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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2021
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from  _ to _
Commission file number 001-40506
Convey Holding Parent, Inc.
(Exact name of registrant as specified in its charter)
Delaware84-2099378
(State or other jurisdiction of
 incorporation or organization)
(I.R.S. Employer Identification No.)
100 SE 3rd Avenue, 26th Floor, Fort Lauderdale, Florida
33394
(Address of Principal Executive Offices)(Zip Code)
(800) 559-9358
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.01 par value per shareCNVYNew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☐    No  ☒ 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).     Yes  ☒   No  ☐ 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filer  Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes        No  ☒
As of July 31, 2021, the registrant had 73,013,291 shares of common stock, $0.01 par value per share, outstanding.


TABLE OF CONTENTS
2

PART I-FINANCIAL INFORMATION
Item 1. Financial Statements.
CONVEY HOLDING PARENT, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data) (unaudited)
June 30,
2021
December 31,
2020
ASSETS
Current assets
Cash and cash equivalents$21,372 $45,366 
Accounts receivable, net of allowance for doubtful accounts of $259 and $610 as of June 30, 2021, and December 31, 2020, respectively
44,557 50,589 
Inventories, net13,186 11,094 
Prepaid expenses and other current assets13,543 15,220 
Restricted cash3,680 3,560 
Total current assets96,338 125,829 
Property and equipment, net19,444 20,667 
Intangible assets, net228,919 238,842 
Goodwill455,206 455,206 
Restricted cash 160 
Other assets2,346 2,364 
Total assets$802,253 $843,068 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Accounts payable$8,612 $21,308 
Accrued expenses39,838 67,159 
Capital lease obligations, current portion403 361 
Deferred revenue, current portion5,346 6,466 
Term loans, current portion 2,500 
Total current liabilities54,199 97,794 
Capital leases obligations, net of current portion866 1,129 
Deferred taxes, net20,294 26,561 
Term loans, net of current portion189,305 239,290 
Other long-term liabilities7,569 8,144 
Total liabilities272,233 372,918 
Commitments and contingencies (Note 14)
Shareholders’ equity
Preferred stock, $0.01 par value; 25,000,000 shares authorized and no shares issued or outstanding as of June 30, 2021 and no shares authorized, issued or outstanding as of December 31, 2020
  
Common stock, $0.01 par value; 500,000,000 and 126,000,000 shares authorized as of June 30, 2021 and December 31, 2020, respectively; 73,013,291 and 61,321,424 shares issued and outstanding as of June 30, 2021, and December 31, 2020, respectively
730 613 
Additional paid-in capital566,589 492,747 
Accumulated other comprehensive income66 78 
Accumulated deficit(37,365)(23,288)
Total shareholders’ equity530,020 470,150 
Total liabilities and shareholders’ equity$802,253 $843,068 
See accompanying notes to unaudited condensed consolidated financial statements
3

CONVEY HOLDING PARENT, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(in thousands, except per share amounts)
(unaudited)
For the Three Months Ended June 30,For the Six Months Ended June 30,
2021202020212020
Net revenues:
Services$42,284 $33,123 $85,811 $67,607 
Products32,964 28,439 72,069 58,698 
Net revenues75,248 61,562 157,880 126,305 
Operating expenses:
Cost of services(1)
20,785 20,067 44,806 39,642 
Cost of products(1)
22,299 18,429 48,826 39,417 
Selling, general and administrative29,589 18,982 49,690 40,102 
Depreciation and amortization7,823 6,950 15,194 13,791 
Transaction related costs1,556 52 2,642 197 
Change in fair value of contingent consideration96  96  
Total operating expenses82,148 64,480 161,254 133,149 
Operating income (loss)(6,900)(2,918)(3,374)(6,844)
Other income (expense):
Interest income 1  7 
Loss on extinguishment of debt(5,015) (5,015) 
Interest expense(6,394)(4,647)(11,861)(8,917)
Total other expense, net(11,409)(4,646)(16,876)(8,910)
Loss from continuing operations before income taxes(18,309)(7,564)(20,250)(15,754)
Income tax benefit5,166 1,537 6,173 2,800 
Net loss from continuing operations(13,143)(6,027)(14,077)(12,954)
Income from discontinued operations, net of tax 7  42 
Net loss$(13,143)$(6,020)$(14,077)$(12,912)
Loss per common share – Basic and diluted
Continuing operations(0.21)(0.10)(0.23)(0.21)
Discontinued operations    
Net loss per common share$(0.21)$(0.10)$(0.23)$(0.21)
Net loss$(13,143)$(6,020)$(14,077)$(12,912)
Foreign currency translation adjustments(5)21 (12)19 
Comprehensive loss$(13,148)$(5,999)$(14,089)$(12,893)
________________________
(1)    Excludes amortization of intangible assets and depreciation, which are separately stated below.
See accompanying notes to unaudited condensed consolidated financial statements
4

CONVEY HOLDING PARENT, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(in thousands, except for number of shares)
(unaudited)
Common stock
Additional
Paid-in Capital
Accumulated
Other
Comprehensive
Income
Accumulated
Deficit
Total
Shareholders’
Equity
SharesAmount
For the Three Months Ended June 30, 2021
March 31, 202161,321,424 $613 $419,237 $71 $(24,222)$395,699 
Share-based compensation— — 1,083 — — 1,083 
Foreign currency translation adjustments— — — (5)— (5)
Issuance of common stock to a board of directors member25,200 — 250 — — 250 
Issuance of common stock in initial public offering, net of issuance costs of $17.2 million
11,666,667 117 146,019 — — 146,136 
Net loss— — — — (13,143)(13,143)
June 30, 202173,013,291 730 566,589 66 (37,365)530,020 
For the Six Months Ended June 30, 2021
December 31, 202061,321,424 613 492,747 78 (23,288)470,150 
Share-based compensation— — 2,073 — — 2,073 
Foreign currency translation adjustments— — — (12)— (12)
Issuance of common stock to a board of directors member25,200 — 250 — — 250 
Issuance of common stock in initial public offering, net of issuance costs of $17.2 million
11,666,667 117 146,019 — — 146,136 
Dividend— — (74,500)— — (74,500)
Net loss— — — — (14,077)(14,077)
June 30, 202173,013,291 $730 $566,589 $66 $(37,365)$530,020 
Common stock
Additional
Paid-in Capital
Accumulated
Other
Comprehensive
Income
Accumulated
Deficit
Total
Shareholders’
Equity
SharesAmount
For the Three Months Ended June 30, 2020
March 31, 202061,321,424 $613 $489,288 $19 $(23,718)$466,202 
Share-based compensation— — 703 — — 703 
Foreign currency translation adjustments— — — 21 — 21 
Net loss— — — — (6,020)(6,020)
June 30, 202061,321,424 613 489,991 40 (29,738)460,906 
For the Six Months Ended June 30, 2020
December 31, 201961,321,424 613 486,065 21 (16,826)469,873 
Share-based compensation— — 3,926 — — 3,926 
Foreign currency translation adjustments— — — 19 — 19 
Net loss— — — — (12,912)(12,912)
June 30, 202061,321,424 $613 $489,991 $40 $(29,738)$460,906 
See accompanying notes to unaudited condensed consolidated financial statements
5

CONVEY HOLDING PARENT, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
For the Six Months Ended June 30,
20212020
Cash flows from operating activities
Net loss$(14,077)$(12,912)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation expense2,728 1,995 
Amortization expense12,466 11,796 
Loss on extinguishment of debt5,015  
Provision for bad debt(130)119 
Provision for inventory reserve643  
Deferred income taxes(6,138)(3,397)
Amortization of debt issuance costs654 507 
Change in fair value of contingent consideration96  
Share-based compensation2,073 3,926 
Changes in operating assets and liabilities:
Accounts receivable6,163 6,493 
Inventory(2,735)(7,099)
Prepaid expenses and other assets1,477 5,269 
Accounts payable and other accrued liabilities(17,808)3,408 
Deferred revenue(1,189)(2,056)
Payment on contingent consideration(10,311) 
Net cash (used in) provided by operating activities(21,073)8,049 
Cash flows from investing activities
Acquisition, net of cash received (3,758)
Purchases of property and equipment, net(3,861)(843)
Capitalized software development costs(2,390)(1,999)
Net cash used in investing activities(6,251)(6,600)
Cash flows from financing activities
Proceeds from issuance of debt78,000 25,000 
Payment of debt issuance cost(2,133)(1,148)
Principal payment on term loan(132,368)(1,188)
Payment on capital leases(221)(44)
Proceeds from issuance of common stock to a board of directors member250  
Proceeds from issuance of common stock in initial public offering, net of issuance costs146,136  
Prepayment premium on early repayment of term loan(1,563) 
Payment on contingent consideration(10,303)(11,010)
Dividend(74,500) 
Net cash provided by (used in) financing activities3,298 11,610 
Effect of exchange rate changes on cash(8)19 
Net decrease in cash and cash equivalents and restricted cash(24,034)13,078 
Cash, cash equivalents and restricted cash at beginning of period49,086 21,346 
Cash, cash equivalents and restricted cash at end of period$25,052 $34,424 
Cash, cash equivalents and restricted cash as of the end of the period
Cash and cash equivalents$21,372 $29,089 
Restricted cash3,680 1,615 
Restricted cash, non-current 3,720 
Cash, cash equivalents and restricted cash$25,052 $34,424 
See accompanying notes to unaudited condensed consolidated financial statements
6


CONVEY HOLDING PARENT, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(in thousands)
(unaudited)
For the Six Months Ended June 30,
20212020
Supplemental disclosures of cash flow information:
Cash paid for taxes$1,077 $29 
Cash paid for interest$11,714 $6,745 
Non-cash investing and financing activities:
Capitalized software and property and equipment, net included in accounts payable$750 $907 

See accompanying notes to unaudited condensed consolidated financial statements
7

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 1. BUSINESS AND BASIS OF PRESENTATION
Business
Convey Holding Parent, Inc. (collectively with its subsidiaries, which includes our main operating subsidiary, Convey Health Solutions, Inc., “we”, “us”, “our”, “Convey” or the “Company”) provides technology enabled solutions to payors within the large and growing government sponsored health plan market. Our platform combines proprietary modular technology and end-to-end solutions to serve as an extension of our clients’ operations and core systems. Our clients are primarily Medicare Advantage, Medicare Part D and Employer Group Waiver Plans, as well as Pharmacy Benefit Managers. Convey is a United States (“U.S.”) based holding company incorporated in Delaware. Our principal executive offices are located in Fort Lauderdale, Florida.
On April 21, 2021, we completed a corporate name change from Cannes Holding Parent, Inc. to Convey Holding Parent, Inc.
Stock Split
Prior to the IPO (as defined below), in June 2021, Convey’s Board of Directors (the “Board”) and stockholders approved a forward split of shares of Convey’s common stock, par value $0.01 per share, on a 126-for-1 basis (the “Stock Split”), which became effective as of June 4, 2021. Prior to the Stock Split, we were authorized to issue 1,000,000 shares of common stock of which (i) 915,000 shares were designated as voting common stock and (ii) 85,000 shares were designated as non-voting common stock. In connection with the Stock Split, the total number of authorized shares of common stock was proportionately increased and the par value of the common stock was not adjusted as a result of the Stock Split. In addition, all authorized shares of common stock were designated voting common stock. All references to common stock, options to purchase common stock, per share data and related information contained in the condensed consolidated financial statements have been retrospectively adjusted to reflect the effect of the Stock Split.
Initial Public Offering
On June 18, 2021, we closed our initial public offering (“IPO”) of our common stock through an underwritten sale of 13,333,334 shares of our common stock at a price of $14.00 per share. In the offering, we sold 11,666,667 shares and a selling stockholder sold 1,666,667 shares. The aggregate net proceeds to us from the offering after deducting underwriting discounts and commissions and other offering expenses payable by us, were approximately $146.1 million. We used approximately $131.5 million of the net proceeds from the IPO to repay outstanding indebtedness under our credit agreement. We did not receive any of the proceeds from the sale by the selling stockholder.
Prior to the closing of the IPO, on June 17, 2021, our Second Amended and Restated Certificate of Incorporation (the “Charter”) and our Second Amended and Restated Bylaws, became effective. The Charter, among other things, provides that our authorized capital stock consists of 500,000,000 shares of common stock, par value $0.01 per share and 25,000,000 shares of preferred stock, par value $0.01 per share.
Basis of Presentation and Consolidation
Convey was formed on June 13, 2019, for the purpose of acquiring Convey Health Solutions, Inc. (“CHS”). On September 4, 2019, Cannes Parent, Inc. (“Cannes”), a direct subsidiary of Convey, entered into an agreement (the “Merger Agreement”) to acquire all of the outstanding stock of CHS through the merger of Cannes Merger Sub, Inc. and Convey Health Parent, Inc. (“Parent”) (the “Merger”) with Parent surviving as a direct subsidiary of Cannes. The Merger principally occurred through an investment from TPG Cannes Aggregation, L.P. (the “selling stockholder”), which is primarily funded by partners of TPG Partners VIII, L.P. and TPG Healthcare Partners, L.P. or any parallel fund or their alternative investment vehicles (collectively, “TPG”).
The accompanying condensed consolidated financial statements are unaudited and include the accounts of Convey and our wholly-owned subsidiaries. They have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP” or “GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial information. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. Our condensed consolidated statements of operations and
8

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
comprehensive loss, shareholders’ equity, and cash flows for the six months ended June 30, 2021, and 2020, and the condensed consolidated balance sheet as of June 30, 2021, reflect all adjustments that are of a normal recurring nature and that are considered necessary for a fair statement of the results for the periods shown.
Our condensed consolidated balance sheet as of December 31, 2020, has been derived from our audited consolidated financial statements as of that date. Our condensed consolidated financial statements should be read in conjunction with our consolidated financial statements and notes thereto for the year ended December 31, 2020, which include a complete set of footnote disclosures, including our significant accounting policies, and are included in the final prospectus for the Company’s IPO dated June 15, 2021, and filed with the SEC on June 17, 2021, pursuant to Rule 424(b)(4) under the Securities Act of 1933, as amended (the “Prospectus”). The results for interim periods are not necessarily indicative of the results that may be expected for a full fiscal year or for any other future period. All significant intercompany balances and transactions have been eliminated in consolidation.
COVID-19 Pandemic
During the first quarter ended March 31, 2020, concerns related to the spread of novel coronavirus (“COVID-19”) began to create global business disruptions as well as disruptions in our operations. COVID-19 was declared a global pandemic by the World Health Organization on March 11, 2020. Governments at the national, state and local level in the U.S., and globally, have implemented aggressive actions to reduce the spread of the virus, with such actions including lockdown and shelter in place orders, limitations on non-essential gatherings of people, suspension of all non-essential travel, and ordering certain businesses and governmental agencies to cease non-essential operations at physical locations. While some of these actions have eased, escalating transmission rates (including of the Delta variant of COVID-19), slowing and uneven vaccination rates and further governmental guidance may result in having to reimplement certain of these measures or implementing new and additional ones. The spread of COVID-19 has also caused significant volatility in the U.S. and international markets and the global impact of the pandemic continues to evolve. The impact of COVID-19 on our business has resulted in elongated sales cycles, postponement of customer contract renewals, and slower implementation of software solutions for our clients, as well as a reduction in billable hours in one of our reportable segments, the Advisory Services segment.
The full extent to which the COVID-19 pandemic and the various responses to the COVID-19 pandemic will impact our business, operations or financial condition will depend on numerous evolving factors that we may not be able to accurately predict, including, but not limited to, the duration, severity and scope of the COVID-19 pandemic (including due to new variants such as Delta); actions by governmental entities, businesses and individuals that have been and continue to be taken in response to the pandemic; the effect on our clients and demand by clients, clients and our clients’ members for and ability to pay for our solutions and services; and disruptions or restrictions on our employees’ ability to work and travel. The impact of these factors and others on our suppliers and clients could persist for some time after governments ease their restrictions and after the overall number of COVID-19 cases in the United States decreases.
We have assessed various accounting estimates and other matters, including those that require consideration of forecasted financial information, in context with the unknown future impacts of COVID-19 using information that is reasonably available to us at this time. While our current assessment of our estimates did not have a material impact on our condensed consolidated financial statements as of and for the six months ended June 30, 2021, as additional information becomes available to us, our future assessment of our estimates, including our expectations at the time regarding the duration, scope and severity of the pandemic, as well as other factors, could materially and adversely impact our consolidated financial statements in future reporting periods.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and judgments that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities. These estimates and judgments are based on historical information currently available to us and based on various other assumptions that we conclude to be reasonable under the circumstances. While management concludes that such estimates are reasonable when considered in conjunction with our condensed consolidated balance sheets and statements of operations and comprehensive loss taken as a whole, actual results could differ materially from those estimates.

9

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)

Deferred Initial Public Offering Costs
We have incurred certain costs in connection with our IPO. Deferred IPO costs of $5.8 million were charged to shareholders’ equity upon the completion of the IPO (see Note 1). As of December 31, 2020, deferred IPO costs were $0.4 million and were included within Prepaid expenses and other current assets on the condensed consolidated balance sheets.
Customer Concentrations
Revenue and Accounts receivable from our major customers are as follows:
Revenues
Revenues
For the Three Months Ended
June 30,
For the Six Months Ended
June 30,
(in thousands)
2021202020212020
Customer A
$18,280 $16,540 $38,681 $34,883 
    % of total revenue
24.3 %27.2 %24.5 %27.7 %
Customer B
$14,651 $11,404 $31,396 $22,422 
    % of total revenue
19.5 %18.8 %19.9 %17.8 %
Accounts Receivable
(in thousands)
June 30, 2021December 31, 2020
Customer A$3,789 $7,582 
    % of total accounts receivable8.5 %15.0 %
Customer B$6,000 $3,447 
    % of total accounts receivable13.5 %6.8 %
Our customer base is highly concentrated. Revenue may significantly decline if we were to lose one or more of our significant customers. However, our risk is reduced due to our significant customers having multiple product delivery solutions under separate contracts.
Contingent Consideration
We recognized an earn-out liability in connection with the November 2018 acquisition of HealthScape Advisors, LLC (“HealthScape Advisors”) and Pareto Intelligence LLC (“Pareto Intelligence”), which represented contingent consideration.
The initial fair value of the earn-out liability was determined by employing a Monte-Carlo simulation model. The underlying simulated variable was adjusted revenue discounted by the market price of risk embedded in the revenue metrics. The revenue volatility estimate was based on a study of historical asset volatility and implied volatility for a set of comparable public companies, adjusted by our operating leverage. The earn-out payments were calculated based on simulated revenue metrics and payment thresholds as set forth in the HealthScape Advisors and Pareto Intelligence purchase agreement. The calculated payments were further discounted back to present value using cost of debt reflecting our credit risk. The fair value of the earn-out liability at each reporting date subsequent to the acquisition was measured using a probability weighted approach.
In connection with the Merger, we recognized a holdback liability, which represented contingent consideration. The initial fair value of the holdback liabilities and at each subsequent reporting date was measured using a probability weighted approach.
A change in any of the unobservable inputs used can change the fair value of our Level 3 earn-out and holdback liabilities.
During the three months ended June 30, 2021, we made a final payment of $13.1 million related to the holdback liability and a $7.5 million final payment related to the earn-out liability due to HealthScape Advisors.




10

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)



The following table provides a reconciliation of our Level 3 earn-out and holdback liabilities for the six months ended June 30, 2021:

(in thousands)
Balance at December 31, 2020$20,538 
Payments against the earn-out liabilities(7,500)
Payments against the holdback liabilities(13,114)
Change in fair value of earn-out liabilities96 
Balance at June 30, 2021$20 

The following table provides a reconciliation of our Level 3 earn-out and holdback liabilities for the six months ended June 30, 2020:

(in thousands)
Balance at December 31, 2019$43,175 
Payments against the earn-out liabilities(11,010)
Change in fair value of the holdback liabilities 
Change in fair value of the earn-out liabilities 
Balance at June 30, 2020$32,165 
Net Loss Per Common Share
Basic loss per share is computed by dividing net loss attributable to common shareholders (the numerator) by the weighted average number of common shares outstanding for the period (the denominator). Diluted net loss per common share attributable to common shareholders is computed by dividing net loss by the weighted average number of common shares outstanding during the period adjusted for the dilutive effects of common stock equivalents. In periods when losses from continuing operations are reported, the weighted-average number of common shares outstanding excludes common stock equivalents because their inclusion would be anti-dilutive.
For the Three Months Ended
June 30,
For the Six Months Ended
June 30,
(in thousands, except per share data)2021202020212020
Net loss attributable to common shareholders
Net loss from continuing operations$(13,143)$(6,027)$(14,077)$(12,954)
Net income from discontinued operations 7  42 
Net loss attributable to common shareholders$(13,143)$(6,020)$(14,077)$(12,912)
Weighted-average common shares outstanding:
Basic and diluted63,013,291 61,321,424 62,172,031 61,321,424 
Loss per share:
Basic and diluted
Continuing operations$(0.21)$(0.10)$(0.23)$(0.21)
Discontinued operations    
Net loss per common share$(0.21)$(0.10)$(0.23)$(0.21)
For the six months ended June 30, 2021 and 2020, 6,386,849 and 5,741,773 of potentially dilutive share-based awards outstanding, respectively, were excluded from the computation of diluted net loss related to common holders as their effect was anti-dilutive. See Note 10. Share-Based Compensation.
11

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
Significant Accounting Policies
There have been no material changes in our significant accounting policies during the six months ended June 30, 2021, as compared to the significant accounting policies described in Note 2 to the consolidated financial statements for the year ended December 31, 2020, which are included in the Prospectus.
Recent Accounting Pronouncements
Recently Adopted Accounting Pronouncements
In December 2019, the Financial Accounting Standards Board (“FASB”) issued ASU 2019-12, Income Taxes (Topic 740) (“ASU 2019-12”), which amended the accounting for income taxes. ASU 2019-12 eliminates certain exceptions to the guidance for income taxes related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences as well as simplifying aspects of the accounting for franchise taxes and enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. We early adopted ASU 2019-12 on January 1, 2021, and the adoption did not have a material impact on our consolidated financial statements.
Accounting Pronouncements Issued Not Yet Adopted
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) (“ASU 2016-02”). The guidance specifies that lessees will need to recognize a right-of-use asset and a lease liability for virtually all of their leases except those which meet the definition of a short-term lease. For income statement purposes, the FASB retained a dual model, requiring leases to be classified as either operating or financing. Classification will be based on criteria that are similar to those applied in current lease accounting, but without explicit bright lines. ASU 2016-02, as subsequently amended for various technical issues, is effective for emerging growth companies following private company adoption dates in fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. We are currently evaluating the new guidance to determine the impact it will have on our consolidated financial statements.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326) (“ASU 2016-13”). ASU 2016-13 changes the impairment model for most financial assets and certain other instruments. Entities will be required to use a model that will result in the earlier recognition of allowances for losses for trade and other receivables, held-to-maturity debt securities, loans, and other instruments. For available-for-sale debt securities with unrealized losses, the losses will be recognized as allowances rather than as reductions in the amortized cost of the securities. ASU 2016-13, as subsequently amended for various technical issues, is effective for emerging growth companies following private company adoption dates for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2022, with early adoption permitted. We are currently evaluating the new guidance to determine the impact it will have on our consolidated financial statements.
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848) (“ASU 2020-04”), subsequently clarified in January 2021 by ASU 2021-01, Reference Rate Reform (Topic 848) (“ASU 2021-01”). The main provisions of this update provides optional expedients and exceptions for contracts, hedging relationships, and other transactions that reference the London Inter-bank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued because of reference rate reform. The guidance in ASU 2020-04 and ASU 2021-01 was effective upon issuance and, once adopted, may be applied prospectively to contract modifications and hedging relationships through December 31, 2022. We are currently evaluating the new guidance to determine the impact ASU 2020-04 and ASU 2021-01 will have on our consolidated financial statements.
NOTE 3. REVENUE FROM CONTRACTS WITH CUSTOMERS
We provide technology enabled solutions and advisory services to assist our clients with workflows across product developments, sales, member experience, clinical management, core operations and business intelligence and analytics. We generate our revenues through our two reporting segments: (i) Technology Enabled Solutions and (ii) Advisory Services.
Technology Enabled Solutions
We help health plans to grow membership and revenue as well as operate more effectively and efficiently. We also assist our clients in managing the compliance and administrative requirements imposed under government sponsored health plans. Our technology solutions are primarily delivered through a web-based customizable application. This application is used to identify, track, and administer contractual services, or benefits provided under a client’s plan to its Medicare and Medicaid
12

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
beneficiaries. We also provide analytics over healthcare data to capture and assess gaps in risk documentation, quality, clinical care, and compliance. Our services are provided through three primary solutions:
Advanced Plan Administration provides technology-enabled 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 provides technology enabled services to manage supplemental benefits provided to members through their Medicare Advantage plans. Our services include benefit design and administration, member eligibility and engagement product fulfillment, end to end analytics and reporting, as well as catalog development and product distribution.
Value Based Payment Assurance provides payment tools and data analytics to improve revenue accuracy and identify gaps in quality, clinical care and compliance.
Advisory Services
We provide Advisory Services that complement our technology enabled solutions, including sales and marketing strategies, provider network strategies, compliance, Star Ratings, quality, clinical, pharmacy, analytics and risk adjustment.
Revenues are recognized when goods and services are transferred to our clients in exchange for the consideration we expect to be entitled to receive. To determine the appropriate recognition of revenue for transactions, we perform the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation.
Disaggregation of revenue
The following tables present disaggregated revenue by reporting segment:
(in thousands)For the Three Months Ended
June 30, 2021
Technology
Enabled
Solutions
Advisory
Services
Total
Product Revenue$32,964 $ $32,964 
Health Plan Management21,166  21,166 
Consulting Services1,445 13,882 15,327 
Software Services2,194  2,194 
Data Analytics3,597  3,597 
Total$61,366 $13,882 $75,248 
(in thousands)For the Six Months Ended
June 30, 2021
Technology
Enabled
Solutions
Advisory
Services
Total
Product Revenue$72,069 $ $72,069 
Health Plan Management45,107  45,107 
Consulting Services2,483 26,931 29,414 
Software Services4,925  4,925 
Data Analytics6,365  6,365 
Total$130,949 $26,931 $157,880 

13

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
(in thousands)For the Three Months Ended
June 30, 2020
Technology
Enabled
Solutions
Advisory
Services
Total
Product Revenue$28,439 $ $28,439 
Health Plan Management17,846  17,846 
Consulting Services842 9,459 10,301 
Software Services2,034  2,034 
Data Analytics2,942  2,942 
Total$52,103 $9,459 $61,562 
(in thousands)For the Six Months Ended
June 30, 2020
Technology
Enabled
Solutions
Advisory
Services
Total
Product Revenue$58,698 $ $58,698 
Health Plan Management37,460  37,460 
Consulting Services1,636 19,511 21,147 
Software Services4,080  4,080 
Data Analytics4,920  4,920 
Total$106,794 $19,511 $126,305 
The revenue recognition pattern, point in time or over time, is consistent within all revenue categories with the exception of Data Analytics which includes revenue recognized on both a point in time and over time basis. The amount of point in time revenue within Data Analytics was $1.7 million and $1.2 million during the three months ended June 30, 2021, and 2020, respectively, and $3.1 million and $1.8 million during the six months ended June 30, 2021, and 2020, respectively.
Contract Balances
The timing of our revenue recognition, invoicing, and cash collections results in billed accounts receivable, unbilled receivables, and deferred revenue. Accounts receivable includes unbilled receivable balances of $13.7 million and $16.0 million as of June 30, 2021, and December 31, 2020, respectively.
Deferred revenue represents payments received from our customers in advance of recognition of revenue. Deferred revenue that will be recognized during the succeeding 12 months is recognized as current deferred revenue and the remaining portion is recognized as non-current deferred revenue within Other long-term liabilities. Revenue recognized during the six months ended June 30, 2021, and 2020 that was included in the deferred revenue balance at the beginning of the period was $5.0 million and $5.5 million, respectively.
Remaining Performance Obligations
Transaction price allocated to remaining performance obligations (“RPO”) represents contracted revenue that has not yet been recognized, which includes contract liabilities and non-cancelable amounts that will be invoiced and recognized as revenue in future periods.
The timing and amount of revenue recognition for our remaining performance obligations are influenced by several factors and therefore the amount of remaining obligations may not be a meaningful indicator of future results. Total RPO equaled $8.6 million as of June 30, 2021, of which we expect to recognize approximately $4.7 million over the next 12 months. The remaining $3.9 million is expected to be recognized in fiscal years 2022, 2023 and 2024 by $2.3 million, $1.4 million and $0.2 million, respectively.




14

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
NOTE 4. PREPAID EXPENSES AND OTHER CURRENT ASSETS
Prepaid expenses and other current assets consist of the following:
(in thousands)June 30, 2021December 31, 2020
Prepaid expenses and other advances$2,505 $4,272 
Software licenses3,181 1,492 
Insurance1,786 852 
Inventory purchase advances91 2,206 
Cloud computing subscription & implementation costs3,506 1,986 
Tenant facility lease allowances789 789 
Deferred IPO costs 446 
Other current assets1,685 3,177 
Total prepaid expenses and other current assets$13,543 $15,220 
NOTE 5. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
(in thousands)
Estimated Life
(in years)
June 30, 2021December 31, 2020
Office and computer equipment3 – 8 years$11,865 $10,383 
Leasehold improvementsUp to 10 years10,485 10,572 
Furniture and fixtures2 – 8 years3,794 3,794 
Software3 years1,531 1,486 
27,675 26,235 
Less: accumulated depreciation(8,231)(5,568)
Property and equipment, net$19,444 $20,667 
Depreciation expense for the three months ended June 30, 2021, and 2020 totaled $1.3 million and $1.0 million, respectively. Depreciation expense for the six months ended June 30, 2021, and 2020 totaled $2.7 million and $2.0 million, respectively.
We lease various equipment and software under capital leases. The depreciation expense associated with the assets under capital leases for the three months ended June 30, 2021, and 2020 totaled $0.1 million and $0.02 million, respectively. The depreciation expense associated with the assets under capital leases for the six months ended June 30, 2021, and 2020 totaled $0.2 million and $0.03 million, respectively. Assets held under capital leases are included in property and equipment as follows:
(in thousands)June 30, 2021December 31, 2020
Office and computer equipment$1,682 $1,682 
Less: accumulated depreciation(412)(192)
Total financing leases included in property and equipment$1,270 $1,490 
NOTE 6. INTANGIBLE ASSETS AND GOODWILL
The carrying amount of goodwill by reporting unit as of both June 30, 2021, and December 31, 2020 was $88.9 million for Advanced Plan Administration, $190.2 million for Supplemental Benefits Administration, $138.2 million for Value Based Payment Assurance and $37.9 million for Advisory Services, respectively.
The goodwill allocated to the Technology Enabled Solutions and Advisory Services reportable segments is $417.3 million and $37.9 million, respectively as of June 30, 2021, and December 31, 2020. Goodwill is assessed for impairment on an annual basis and on an interim basis when indicators of impairment exist. There were no indicators of impairment as of June 30, 2021.

15

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
The carrying value of identifiable intangible assets consisted of the following at June 30, 2021:
(in thousands)
Gross
Carrying
Amount
Accumulated
Amortization
Net Carrying
Amount
Amortized intangible assets
Trade names$27,300 $(2,668)$24,632 
Customer relationships189,000 (31,500)157,500 
Technology47,800 (8,763)39,037 
Capitalized software development costs8,948 (1,198)7,750 
Total intangible assets$273,048 $(44,129)$228,919 
The carrying value of identifiable intangible assets consisted of the following at December 31, 2020:
(in thousands)
Gross
Carrying
Amount
Accumulated
Amortization
Net Carrying
Amount
Amortized intangible assets
Trade names$27,300 $(1,940)$25,360 
Customer relationships189,000 (22,909)166,091 
Technology47,800 (6,373)41,427 
Capitalized software development costs6,405 (441)5,964 
Total intangible assets$270,505 $(31,663)$238,842 
Amortization expense for Trade names, Customer relationships and Technology for the three months ended June 30, 2021 and 2020 totaled $5.9 million. Amortization expense for Trade names, Customer relationships and Technology for the six months ended June 30, 2021 and 2020 totaled $11.7 million.
Amortization expense for Capitalized software development costs for the three months ended June 30, 2021 and 2020 totaled $0.6 million and $50 thousand, respectively. Amortization expense for Capitalized software development costs for the six months ended June 30, 2021 and 2020 totaled $0.8 million and $90 thousand, respectively.
NOTE 7. ACCRUED EXPENSES
Accrued expenses and other current liabilities consist of the following:
(in thousands)June 30, 2021December 31, 2020
Contingent consideration$20 $20,538 
Incentive bonus7,512 12,198 
Employee related10,664 11,065 
Sales and use tax9,169 7,469 
Rebates1,823 3,822 
Accrued interest1,836 2,794 
Accrued professional fees6,621 6,389