Tabula Rasa HealthCare Reports Fourth Quarter and Full Year 2020 Results

2/24/21

Tabula Rasa HealthCare, Inc. (Nasdaq: TRHC), a healthcare technology company advancing the safe use of medications, today reported financial results for the fourth quarter and full year ended December 31, 2020.

"We finished a challenging 2020 with fourth quarter revenue exceeding the high end of the guidance range we provided on November 3, 2020 and adjusted EBITDA at the high end of our guidance range. While the ongoing pandemic has created short-term headwinds, it has also elevated the critical role pharmacists play in the broader healthcare ecosystem. We are uniquely positioned to capitalize on the growing market opportunity for our medication risk mitigation science and solutions over the next decade," said Calvin H. Knowlton, PhD, TRHC's Chief Executive Officer, Chairman and Founder.

CareVention Highlights

  • Through a combination of organic growth and strategic acquisitions, we ended 2020 serving 44,947 PACE participants, which represents less than 3% of the estimated 2.2 million PACE-eligible individuals based on recent industry data. After taking into account the October 2020 acquisition of Personica, our average PACE per-member per-month (PMPM) revenue during the fourth quarter was $394, which is one-third of the potential revenue we would expect to capture for clients utilizing all of our services. Driving our PMPM higher through cross-selling new services to existing clients is a strategic priority for TRHC in 2021. During 2020, we recognized more than $2 million of cross-sell revenue.
  • Our fourth quarter PACE census additions for our pharmacy fulfillment services represented the best quarterly performance during 2020 and increased as compared with the fourth quarter of 2019 on both a gross and net enrollment basis.
  • As of February 16, 2021 the current backlog of new expansion centers and new PACE organizations under contract to open over the remainder of 2021 stands at 21 locations. The majority of these new implementations are scheduled for the second half of 2021.

MedWise Highlights

  • Fourth quarter bookings across all divisions (i.e. MedWise and CareVention) increased 58% as compared to the same period in 2019. This growth was driven by exponential growth in our MedWise payer division and strong growth in our CareVention segment. For the full year 2020, bookings increased 52% as compared to 2019, once again driven by our MedWise payer division, which represented 44% of total bookings as compared to 7% in 2019.
  • TRHC enters 2021 in a strong position with respect to our overall sales pipeline (i.e. MedWise and CareVention). As of January 1, 2021, our sales pipeline was 92% higher as compared to January 1, 2020. We plan to continue to aggressively grow our sales headcount, with an emphasis on our MedWise payer division, as well as invest in sales enablement tools to further increase productivity in a virtual sales environment.
  • Notable fourth quarter 2020 deals included: 1) expansion agreements with several of our largest health plan clients, 2) a new Medicare Advantage plan in California, further validating our efforts to expand beyond PACE to the broader Medicare market, and 3) Kinney Drugs, a large pharmacy chain in New York State. During the full year 2020, we added a number of new MedWise payer clients, including several contracts well in excess of $1 million, and have continued to expand our retail pharmacy footprint with the addition of nearly 1,200 new rooftops including several large chains.

Fourth Quarter and Full Year 2020 Financial Results

All comparisons, unless otherwise noted, are to the three months ended December 31, 2019.

  • Total revenue - Total revenue of $77.1 million, which exceeded our guidance range of $74 million to $76 million, increased 5% as compared to $73.2 million. Total revenue included product revenue of $43.8 million, an increase of 16%, and solutions (i.e. software and services) revenue of $33.3 million, a decrease of 6%. The October 2020 acquisition of Personica contributed 5% of inorganic growth during the fourth quarter of 2020. For the full year 2020, total revenue of $297.2 million increased 4% as compared to $284.7 million in 2019. Total revenue included product revenue of $159.6 million, an increase of 16%, and solutions (i.e. software and services) revenue of $137.6 million, a decrease of 7%, respectively, as compared to 2019.
  • Total revenue by segment
    • CareVention HealthCare revenue increased 14% to $56.9 million. Our October acquisition of Personica contributed 7% of inorganic growth to overall segment growth during the fourth quarter of 2020. For the full year 2020, CareVention HealthCare revenue increased 13% to $206.3 million as compared to 2019, comprised of $158.7 million (up 16% as compared to a year ago) of PACE product revenue and $47.6 million (up 4% as compared to a year ago) of PACE solutions revenue. 2020 PACE solutions growth was negatively impacted by a renegotiated contract, which created a $4 million or 2% of growth revenue headwind as compared to a year ago.
    • MedWise HealthCare revenue decreased 14% to $20.2 million and performed consistent with expectations, and showed modest sequential growth as compared to the three months ended September 30, 2020, which historically had been a weaker quarter for medication safety services. During the quarter we fully implemented the two contracts that had been delayed throughout 2020 and both contracts have been renewed for 2021. For the full year, MedWise HealthCare revenue decreased 11% as compared to a year ago to $91.0 million due in part to the changes in CMS guidance we discussed last quarter driving fewer comprehensive medication reviews across the industry, as well as consolidation in the health plan industry that resulted in lower-than-expected revenue at a small number of large accounts.
  • Non-GAAP Adjusted EBITDA - Non-GAAP Adjusted EBITDA of $4.7 million (6.2% margin), at the high end of our guidance range, declined as compared to $8.0 million (10.9% margin) a year ago. For the full year 2020, non-GAAP Adjusted EBITDA declined to $21.8 million (7.3% margin) as compared to $37.9 million (13.3% margin) for 2019. Both the quarter and full year declines were driven by lower revenue and profitability in our MedWise HealthCare segment and increased investments in corporate shared services to support our growth strategy.
  • Non-GAAP Adjusted EBITDA by segment - Excluding $9.8 million and $37.9 million of shared services for the fourth quarter and full year 2020, respectively:
    • CareVention HealthCare non-GAAP Adjusted EBITDA of $13.8 million (24.3% margin) increased 8% as compared to $12.8 million (25.6% margin) a year ago. For the full year 2020, CareVention HealthCare non-GAAP Adjusted EBITDA of $50.4 million (24.4% margin) increased 6% as compared to $47.5 million (25.9% margin) for 2019.
    • MedWise HealthCare non-GAAP Adjusted EBITDA of $0.7 million (3.7% margin) decreased as compared to $2.2 million (9.3% margin) a year ago, primarily due to lower medication safety services revenue. MedWise HealthCare non-GAAP Adjusted EBITDA of $9.3 million (10.2% margin) decreased as compared to $18.3 million (18.0% margin) for 2019.
  • GAAP net loss - Net loss was $30.6 million for the three months ended December 31, 2020 as compared to a net loss of $6.8 million a year ago, driven by our core expenses (i.e. cost of revenue, research and development, sales and marketing, and general and administrative expenses), including stock-based compensation. Our core expenses increased $10.7 million, or 15%, which was offset by revenue growth of 5%, or $3.8 million. Additional factors contributing to the net loss were depreciation and amortization of $12.7 million (compared to $9.8 million a year ago), interest expense of $6.7 million (as compared to $4.5 million a year ago), and an intangible impairment charge of $5.0 million related to our 2014 acquisition of Medliance (as compared to $0 a year ago). For the full year 2020, net loss was $81.0 million compared to a net loss of $32.4 million a year ago, driven by our core expenses. Our core expenses increased $30.7 million, or 11%, which was offset by revenue growth of 4% or $12.5 million. Additional factors contributing to the net loss were depreciation and amortization of $45.0 million (as compared to $34.3 million a year ago), interest expense of $20.7 million (as compared to $16.0 million a year ago), and an intangible impairment charge of $5.0 million (as compared to $0 a year ago).

A reconciliation of generally accepted accounting principles ("GAAP") in the United States to non-GAAP results has been provided in this press release in the accompanying tables. An explanation of these measures is also included below under the heading "Non-GAAP Financial Measures."

2021 Financial Outlook

Our guidance, based on current market conditions and our expectations as of today, is summarized below.

Three Months Ended March 31, 2021Year Ended December 31, 2021LOWHIGHLOWHIGH(in millions except percentages)
Total revenue$75.0$77.0$336.0$356.0
Year over year growth3%6%13%20%
GAAP net loss$(19.5)$(18.5)$(65.5)$(59.5)
Adjusted EBITDA$3.0$4.0$26.0$32.0
Adjusted EBITDA margin4%5%8%9%

The above revenue guidance for the full year 2021 is based on a number of assumptions including:

  • We expect our PACE census growth to gradually improve throughout 2021 with a weaker first half growth followed by a return to more normal growth rates in the second half as more of our PACE members are vaccinated and the backlog of new PACE and client center expansion come online.
  • Personica, included in our CareVention HealthCare segment, is expected to add 5% of inorganic growth, which is ahead of our prior estimates based on the strength of entering into agreements with new clients.
  • New client contracts, including Health Mart, signed in 2020 that are currently implemented or will be implemented in 2021 are expected to add 3% of growth. Our current estimate for Health Mart includes the minimum contracted revenue and does not include upsell revenue that we expect to generate once implementation is completed.
  • New business to be sold and implemented during the course of 2021 is expected to add 7% of growth. This estimate is based on our current pipeline, planned sales force headcount growth during 2021, and assumes no change to the conversion rates we experienced during 2020.
  • Revenue attrition of 5% of growth is higher than normal and is being driven by the non-renewal of the CVS Health contract for medication therapy management services.

With regards to profitability, the mid-point of our non-GAAP Adjusted EBITDA estimate represents a margin of 8.4%, which is 110 basis points improvement as compared to 2020. Given the large market opportunity ahead of us, we plan to continue to invest across all areas, with an emphasis on sales and marketing and our MedWise payer division, along with investments in software product engineering (net of capitalized software) to support existing products and future initiatives. These higher operating expenses will offset significant gross margin expansion projected in 2021, largely driven by continued efficiencies and economies of scale with our CareVention HealthCare segment.

Looking beyond the first quarter of 2021, we expect steady sequential revenue growth as we progress throughout the 2021 fiscal year, reflecting typical seasonality, starting in the range of 7% for the second quarter, followed by 8% for the third quarter, and 9% for the fourth quarter. Second quarter 2021 revenue will benefit from normal seasonality within our MedWise HealthCare segment as we perform the largest number of clinical interventions on behalf of our health plan clients related to CMS Star Ratings, as well as the go-live of contracted backlog. Sequential revenue growth during the third and fourth quarter of 2021 will be primarily driven by 1) improved PACE census growth and 2) implementations from contracted revenue, as well as new business to be sold during the course of 2021.

COVID-19

We expect COVID-19 to remain a challenge primarily in the first half of 2021. Although PACE census experienced negative net enrollment sequentially during both January and February, net enrollment in February was up 1.7% over February 2020 according to CMS. In addition, the latest National PACE Association has published promising data showing a continued reduction in the number of deaths over the past four weeks, which we have also seen in our client data. We expect this positive trend to continue as we progress throughout 2021 with net enrollment growth materially improving in the second quarter and half of 2021 as vaccinations across PACE participants become more widespread.

Upcoming Events

Members of TRHC's executive team will be presenting at the following conferences: (1) SVB Leerink's 10th Annual Global Healthcare Conference on February 25 and 26 and (2) Truist's 2021 Technology, Internet & Services Conference on March 9 and 10.

About Tabula Rasa HealthCare

Tabula Rasa HealthCare (TRHC) provides patient medication safety solutions empowering pharmacists and prescribers to optimize medication regimens and reduce medication-related risk, specifically targeting adverse drug events. Utilizing its proprietary medication decision science technology, MedWise™, TRHC improves patient outcomes, reduces hospitalizations, and lowers healthcare costs. Additionally, TRHC provides an extensive clinical telepharmacy network across the U.S. Our solutions are trusted by health plans and pharmacies nationwide to help drive value-based payment results. For more information, visit TRHC.com.

Recent Deals

Interested in advertising your deals? Contact Edwin Warfield.