CNVY - Earnings call transcript Q1 2022 | Convey Health Solutions Holdings Inc

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Operator

Good afternoon, and welcome to Convey Health Solution's First Quarter 2022 Earnings Conference Call and Webcast. [Operator Instructions] Leading the call today is Stephen Farrell, Chief Executive Officer; and Tim Fairbanks, Chief Financial Officer; John Steele, Convey's Executive Vice President of Technology is also joining the call.

Before we begin, we would like to remind you that certain statements made during this call, including during both Q&A will be forward-looking statements pursuant to the safe harbor provision and Private Securities Litigation Reform Act. These forward-looking statements are subject to known and unknown risks and uncertainties and reflect our current expectations based on our beliefs, assumptions and information currently available to us. 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 such forward-looking statements. the actual statements differ section XX, include company's XX-K cause reflected from of XXXX could for Exchange Form forward-looking -- Commission. filings in the for Securities and that its results ended on materially to those the the other Factors period ending the December and period Risk Factors of Expect otherwise. statements whether forward-looking publicly update as required any or by events law, a we new result undertake future no obligation to information, as

in forth ended Convey Solutions Additional which information set will XX-Q later quarter be form report the is filed Form March Health on be also quarterly XXXX, today. expected for to XX,

can financial In a non-GAAP non-GAAP will over comparable we Stephen With performance. be that the and please the posted addition, relations historical measures measures company on financial GAAP of in that measures go the Farrell. to reconciliation the believe found like financial measures note release press please discussing Solutions ahead. in are CEO, to is certain its Convey Health I'd turn understanding website. the most company's Stephen, be Details between that on that, these non-GAAP important to assessing call and

Stephen Farrell

quarter joining Financial Tim thank concluded company. fourth XXXX to our of We Steele, President today Technology. public and I'd like quarter a earnings just our our joined us John Fairbanks, for I'm you Officer; for call. as Chief first by our Executive Vice

less well. than our been months perform update. to It's continue We X last since

increase our quarter of which the of an of million of year have in generally attractive abbreviated. when $XX.X we we nature revenues Today, expectations outlined expect on XXXX, $XX.X predictable. believe over business EBITDA So line to bit adjusted the flow is adjusted last and first reported the EBITDA strategy business the with million that will indicated balance generation makes and margins cash XX% my and our a be the revenue, than first and comments recurring for net XXXX We our our of March quarter. higher we on call, of

strong we forward leader and as to expect growing excellent we continue a to achieve management We technology, growth team, markets. are a operating strong going in have

currently on we XX. guidance XXXX that are March for not provided recently just our changing We

our continue be XXXX. clients and for upsell to for execute to We and the confident we We our in with remainder on the believe ability are first onboarded of we the quarter, in new year successfully track activities. cross-sell

chain States, As at like of some experienced our supply shipping we challenges quarter. caused costs other some labor incremental we've call end the challenges. March, the in many the on Those United mentioned companies first in and

me a to take minute elaborate. Let

We've experienced rates percentage factor. very as first first and chain we partly that we partly were by the in closed leveraging to team, improve In although little future, are supply specific on expect a pressure leveraging our we of was by technology small our leverage the by which really higher the inventory rates caused costs, the will inventory good job of HealthSmart offshore capability. just expertise that quarter not a or drive Our managing labor in higher they efficiency primarily margin quarter inventory, labor and cost done to costs, our we acquisition. of because although benefit

pressure for times was margin longer quarter inventory. Our the lead in to due primarily first

order shipping we cost-effective to and we to and products incurred by incurred our needs, positioned deliver to we client the order the expedite manage help which and be leverage received on will shortage. and created enough it as our time between experienced. explain. the to engagement acquisition both an charges able is us meet challenges now we to we me meet didn't Let Lead HealthSmart inventory, to supply order an We were manage chain get We we expected, member longer than incremental that expenses we to time believe in-house these manufacturer demand when related to the orders inventory place time. also shipments high-quality times high to for relationships are effectively should better more shortfall. labor higher and the deliveries inventory In the

We also safety set and leveraging are Philippines' footprint skill our our valves. as work-at-home

importantly, to we the to headwinds although supply continue So is challenges, to offerings. manageable. have due seeing we continue momentum think and service strong in chain inflation our and And may short-term we labor are it technology some

far. solid continued is our revenue net early, closing, year compared and Although starting into selling up and growth another well margins revenues we the a so In start year believe good with translate XX% off the will to progresses. as tracking quarter higher season XXXX we delivered to last is off year

to help increase continue clients plan and health efficiently. We with engage members operate our revenue, more

to strong. continues proposition value be our So

there. attending We be many will you Conference and the look America see Bank of tomorrow forward to of

provide will Tim, for details on first will turn will up I we call call more then the over to Tim? open the who Now quarter questions. our

Timothy Fairbanks

call for XX% strong you, million, compared quarter $XX.X first to revenues million joining Stephen, to of thanks and first today. with quarter in increasing generated Thank the net XXXX We XXXX. the everyone financial to results $XX.X

over growth $XX.X driven the was The benefit increase services is by supplemental Our and both plan during which quarter in Solutions million, a XXXX. million first increase health management Technology $XX.X Enabled segment of revenue. primarily was revenue XX%

quarter compared first segment Advisory million $XX.X during the $XX first of in was XXXX. revenue to of Our Services approximately quarter the million

no a first have when quarter loss from impact February expenses of million Services of XXXX return but to generated million the onetime $X.X lockdown. Included or purchase X. which on step-up expense Advisory quarter-over-quarter noncash net year-over-year closed a for cash nicely, quarter, pent-up $XX.X our margin Note the EBITDA. of million office was the compared continues that quarter by accounting. We comparison in driven the the these EBITDA in demand of for grow to related is acquisition inventory impact believe $XX.X was during to their after million need strong adjusted first continue HealthSmart pandemic million costs to a of to we impacted clients $X.X by XXXX While quarter our $X.X business comparison this benefited XXXX. first will Adjusted onetime

our While we some quarter in EBITDA adjusted expectations, for was first inflation of margin reflects XX related we of our to chain first XXXX amended experienced XXXX. points. by approximately in interest basis rate hire first quarter by quarter second Also, pressure growth. for July, quarter staffing, to loan expense the our Interest the IPO reduced using credit agreement, $X.X following million compared lower our exacerbated balances of decrease our proceeds. with was term quarter line $X.X the This first paydown million supply challenges effective and XXXX revenue which

cash and Moving flow items. to balance sheet

HealthSmart XX, $XXX.X connection of excluding March liabilities. net as during activities acquisition. capital Total by we use increase cash during last quarter with million, prior $X.X pay used normal cash of we was cash year unamortized typically equivalents cash As over the the approximately available million, totaled million million. higher the reflects and debt, capital driven $XX.X $XX.X had $XX.X incurred cost XXXX, million. was and our a revolver. than on quarter million of first used We This see in working operating quarter debt in Net $XX.X additional down net working

now to for Operator, we employees to continued like to our and hard questions. ready dedication. their work are the I'd Finally, open call thank

Operator

question Instructions] of Cindy [Operator Motz first The comes Sachs. from Goldman

Cynthia Motz

have X questions. I

the The costs some first get the with I the a quarter, of margins, little in -- with thing, there. supply first the so the chain with bit

the you so still same, margins year? also million. the was it stop should the a guidance And the midrange we range around I around you're keeping I So in I'll have other for I XX% like but think comfortable housekeeping, -- guidance EBITDA like margins was there. you're And with think, then would to ramp. then just see, revenue good overall Are but the expect keeping of X same, $XXX pretty

Timothy Fairbanks

Great. Yes.

you're not that Cindy, right. So We're changing guidance.

This margins we from you are are issued number lower onboard we also quarter's amplified quarter guidance, first margins typically The we average we number with our year, typically, some number HealthSmart fourth acquisition And one. is expenses it February because quarter for X, implementation bit quarter had a was higher that logos, integration did year, of If new for new the clients. X. our that margin bit the on the a a last on of reasons first indicated degradation a and higher. remember the bit call, closed

Cynthia Motz

on Okay. working the new think. Actually, thing shift. to that capital hear good makes guess sense. And I one clients, the that's I

some gave you color. So

So it of inventories was the were accounts because an noticing there but were thing the is a you sort receivables I saying up, at like was issue. seasonal

Now you have inventory. of plenty

correct. go should the the would that in see think, I we shift So second other capital quarter, way working

Timothy Fairbanks

seasonal pointed on accurately compare number piece Little the point this the cash liability period. payable I'll XX that things X it is does now see use because Cindy. one include it really the was $XX where X, sheet. that really in there, out, a of line and And to balance million But acquisition. accounts March accrued you Number Correct. of out the tough HealthSmart you'll

also However, a in cash the prior it prior year. -- was million $XX use of

have itself AP should that year as paydown goes do reverse that seasonal And on. so we the

Operator

Steven of The Barclays. Valiquette next from question comes

Steven Valiquette

just you 'XX. quarter 'XX looking mix high-level just that but by on any mix it to how unless 'XX? So have up the guess wondering updates for disclose calendar from the specific thought couple kind conversation I'm last one of you wondering first key quarterly would call. pick some I'm ended of on numbers, you the the you where shook your I your in where a of customers out anything, of early just just of any versus revenue want in versus not ended if topics to conference largest you if

Timothy Fairbanks

similar Yes. XX% about points which our total There's revenue. vary around actually B, portion is ago. disclose We in Again, base. But can Steve. bit numbers those customers provide each these with fee This very around I so will will always by be to later points movement customer But our of a our roughly line will you've of of quarters, different XXX as A But seen. a of months included in bit I will Customer many the largest mix in basis that within basis released revenue of it customer customer be be was revenue. it be within up specifics. of quarter. little terms also today. down to quarter to overall, XX% Q, consolidating mean a little solutions XXX is XX what and bit of little there

Stephen Farrell

large with a And to customers, really it's and we good a that good customers. our largest job Steven, job and try there'll with want we incremental it's they a a all fluctuation sword us But job do dual-edge reward of with We year-to-year. business. them, to our good we natural do them. to some So, do grow be continue with because with

Operator

comes next Sandy Guggenheim. Draper The question from of

Sandy Draper

and a but selling Just the it's some on gave early on still you comments -- I question season. know

Just curious, a bit last year, was lighter. little

You around issue out not were much that called retail. there having some as

it? Is driving here better. to specific doing business just sort that seem primary to fill of seems Or You that's can the lines be you any driver that gap. of comment that around

Stephen Farrell

Sure.

terms growth our have, in clients incremental have was within same-store as didn't than to year quickly so we expected a was think, year-over-year So less speak, quite analysis the historically. accounts who I as our existing grow in they we new good where season last our selling of growth,

Last -- forward. years. of a trajectory I exception that, will large XX clients that for clients had bit and year growth -- a fully was going So over good here have our largest our an year last this to on expect outstanding was be the

brought year, certainly was some income significant up season portion we terms fixed retail, of in we selling of and which late early In with year, fall. by fixed the a that our the the passed of that last the that But already you challenges of summer challenge, us. time partnership, last

set year's So a season partners of of we entered this set and with products. selling good excellent an

in that of you swing season, we'll the season. most full year. go selling But through if this are recall, We now XXXX in

Operator

Close of Richard from Canaccord. Next question comes

Richard Close

or could respect maybe bit provide those in terms something longer the to Tim, of along wondering maybe the headwind points if I a basis times in lines? was with inventory, degree created more details that you little lead

Timothy Fairbanks

specifically Richard, impact basis. tough bridge it's exact Yes. to down dollar a on nail

there's supplemental pressure of give the aiding you a in as always However, sense, we our QX margin onboard benefits business. portion just to

history order As rely we have don't you your or customers. of new clients, onboard kind really upon legacy you do to patterns any like

they you because you issues. patterns And shift decide lead inventory their surprised little catch to quickly In a the ordering so it's new the to are, and there's supply times, time normal -- possible products in what a ordering, and that quickly today's cetera. the by loads quarter world, clients world, that. In for many are get in can no scramble first more chain order, when up quarter these exactly bit need et

that And so of does is where overnight forced is labor, loads pleasantly business pressure bit I more it more putting more charges, you think company see. in quarter shipping labor, would of downstream was than we figure. cetera, said, our the to with creates that first the dollar our margin what little uneven incur revenue surprised be. inventory distribution a more on the normally absolute thought EBITDA That We were amount where et it

end we dollars just little up of I a But a And associated thought certainly we'd think, it the reasons where for to with getting, ultimately, margin lower so additional EBITDA the we discussed. be. that bit revenue had

Stephen Farrell

Yes.

It's terms it the of add exactly the in of but just would I'd in hundreds science what So not inexact dollars, to was thousands. be millions measured of an calculating impact that.

Richard Close

Okay. do to And guidance you the as quarterly pertains how your confidence then level month -- a But gauge on compared when guidance year. ago guidance, said as you give the I it. guidance this for in you're that specific reaffirming Obviously, just quarterly don't you guess guidance. EBITDA adjusted primarily to it

Stephen Farrell

Yes.

issued So ask had when think end, Tim, you on a on, guidance. was we QX, it in solid which the anticipated jump but I'll we March we I XX to that back

really going insight the into because this to expected quarter we up line our time had to QX. We're be. changing not was what ended at good with guidance for in we be where we So

way move we we that that of we call, think have I grow done our if quarters we felt And thought the was terms is so. a And to the there of so line XX -- guidance March and think, EBITDA would down, some our to terms on provided in color adjusted like continue we accurate. in need would

model bit We it. on acquired to feel a about strong Tim, to perform continue operation to valve continue this be work and But good our which year. the confident we of have on the acquisition. do considering very we our our Anything ability business, believe little offshore in do throughout and revenue in and headwind. We to labor recurring to our the safety a have And makes us to in inventory especially manageable, that side newly HealthSmart it's we add, have that? powerful

Timothy Fairbanks

for No. Not me. Thanks.

Richard Close

maybe could quarter progression think little I how should if a And talk comment slip quarter, one how more Obviously, in. quarter? cash flow we first of on the through just through year? but Tim, bit did think second some about we the about you fourth

Timothy Fairbanks

million paydown that a I would chance $XX our Yes. at flow one of outlier quarter. think in -- the when big seasonal. look I majority quarterly to is here, you have the cash of statement, is vast accounts the The payable of

see X. to paying cash in payables by quarters and down your sort X, expect of you wouldn't so X that of And use

then clearly, that's And outlier where of as through our the so about in the really indicates well. increase also you $XX if And that of the income an million net think is guidance midpoint quarters EBITDA, there.

of And certainly we see use as haven't net so on I income. improvement the quarterly as while both flow, AP in of well published you'll think cash cash guidance

Operator

questions questions There [Operator at at registered no no time. Instructions] currently There are registered are this currently further time. this

for back remarks. pass management to will the I So conference the over team closing

Stephen Farrell

of the to Bye. We Conference. see you joining Thank of first Bank you. tomorrow our quarter hope and Great. you call, I at XXXX appreciate some America

Operator

Thank XXXX participation. your Quarter Health Convey concludes Call. Earnings Solutions' you for That Conference First

may now disconnect lines. You your

Convey Health Solutions (CNVY) 14 May 222022 Q1 Earnings call transcript