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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, 2021

OR

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)

(866648 - 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

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 31, 2021, the Registrant had 25,718,707 shares of Common Stock outstanding.

Table of Contents

TABULA RASA HEALTHCARE, INC.

QUARTERLY REPORT ON FORM 10-Q

For the period ended September 30, 2021

TABLE OF CONTENTS

Page

Number

PART I

Financial Information

3

Item 1.

Financial Statements

3

Unaudited Consolidated Balance Sheets as of September 30, 2021 and December 31, 2020

3

Unaudited Consolidated Statements of Operations for the three and nine months ended September 30, 2021 and 2020

4

Unaudited Consolidated Statements of Stockholders’ Equity for the three and nine months ended September 30, 2021 and 2020

5

Unaudited Consolidated Statements of Cash Flows for the nine months ended September 30, 2021 and 2020

7

Notes to Unaudited Consolidated Financial Statements

8

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

29

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

47

Item 4.

Controls and Procedures

47

PART II

Other Information

48

Item 1.

Legal Proceedings

48

Item 1A.

Risk Factors

48

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

48

Item 3.

Defaults Upon Senior Securities

48

Item 4.

Mine Safety Disclosures

48

Item 5.

Other Information

48

Item 6.

Exhibits

49

Signatures

50

2

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, 

    

2021

    

2020

Assets

Current assets:

Cash

$

11,347

$

23,362

Restricted cash

4,014

5,170

Accounts receivable, net of allowance of $297 and $224, respectively

31,736

32,516

Inventories

5,127

4,261

Prepaid expenses

5,344

3,739

Client claims receivable

15,284

14,412

Other current assets

15,398

9,752

Total current assets

88,250

93,212

Property and equipment, net

13,234

15,070

Operating lease right-of-use assets

21,935

21,711

Software development costs, net

40,297

27,882

Goodwill

170,835

170,862

Intangible assets, net

161,626

183,094

Other assets

4,801

2,609

Total assets

$

500,978

$

514,440

Liabilities and stockholders’ equity

Current liabilities:

Current portion of finance leases

$

$

4

Current operating lease liabilities

4,706

4,402

Acquisition-related contingent consideration

166

Acquisition-related notes payable

3,995

16,662

Accounts payable

13,019

11,245

Client claims payable

8,157

7,773

Accrued expenses and other liabilities

35,443

31,968

Total current liabilities

65,320

72,220

Line of credit

27,500

10,000

Long-term debt, net

318,969

239,285

Noncurrent operating lease liabilities

20,152

20,381

Deferred income tax liability, net

1,226

3,354

Other long-term liabilities

563

671

Total liabilities

433,730

345,911

Commitments and contingencies (Note 16)

Stockholders' equity:

Preferred stock, $0.0001 par value; 10,000,000 shares authorized; no shares issued and outstanding at September 30, 2021 and December 31, 2020

Common stock, $0.0001 par value; 100,000,000 shares authorized, 25,323,087 and 24,222,674 shares issued and 25,032,312 and 24,004,896 shares outstanding at September 30, 2021 and December 31, 2020, respectively

2

2

Treasury stock, at cost; 290,775 and 217,778 shares at September 30, 2021 and December 31, 2020, respectively

(4,292)

(4,018)

Additional paid-in capital

310,514

352,445

Accumulated deficit

(238,976)

(179,900)

Total stockholders’ equity

67,248

168,529

Total liabilities and stockholders’ equity

$

500,978

$

514,440

See accompanying notes to unaudited consolidated financial statements.

3

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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, 

    

2021

    

2020

    

2021

    

2020

Revenue:

Product revenue

  

$

50,636

$

39,365

$

139,496

$

115,825

Service revenue

35,950

31,141

106,079

104,342

Total revenue

86,586

70,506

245,575

220,167

Cost of revenue, exclusive of depreciation and amortization shown below:

Product cost

38,770

28,638

105,326

84,879

Service cost

22,392

20,610

67,126

64,140

Total cost of revenue, exclusive of depreciation and amortization

61,162

49,248

172,452

149,019

Operating expenses:

Research and development

4,984

5,101

14,893

13,750

Sales and marketing

6,218

5,030

18,786

15,597

General and administrative

16,870

15,620

54,360

48,914

Change in fair value of acquisition-related contingent consideration expense

2,005

2,605

Depreciation and amortization

12,099

12,199

35,343

32,323

Total operating expenses

40,171

39,955

123,382

113,189

Loss from operations

(14,747)

(18,697)

(50,259)

(42,041)

Interest expense, net

2,230

4,722

6,959

14,000

Loss before income taxes

(16,977)

(23,419)

(57,218)

(56,041)

Income tax expense (benefit)

134

(1,830)

466

(5,705)

Net loss

$

(17,111)

$

(21,589)

$

(57,684)

$

(50,336)

Net loss per share, basic and diluted

$

(0.73)

$

(0.99)

$

(2.48)

$

(2.33)

Weighted average common shares outstanding, basic and diluted

23,407,391

21,779,808

23,230,138

21,571,214

See accompanying notes to unaudited consolidated financial statements.

4

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TABULA RASA HEALTHCARE, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(In thousands, except share amounts)

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.

5

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Stockholders' Equity

Nine Months Ended September 30, 2020

Common Stock

Treasury Stock

Additional

Accumulated

Stockholders'

Shares

    

Amount

Shares

    

Amount

    

Paid-in Capital

    

Deficit

    

Equity

Balance, January 1, 2020

22,496,999

$

2

(175,689)

$

(3,865)

$

288,345

$

(98,934)

$

185,548

Issuance of common stock awards

14,386

Issuance of restricted stock

388,108

Forfeitures of restricted shares

(33,371)

Exercise of stock options, net of shares withheld

116,288

(1,681)

(91)

1,244

1,153

Share adjustment

12,500

Stock-based compensation expense

7,137

7,137

Net loss

(14,437)

(14,437)

Balance, March 31, 2020

23,015,781

2

(198,241)

(3,956)

296,726

(113,371)

179,401

Issuance of restricted stock

37,702

Forfeitures of restricted shares

(5,807)

Exercise of stock options, net of shares withheld

105,828

1,159

1,159

Stock-based compensation expense

7,173

7,173

Net loss

(14,310)

(14,310)

Balance, June 30, 2020

23,159,311

2

(204,048)

(3,956)

305,058

(127,681)

173,423

Issuance of restricted stock

9,290

Forfeitures of restricted shares

(6,442)

Exercise of stock options, net of shares withheld

172,554

(1,517)

(62)

(2,017)

(2,079)

Issuance of common stock in connection with the settlement of acquisition-related contingent consideration

135,434

6,853

6,853

Stock-based compensation expense

8,098

8,098

Net loss

(21,589)

(21,589)

Balance, September 30, 2020

23,476,589

$

2

(212,007)

$

(4,018)

$

317,992

$

(149,270)

$

164,706

See accompanying notes to unaudited consolidated financial statements.

6

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TABULA RASA HEALTHCARE, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

Nine Months Ended

September 30, 

    

2021

    

2020

Cash flows from operating activities:

Net loss

$

(57,684)

$

(50,336)

Adjustments to reconcile net loss to net cash provided by operating activities:

Depreciation and amortization

35,343

32,323

Amortization of deferred financing costs and debt discount

1,714

9,925

Deferred taxes

337

(5,705)

Stock-based compensation

28,962

22,408

Change in fair value of acquisition-related contingent consideration

2,605

Acquisition-related contingent consideration paid

(67)

(2,390)

Other noncash items

9

(70)

Changes in operating assets and liabilities, net of effect from acquisitions:

Accounts receivable, net

789

(3,220)

Inventories

(866)

(494)

Prepaid expenses and other current assets

(6,084)

7,209

Client claims receivables

(872)

Other assets

(2,604)

(382)

Accounts payable

1,587

(1,432)

Accrued expenses and other liabilities

2,138

(5,408)

Client claims payables

423

Other long-term liabilities

(108)

315

Net cash provided by operating activities

3,017

5,348

Cash flows from investing activities:

Purchases of property and equipment

(1,611)

(2,537)

Software development costs

(22,649)

(13,734)

Net cash used in investing activities

(24,260)

(16,271)

Cash flows from financing activities:

Proceeds from exercise of stock options

3,683

3,225

Payments for employee taxes for shares withheld

(2,993)

Payments for debt financing costs

(8)

(38)

Borrowings on line of credit

17,500

Payment of acquisition-related notes payable

(13,000)

Payments of acquisition-related contingent consideration

(99)

(3,504)

Repayments of long-term debt and finance leases

(4)

(54)

Net cash provided by (used in) financing activities

8,072

(3,364)

Net decrease in cash and restricted cash

(13,171)

(14,287)

Cash and restricted cash, beginning of period

28,532

46,581

Cash and restricted cash, end of period

$

15,361

$

32,294

Supplemental disclosure of cash flow information:

Purchases of property and equipment and software development included in accounts payable and accrued expenses

$

370

$

103

Cash paid for interest

$

8,169

$

5,690

Cash paid for taxes

$

44

$

290

Interest costs capitalized to software development costs

$

216

$

192

Stock issued in connection with settlement of acquisition-related contingent consideration

$

$

6,853

Reconciliation of cash and restricted cash:

Cash

$

11,347

$

28,721

Restricted cash

4,014

3,573

Total cash and restricted cash

$

15,361

$

32,294

See accompanying notes to unaudited consolidated financial statements.

7

Table of Contents

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. The Company’s advanced proprietary technology, MedWise®, identifies the cause of medication-related problems, including adverse drug events, so healthcare professionals can minimize harm and reduce medication-related risks. Adverse drug events are a large and growing problem with medication therapy, costing an estimated $528 billion annually in the United States (“U.S.”) and resulting in more than 275,000 deaths per year in the U.S. in 2018. The Company’s software and services help improve patient outcomes and lower healthcare costs through reduced hospitalizations, emergency department visits, and healthcare utilization. In order to deliver its services, the Company has developed an extensive clinical tele-pharmacy network, with seven call centers across the U.S., a number of which are tethered to academic institutions. The Company serves a number of different organizations within the healthcare industry, including more than 400 health plans, nearly 19,000 pharmacies, more than 150 hospital sites, and more than 140 at-risk provider groups, the majority of which are PACE organizations.

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

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, 2021 are not necessarily indicative of results to be expected for the year ending December 31, 2021, 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 26, 2021 (“2020 Form 10-K”).

The Company operates its business through two segments, CareVention HealthCare and MedWise HealthCare. See Note 17 for a discussion of the Company’s reportable segments.

Risks Related to the COVID-19 Pandemic

 

On January 30, 2020, the World Health Organization (“WHO”) announced a global health emergency caused by a new strain of coronavirus (“COVID-19”) and the risks to the international community. In March 2020, the WHO classified the COVID-19 outbreak as a pandemic (“COVID-19 pandemic”), based on the rapid increase in exposure globally. The full impact of the COVID-19 pandemic continues to present a substantial public health and economic challenge around the world.

The Company continues to closely monitor the impact of COVID-19 pandemic on both its employees and operations. In response to the pandemic, the Company has implemented measures to protect the health and safety of its employees, including hybrid and remote work arrangements, reduced density in the Company’s buildings, guidelines to ensure safe business travel, and safety protocols for on-site employees, including social distancing, enhanced cleaning, contact tracing.

8

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TABULA RASA HEALTHCARE, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

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

During 2020, the Company experienced challenges with revenue growth as the COVID-19 pandemic delayed the closing of client contracts and, in some cases, shifted project priorities and timelines, which management believed resulted in fewer business wins during 2020 and reduced future revenue. Overall census growth for Programs of All-Inclusive Care for the Elderly (“PACE”) was below historical levels during 2020 and the first quarter of 2021, which reduced the CareVention HealthCare segment growth. However, since the second quarter of 2021, the Company has experienced some recovery, including with respect to PACE census growth. During the third quarter of 2021, the Company’s net census growth for PACE remained at pre-pandemic levels with monthly sequential growth, which positively impacted revenue within the Company’s CareVention HealthCare segment. The PACE population also benefited from the high level of vaccinations administered to seniors across the U.S.

The Company’s MedWise HealthCare segment continues to be impacted by the COVID-19 pandemic. Changes made by Centers for Medicare & Medicaid Services (‘CMS”) to their Medicare Part D Star Ratings improvement programs for health plans in response to COVID-19 have negatively impacted the Company’s medication safety services revenues. In addition, the COVID-19 pandemic has elevated the role of retail pharmacies and created strong demand for pharmacists and pharmacy technicians. As a result, the Company has faced challenges in hiring to staff the Company’s call centers to support its health plan clients.

Given the daily evolution of the COVID-19 pandemic and the global responses to curb its spread, as well as the factors discussed in Part Item 1A, “Risk Factors” in the Company’s 2020 Form 10-K and elsewhere in this Quarterly Report on Form 10-Q, the Company is not able to predict the continuing effects that the COVID-19 pandemic may have on its results of operations, financial condition, or liquidity for the remainder of 2021 and beyond. Management continues to actively monitor the COVID-19 pandemic and is prepared to mitigate potential adverse impacts to its business, including its financial position, liquidity, operations, suppliers, industry, and workforce.

Summary of Significant Accounting Policies

There have been no changes to the Company's significant accounting policies described in the 2020 Form 10-K that have had a material impact on the consolidated financial statements and related notes.

Recent Accounting Pronouncements

In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06”). ASU 2020-06 provides new guidance to simplify the accounting for convertible instruments by eliminating the cash conversion model. As compared with the current accounting standards, more convertible debt instruments will be reported as a single liability instrument and the interest rates of more convertible debt instruments will be closer to the coupon interest rate. ASU 2020-06 also aligns the consistency of diluted earnings per share calculations for convertible instruments by requiring that (1) an entity use the if-converted method and (2) share settlement be included in the diluted earnings per share calculation for both convertible instruments and equity contracts when those contracts include an option of cash settlement or share settlement. The treasury stock method will no longer be permitted. ASU 2020-06 is effective for financial statements issued for fiscal years beginning after December 15, 2021 and early adoption is permitted.

Under ASC 470-20 Debt with Conversion and Other Options (“ASC 470-20”), the Company separately accounted for the liability and equity components of its 1.75% convertible senior subordinated notes (the “2026 Notes”), which may be settled entirely or partly in cash upon conversion. The equity component was required to be included in the additional paid-in capital section of stockholders’ equity on the Company’s consolidated balance sheet, and the value of the equity component was treated as original issue discount for purposes of accounting for the debt component of the 2026 Notes. As a result, the Company was required to record a greater amount of non-cash interest expense in previous periods presented related to the amortization of the discounted carrying value of the 2026 Notes to their face amount over the term of the 2026 Notes. Because the Company intends to settle the 2026 Notes entirely or partly in cash, the Company had used the treasury stock method when calculating their potential dilutive effect, if any.

9

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TABULA RASA HEALTHCARE, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

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

ASU 2020-06 allows adoption through either a modified retrospective method or fully retrospective method of transition. The Company early adopted ASU 2020-06 effective January 1, 2021 using the modified retrospective method. In applying the modified retrospective transition method, the cumulative effect of the accounting change is recognized as an adjustment to the opening balance of retained earnings at the date of adoption. Upon adoption, the Company recorded a $74,850 decrease to additional paid-in capital, a $78,707 increase to the carrying value of its convertible notes, a $2,465 decrease to the net deferred tax liability, and a $1,392 increase in accumulated deficit. See Note 12 for further details on the 2026 Notes.

In October 2021, the FASB issued ASU 2021-08, Accounting for Contract Assets and Contact Liabilities from Contracts with Customers (“ASU 2021-08”). ASU 2021-08 requires an acquirer in a business combination to recognize and measure contract assets and contract liabilities from acquired contracts using the revenue recognition guidance under Accounting Standards Codification Topic 606 in order to align the recognition of a contract liability with the definition of performance obligation. This approach differences from the current requirement to measure contract assets and contract liabilities acquired in a business combination at fair value. ASU 2021-08 is effective for financial statements issued for fiscal years beginning after December 15, 2022 and early adoption is permitted. The Company is currently evaluating the potential impact of the adoption of this standard on the Company’s consolidated financial statements.

3.     Revenue

The Company generates revenue from its CareVention HealthCare and MedWise HealthCare segments. See Note 17 for additional discussion of the Company’s reportable segments.

Client contracts generally have a term of one to five years and generally renew at the end of the initial term. In most cases, clients may terminate their contracts with a notice period ranging from 0 to 180 days without cause, thereby limiting the term in which the Company has enforceable rights and obligations. Revenue is recognized in an amount that reflects the consideration that is expected in exchange for the goods or services. Generally, there are not significant differences between the timing of revenue recognition and billing. Consequently, the Company has determined that client contracts do not include a financing component.

The Company does not disclose the amount of variable consideration that the Company expects to recognize in future periods, as the variable consideration in the Company’s contracts is allocated entirely to a wholly unsatisfied performance obligation or to a wholly unsatisfied promise to transfer a distinct good or service that forms part of a single performance obligation, and the terms of that variable consideration relate specifically to the Company’s efforts to transfer the distinct service, or to a specific outcome from transferring the distinct service. The Company’s contracts primarily include monthly fees associated with unspecified quantities of medications, members, claims, medication safety reviews, or user subscriptions that fluctuate throughout the contract. See below for a description of the Company’s revenues by segment.

CareVention HealthCare

PACE Product Revenue

The Company provides medication fulfillment pharmacy services to PACE organizations. While the majority of medications are routinely filled in order to treat chronic conditions, the mix and quantity of medications can vary. Revenue from medication fulfillment services is generally billed monthly or weekly, depending on whether the PACE organization is contracted with a pharmacy benefit manager, and recognized when medications are delivered and control has passed to the client. At the time of delivery, the Company has performed substantially all of its performance obligations under its client contracts. The Company does not experience a significant level of returns or reshipments.

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TABULA RASA HEALTHCARE, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

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

PACE Solutions

The Company provides medication safety services and health plan management services to PACE organizations. These services include medication reviews, risk adjustment services, third-party administration services, pharmacy benefit management (“PBM”) solutions, and electronic health records software. Revenue related to these services primarily consists of a fixed monthly fee assessed based on number of members served (“per member per month”), a fee for each claim adjudicated, and subscription fees. These fees are recognized when the Company satisfies its performance obligation to stand ready to provide PACE services, which occurs when the Company’s clients have access to the PACE services. The Company generally bills for PACE services on a monthly basis.

MedWise HealthCare

Product Revenue

The Company provides COVID-19 test kits to pharmacies and other clients. Revenue from the sale of these products is generally billed when test kits are shipped and is recognized as the Company satisfies its performance obligations to deliver the test kits and provide the test results. The Company does not experience a significant level of returns or reshipments.

Medication Safety Services

The Company provides medication safety services, which include identification of high-risk individuals, medication regimen reviews including patient and prescriber counseling, and targeted interventions to increase adherence and close gaps in care. Revenue related to these services primarily consists of per member per month fees and fees for each medication review and clinical encounter completed. Revenue is recognized when the Company satisfies its performance obligation to stand ready to provide medication safety services, which occurs when the Company’s clients have access to the medication safety services and when medication reviews and clinical encounters are completed. The Company generally bills for the medication safety services on a monthly basis.

Software Subscription

The Company provides software as a service (“SaaS”) solutions, which allow for the identification of individuals with high medication-related risk, for patient communication and engagement, for documentation of clinical interventions, for optimizing medication therapy, for targeting adherence improvement, and for precision dosing. Revenues related to these software services primarily consist of monthly subscription fees and are recognized monthly as the Company meets its performance obligation to provide access to the software. Revenue for implementation and set up services is generally recognized over the contract term as the software services are provided. The Company generally bills for the software services on a monthly basis.

11

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TABULA RASA HEALTHCARE, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

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

Disaggregation of Revenue

In the following table, revenue is disaggregated by reportable segment. Substantially all of the Company’s revenue is recognized in the U.S.

Three Months Ended

Nine Months Ended

September 30, 

September 30, 

2021

2020

2021

2020

CareVention HealthCare:

PACE product revenue

$

50,321

$

39,086

$

139,021

$

115,103

PACE solutions

14,707

11,214

42,973

34,307

$

65,028

$

50,300

$

181,994

$

149,410

MedWise HealthCare:

Product revenue

$

315

$

279

$

475

$

722

Medication safety services

9,467

9,817

31,247

39,844

Software subscription and services

11,776

10,110

31,859

30,191

$

21,558

$

20,206

$

63,581

$

70,757

Total revenue

$

86,586

$

70,506

$

245,575

$

220,167

Contract Balances

Assets and liabilities related to the Company’s contracts are reported on a contract-by-contract basis at the end of each reporting period. Contract balances consist of contract assets and contract liabilities. Contract assets are recorded when the right to consideration for services is conditional on something other than the passage of time. Contract assets relating to unbilled receivables are transferred to accounts receivable when the right to consideration becomes unconditional. Contract assets are classified as current or non-current based on the timing of the Company’s rights to the unconditional payments. Contract assets are generally classified as current and recorded within other current assets on the Company’s consolidated balance sheets.

Contract liabilities include advance customer payments and billings in excess of revenue recognized. The Company generally classifies contract liabilities in accrued expenses and other current liabilities and in other long-term liabilities on the Company’s consolidated balance sheets. The Company anticipates that it will satisfy most of its performance obligations associated with its contract liabilities within one year.

The following table provides information about the Company’s contract assets and contract liabilities from contracts with clients as of September 30, 2021 and December 31, 2020.

September 30, 

December 31, 

2021

    

2020

Contract assets

$

11,638

$

7,601

Contract liabilities

4,549

3,876

12

Table of Contents

TABULA RASA HEALTHCARE, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

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

Significant changes in the contract assets and the contract liabilities balances during the nine months ended September 30, 2021 are as follows:

September 30, 

2021

Contract assets:

Contract assets, beginning of period

$

7,601

Decreases due to cash received

(8,881)

Changes to the contract assets at the beginning of the period as a result of changes in estimates

2,391

Changes during the period, net of reclassifications to receivables

10,527

Contract assets, end of period

$

11,638

Contract liabilities:

Contract liabilities, beginning of period

$

3,876

Revenue recognized that was included in the contract liabilities balance at the beginning of the period

(2,708)

Increases due to cash received, excluding amounts recognized as revenue during the period

3,381

Contract liabilities, end of period

$

4,549

During the nine months ended September 30, 2020, the Company recognized $3,783 of revenue that was included in the December 31, 2019 contract liability balance of $4,930.

4.     Net Loss per Share

Basic and diluted net loss per share is computed by dividing net loss by the weighted average number of shares of common stock of the Company outstanding during the period.

The following table presents the calculation of basic and diluted net loss per share for the Company’s common stock:

Three Months Ended

Nine Months Ended

September 30, 

September 30, 

    

2021

   

2020

    

2021

   

2020

Numerator (basic and diluted):