Convey Health Solutions Holdings, Inc. (CNVY) is a leading healthcare platform that leverages technology and expertise to enhance the performance of government-sponsored health plans, including Medicare Advantage (MA) plans. The company's innovative solutions and services empower payors to attract and retain members, improve revenue accuracy, drive cost savings, facilitate regulatory compliance, and enhance operational effectiveness.
Business Overview
Convey's comprehensive suite of technology-enabled solutions and advisory services cater to the evolving needs of its clients, which are primarily MA plans, Medicare Part D plans, and pharmacy benefit managers. The company's proprietary, modular technology platform serves as an extension of its clients' core health plan operations, addressing critical workflows across product development, member experience, clinical management, core operations, and business intelligence.
Convey's Technology Enabled Solutions segment provides a range of services, including Health Plan Management, Software Services, Data Analytics, and Supplemental Benefit Services. These solutions leverage Convey's deep domain expertise and cutting-edge technology to help health plans navigate the complex and highly regulated Medicare market. The company's Advisory Services segment complements its technology offerings, providing project-based consulting services led by seasoned subject matter experts.
Financials
In the latest fiscal year, Convey reported annual revenue of $337.6 million, a testament to the company's strong market position and the growing demand for its solutions. However, the company faced challenges during the year, resulting in a net loss of $9.98 million. This was primarily due to increased costs associated with the acquisition of HealthSmart, a provider of healthcare products and services, as well as expenses related to the company's going-private transaction.
Despite the net loss, Convey's annual operating cash flow was -$2.32 million, and its annual free cash flow was -$14.64 million. These figures highlight the company's ongoing investments in growth initiatives and the integration of HealthSmart, which are expected to drive long-term value creation.
Quarterly Performance
In the most recent quarter, Convey reported revenue of $89.8 million, a 19% increase compared to the same period in the prior year. This growth was driven by strong performance in both the Technology Enabled Solutions and Advisory Services segments. The Technology Enabled Solutions segment saw a 23% increase in revenue, primarily due to the contribution from the HealthSmart acquisition and continued growth in the company's existing client base. The Advisory Services segment also experienced a 2% increase in revenue, reflecting new project wins within Convey's existing client base.
However, the company's profitability remained challenged in the quarter, with a net loss of $9.9 million. This was largely attributable to higher costs associated with the HealthSmart acquisition, including a $2.8 million inventory step-up charge, as well as expenses related to the company's going-private transaction.
Liquidity
As of the latest reporting period, Convey had $19.7 million in cash and cash equivalents, providing the company with the financial flexibility to execute its growth strategies. The company's balance sheet also includes $270.4 million in total debt, primarily consisting of term loans. Convey's debt structure and liquidity position are expected to support its ongoing investments in technology, product development, and strategic initiatives.
Acquisition of HealthSmart
In February 2022, Convey acquired HealthSmart, a provider of a diverse portfolio of health, wellness, and diagnostic products centered on home-based care outcomes. The acquisition aligns with Convey's strategy to expand its product and service offerings, leveraging HealthSmart's supply chain and logistics expertise to deliver high-quality products to members faster and at a lower cost.
The integration of HealthSmart has been a key focus for Convey, with the company reporting $22.6 million in revenue and a net loss of $2.0 million from the acquired business in the first half of the year. Convey expects the HealthSmart acquisition to be accretive to its financial performance in the long term, as the company realizes synergies and cross-selling opportunities between the two businesses.
Going-Private Transaction
On June 20, 2022, Convey announced that it had entered into a definitive agreement to be acquired by an affiliate of TPG Global, LLC, a leading global alternative asset management firm. Under the terms of the agreement, Convey shareholders will receive $10.50 per share in cash, representing a premium of approximately 25% over the company's closing stock price on the last trading day prior to the announcement.
The going-private transaction is expected to close in the second half of 2022, subject to customary closing conditions. Upon completion, Convey will become a private company, and its shares will no longer be publicly traded on the New York Stock Exchange.
Competitive Landscape and Growth Opportunities
Convey operates in a highly competitive market, with healthcare services and technology companies vying for a share of the growing government-sponsored health plan market. The company's key competitors include Optum, Anthem, and Centene, among others. However, Convey's unique combination of technology-enabled solutions and deep domain expertise in the Medicare market has allowed the company to establish strong relationships with its clients and differentiate itself in the industry.
Looking ahead, Convey sees significant growth opportunities within its existing client base, as the majority of its clients currently subscribe to only a subset of the company's solutions and services. Additionally, Convey is well-positioned to win new clients in the MA market, expand into adjacent markets such as Medicaid and commercial insurance, and pursue complementary strategic acquisitions.
Risks and Challenges
While Convey's business model and growth prospects are promising, the company faces several risks and challenges that investors should consider. These include the highly competitive and regulated nature of the healthcare industry, the company's reliance on a small number of large clients, and the integration and execution risks associated with the HealthSmart acquisition.
Furthermore, the pending going-private transaction introduces additional uncertainties, as the completion of the deal is subject to various closing conditions and could face potential legal or regulatory challenges. Investors should closely monitor the progress of the transaction and its potential impact on Convey's operations and financial performance.
Conclusion
Convey Health Solutions Holdings, Inc. is a leading provider of technology-enabled solutions and advisory services to the government-sponsored health plan market. The company's innovative offerings, deep industry expertise, and strategic acquisitions position it well to capitalize on the growing demand for solutions that help health plans navigate the complex and evolving Medicare landscape.
Despite the challenges faced in the latest fiscal year, Convey's strong market position, diversified service offerings, and ongoing investments in growth initiatives suggest that the company is well-positioned to deliver long-term value for its stakeholders. However, investors should closely monitor the company's financial performance, the progress of the going-private transaction, and the broader competitive and regulatory landscape in the healthcare industry.