CONVEY HEALTH SOL HLDNGS INC CNVY
June 17, 2022 - 2:24pm EST by
sag301
2022 2023
Price: 4.21 EPS 0 0
Shares Out. (in M): 73 P/E 0 0
Market Cap (in $M): 308 P/FCF 0 0
Net Debt (in $M): 225 EBIT 0 0
TEV (in $M): 532 TEV/EBIT 0 0

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Description

I do not hold a position with the issuer such as employment, directorship, or consultancy.
I and/or others I advise hold a material investment in the issuer's securities.

Catalyst

-        2022 revenue guidance is revised higher: In our view, Convey has positioned itself to raise its 2022 revenue guidance in Q2 or Q3. Its 2022 guidance is for $390m-$410m revenue and $80m-$84m of Adj. EBITDA, which it reiterated in Q1. However, management noted on the Q4 call, which it held on March 23rd, or eight days before the end of Q1 when results were nearly fully baked, that they expected revenue to be weighted towards Q4 and light in Q1, actually providing percentages by quarter:

Steven James Valiquette, Barclays Bank PLC, Research Division - Research Analyst

 Okay. That's still helpful. And then just a quick follow-up on your comment about the revenues in the fourth quarter being a little bit higher as a percentage of total full year revs this year versus last year. I think you mentioned it was due to some benefit design changes. I'm not sure if that was OTC specifically or not. But I was just curious to hear more about the mechanics of that. Is it really just a function of more of the end of member spending in relation to those benefits will just occur later in the year, and it's correlated to that? Or are there some other mechanics that drives that revenue being more back-end loaded into the fourth quarter?

Timothy Fairbanks, Convey Health Solutions Holdings, Inc. - Executive VP & CFO

 Yes. There's -- Steve, it's Tim. So there's a couple of different sub mechanics there, but one is just a plan design. You hit the nail on the head that each of our clients typically have many different plan designs that we've gotten fairly accurate in predicting the seasonality of that revenue based on the plan design. And the way the plans are designed this year, we predict there'll be a little bit more back-end loaded. They're typically seasonal, so no surprise there, and we think there will be just a bit more seasonal than usual.

 There's other factors at play here as well outside the Supplemental Benefit realm. We've got a number of new clients and some of these clients, based on the type of work we're doing for them, we expect the revenue to build throughout the year. So there'll be a little bit more back-end load, but this isn't dramatic.

 And so to give you -- to give everyone just a sense of kind of what we're talking about here, if you look at our 2021 revenue distribution, about 29% of our total annual revenue landed in the fourth quarter and 24% of our total annual revenue landed in the first quarter. I expect -- we expect that 29% in the fourth quarter to maybe be 31% in the fourth quarter of '22. And that additional 2% will come from the first quarter. So the 24% of revenue that we had in the first quarter of '21 might decline to 22%. I think quarters 2 and 3 in the middle there will be roughly similar in their distribution to what we had in the previous years. And so this isn't a massive shift of seasonality, but a 200 basis point shift of seasonality in our first and fourth quarters compared to last year.

o   Assuming that 22% of 2022 revenue was actually earned in Q1, Convey would generate $440m revenue in 2022, 10% above the midpoint of its initial guidance and representing 30% YoY revenue growth. When we asked management 3 different ways about this discrepancy, they dodged each time, but they also did not walk back their previous commentary highlighted above.

Greater visibility/attention helps improve liquidity: CNVY has told us they’d like to hold an investor day in H2 2022.

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