Tabula Rasa HealthCare, Inc. [TRHC] Filings

10-Q 1 trhc-20220930x10q.htm 10-Q

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2022

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 001-37888

Tabula Rasa HealthCare, Inc.

(Exact name of registrant as specified in its charter)


Delaware (State of incorporation)	46-5726437 (I.R.S. Employer Identification No.)
228 Strawbridge Drive, Suite 100 Moorestown, NJ 08057 (Address of Principal Executive Offices, including Zip Code)	(866) 648 - 2767 (Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class:	Trading Symbol	Name of each exchange on which registered:
Common Stock, par value $0.0001 per share	TRHC	The Nasdaq Stock Market
Preferred Stock Purchase Rights		The Nasdaq Stock Market

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer ☒	Accelerated filer ☐	Non-accelerated filer ☐	Smaller reporting company ☐

			Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of October 15, 2022, the Registrant had 27,124,287 shares of Common Stock outstanding.

Table of Contents

TABULA RASA HEALTHCARE, INC.

QUARTERLY REPORT ON FORM 10-Q

For the period ended September 30, 2022

TABLE OF CONTENTS

		Page
		Number

PART I	Financial Information	3
Item 1.	Financial Statements	3
	Unaudited Consolidated Balance Sheets as of September 30, 2022 and December 31, 2021	3
	Unaudited Consolidated Statements of Operations for the three and nine months ended September 30, 2022 and 2021	4
	Unaudited Consolidated Statements of Stockholders’ Equity (Deficit) for the three and nine months ended September 30, 2022 and 2021	5
	Unaudited Consolidated Statements of Cash Flows for the nine months ended September 30, 2022 and 2021	7
	Notes to Unaudited Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	34
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	50
Item 4.	Controls and Procedures	50
PART II	Other Information	51
Item 1.	Legal Proceedings	51
Item 1A.	Risk Factors	51
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	52
Item 3.	Defaults Upon Senior Securities	52
Item 4.	Mine Safety Disclosures	52
Item 5.	Other Information	52
Item 6.	Exhibits	53
Signatures		55

Table of Contents

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

TABULA RASA HEALTHCARE, INC.

UNAUDITED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share amounts)


	September 30,		December 31,
	2022		2021
Assets
Current assets:
Cash	$	80,783	$	9,395
Restricted cash		7,389		6,038
Accounts receivable, net of allowance of $107 and $110, respectively		18,960		21,405
Inventories		5,735		5,444
Prepaid expenses		3,484		3,812
Client claims receivable		16,193		11,257
Other current assets		20,439		18,033
Current assets of discontinued operations		26,861		14,511
Total current assets		179,844		89,895
Contingent consideration receivable		7,000		—
Property and equipment, net		10,038		11,778
Operating lease right-of-use assets		14,069		16,323
Software development costs, net		32,606		29,254
Goodwill		115,323		115,323
Intangible assets, net		40,275		45,358
Other assets		4,691		3,929
Noncurrent assets of discontinued operations		—		187,558
Total assets	$	403,846	$	499,418

Liabilities and stockholders’ equity (deficit)
Current liabilities:
Current operating lease liabilities	$	3,195	$	3,275
Accounts payable		14,685		8,870
Client claims payable		9,537		8,398
Accrued expenses and other liabilities		59,507		40,997
Current liabilities of discontinued operations		11,132		12,380
Total current liabilities		98,056		73,920
Line of credit		—		29,500
Long-term debt, net of discount of $3,404 and $5,701, respectively		231,868		319,299
Long-term debt – related party, net of discount of $1,299 and $0, respectively		88,429		—
Noncurrent operating lease liabilities		13,223		15,792
Deferred income tax liability, net		889		1,402
Other long-term liabilities		3,032		176
Noncurrent liabilities of discontinued operations		—		3,573
Total liabilities		435,497		443,662

Commitments and contingencies (Note 15)

Stockholders’ equity (deficit):
Preferred stock, $0.0001 par value; 10,000,000 shares authorized; no shares issued and outstanding at September 30, 2022 and December 31, 2021		—		—
Common stock, $0.0001 par value; 100,000,000 shares authorized, 27,967,305 and 26,036,236 shares issued and 27,081,443 and 25,666,434 shares outstanding at September 30, 2022 and December 31, 2021, respectively		3		3
Treasury stock, at cost; 885,862 and 369,802 shares at September 30, 2022 and December 31, 2021, respectively		(3,350)		(4,292)
Additional paid-in capital		349,911		320,392
Accumulated deficit		(378,215)		(260,347)
Total stockholders’ equity (deficit)		(31,651)		55,756
Total liabilities and stockholders’ equity (deficit)	$	403,846	$	499,418

See accompanying notes to unaudited consolidated financial statements.

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TABULA RASA HEALTHCARE, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except share and per share amounts)


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2022		2021		2022		2021
Revenue:
Product revenue	$	59,780	$	50,321	$	166,645	$	139,021
Service revenue		17,321		17,589		50,163		51,964
Total revenue		77,101		67,910		216,808		190,985
Cost of revenue, exclusive of depreciation and amortization shown below:
Product cost		46,221		38,518		129,157		104,939
Service cost		14,014		12,697		40,430		37,875
Total cost of revenue, exclusive of depreciation and amortization		60,235		51,215		169,587		142,814
Operating expenses:
Research and development		4,018		3,699		11,226		11,069
Sales and marketing		2,857		2,719		7,678		8,225
General and administrative		27,917		14,393		58,945		45,725
Long-lived asset impairment charge		—		—		4,062		—
Depreciation and amortization		5,723		5,328		16,954		15,109
Total operating expenses		40,515		26,139		98,865		80,128
Loss from operations		(23,649)		(9,444)		(51,644)		(31,957)
Other income (expense):
Interest expense, net		(2,717)		(2,230)		(7,430)		(6,959)
Other income		479		—		479		—
Total other expense, net		(2,238)		(2,230)		(6,951)		(6,959)
Loss from continuing operations before income taxes		(25,887)		(11,674)		(58,595)		(38,916)
Income tax (benefit) expense		(7)		82		368		284
Net loss from continuing operations		(25,880)		(11,756)		(58,963)		(39,200)
Net loss from discontinued operations, net of tax		(14,185)		(5,355)		(58,905)		(18,484)
Net loss	$	(40,065)	$	(17,111)	$	(117,868)	$	(57,684)

Net loss per share:
Net loss per share from continuing operations, basic and diluted	$	(1.07)	$	(0.50)	$	(2.45)	$	(1.68)
Net loss per share from discontinued operations, basic and diluted		(0.58)		(0.23)		(2.45)		(0.80)
Total net loss per share, basic and diluted	$	(1.65)	$	(0.73)	$	(4.90)	$	(2.48)

Weighted average common shares outstanding, basic and diluted		24,350,182		23,407,391		24,075,666		23,230,138

See accompanying notes to unaudited consolidated financial statements.

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TABULA RASA HEALTHCARE, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

(In thousands, except share amounts)


	Stockholders' Equity (Deficit)
	Nine Months Ended September 30, 2022
	Common Stock			Treasury Stock			Additional		Accumulated		Stockholders'
	Shares	Amount		Shares	Amount		Paid-in Capital		Deficit		Equity (Deficit)
Balance, January 1, 2022	26,036,236	$	3	(369,802)	$	(4,292)	$	320,392	$	(260,347)	$	55,756
Issuance of common stock awards	16,471		—	—		—		—		—		—
Issuance of restricted stock	297,434		—	—		—		—		—		—
Forfeitures of restricted shares	—		—	(138,882)		—		—		—		—
Exercise of stock options, net of shares withheld	11,646		—	—		—		60		—		60
Stock-based compensation expense	—		—	—		—		8,609		—		8,609
Net loss	—		—	—		—		—		(28,193)		(28,193)
Balance, March 31, 2022	26,361,787		3	(508,684)		(4,292)		329,061		(288,540)		36,232
Issuance of common stock awards	12,262		—	—		—		—		—		—
Issuance of restricted stock	424,540		—	—		—		—		—		—
Forfeitures of restricted shares	—		—	(30,542)		—		—		—		—
Exercise of stock options, net of shares withheld	927		—	(109)		—		3		—		3
Stock-based compensation expense	—		—	—		—		6,692		—		6,692
Net loss	—		—	—		—		—		(49,610)		(49,610)
Balance, June 30, 2022	26,799,516		3	(539,335)		(4,292)		335,756		(338,150)		(6,683)
Issuance of common stock awards	—		—	615,066		3,082		(3,082)		—		—
Issuance of restricted stock	1,167,532		—	—		—		—		—		—
Forfeitures of restricted shares	—		—	(507,299)		—		—		—		—
Exercise of stock options, net of shares withheld	257		—	—		—		1		—		1
Shares withheld for payment of employee taxes	—		—	(454,294)		(2,140)		—		—		(2,140)
Stock-based compensation expense	—		—	—		—		17,236		—		17,236
Net loss	—		—	—		—		—		(40,065)		(40,065)
Balance, September 30, 2022	27,967,305	$	3	(885,862)	$	(3,350)	$	349,911	$	(378,215)	$	(31,651)

See accompanying notes to unaudited consolidated financial statements.

Table of Contents


	Stockholders' Equity
	Nine Months Ended September 30, 2021
	Common Stock			Treasury Stock			Additional		Accumulated		Stockholders'
	Shares	Amount		Shares	Amount		Paid-in Capital		Deficit		Equity
Balance, January 1, 2021	24,222,674	$	2	(217,778)	$	(4,018)	$	352,445	$	(179,900)	$	168,529
Cumulative effect of change in accounting policy	—		—	—		—		(74,850)		(1,392)		(76,242)
Issuance of common stock awards	1,416		—	—		—		—		—		—
Issuance of restricted stock	629,088		—	—		—		—		—		—
Forfeitures of restricted shares	—		—	(12,880)		—		—		—		—
Exercise of stock options, net of shares withheld	224,503		—	(6,218)		(274)		2,501		—		2,227
Stock-based compensation expense	—		—	—		—		8,602		—		8,602
Net loss	—		—	—		—		—		(19,492)		(19,492)
Balance, March 31, 2021	25,077,681		2	(236,876)		(4,292)		288,698		(200,784)		83,624
Issuance of restricted stock	120,598		—	—		—		—		—		—
Forfeitures of restricted shares	—		—	(22,913)		—		—		—		—
Exercise of stock options, net of shares withheld	84,396		—	—		—		885		—		885
Stock-based compensation expense	—		—	—		—		12,349		—		12,349
Net loss	—		—	—		—		—		(21,081)		(21,081)
Balance, June 30, 2021	25,282,675		2	(259,789)		(4,292)		301,932		(221,865)		75,777
Issuance of restricted stock	13,290		—	—		—		—		—		—
Forfeitures of restricted shares	—		—	(30,986)		—		—		—		—
Exercise of stock options, net of shares withheld	27,122		—	—		—		571		—		571
Stock-based compensation expense	—		—	—		—		8,011		—		8,011
Net loss	—		—	—		—		—		(17,111)		(17,111)
Balance, September 30, 2021	25,323,087	$	2	(290,775)	$	(4,292)	$	310,514	$	(238,976)	$	67,248

See accompanying notes to unaudited consolidated financial statements.

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TABULA RASA HEALTHCARE, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)


	Nine Months Ended
	September 30,
	2022		2021
Cash flows from operating activities:
Net loss	$	(117,868)	$	(57,684)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		24,285		35,343
Amortization of deferred financing costs and debt discount		1,972		1,714
Deferred taxes		(513)		337
Stock-based compensation		32,537		28,962
Acquisition-related contingent consideration paid		—		(67)
Impairment charges		46,355		—
Loss on divestiture of business		2,879		—
Other noncash items		(9)		9
Changes in operating assets and liabilities, net of effect of divestiture:
Accounts receivable, net		5,107		789
Inventories		(291)		(866)
Prepaid expenses and other current assets		(1,375)		(6,084)
Client claims receivables		(4,936)		(872)
Other assets		(1,357)		(2,604)
Accounts payable		5,074		1,587
Accrued expenses and other liabilities		13,534		2,138
Client claims payables		1,139		423
Other long-term liabilities		3,220		(108)
Net cash provided by operating activities		9,753		3,017

Cash flows from investing activities:
Purchases of property and equipment		(1,021)		(1,611)
Software development costs		(23,860)		(22,649)
Proceeds from divestiture of business ⁽¹⁾		118,561		—
Net cash provided by (used in) investing activities		93,680		(24,260)

Cash flows from financing activities:
Proceeds from exercise of stock options		64		3,683
Payments for employee taxes for shares withheld		(1,112)		—
Payments for debt financing costs		(350)		(8)
Borrowings on line of credit		27,700		17,500
Repayments of line of credit		(57,200)		—
Payment of acquisition-related notes payable		—		(13,000)
Payments of acquisition-related contingent consideration		—		(99)
Repayments of long-term debt and finance leases		—		(4)
Net cash (used in) provided by financing activities		(30,898)		8,072

Net increase (decrease) in cash and restricted cash		72,535		(13,171)
Cash and restricted cash, beginning of period		15,706		28,532
Cash and restricted cash, end of period ⁽²⁾	$	88,241	$	15,361

Supplemental disclosure of cash flow information:
Purchases of property and equipment and software development included in accounts payable and accrued expenses	$	1,082	$	370
Cash paid for interest	$	7,204	$	8,169
Cash paid for taxes	$	137	$	44
Interest costs capitalized to software development costs	$	257	$	216
Employee taxes for shares withheld included in accrued expenses	$	1,028	$	—

Reconciliation of cash and restricted cash:
Cash	$	80,783	$	10,757
Restricted cash		7,389		4,014
Cash from discontinued operations		69		590
Total cash and restricted cash	$	88,241	$	15,361

(1)

The cash proceeds received from divestiture of business do not include $1,477 of additional consideration subsequently received by the Company in October 2022 due to customary post-closing adjustments or $3,000 of transaction costs incurred as of the sale date and expected to be paid in the fourth quarter of 2022. See Note 3 for additional information.

(2)

The cash flows related to discontinued operations have not been segregated. Accordingly, the unaudited consolidated statements of cash flows include the results of continuing and discontinued operations. As a result of the divestiture, the changes in operating assets and liabilities for the nine months ended September 30, 2022 exclude changes related to the divested business. See Note 3 for discussion of discontinued operations and divestiture of business.

See accompanying notes to unaudited consolidated financial statements.

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TABULA RASA HEALTHCARE, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)

1. Nature of Business

Tabula Rasa HealthCare, Inc. (the “Company”) is a healthcare technology company advancing the safe use of medications by creating solutions designed to empower pharmacists, providers, and patients to optimize medication regimens, combating medication overload and reducing adverse drug events. The Company’s advanced proprietary technology solutions, including MedWise®, identify causes of and risks for medication-related problems so healthcare professionals can minimize harm and reduce medication-related risks. The Company’s software and services help improve patient outcomes and lower healthcare costs through reduced hospitalizations, emergency department visits, and healthcare utilization. The Company serves a number of different organizations within the healthcare industry, including health plans, and at-risk provider groups, the majority of which are organizations with Programs of All-Inclusive Care for the Elderly (“PACE”).

2. Basis of Presentation, Summary of Significant Accounting Policies, and Recent Accounting Pronouncements

(a)Basis of Presentation

The accompanying unaudited consolidated financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (the “SEC”) regarding interim financial reporting. The unaudited interim consolidated financial statements have been prepared on the same basis as the annual audited consolidated financial statements and, in the opinion of management, reflect all adjustments (consisting of normal recurring accruals and adjustments) necessary to present fairly the Company’s interim consolidated financial position for the periods indicated. The interim results for the three and nine months ended September 30, 2022 are not necessarily indicative of results to be expected for the year ending December 31, 2022, any other interim periods, or any future year or period. As such, the information included in this Quarterly Report on Form 10-Q should be read in conjunction with the audited consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K filed with the SEC on February 25, 2022 (the “2021 Form 10-K”).

Except as described below, there have been no material changes to the Company’s significant accounting policies described in the 2021 Form 10-K that have a material impact on the Company’s accompanying unaudited consolidated financial statements and related notes.

(b)Assets and Liabilities Held for Sale and Discontinued Operations

A long-lived asset (or disposal group) is classified as held for sale if its carrying amount will be recovered principally through a sale transaction rather than through continuing use and a sale is considered highly probable within a year. A long-lived asset (or disposal group) classified as held for sale is initially measured at the lower of its carrying amount or fair value less costs to sell. An impairment loss is recognized for any initial or subsequent write-down of the long-lived asset (or disposal group) to fair value less costs to sell. A gain or loss not previously recognized by the date of the sale of the long-lived asset (or disposal group) is recognized at the date of derecognition.

Long-lived assets (including those that are part of a disposal group) are not depreciated or amortized while they are classified as held for sale. Long-lived assets classified as held for sale and the assets of a disposal group classified as held for sale are presented separately from the other assets in the balance sheet. The liabilities of a disposal group classified as held for sale are presented separately from other liabilities in the balance sheet.

Unless otherwise noted, amounts and disclosures throughout the notes to the unaudited consolidated financial statements relate to the Company’s continuing operations.

Additional details surrounding the Company’s assets and liabilities held for sale and discontinued operations are included in Note 3.

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TABULA RASA HEALTHCARE, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)

(c)Cloud Computing Arrangements

Costs to implement cloud computing arrangements that are hosted by third-party vendors are capitalized when incurred during the application development phase. Capitalized implementation costs are amortized on a straight-line basis over the reasonably certain term of the hosting arrangement, beginning when the service is ready for its intended use. As of September 30, 2022 and December 31, 2021, capitalized implementation costs of $882 and $747, respectively, were included in prepaid expenses, and $1,276 and $0, respectively, were included in other assets on the Company’s consolidated balance sheets. Accumulated amortization for these arrangements was $554 and $398 as of September 30, 2022 and December 31, 2021, respectively. Amortization expense for the three months ended September 30, 2022 and 2021, was $51 and $53, respectively. Amortization expense for the nine months ended September 30, 2022 and 2021, was $156 and $155, respectively.

(d)Vendor Financing Arrangements

On February 24, 2022, the Company expanded its existing relationship with a third-party service provider for business process outsourcing and technology services for its third-party administration services and electronic health records solutions. As a result, the third-party provider hired approximately 180 employees from the Company, hired to fill existing open positions and will augment with additional resources to meet client demand. The agreement term is seven years and includes total estimated fees of $115,300.

The arrangement includes extended payment terms for cloud computing implementation costs, internally developed software support, and business process support. In order to determine the present value of the commitment, the Company used an imputed interest rate of 9.5%, which was reflective of its estimated uncollateralized borrowing rate at signing. As of September 30, 2022, the outstanding principal balance of the financing arrangement was $3,772 with an unamortized discount of $876, and was included in accrued expenses and other liabilities and other long-term liabilities on the Company’s consolidated balance sheet. Imputed interest expense from the arrangement was $53 and $89 for the three and nine months ended September 30, 2022, respectively.

(e)Concentrations of Credit Risk

The Company is subject to concentrations of credit risk related to cash, restricted cash, accounts receivable, and client claims receivable. While the Company maintains its cash and restricted cash with financial institutions with high credit ratings, it often maintains these deposits in federally insured financial institutions in excess of federally insured limits. The Company has not experienced any realized losses on cash or restricted cash to date.

The Company’s medication fulfillment services clients are sponsors of the federal Medicare Part D plan (prescription drug coverage plan) and, therefore, subject to the payment regulations established by the Centers for Medicare & Medicaid Services (“CMS”). Under CMS guidelines, Medicare Part D sponsors are required to remit payment for claims within 14 calendar days of the date on which an electronically-submitted claim is received and within 30 days of the date on which non-electronically-submitted claims are received. The Company extends credit to clients based upon such terms, as well as management’s evaluation of creditworthiness, and generally collateral is not required.

The Company’s clients also include health plans and other healthcare providers. Credit associated with these accounts is extended based upon management’s evaluation of creditworthiness and is monitored on an on-going basis.

As of September 30, 2022 and December 31, 2021, no client represented more than 10% of net accounts receivable.

As of September 30, 2022 one client represented 21% of client claims receivable. As of December 31, 2021, two clients represented 13% and 11%, respectively, of client claims receivable.

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TABULA RASA HEALTHCARE, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)

Tabula Rasa HealthCare, Inc. [TRHC] Filings
10-Q	[2022-11-04]
10-Q	[2022-08-05]
10-Q	[2022-05-09]
10-K	[2022-02-25]
10-Q	[2021-11-05]
10-Q	[2021-08-06]
10-Q	[2021-05-07]
10-K	[2021-02-26]
10-Q	[2020-11-06]
10-Q	[2020-08-06]
10-Q	[2020-05-08]
10-K	[2020-03-02]
10-Q	[2019-11-08]
10-Q	[2019-08-09]
10-Q	[2019-05-10]
10-K	[2019-03-01]
10-Q	[2018-11-08]
10-Q	[2018-08-08]
10-Q	[2018-05-09]
10-K	[2018-03-14]
10-Q	[2017-11-09]
10-Q	[2017-08-08]
10-Q	[2017-05-02]
10-K	[2017-03-14]
10-Q	[2016-11-10]
S-1	[2016-01-04]