rule 144 under the Securities Act, including our principal stockholder. Immediately after this offering, the public market for our common stock will include only the shares of common stock that are being sold in this offering, assuming a price per share at the midpoint of the estimated price range set forth on the cover page of this prospectus. Once we register these shares, they can be sold in the public market upon issuance, subject to restrictions under the securities laws applicable to resales by affiliates. In connection with this offering, we expect that we will enter into a Registration Rights Agreement with TPG, the Chairman of our Board of Directors and our Chief Executive Officer. The Registration Rights Agreement will provide TPG with certain registration rights whereby TPG can require us to register under the Securities Act shares of our common stock. See “Description of Capital Stock — Registration Rights.”
We, the selling stockholder, our executive officers and directors and other stockholders representing more than 99% of our outstanding capital stock and options will enter into lock-up arrangements under which we and they will agree that we and they will not sell, directly or indirectly, any common stock for a period of 180 days from the date of this prospectus (subject to certain exceptions) without the prior written consent of BofA Securities, Inc. and Goldman Sachs & Co. LLC. See “Underwriting (Conflicts of Interest) — No Sales of Similar Securities.”
We do not anticipate declaring or paying regular dividends on our common stock in the near term, and our indebtedness could limit our ability to pay dividends on our common stock.
We do not currently anticipate declaring or paying regular cash dividends on our common stock in the near term. We currently intend to use our future earnings, if any, to pay debt obligations, to fund our growth and develop our business and for general corporate purposes. Therefore, you are not likely to receive any cash dividends on your common stock in the near term, and the success of an investment in shares of our common stock will depend upon any future appreciation in their value. There is no guarantee that shares of our common stock will appreciate in value or even maintain the price at which they are initially offered.
 
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Any future declaration and payment of cash dividends or other distributions of capital will be at the discretion of our Board of Directors and the payment of any future cash dividends or other distributions of capital will depend on many factors, including our financial condition, earnings, cash needs, regulatory constraints, capital requirements (including requirements of our subsidiaries) and any other factors that our Board of Directors deems relevant in making such a determination. The agreement governing the indebtedness of our subsidiaries imposes restrictions on our subsidiaries’ ability to pay dividends or other distributions to us, and future agreements governing debt our subsidiaries may enter into may impose similar restrictions. For more information, see “Dividend Policy.” We cannot assure you that we will establish a dividend policy or pay cash dividends in the future or continue to pay any cash dividend if we do commence paying cash dividends pursuant to a dividend policy or otherwise.
Our amended and restated certificate of incorporation after this offering will designate courts in the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, and also provide that the federal district courts will be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act, each of which could limit our stockholders’ ability to choose the judicial forum for disputes with us or our directors, officers, stockholders or employees.
Our amended and restated certificate of incorporation will provide that, subject to limited exceptions, the Court of Chancery for the State of Delaware will be the sole and exclusive forum for:

any derivative action or proceeding brought on behalf of the Company;

any action asserting a claim of breach of a fiduciary duty owed by any director, officer, employee or stockholder of the Company to the Company or the Company’s stockholders;

any action asserting a claim arising pursuant to any provision of our amended and restated certificate of incorporation, our amended and restated bylaws or the Delaware General Corporation Law (the “DGCL”) or as to which the DGCL confers jurisdiction on the Court of Chancery of the State of Delaware; and

any action asserting a claim governed by the internal affairs doctrine.
Our amended and restated certificate of incorporation will also provide that the federal district courts of the United States of America will be the exclusive forum for the resolution of any complaint asserting a cause of action against us or any of our directors, officers, employees or agents and arising under the Securities Act. However, Section 22 of the Securities Act provides that federal and state courts have concurrent jurisdiction over lawsuits brought pursuant to the Securities Act or the rules and regulations thereunder. To the extent the exclusive forum provision restricts the courts in which claims arising under the Securities Act may be brought, there is uncertainty as to whether a court would enforce such a provision. We note that investors cannot waive compliance with the federal securities laws and the rules and regulations thereunder. This provision does not apply to claims brought under the Exchange Act.
Any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock shall be deemed to have notice of and to have consented to these provisions. These provisions may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees, which may discourage such lawsuits against us and our directors, officers and employees. Alternatively, if a court were to find these provisions of our amended and restated certificate of incorporation inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect our business or financial condition.
Provisions in our amended and restated certificate of incorporation and amended and restated bylaws, and Delaware corporate laws, may prevent or delay an acquisition of us, which could decrease the trading price of our common stock.
Provisions of our amended and restated certificate of incorporation and amended and restated bylaws and of state law may delay, deter, prevent or render more difficult a takeover attempt that our stockholders might consider in their best interests. For example, such provisions or laws may prevent our stockholders from receiving the benefit from any premium to the market price of our common stock offered by a bidder in a
 
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takeover context. Even in the absence of a takeover attempt, the existence of these provisions may adversely affect the prevailing market price of our common stock if they are viewed as discouraging takeover attempts in the future.
Certain provisions of our amended and restated certificate of incorporation and amended and restated bylaws may have anti-takeover effects and may delay, deter or prevent a takeover attempt that our stockholders might consider in their best interests. These anti-takeover provisions and laws may delay, deter or prevent a takeover attempt that our stockholders might consider in their best interests. As a result, our stockholders may be limited in their ability to obtain a premium for their shares. See “Description of Capital Stock — Certain Anti-Takeover Provisions of our Amended and Restated Certificate of Incorporation, our Amended and Restated Bylaws and Delaware Law.”
We have broad discretion in the use of the net proceeds from this offering, and our use of those proceeds may not yield a favorable return on your investment.
We intend to use a portion of the net proceeds from this offering to repay outstanding indebtedness under the Credit Agreement (as defined in “Description of Certain Indebtedness”), to pay a one-time fee to TPG upon the termination of our management services agreement with TPG, which will terminate upon the completion of this offering, and the remainder of the net proceeds for general corporate purposes. See “Use of Proceeds.” At this time, other than repayment of outstanding indebtedness and payment of the fee under our management services agreement with TPG, we cannot specify with certainty the particular uses for the net proceeds from this offering. Our management has broad discretion over how these proceeds are to be used and could spend the proceeds in ways with which you may not agree. In addition, we might not use the proceeds from this offering effectively or in a manner that increases our market value or enhances our profitability. We have not established a timetable for the effective deployment of the proceeds, and we cannot predict how long it will take to deploy the proceeds.
Our amended and restated certificate of incorporation will contain a provision renouncing our interest and expectancy in certain corporate opportunities, which could adversely impact our business.
Our amended and restated certificate of incorporation will provide that TPG, any of its affiliates and the members of our Board of Directors who are affiliated with them (including, based on the current composition of our Board of Directors, Todd Sisitsky, who is a Partner of TPG, and Katherine Wood, who is a Partner of TPG) will not be required to offer us corporate opportunities of which they become aware and can take any such corporate opportunities for themselves or offer such opportunities to other companies in which they have an investment. Such corporate opportunities include engaging, directly or indirectly, in the same, similar or competing business activities or lines of business in which we operate. We, by the terms of our amended and restated certificate of incorporation, will expressly renounce any interest or expectancy in any such corporate opportunity to the extent permitted under applicable law, even if the opportunity is one that we or our subsidiaries might reasonably have pursued or had the ability or desire to pursue if granted the opportunity to do so. Our amended and restated certificate of incorporation will not be able to be amended to eliminate our renunciation of any such corporate opportunity arising prior to the date of any such amendment.
TPG is in the business of making investments in companies and TPG may from time to time acquire and hold interests in businesses that compete directly or indirectly with us. These potential conflicts of interest could have a material adverse effect on our business, results of operations, financial condition, cash flows or prospects if TPG allocates attractive corporate opportunities to itself or its affiliates instead of to us.
General Risks
We may become involved in litigation, investigations and regulatory inquiries and proceedings that could negatively affect us and our reputation.
From time to time, we may become involved in various legal, administrative and regulatory proceedings, claims, demands and investigations relating to our business, which may include claims with respect to commercial, tort, intellectual property, data privacy, consumer protection, breach of contract, employment,
 
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class action, whistleblower and other matters. In the ordinary course of business, we also receive inquiries from and have discussions with government entities regarding our compliance with laws and regulations. Such matters can be costly and time consuming and divert the attention of our management and key personnel from our business operations. Additionally, insurance coverage with respect to some claims against us or our directors and officers may not be available on terms that would be favorable to us, or the cost of such coverage could increase in the future. Similarly, if any litigation to which we are a party is resolved adversely, we may be subject to an unfavorable judgment that may not be reversed upon appeal. Any claims or litigation could cause us to incur significant expenses, including legal expenses, and, if successfully asserted against us, could require that we pay substantial damages, delay or prevent us from offering our products or services, or require that we comply with other unfavorable terms. We may also decide to settle such matters on terms that are unfavorable to us.
Our financial results may be adversely impacted by changes in accounting principles applicable to us.
Generally accepted accounting principles in the United States are set by and subject to interpretation by the FASB and the SEC and new accounting principles are adopted from time to time. For example, in May 2014, the FASB issued accounting standards update No. 2014-09 (Topic 606), Revenue from Contracts with Clients, which superseded nearly all previously existing revenue recognition guidance under GAAP. The core principle of Topic 606 is that an entity should recognize revenue to depict the transfer of promised goods or services to clients in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.
We adopted this standard as of January 1, 2019 using the modified retrospective method. As a result of using this approach, the Company recognized a cumulative effect adjustment recorded to accumulated deficit for initial application of the guidance totaling $0.2 million for contracts not completed as of the date of the adoption. The adoption of ASC 606 had no transition impact on cash provided by or used in operating, financing, or investing activities reported in the consolidated statements of cash flows. Under Topic 606, more estimates, judgments, and assumptions are required within the revenue recognition process than were previously required. Our reported financial position and financial results may be harmed if our estimates or judgments prove to be wrong, assumptions change, or actual circumstances differ from those in our assumptions. Any difficulties in implementing these pronouncements could cause us to fail to meet our financial reporting obligations, which could result in regulatory discipline and harm our business and the trading price of our common stock.
If our estimates or judgments relating to our critical accounting policies prove to be incorrect or change, our results of operations could be harmed.
The preparation of financial statements in conformity with GAAP requires management to make judgments, estimates and assumptions that affect the reported amounts in the consolidated financial statements and related notes thereto. We base these estimates on historical experience and various other assumptions that we believe to be reasonable under the circumstances, as provided in “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies and Use of Estimates.” The results of these estimates form the basis for making judgments about the carrying values of assets, liabilities and equity and the amount of revenue and expenses that are not readily apparent from other sources. The preparation of consolidated financial statements in conformity with 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 consolidated balance sheets and statements of operations and comprehensive loss taken as a whole, actual results could differ materially from those estimates.
Changes in accounting standards issued by the FASB or other standard-setting bodies may adversely affect our financial statements.
Our financial statements are subject to the application of GAAP, which is periodically revised or expanded. From time to time, we are required to adopt new or revised accounting standards issued by
 
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recognized authoritative bodies. It is possible that future accounting standards we are required to adopt may require changes to the current accounting treatment that we apply to our consolidated financial statements and may require us to make significant changes to our systems. Such changes could result in a material adverse impact on our business, results of operations or financial condition.
If securities analysts do not publish research or reports about our business or our industry or if they issue unfavorable commentary or negative recommendations with respect to our common stock, the price of our common stock could decline.
The trading market for our common stock will be influenced by the research and reports that equity research and other securities analysts publish about us, our business and our industry. We do not have control over these analysts and we may be unable or slow to attract research coverage following the completion of this offering. One or more analysts could issue negative recommendations with respect to our common stock or publish other unfavorable commentary or cease publishing reports about us, our business or our industry. If one or more of these analysts cease coverage of us, we could lose visibility in the market. As a result of one or more of these factors, the market price of our common stock could decline rapidly and our common stock trading volume could be adversely affected.
We will incur increased costs as a result of operating as a public company, and operating as a public company will place additional demands on our management.
As a public company, we will incur significant legal, accounting and other expenses that we did not incur as a private company. In addition, the Sarbanes-Oxley Act and rules subsequently implemented by the SEC and the NYSE have imposed various requirements on public companies, including the establishment and maintenance of effective disclosure and financial controls and corporate governance practices. Compliance with these requirements will place significant additional demands on our management and will require us to enhance certain internal functions, such as investor relations, legal, financial reporting and corporate communications. Accordingly, these rules and regulations will increase our legal and financial compliance costs and will make some activities more time-consuming and costly. For example, we expect that these rules and regulations may make it more difficult and more expensive for us to obtain director and officer liability insurance.
Pursuant to Section 404 of the Sarbanes-Oxley Act, we will be required to furnish a report by our management regarding our internal control over financial reporting, including, once we are no longer an emerging growth company, an attestation report on internal control over financial reporting issued by our independent registered public accounting firm. To achieve compliance with Section 404 of the Sarbanes-Oxley Act within the prescribed period, we will be engaged in a process to document and evaluate our internal control over financial reporting, which is both costly and time-consuming. In this regard, we will need to continue to dedicate internal resources, engage outside consultants and adopt a detailed work plan to assess and document the adequacy of our internal control over financial reporting, continue steps to improve control processes, validate through testing that controls are functioning as documented and implement a continuous reporting and improvement process for internal control over financial reporting. Despite our efforts, there is a risk that neither we nor our independent registered public accounting firm will be able to conclude within the prescribed timeframe that our internal control over financial reporting is effective as required by Section 404 of the Sarbanes-Oxley Act. This could result in an adverse reaction in the financial markets due to a loss of confidence in the reliability of our financial statements.
 
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements. 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. 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 prospectus. 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 prospectus, 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;

consolidation in the healthcare industry, and decisions by clients to perform internally some of the same solutions or services we offer;

the limiting 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;

acquisitions of other businesses or technologies and other significant transactions;

increases in labor costs, including due to changing minimum wage laws;

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;

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;

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;
 
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security breaches, failures or 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;

material weaknesses in our internal control over financial reporting and a failure to remediate material weaknesses, and the effectiveness of our internal controls over financial reporting; and

the significant influence our principal stockholder, TPG, has over us.
We discuss these risks and others in greater detail under the section titled “Risk Factors.” 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 prospectus 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 prospectus, 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.
You should read this prospectus, and the documents that we reference in this prospectus and have filed as exhibits to the registration statement of which this prospectus is a part, completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of the forward-looking statements in this prospectus 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.
 
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MARKET, INDUSTRY AND OTHER DATA
This prospectus includes estimates regarding market and industry data. Unless otherwise indicated, information concerning our industry and the markets in which we operate, including our general expectations, market position, market opportunity and market size, are based on our management’s knowledge and experience in the markets in which we operate, together with currently available information obtained from various sources, including publicly available information, industry reports and publications, surveys, our clients, trade and business organizations and other contacts in the markets in which we operate. Certain information is based on management estimates, which have been derived from third-party sources, as well as data from our internal research.
In presenting this information, we have made certain assumptions that we believe to be reasonable based on such data and other similar sources and on our knowledge of, and our experience to date in, the markets in which we operate. While we believe the estimated market and industry data included in this prospectus are generally reliable, such information, which is derived in part from management’s estimates and beliefs, is inherently uncertain and imprecise. Market and industry data are subject to change and may be limited by the availability of raw data, the voluntary nature of the data gathering process and other limitations inherent in any statistical survey of such data. In addition, projections, assumptions and estimates of the future performance of the markets in which we operate and our future performance are necessarily subject to uncertainty and risk due to a variety of factors, including those described in the “Risk Factors” and “Special Note Regarding Forward-Looking Statements” sections of this prospectus. These and other factors could cause results to differ materially from those expressed in the estimates made by third parties and by us.
The information contained on, or that can be accessed through, the websites referenced in this prospectus is not part of, and is not incorporated into, this prospectus, and you should not rely on any such information in making the decision whether to purchase shares of our common stock. We have included the website addresses referenced in this prospectus only as inactive textual references and do not intend them to be active links to such website addresses.
TRADEMARKS AND TRADE NAMES
We own or have rights to certain trademarks and trade names that we use in conjunction with the operations of our business, including but not limited to “Convey Health Solutions,” “Pareto Intelligence,” “Gorman Health Group” and “HealthScape Advisors” and certain logos and service marks associated with our business. Each trademark, trade name or service mark of any other company appearing or incorporated by reference in this prospectus belongs to its holder. Solely for convenience, trademarks, trade names and service marks referred to in this prospectus may appear without the “®” or “™” symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent possible under applicable law, our rights or the rights of the applicable licensor to these trademarks, trade names and service marks. We do not intend our use or display of other companies’ trademarks, trade names or service marks to imply a relationship with, or endorsement or sponsorship of us by, such other companies.
 
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USE OF PROCEEDS
We estimate that the net proceeds we will receive from the issuance and sale of the shares of common stock offered by us in this offering will be approximately $157.0 million, assuming the initial public offering price of $15.00 per share, which is the midpoint of the estimated price range set forth on the cover page of this prospectus, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. We will not receive any of the proceeds from the sale of shares by the selling stockholder, including any shares the selling stockholder may sell pursuant to the underwriters’ option to purchase additional shares of our common stock, although we will bear the costs, other than underwriting discounts and commissions, associated with those sales.
We intend to use approximately $131.5 million of the net proceeds from this offering to repay outstanding indebtedness under the Credit Agreement (as defined in “Description of Certain Indebtedness” ), with such net proceeds expected to be used to repay the 2020 Incremental Term Loans and the 2021 Incremental Term Loans in full and the remainder of such net proceeds to be used to repay a portion of the Term Facility.
As of March 31, 2021, the aggregate principal balance outstanding under each of the Term Facility, the 2020 Incremental Term Loans, and the 2021 Incremental Term Loans, was $221.6 million, $24.8 million, and $77.8 million, respectively. For the three months ended March 31, 2021, the average interest rate applicable to each of the Term Facility, the 2020 Incremental Term Loans, and the 2021 Incremental Term Loans was 6.3%, 10.0%, and 7.0%, respectively. The Term Facility, the 2020 Incremental Term Loans, and the 2021 Incremental Term Loans have a maturity date of September 4, 2026. The proceeds of the 2021 Incremental Term Loans were used to pay a special dividend in an aggregate amount of $74.5 million and related fees and expenses. For more information regarding our outstanding indebtedness, including descriptions of the Term Facility, the 2020 Incremental Term Loans, and the 2021 Incremental Term Loans, see “Description of Certain Indebtedness.”
We intend to use approximately $2.3 million of the net proceeds from this offering to pay a one-time fee to TPG upon the termination of our management services agreement with TPG, which will terminate upon the completion of this offering. We intend to use the remainder of the net proceeds from this offering for general corporate purposes.
At this time, other than repayment of outstanding indebtedness under the Credit Agreement and payment of the fee under our management services agreement with TPG, we cannot specify with certainty the particular uses for the net proceeds from this offering. We will have broad discretion over how to use the net proceeds from this offering, and our investors will be relying on the judgment of our management regarding the application of the net proceeds from this offering. Pending these uses, we intend to invest the net proceeds in short-term, investment-grade interest-bearing securities, such as money market accounts, certificates of deposit, commercial paper and guaranteed obligations of the U.S. government. The principal purposes of this offering are to create a public market for our common stock, obtain additional capital (including to repay outstanding indebtedness under the Credit Agreement as described above), facilitate future access to public equity markets, increase awareness of our company in the market, facilitate the use of our common stock as a means of attracting and retaining key employees and provide liquidity to our current stockholders.
Each $1.00 increase or decrease in the assumed initial public offering price of $15.00 per share of common stock offered by us in this offering, which is the midpoint of the estimated price range set forth on the cover page of this prospectus, would increase or decrease the net proceeds to us from this offering by approximately $10.85 million, assuming no change in the number of shares of common stock offered by us in this offering, as set forth on the cover page of this prospectus, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.
Each 1,000,000 increase or decrease in the number of shares of common stock offered by us in this offering would increase or decrease the net proceeds to us from this offering by approximately $13.95 million, assuming that the assumed initial public offering price for this offering remains at $15.00 per share, which is the midpoint of the estimated price range set forth on the cover page of this prospectus, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.
 
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DIVIDEND POLICY
We do not currently anticipate declaring or paying regular cash dividends on shares of our common stock in the near term. Any future declaration and payment of cash dividends or other distributions of capital will be at the discretion of our Board of Directors and will depend on our financial condition, earnings, cash needs, capital requirements (including requirements of our subsidiaries), contractual, legal, tax and regulatory restrictions, and any other factors that our Board of Directors deems relevant in making such a determination. Therefore, we cannot assure you that we will pay any cash dividends or other distributions to holders of shares of our common stock, or as to the amount of any such cash dividends or other distributions.
We are a holding company and do not conduct any business operations of our own. As a result, our ability to pay cash dividends on shares of our common stock is dependent upon cash dividends, distributions and other transfers from our subsidiaries. Our Credit Agreement imposes restrictions on certain of our subsidiaries’ ability to pay dividends or other distributions to us. See “Risk Factors—Risks Related to Our Capital Structure, Indebtedness and Capital Requirements” and “Description of Certain Indebtedness.”
 
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CAPITALIZATION
The following table sets forth our cash and cash equivalents and capitalization as of March 31, 2021:

on an actual basis; and

on an as adjusted basis to give effect to the issuance and sale by us of 11,666,667 shares of common stock in this offering at the assumed initial public offering price of $15.00 per share, which is the midpoint of the estimated price range set forth on the cover page of this prospectus, and our receipt of the estimated net proceeds from that sale after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us and the application of the net proceeds from this offering as set forth in “Use of Proceeds.”
The as adjusted information set forth in the table below is illustrative only and our cash and cash equivalents and capitalization following the completion of this offering will adjust based on the actual initial public offering price, the number of common shares issued and sold in this offering and other terms of this offering determined when the initial public offering price is determined. You should read the following table in conjunction with the sections of this prospectus entitled “Selected Historical Consolidated Financial Information” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and related notes included elsewhere in this prospectus.
As of March 31, 2021
(in thousands, except share amounts)
Actual
As Adjusted
Cash and cash equivalents
$ 28,938 $ 52,094
Long-term debt (including current portion):
Term loans(1)
324,178 192,632
Revolving facility(1)
500 500
Total debt(2)
324,678 193,132
Stockholders’ equity:
Common stock, $0.01 par value, 126,000,000 shares authorized and 61,321,424 shares issued and outstanding on an actual basis; 500,000,000 shares authorized and 73,013,291 shares issued and outstanding on an as adjusted basis
613 730
Additional paid-in capital
419,237 576,123
Accumulated other comprehensive income
71 71
Accumulated deficit
(24,222) (24,222)
Total stockholders’ equity
395,699 552,702
Total capitalization
$ 720,377 $ 745,833
(1)
See “Description of Certain Indebtedness” for descriptions of the term loans and the revolving facility. We intend to use approximately $131.5 million of the net proceeds from this offering to repay outstanding indebtedness under the Credit Agreement (as defined in “Description of Certain Indebtedness”). See “Use of Proceeds.” We also intend to pay a $1.4 million prepayment premium in connection therewith.
(2)
Our total debt as of March 31, 2021 does not include $7.1 million of unamortized debt issuance costs.
A $1.00 increase or decrease in the assumed initial offering price of $15.00 per share of common stock offered by us in this offering, which is the midpoint of the estimated price range set forth on the cover page of this prospectus, would increase or decrease the as adjusted amount of each of cash and cash equivalents, total stockholders’ equity and total capitalization by approximately $10.85 million, assuming no change in the number of shares of common stock offered by us in this offering, as set forth on the cover page of this prospectus, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.
An increase or decrease of 1,000,000 shares in the number of shares of common stock offered by us in this offering, as set forth on the cover page of this prospectus, would increase or decrease each of cash
 
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equivalents, total stockholders’ equity and total capitalization on an as adjusted basis by $13.95 million, assuming that the assumed initial public offering price for this offering remains at $15.00 per share, which is the midpoint of the estimated price range set forth on the cover page of this prospectus, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.
The table above assumes no exercise of the underwriters’ option to purchase 2,000,000 additional shares of our common stock from the selling stockholder and excludes 5,690,664 shares of our common stock issuable upon exercise of options to purchase shares of our common stock outstanding under our 2019 Equity Incentive Plan as of May 31, 2021, 9,250,000 shares of our common stock reserved for future issuance under our 2021 Omnibus Equity Incentive Plan, of which an aggregate of 649,833 shares of our common stock would underlie restricted stock units and stock options expected to be granted immediately following the pricing of this offering (assuming an initial public offering price of $15.00 per share of common stock, which is the midpoint of the estimated price range set forth on the cover page of this prospectus), as described under “Executive Compensation — Post-Offering Compensation — IPO Grants”, and 1,500,000 shares of our common stock reserved for future issuance under our Employee Stock Purchase Plan.
 
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DILUTION
If you invest in our common stock in this offering, your ownership interest will be immediately diluted to the extent of the difference between the initial public offering price per share of our common stock in this offering and the pro forma as adjusted net tangible book (deficit) per share of our common stock immediately after this offering. Dilution results from the fact that the initial public offering price per share of our common stock is substantially in excess of the net tangible book (deficit) per share of our common stock attributable to the existing stockholders for our presently outstanding shares of common stock. Our net tangible book (deficit) per share represents the amount of our total tangible assets (total assets less goodwill and intangible assets, net) less total liabilities, divided by the number of shares of common stock issued and outstanding.
As of March 31, 2021, we had a historical net tangible book (deficit) of $(293.6) million, or $(4.79) per share of common stock, based on 61,321,424 shares of our common stock outstanding as of March 31, 2021. Dilution is calculated by subtracting net tangible book (deficit) per share of our common stock from the initial public offering price per share of our common stock.
After giving effect to the sale of shares of our common stock in this offering at the initial public offering price of $15.00 per share, which is the midpoint of the estimated price range set forth on the cover page of this prospectus, less the estimated underwriting discounts and commissions and estimated offering expenses payable by us, and the application of the net proceeds of this offering as set forth in “Use of Proceeds,” our pro forma as adjusted net tangible book (deficit) as of March 31, 2021 would have been approximately $(138.9) million, or $(1.90) per share of common stock. This amount represents an immediate increase in net tangible book (deficit) of $2.89 per share of our common stock to the existing stockholders and immediate dilution of $16.90 per share of our common stock to investors purchasing shares of our common stock in this offering at the assumed initial offering price of $15.00 per share, which is the midpoint of the estimated price range set forth on the cover page of this prospectus. The following table illustrates this dilution on a per share basis:
Assumed initial public offering price per share
$ 15.00
Historical net tangible book (deficit) per share as of March, 31, 2021, before giving effect
to this offering
$ (4.79)
Increase in net tangible book (deficit) per share attributable to investors purchasing shares in this offering
2.89
Less: Pro forma as adjusted net tangible book (deficit) per share, after giving effect to this
offering
(1.90)
Dilution in pro forma as adjusted net tangible book (deficit) per share to investors in this
offering
$ 16.90
A $1.00 increase or decrease in the assumed initial public offering price of $15.00 per share of common stock offered by us in this offering, which is the midpoint of the estimated price range set forth on the cover page of this prospectus, would increase or decrease our pro forma as adjusted net tangible book (deficit) per share after this offering by $0.15, and would increase or decrease the dilution per share to the investors in this offering by $0.15, assuming no change in the number of shares of common stock offered by us in this offering, as set forth on the cover page of this prospectus, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.
An increase or decrease of 1,000,000 shares in the number of shares of common stock offered by us in this offering, as set forth on the cover page of this prospectus, would increase our pro forma as adjusted net tangible book (deficit) per share after this offering by $0.21 and would increase or decrease dilution per share to investors in this offering by $0.21, assuming that the assumed initial public offering price for this offering remains at $15.00 per share, which is the midpoint of the estimated price range set forth on the cover page of this prospectus, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.
The following table summarizes, as of March 31, 2021, on the pro forma basis described above, the total number of shares of our common stock purchased from us, the total consideration paid to us and the
 
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average price per share of our common stock paid by purchasers of such shares and by new investors purchasing shares of our common stock in this offering. The following table does not reflect any sales of our common stock by the selling stockholder in this offering.
Shares Purchased
Total Consideration
Number
Percentage
Amount
Percentage
Average
Price Per
Share
Existing stockholders
61,321,424 84.0% $ 702,063,000 80.0% $ 11.45
New investors
11,666,667 16.0% $ 175,000,005 20.0% $ 15.00
Total
72,988,091 100.0% $ 877,063,005 100.0% $ 12.02
After giving effect to the sale of 1,666,667 shares of our common stock by the selling stockholder in this offering, the percentage of our shares held by existing stockholders would be 81.7% and the percentage of our shares held by new investors would be 18.3%. If the underwriters were to exercise in full their option to purchase an additional 2,000,000 shares of our common stock from the selling stockholder, the percentage of our shares held by existing stockholders would be 79.0% and the percentage of our shares held by new investors would be 21.0%.
A $1.00 increase or decrease in the assumed initial public offering price of $15.00 per share of common stock offered by us in this offering, which is the midpoint of the estimated price range set forth on the cover page of this prospectus, would increase or decrease the total consideration paid by new investors by $11,666,667 million and increase or decrease the percent of total consideration paid by new investors by 1.0%, assuming no change in the number of shares of common stock offered by us in this offering, as set forth on the cover page of this prospectus, and before deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.
The number of shares of our common stock that will be outstanding after this offering is based on 61,346,624 shares of common stock outstanding as of May 31, 2021 and excludes 5,690,664 shares of our common stock issuable upon exercise of options to purchase shares of our common stock outstanding under our 2019 Equity Incentive Plan as of May 31, 2021, 9,250,000 shares of our common stock reserved for future issuance under our 2021 Omnibus Equity Incentive Plan, of which an aggregate of 649,833 shares of our common stock would underlie restricted stock units and stock options expected to be granted immediately following the pricing of this offering (assuming an initial public offering price of $15.00 per share of common stock, which is the midpoint of the estimated price range set forth on the cover page of this prospectus), as described under “Executive Compensation — Post-Offering Compensation — IPO Grants”, and 1,500,000 shares of our common stock reserved for future issuance under our Employee Stock Purchase Plan.
 
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SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION
The following selected historical consolidated financial information is derived from the consolidated financial statements and the accompanying notes that are included elsewhere in this prospectus. The year ended December 31, 2020 and the period from June 13, 2019 to December 31, 2019 (“Successor”) reflects the audited financial information for Convey Holding Parent, Inc. (formerly known as Cannes Holding Parent, Inc.) and its subsidiaries. The period from January 1, 2019 to September 3, 2019 reflects the audited financial information for Convey Health Parent, Inc. and its subsidiaries prior to the closing of the Merger (“Predecessor”). The Successor period and the Predecessor period selected historical consolidated financial information is not comparable due to the impacts of the Merger, including the application of acquisition accounting in the Successor financial statements as of September 4, 2019. The three months ended March 31, 2021 and the three months ended March 31, 2020 reflects the unaudited financial information for Convey Holding Parent, Inc. (formerly known as Cannes Holding Parent, Inc.) and its subsidiaries.
The unaudited consolidated statement of income data and summary cash flow data for the three months ended March 31, 2021, and 2020, and the unaudited consolidated balance sheet data as of March 31, 2021, have been derived from our interim condensed consolidated financial statements included elsewhere in this prospectus.
The interim condensed consolidated financial statements as of March 31, 2021 were prepared on the same basis as our annual consolidated financial statements. In our opinion, such financial statements include all normal and recurring adjustments considered necessary for a fair statement of the financial information set forth in those statements.
The historical results presented below are not necessarily indicative of financial results to be achieved in future periods. The selected historical consolidated financial information should be read together with the sections entitled “Selected Historical Consolidated Financial Information” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and the related notes included elsewhere in this prospectus.
 
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($ in thousands, except per share amounts)
Consolidated Statement of Operations Data:
Three Months Ended
March 31,
Year Ended
December 31,
2020
Period from
June 13, 2019
(date of inception) to
December 31, 2019
Period from
January 1, 2019 to
September 3, 2019
2021
2020
(Successor)
(Predecessor)
Net revenues:
Services
$ 43,527 $ 34,484 $ 147,191 $ 51,153 $ 92,445
Products
39,104 30,259 135,723 29,262 48,293
Net revenues
82,631 64,743 282,914 80,415 140,738
Operating expenses:
Cost of services
24,021 19,575 84,144 28,844 48,196
Cost of products
26,527 20,988 87,153 17,841 29,210
Selling, general and administrative
20,099 21,120 79,955 21,753 40,521
Depreciation and amortization
7,372 6,842 28,032 9,188 13,359
Transaction related costs
1,086 145 3,949 14,784 2,511
Change in fair value of contingent consideration
(10,770) 19,671
Total operating expenses
79,105 68,670 272,463 92,410 153,468
Operating income (loss)
3,526 (3,927) 10,451 (11,995) (12,730)