Tabula Rasa HealthCare (TRHC) Tops Q4 EPS by 9c, Revenues Beat; Offers Q1 & FY20 Revenue Guidance Below Consensus

Tabula Rasa HealthCare (NASDAQ: TRHC) reported Q4 EPS of $0.13, $0.09 better than the analyst estimate of $0.04. Revenue for the quarter came in at $73.2 million versus the consensus estimate of $72.67 million.

Fourth Quarter of 2019 Results

All comparisons, unless otherwise noted, are to the three months ended December 31, 2018.

• Total revenue - Total revenue increased 28% to $73.2 million. Total revenue included product revenue of $37.8 million, an increase of 25%, largely driven by an increase in the number of participants enrolled in existing clients, the onboarding of new clients, and cross-sell efforts. Service revenue increased 30% to $35.4 million, driven by expanded services offered to existing clients as well as a contribution from recent acquisitions, the latter of which accounted for 14 percentage points of growth. Software as a service related revenue represented 18% of total revenue as compared to 8% for the three months ended December 31, 2018.
• Gross margin - Gross margin, excluding depreciation and amortization expense, a non-GAAP measure, was 34.3% compared to 32.8%. The year-over-year increase is a result of improved margins in both product and service revenue, the former due to the transition to a new prime vendor in the second quarter of 2019 and the latter due to a growing mix of SaaS revenue.
• Non-GAAP Adjusted EBITDA - Non-GAAP Adjusted EBITDA was $8.0 million compared to $8.5 million. Non-GAAP Adjusted EBITDA margin decreased to 10.9% from 14.7%. The decrease in Non-GAAP Adjusted EBITDA was due to increased expenses related to acquisition integration activities and increased investments across all operational areas to drive future growth.
• GAAP Net loss - Net loss was $6.8 million compared to a net loss of $10.6 million. The primary factors contributing to the net loss were stock-based compensation expense of $6.3 million, depreciation and amortization of $9.8 million, and interest expense of $4.5 million primarily related to TRHC’s convertible senior subordinated notes due 2026.
• GAAP EPS - Net loss per diluted share was $0.33, compared to a net loss per diluted share of $0.54. The net loss per share calculations were based on a diluted share count of 20.9 million for the fourth quarter of 2019, compared to 19.4 million shares for the same period in 2018.
• Non-GAAP EPS - Non-GAAP Adjusted net income per diluted share, or Adjusted Diluted EPS, was $0.13 as compared to $0.21 in the fourth quarter of 2018. The net income per share calculations were based on a diluted share count of 23.0 million for the fourth quarter of 2019, compared to 22.8 million for the same period in 2018.
• Cash - Unrestricted cash at the end of the fourth quarter was $42.5 million as compared to $47.3 million at September 30, 2019 and $20.3 million at December 31, 2018. No amounts were drawn on TRHC’s $60 million line of credit at the end of the fourth quarter of 2019.

“I’m pleased to report a solid end to our 2019 fiscal year, a year in which we generated 20% organic growth, aggressively invested in sales personnel in order to advance future growth, continued to advance our unique medication risk identification and mitigation technology platform, and completed the major acquisition of PrescribeWellness in the first quarter of 2019, further diversifying our revenue mix towards services, including SaaS. Our core PACE market continues to exhibit strong growth, driven by new PACE organizations and existing organizations opening new centers, higher enrollment of participants at existing clients aided by the PACE 2.0 Initiative, and our comprehensive CareVention family of product offerings that we believe remain under-penetrated,” said Calvin H. Knowlton, PhD, TRHC’s Chairman and Chief Executive Officer.

Dr. Knowlton continued, “As we outlined at our recent investor day in New York on January 29, 2020, in addition to our ongoing focus on cross-sell activities within the PACE market to increase our average per member per month (“PMPM”), our additional key 2020 growth drivers are: 1) accelerating the adoption of our MedWise solutions by health plans across all lines of business (i.e. Medicare, Medicaid, and commercial) and 2) increasing the number of pharmacists licensing the MedWise platform. We signed important new deals in 2019, and during the fourth quarter including Magellan and BCBS of Arkansas, and have begun to see real interest from pharmacies outside of our MedWise pilot, validating our strategy to propagate the use of MedWise across new populations and in new settings. Lastly, we are our excited about the new opportunities building in our sales pipeline for 2020.”

GUIDANCE:

Tabula Rasa HealthCare sees Q1 2020 revenue of $68.5-73.5 million, versus the consensus of $76.59 million.

Tabula Rasa HealthCare sees FY2020 revenue of $332-352 million, versus the consensus of $343.17 million.

• First Quarter 2020 Guidance: Revenue for the first quarter of 2020 ending on March 31st is expected to be in the range of $68.5 million to $73.5 million. Net loss is expected to be in the range of $13.2 million to $12.5 million. Adjusted EBITDA is expected to be in the range of $4.0 million to $5.0 million. Adjusted EBITDA in the first quarter of each fiscal year historically has been materially lower than the remaining quarters due to the seasonality of the MTM offering, and that is expected to be the case once again in 2020.
• Full Year 2020 Guidance: Revenue for the full fiscal year 2020 ending on December 31st is expected to be in the range of $332 million to $352 million. Net loss is expected in the range of $31 million to $27 million. These net loss projections do not include any future adjustments to contingent consideration liabilities related to a prior acquisition. Non-GAAP Adjusted EBITDA is expected to be in the range of $46 million to $52 million.

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