Tabula Rasa HealthCare (TRHC) Misses Q3 EPS by 5c, Revenues Miss; Offers FY20 Revenue Guidance Below Consensus

Tabula Rasa HealthCare (NASDAQ: TRHC) reported Q3 EPS of ($0.01), $0.05 worse than the analyst estimate of $0.04. Revenue for the quarter came in at $70.51 million versus the consensus estimate of $75.81 million.

Third Quarter 2020 Financial Results

All comparisons, unless otherwise noted, are to the three months ended September 30, 2019.

• Total revenue - Total revenue of $70.5 million declined 5% as compared to $74.3 million. Total revenue included product revenue of $39.4 million, an increase of 13%, and solutions (i.e. software and services) revenue of $31.1 million, a decrease of 21%.
• Total revenue by segment
  • ° CareVention HealthCare revenue increased 9% to $50.3 million, comprised of $39.1 million (up 12% as compared to a year ago) of PACE product revenue and $11.2 million (down 1%) of PACE solutions revenue, the latter of which remains negatively impacted by the large renegotiated contract we have highlighted in prior quarters.
  • ° MedWise HealthCare revenue decreased 28% to $20.2 million, comprised of $9.8 million (down 48%) of medication safety services and $10.1 million (up 8%) of software subscriptions and software related services. Medication safety services accounted for our entire shortfall relative to our original revenue guidance expectations and were negatively impacted by: (i) COVID-related delays with two large health plan contracts, originally signed in the first quarter of 2020, that went live later than expected during the end of the third quarter and (ii) new restrictions related to Comprehensive Medication Reviews (CMRs) performed with caregivers and prescribers temporarily slowed patient engagement in the third quarter.
• Non-GAAP Adjusted EBITDA - Non-GAAP Adjusted EBITDA of $5.1 million declined as compared to $10.6 million a year ago, driven entirely by lower revenue and profitability in our MedWise HealthCare segment. Non-GAAP Adjusted EBITDA margin decreased to 7.2% as compared to 14.2% a year ago.
• Non-GAAP Adjusted EBITDA by segment (excluding $8.7 million of shared services allocated to corporate)

“We are pleased with the resilience and focus of our team during these unprecedented times. While the ongoing pandemic impacted our financial results during the third quarter, we are continuing to see signs of recovery that we believe will be meaningful drivers of improved performance in the fourth quarter of 2020 and in 2021. For example, our October 2020 PACE net enrollment figures far exceeded our expectations and are at the highest levels we have seen in two years. Recent industry data from the National PACE Association shows a sharp decline in the number of COVID-19 cases and number of deaths among PACE members. This, combined with our increasing sales pipeline, strong contracted backlog, recent acquisition of Personica, and new leadership talent, provides us with amplified confidence regarding our 2021 revenue growth,” said Calvin H. Knowlton, PhD, TRHC’s Chief Executive Officer, Chairman and Founder.

GUIDANCE:

Tabula Rasa HealthCare sees FY2020 revenue of $294-296 million, versus the consensus of $304.93 million.

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

For the full year 2020 ending December 31, we expect:

• Revenue in the range of $294 million to $296 million, the mid-point of which represents 4% growth compared to the full year 2019, and fourth quarter revenue to increase 5% to 8% as compared to the third quarter through a combination of organic growth and our October acquisition of Personica. The key factors influencing our guidance are: (i) the aforementioned CMR restrictions and (ii) the negative impact from COVID-19 on medication adherence initiatives, which are seasonally weighted toward the second half of the calendar year.
• GAAP net loss in the range of $68.8 million to $67.9 million.
• Non-GAAP Adjusted EBITDA in the range of $21 million to $22 million with fourth quarter non-GAAP Adjusted EBITDA in the range of $4 million to $5 million.

2021 Outlook

We plan to provide formal guidance following our fourth quarter and full year 2020 results. Currently, we believe that overall revenue can grow at 20% in 2021 as compared to the mid-point of our 2020 guidance. At present, our confidence in our growth outlook is based on: (i) positive PACE enrollment trends, (ii) our contracted backlog, which now includes a committed timeline for implementing our single largest new contract signed in 2020 in our pharmacy segment, and (iii) the growth of our sales pipeline across all segments of the business. In addition, we are excited about our October acquisition of Personica, and expect Personica revenue could grow at a rate materially faster than our other business lines, with further potential upside based on cross-selling efforts.

Looking farther ahead, in addition to the October 15, 2020 launch of our medication safety campaign (“Medication Safety Starts with a Pharmacist”) with the American Pharmacists Association, we have a number of exciting initiatives aimed at building greater awareness and, ultimately, revenue. Our MedWise™ science is attracting a high level of attention from pharmacists, state and national pharmacy associations, state boards of pharmacy, and the 60,000 student pharmacists in 145 schools of pharmacy in the U.S. Lastly, we see strong levels of interest and ongoing discussions with healthcare organizations recognizing the compelling value of MedWise™ as part of broader value-based agreements with employers, health plans, and government entities. Dr. Knowlton concluded, “As we exit 2020, we are encouraged by many of our leading indicators for future revenue growth in 2021 and beyond.”

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