SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

9 Months Ended

Sep. 30, 2021

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and judgments that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities. These estimates and judgments are based on historical information currently available to us and based on various other assumptions that we conclude to be reasonable under the circumstances. While management concludes that such estimates are reasonable when considered in conjunction with our condensed consolidated balance sheets and statements of operations and comprehensive income (loss) taken as a whole, actual results could differ materially from those estimates.

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 September 30,						For the Nine Months Ended September 30,
(in thousands)	2021			2020			2021			2020
Customer A	$	15,409		$	13,479		$	41,594		$	33,547
% of total revenue	18.7		%	19.4		%	17.3		%	17.1		%
Customer B	$	13,492		$	12,215		$	44,888		$	34,636
% of total revenue	16.4		%	17.6		%	18.7		%	17.7		%


	Accounts Receivable
(in thousands)	September 30, 2021			December 31, 2020
Customer A	$	4,344		$	7,582
% of total accounts receivable	9.3		%	15.0		%
Customer B	$	7,558		$	3,447
% of total accounts receivable	16.2		%	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 nine months ended September 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.

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


(in thousands)
Balance at December 31, 2020	$	20,538
Payments against the earn-out liabilities	(7,500)
Payments against the holdback liabilities	(13,134)
Change in fair value of earn-out liabilities	96
Balance at September 30, 2021	$	—

The following table provides a reconciliation of our Level 3 earn-out and holdback liabilities for the nine months ended September 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 September 30, 2020	$	32,165

Net Income (Loss) Per Common Share

Basic income (loss) per share is computed by dividing net income (loss) attributable to common shareholders (the numerator) by the weighted average number of common shares outstanding for the period (the denominator). Diluted net income (loss) per common share attributable to common shareholders is computed by dividing net income (loss) by the weighted average number of common shares outstanding during the period adjusted for the dilutive effects of common stock equivalents. In periods when losses from 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 September 30,				For the Nine Months Ended September 30,
(in thousands, except per share data)	2021		2020		2021		2020
Net income (loss) attributable to common shareholders
Net income (loss) from continuing operations	$	3,686	$	(1,646)	$	(10,391)	$	(14,601)
Net income (loss) from discontinued operations	—		(6)		—		37
Net income (loss) attributable to common shareholders	$	3,686	$	(1,652)	$	(10,391)	$	(14,564)
Weighted-average common shares outstanding:
Basic and diluted	73,061,790		61,321,424		65,841,840		61,321,424
Income (Loss) per share:
Basic and diluted
Continuing operations	$	0.05	$	(0.03)	$	(0.16)	$	(0.24)
Discontinued operations	—		—		—		—
Net income (loss) per common share	$	0.05	$	(0.03)	$	(0.16)	$	(0.24)

For the three and nine months ended September 30, 2021, and 2020, 5,790,375 and 5,621,364 of potentially dilutive share-based awards outstanding, respectively, were excluded from the computation of diluted net income (loss) related to common holders as their effect was anti-dilutive. See Note 10. Share-Based Compensation.

Significant Accounting Policies

There have been no material changes in our significant accounting policies during the nine months ended September 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. As of September 30, 2021, we have identified our arrangements that are within the scope of the new guidance and have evaluated our portfolio of leases, which is primarily comprised of operating real estate leases for our respective offices. We will elect the package of practical expedients under which we will not reassess prior conclusions about lease identification, lease classification, and initial direct costs of existing leases as of the date of the adoption and, upon adoption, will recognize the right-of-use lease assets and related lease liabilities as of the adoption date using the modified retrospective approach. Prior period information will not be restated. Upon transition to the guidance as of the date of adoption, we expect a material effect on the consolidated balance sheet. Further, we do not expect that the adoption of the guidance will have a material effect on the consolidated statements of operations or cash flows.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326) (“ASU 2016-13”). ASU 2016-13 changes the impairment model for most financial assets and certain other instruments. Entities will be required to use a model that will result in the earlier recognition of allowances for losses for trade and other receivables, held-to-maturity debt securities, loans, and other instruments. For available-for-sale debt securities with unrealized losses, the losses will be recognized as allowances rather than as reductions in the amortized cost of the securities. ASU 2016-13, as subsequently amended for various technical issues, is effective for emerging growth companies following private company adoption dates for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2022, with early adoption permitted. We are currently evaluating the new guidance to determine the impact it will have on our consolidated financial statements.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848) (“ASU 2020-04”), subsequently clarified in January 2021 by ASU 2021-01, Reference Rate Reform (Topic 848) (“ASU 2021-01”). The main provisions of this update provide optional expedients and exceptions for contracts, hedging relationships, and other transactions that reference the London Inter-bank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued because of reference rate reform. The guidance in ASU 2020-04 and ASU 2021-01 was effective upon issuance and, once adopted, may be applied prospectively to contract modifications and hedging relationships through December 31, 2022. We are currently evaluating the new guidance to determine the impact ASU 2020-04 and ASU 2021-01 will have on our consolidated financial statements.