MOORESTOWN, N.J., Nov. 06, 2018 (GLOBE NEWSWIRE) -- Tabula Rasa HealthCare, Inc. (NASDAQ:TRHC), a healthcare technology company advancing the field of medication safety, today announced its financial results for the third quarter ended September 30, 2018.

“I'm pleased to report another strong quarter across all areas of our business. During the third quarter, we continued to see demonstrable results that our solutions are both lowering the cost of care and also improving patient outcomes for our clients,” said Calvin H. Knowlton, PhD, TRHC’s Chairman and Chief Executive Officer.

Dr. Knowlton continued, “The integration efforts of our three previously announced PACE-focused acquisitions continue to proceed on track. We believe that our clients will benefit from a unified platform that leverages clinical, cost, and medication data. This highly differentiated solution will drive improved patient outcomes and uniquely position us in the market. In addition, the investments we are currently making, as part of our TRHC 2.0 initiative, will support our growth in 2019 and beyond. We remain very enthusiastic about the growing market opportunities for TRHC.”

Financial Performance for the Three Months Ended September 30, 2018

All comparisons, unless otherwise noted, are to the three months ended September 30, 2017.

• Total revenue was $54.4 million, an increase of 66%. Total revenue included product revenue of $28.0 million, an increase of 18% largely driven by expansion from existing clients and the onboarding of new clients in the first three quarters of 2018. Service revenue was $26.4 million, an increase of 195% that was driven by expanded services offered to existing clients as well as a contribution of $12.3 million from recent acquisitions including the SinfoníaRx (“SRx”) business which was acquired in September of 2017, the Peak PACE health plan management business acquired in May of 2018 and the Mediture and eClusive businesses which were acquired in September of 2018. Additionally, during the third quarter of 2018, TRHC received notification from its data aggregation partner for the pharmacy cost management business that they had transitioned to a new data submission platform, which involved directly contracting with pharmaceutical manufacturers versus using a third party service, effective January 1, 2018. As a result, revenue attributable to the sale of data from our pharmacy cost management services increased by $4.1 million, of which $3.4 million related to the first and second quarters of 2018.

• Gross margin, excluding depreciation and amortization expense, was 35.6% compared to 28.3%. The year-over-year increase was in line with management’s expectations due in part to the seasonality of the SRx business which historically has experienced higher gross margins in the second and third quarters of each fiscal year and the contribution from the higher reimbursement for data in the pharmacy cost management business. Excluding the incremental contribution from the pharmacy cost management services related to the first and second quarters of 2018, gross margin would have been 31.3%. TRHC maintains a long-term gross margin target, excluding depreciation and amortization expense, of 35% to 40% over the next three to five years.

• Non-GAAP Adjusted EBITDA was $9.3 million compared to $4.1 million, an increase of 125%. The increase in Non-GAAP Adjusted EBITDA was primarily driven by new and existing client growth in both the PACE market and health plan market as well as a higher contribution from the pharmacy cost management business.

• Non-GAAP Adjusted EBITDA margin was 17.0%, up from 12.6%, and was in line with management’s expectation given the enhanced margin contribution from the pharmacy cost management business in the third quarter. Excluding the incremental pharmacy cost management services related to the first and second quarters of 2018, Adjusted EBITDA margin would have been 11.5%.

• Net income of $10.4 million compared to a net income of $6.2 million. This net income was significantly impacted by a benefit of $8.3 million due to the change in fair value of acquisition-related contingent consideration for the SRx acquisition. Under Accounting Standards Codification 805, “Business Combinations”, contingent consideration liabilities are remeasured at the end of each reporting period to their respective fair values until the contingency is resolved with those changes flowing through earnings. Given the sensitivity of the SRx contingent consideration payment calculation, this remeasurement can produce significant impacts to GAAP net income (loss) that are not reflective of current operating results. The benefit recognized in the third quarter of 2018 decreased the amount of contingent consideration TRHC expects to pay in connection with the SRx acquisition. This was the result of an adjustment in the projected 2018 EBITDA for SRx. As of September 30, 2018, the SRx contingent consideration liability was $71.9 million, of which 50% is payable in stock (subject to certain limitations), with the potential for up to an additional $13.1 million to be earned if the maximum contingent amount is earned, which would flow through as a charge to GAAP net income (loss). Any decreases in the contingent amount will be recorded as GAAP net income. The actual amount of the contingent consideration will be known as of December 31, 2018.

• Net income per diluted share was $0.47, compared to net income per diluted share of $0.33. The net income per share calculations were based on a diluted share count of 22.3 million for the third quarter of 2018, compared to 18.6 million shares for the same period in 2017.

• Non-GAAP Adjusted net income per diluted share was $0.26 compared to Non-GAAP Adjusted net income per diluted share of $0.10.

• Cash at the end of the third quarter was $13.9 million compared to $10.4 million at December 31, 2017. Cash flow from operations contributed to the increase in cash during the nine-month period. TRHC had $26.5 million drawn on its line of credit at the end of the third quarter. The Company is in the process of evaluating refinancing options in order to opportunistically increase its borrowing capacity.

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”.

Financial Outlook
Fourth Quarter 2018 Guidance: Revenue for TRHC’s fourth quarter in 2018 is expected to be in the range of $53.0 million to $58.0 million. Net income or loss is expected to be in the range of a net loss of $1.0 million to net income of $1.0 million. Adjusted EBITDA is expected to be in the range of $7.0 million to $9.0 million.

Full Year 2018 Guidance: Revenue for fiscal year 2018 is now expected to be in the range of $200 million to $205 million. TRHC now expects a net loss in the range of $35.7 million to $37.7 million. Any further charges or benefits related to adjustments in contingent consideration with respect to the SRx or Peak PACE acquisitions are not factored in this guidance. Adjusted EBITDA is expected to be in the range of $27.9 million to $29.9 million after accounting for the additional investment for TRHC 2.0 initiatives and costs related to becoming a large accelerated filer which TRHC expects to become in the 2019 fiscal year. Full year guidance is reflective of the seasonality of the SRx business which has historically realized stronger financial performance in the second and third quarters of the fiscal year.

About Tabula Rasa HealthCare

Tabula Rasa HealthCare, Inc. (NASDAQ:TRHC) is a leader in providing patient-specific, data-driven technology and solutions that enable healthcare organizations to optimize patient outcomes, lower healthcare costs, and improve organizational performance. Medication risk management is TRHC’s lead offering, and its cloud-based software applications provide solutions for a range of payers, providers and other healthcare organizations. For more information, visit: www.TRHC.com.