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June 2018 (NASDAQ: TRHC)Proprietary and Confidential --- © 2018 Tabula Rasa HealthCare, Inc.
Investor Presentation
MOORESTOWN | BOULDER | CHARLESTON | SAN FRANCISCO | ST LOUIS | PHOENIX | TUCSON | COLUMBUS | AUSTIN
Legal Disclosure
Forward-looking statements
This presentation contains “forward-looking” statements that are based on our management’s beliefs and assumptions and on information currently available to management. These forward-looking statements include, without limitation, statements regarding the industry, business strategy, plans, goals and expectations concerning market position, product expansion, future operations, margins, profitability, future efficiencies, capital expenditures, liquidity and capital resources and other financial and operating information of Tabula Rasa HealthCare, Inc. (“Company”). When used in this discussion, the words “may,” “believes,” “intends,” “seeks,” “anticipates,” “plans,” “estimates,” “expects,” “should,” “assumes,” “continues,” “could,” “will,” “future” and the negative of these or similar terms and phrases are intended to identify forward-looking statements.
Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the Company’s actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Forward-looking statements represent our management’s beliefs and assumptions only as of the date of this presentation. The Company’s actual future results may be materially different from what we expect. Except as required by law, we assume no obligation to update these forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in the forward-looking statements, even if new information becomes available in the future.
This presentation also contains estimates and other statistical data made by independent parties and by the Company relating to market size and growth and other data about our industry. This data involves a number of assumptions and limitations, and you are cautioned not to give undue weight to such estimates.
This presentation includes certain non-GAAP financial measures as defined by SEC rules. As required by Regulation G, we have provided a reconciliation of those measures to the most directly comparable GAAP measures, which is available in the Appendix.
Medication Risk Mitigation2
Tabula Rasa HealthCare at a Glance
• Founded late 2009
• First PACE contract 1/1/2011
• HQ in Moorestown, NJ
• ~600 FT employees
• ~170 clients
• 98% recurring revenue retention
• IP Patents & Significant Science that is difficult to replicate
• Multi-billion $ U.S. TAM
Tabula Rasa HealthCare has developed a proprietary software platform that reduces adverse drug events and lowers healthcare costs in at-risk populations
Clinical Intelligence Call Centers Phoenix, AZGainesville, FL Columbus, OHSan Francisco, CA
Revenue ($M) Adjusted EBITDA
Medication Risk Mitigation3
$94.1
$134.5
FY16 FY17
$13.6
$18.3
FY16 FY17
Tucson, AZMoorestown, NJAustin, TX
Combined Medication Risk Mitigation® Product Portfolio
Proprietary Medication Risk Mitigation Matrix®
Mar
kets
Serv
ed PACE Payors & Pharmacists
Consumers
Product Portfolio
RxCompanion
• Prospective (prior to
submitting to a
phcy)
• Prescriber-centric
• Secure instant
messaging with a
certified PharmD
• Closed system (e.g.,
hospital, network
docs)
• Concurrent (at
the pharmacy
prior to being
filled)
• Retrospective
(risk-
stratification of
a large cohort)
• Prior to purchasing
an OTC/Herbal
medication
• Secure instant
messaging with a
certified PharmD
• Part D MTM
• Medicaid MTM
• Licensing to national
pharmacy
Investment Highlights
First mover in ADE medication risk mitigation software & decision support tools recent launch of proprietary Medication Risk Score
Proprietary, scalable solution reduces ADEs, improves outcomes and lowers cost clients report up to 50% reductions
Adverse Drug Events (ADEs) prevalence is a large; untapped and growing market—2016 spent $450 B Rx Expenditures and $528 B on Cost of Illness1
Rapid migration to value-based care creates demand for our scalable solution
Profitable with high recurring revenue, EBITDA, and expanding margins
Medication Risk Mitigation5
1Watanabe JH, McInnis T, Hirsch, JD, Annals of Pharmacother 26March2018 https://www.ncbi.nlm.nih.gov/pubmed/29577766
Impact of ADEs Annually in the U.S.
Physician office visits
3.5 millionHospitalizations
125,000
Affected hospital stays
2 million20% of Re-admissions
1.7 to 4.6Increased days per affected
hospital stay
1.7 to 4.6
Emergency department visits
1 millionDeaths
100,000Deaths
100,000
RIP
Medication Risk Mitigation6
Increase of 12% from 20 years ago
50% of seniors in UK on 5+ Meds
Approximately 20 million people
39% of seniors in U.S. on 5+ meds
https://www.cdc.gov/nchs/data/hus/hus15.pdf#079
http://www.telegraph.co.uk/news/2017/11/15/half-over-65s-take-least-five-drugs-day
Source: Alliance for Human Services and HHS
Medication Risk Mitigation
The Pandemic of Preventable ADEs --Representing the 4th Leading Cause of Death.
The Need for Personalized Pharmacotherapy is urgent
Hospital Utilization Review ADEs Impact: Cost of Drug-Related Morbidity and Mortality Studies
Medication Risk Mitigation
It still rings true: For every dollar we spend on prescription medication, we spend more than another dollar trying to address problems caused by the medications.
$67
$101
$251
$450
$77
$177
$290
$528
1995 2000 2008 2016
Rx Spending Versus Cost of Illness* 1995-2016(*Drug Related Morbidity and Mortality)
Rx Spend (billions) COI (billions)
1Watanabe JH, McInnis T, Hirsch, JD, Annals of Pharmacother 26March2018 https://www.ncbi.nlm.nih.gov/pubmed/29577766
Medication Risk Mitigation
TRHC’s New, Unique Multi-Drug Analysis Software
TRHC’s novel software to guide pharmacists and prescribers
toward individualized medication decision support
One-to-One Drug Risk Analysis Simultaneous Multi-Drug Risk Analysis
This one-to-one drug interaction software is three decades old,
and is embedded in EHRs, Pharmacies, PBMs, etc.
9
Medication Risk Mitigation
• Enhanced MTM | Innovations in MTM• SaaS and Service Based Models
Identification
Intervention
Data Analytics
Comprehensive Medication Management
Targeted Support | Drug, Disease or Condition
Star Ratings & HEDIS Scores
Simultaneous, Multi-Drug Interaction
Analysis
• MedWise Advisor® Risk Stratification
• Population Risk Distribution Analysis
• Individual Risk/Safety Scoring
• MedWise Advisor® Medication Risk Mitigation Strategic Deployment to Reduce Risk Scores
• Medication Safety Call Center Support (Primary/Secondary)
• Provider/Patient Engagement
• Member Engagement• MedWise Advisor® Medication Reconciliation• Leveraging Success (Osteoporosis, etc.)
• Opioids, Diabetes, Falls
• Reminder Packaged Medications (PACE Only)
Medication Risk Innovations
Care Transitions
• MedWise Advisor® Medication Reconciliation• In-Home | Call Center
• Cohort Comparisons• Opportunity Analysis
Personalized Medication Risk Management Portfolio
Medication Risk Mitigation
Decreases Medication-
Related RiskReduces Adverse Drug
Events
Enhances Compliance
and Quality of Care
Improves Medication
Outcomes
10
Why is Medication Risk Score Important, besides QOL?
• For members with a high medication risk score, healthcare expenditures are twice as high on average than for members with lower risk scores.
• The above chart illustrates our goal to identify and remediate member medication risk – improving medication safety and reducing cost.
• Extracted from >13 MM patients medical and pharmacy claims.• Does not include medications that were OTC, Herbal, Recreational, Samples, $4 Generics.
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
50,000
11 1716 3029282524231210976 22210 8
CK’s Medication Risk Score
34-43
272621 151413 201918 31-33
543
20
+ =
hig
h r
isk
Lower drug risk correlates with lower medical costs
Higher riskLower riskA
nn
ual
ize
d M
ed
ical
Sp
en
d(2
01
6 d
olla
rs)
Medication Risk Mitigation
Medication Risk Mitigation + Medication Decision Support Yields:Reduced ADEs, ER visits, Hospitalizations, and Cost Saving Millions
12
Clients have reported that our solutions have contributed to improved outcomes for their patients
Southeast Client
Midwest ClientNortheast Client
East Coast Client
Hospitalizations by census
Hospital admissions PMPM
Falls by census (%)
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
9.0
10.0
Q1 2013 Q1 2014 Q1 2015 Q1 2016 Q1 2017
Ho
sp
ita
liza
tio
ns p
er
10
0
me
mb
ers
pe
r m
on
th
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
9.0
10.0
Q4 2012 Q4 2013 Q4 2014 Q4 2015 Q4 2016
Ho
sp
ita
liza
tio
ns p
er
10
0
me
mb
ers
pe
r m
on
th
$600
$650
$700
$750
$800
$850
$900
$950
$1,000
$1,050
Q1 2015Q2 2015Q3 2015Q4 2015Q1 2016Q2 2016Q3 2016Q4 2016
Medication spend PMPM
0.0
5.0
10.0
15.0
20.0
25.0
Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016
Fa
lls p
er
10
0 m
em
be
rs p
er
mo
nth
MRM involvement MRM involvement
MRM involvement MRM involvement
Medication Risk Mitigation
Markets & Growth Strategy
Tabula Rasa’s Matrix is Applicable in All At-Risk Settings
14
Medication Risk Mitigation Matrix
PACE represents ~70% of revenue andHas grown annually at ~20%
Medicare
• ACOs
• Commercial
• Self-Insured Employers
• Retail Pharmacies
Incremental At-Risk markets expected to contribute to
margin expansion
Current Populations Served
April 2018 CMS adopted rule encourage broader
adoption of MTM services (change from ALR to MLR)
Medicaid Providers
PACE
Medication Risk Mitigation
15
Growth Strategy
Expand PACE Leadership
Medication Risk Mitigation
Deepen Existing Relationships
Grow Non-PACE Business
Service Expansion
Only 20% penetration based on members served
350+ health plan customers represent material opportunity
MTM, Stars, Opioid Misuse programs
Shifting pipeline mix to higher margin licensing & service contracts
16
In Addition Sustained PACE Growth, We Continue to Expand into Health Plans and Provider Organizations
Medication Risk Mitigation
Combination Creates Market Leading Position
Medication Risk Mitigation17
Flexible and highly scalable service delivery platform
Services performed beyond traditional MTM requirements
Track record of meeting 100% of client goals
Recent expansion of markets and to Medicare, National Pharmacies, and
software licensing
Proprietary medication risk identification and stratification
tools
Validated Medication Risk Score
Demonstrated reductions in medical spending and optimized outcomes
Participant in EMTM model pilot which includes a new method to leverage community pharmacists
Consolidated business: The market leader in medication safety
Acquisition of SinfoniaRX competed September 6, 2017
18
Analytics platform demonstrating optimized outcomes
Extensive Clinical & Management Expertise
First Mover Advantage
Market Leadership
Direct Sales to Payers with Ongoing Client Liaison
Support
High Customer Retention
Long-Term Contracts
Highly Scalable Platform
Aligned Incentives with Value-Based Care
TRHC Intellectual Property
High Barriers to EntrySolid Competitive Advantage
Medication Risk Mitigation Patents
Medication Management System and Method #8,392,220
Medication Management System and MethodMedication Risk Mitigation Matrix System and MethodLong QT-JT: Index & Score Method
Issued Pending
Proprietary Multidrug Medication Risk Matrix
Data analytics demonstrating up to
50% reductions in hospitalizations, ER
Visits and readmissions
Applicable in a Variety of Markets (Pace, Part-D Opioids,
ACO)
Proprietary Medication Risk
Score
Adaptable Solution Delivery
(License, PMPM,
Product)
Unique Market Position, High Barriers to Entry and Deep Competitive Moat
Financials
Track Record of Consistent Growth
Medication Risk Mitigation20
Annual Revenue ($M) Annual Adjusted EBITDA ($M)
Per-Member Per-Month and Subscription-Based Revenue Models
98% Revenue Retention
Exclusive and Multi-year Contracts
$3.0
$8.6
$13.6
$18.3
$30.0
2014 2015 2016 2017 2018E
Anticipated Service revenue growth of approximately 100% in 2018
$48
$70
$94
$135
$193
2014 2015 2016 2017 2018E
$21.9$27.2
$6.0
$16.8
1Q'17 1Q'18
133
170
FY16 FY17
$79.4$98.5
$14.6
$36.0
FY16 FY17
Strong financial performance
Adjusted EBITDA ($M)
Revenue ($M) Clients
Gross profit ($M)
Margin 30.7% 30.4% 27.9% 29.7% 13.6% 9.8% 11.7% 14.5%
21
$43.9
$28.0
$134.5
$94.1
Product Revenue Service Revenue
Medication Risk Mitigation
$13.6
$18.3
FY16 FY17
$28.9
$40.9
FY16 FY17
$3.3$4.3
1Q'17 1Q'18
$8.3
$12.3
1Q'17 1Q'18
GM: Low 20’s
Medication Risk Management Offering Summary
22
PACE Payors and At-Risk Providers
Technology
Medication Risk Mitigation
Clinical Services
Medication Fulfillment
Technology Technology
Clinical Services
PMPM + FFS PMPM or PUMPM SaaS
Gross Margin: Low 20’s Gross Margin: ~40% Gross Margin: ~80%
Shifting Business Mix Driving Increased Margins
23
Gross Margin: 17%2013Product Revenue
100%
Medication Risk Mitigation
2014
2015
2016
Product Revenue 97%
Gross Margin: 22%
Product Revenue 86%
Gross Margin: 30%
Product Revenue 84%
Gross Margin: 31%16%
14%
3%
Next 3 - 5 Years
Gross Margin: 35-40%(Estimated)
Product Service
4Q17Product Revenue
62%Gross Margin: 33%38%
Financial Outlook
24
$46m - $47m
$0.4m – $0.9m
$6.0m - $6.5m
Revenue
Net Income (Loss)
Adjusted EBITDA
Medication Risk Mitigation
2Q18 Guidance 2018 Guidance
$188m - $198m
$(11.4)m - $(7.4)m
$28m - $32m
Appendix
Medication Risk Mitigation
Our Focus: Identifying and Mitigating Adverse Drug Events by Personalizing Medication Regimens, Using Science
A medication error is defined as “inappropriate use of a drug that may or may not result in harm;” such errors may occur during prescribing, transcribing, dispensing, administering, adherence, or monitoring of a drug
In contrast, ADRs and ADEs are “harms directly caused by a drug at normal doses”
Aug 2014, https://health.gov/hcq/pdfs/ade-action-plan-508c.pdf
Medication Risk Mitigation
74% of physician office visits involve drug therapy
--CDC
26
Proficient Management Team
Calvin H. Knowlton, PhD
Chief Executive Officer
Orsula V. Knowlton PharmD, MBA
Chief Marketing & New Business Development Officer
Janice R. Casserly, JD
SVP, Human Resources
Brian W. Adams
Chief Financial Officer
Kevin J. Dill, JD
Chief Compliance Officer & General Counsel
Joseph J. Filippoli, MBA
Chief Information Officer
Brian J. Litten, JD
Chief Strategy Officer
Robert L. Alesiani, PharmD
Chief Pharmacotherapy Officer
Michael Greenhalgh, RPh
Chief Operations Officer
Michael J. Ristagno, PharmD, MBA
Chief Client Officer
Kevin P. Boesen, PharmD
CEO, SinfoniaRx
Richard O. Schamp, MD
Chief Medical Officer
Philip W. Heath, MS
Chief Administrative Officer
Thomas N. Wilson
Chief Technology Innovations Officer
Chief Accounting Officer
Andrea C. Speers
Medication Risk Mitigation27
TRHC Intellectual Property
Medication Risk Mitigation Patents
• Medication Management System and Method
• # 8,392,220 • Medication Management System and Method
• Medication Risk Mitigation Matrix System and Method
• Long QT-JT: Index & Score Method
Medication Risk Mitigation Copyrights & Trademarks
• Source Code and Manuals of EireneRx® - 2012, 2015
Copyrights Trademarks
Issued Pending
• Tabula Rasa HealthCare• CareKinesis• MedWise Advisor• EireneRx & EireneRxCS• Capstone Performance
System• Medliance
• CareVentions• NiaRx• Medication Risk
Mitigationby CareKinesis
• Jack Russell Software Company
• WalletRxProprietary Undergirding of Scientific Processes and Application
Medication Risk Mitigation27
Balance Sheet Summary
29
Period Ended
March 31, 2018 December 31, 2017
Cash $4,252 $10,430
Accounts receivable, net 20,372 17,087
Other current assets 8,315 $7,934
Current assets $32,939 $35,451
Noncurrent assets 150,478 152,381
Total assets $183,417 $187,832
Long term debt 1,894 1,705
Other liabilities 75,750 62,239
Total liabilities $77,644 $63,944
Shareholders’ equity $105,773 $123,888
Total liabilities & shareholders’ equity $183,417 $187,832
($ in thousands)
Three Months Ended March 31,
2018 2017
Net income (loss) ($18,094) ($2,593)
Add:
Interest expense 63 76
Income tax expense 2,650 95
Depreciation and amortization 4,048 1,765
Change in fair value of acquisition-related contingent consideration expense
13,521 21
Acquisition-related expense 164 -
Payroll tax expense related to stock option exercises - 83
Stock-based compensation expense 1,945 3,821
Adjusted EBITDA $4,297 $3,268
Reconciliation of GAAP Net Income to Adjusted EBITDA at 3/31
($ in thousands)
30
Adjusted EBITDA consists of net income (loss) plus certain other expenses, which includes interest expense, provision (benefit) for income tax,
depreciation and amortization, loss on extinguishment of debt, change in fair value of acquisition-related contingent consideration expense, change
in fair value of warrant liability, acquisition-related expense, payroll tax expense related to stock option exercises and stock-based compensation
expense. TRHC believes the exclusion of these items assists in providing a more complete understanding of the company’s underlying operations
results and trends and allows for comparability with TRHC’s peer company index and industry and to be more consistent with TRHC’s expected
capital structure on a going forward basis.
Reconciliation of GAAP Net Income to Adjusted EBITDA
($ in thousands)
31
Adjusted EBITDA consists of net income (loss) plus certain other expenses, which includes interest expense, provision (benefit) for income tax,
depreciation and amortization, loss on extinguishment of debt, change in fair value of acquisition-related contingent consideration expense, change
in fair value of warrant liability, acquisition-related expense, payroll tax expense related to stock option exercises and stock-based compensation
expense. TRHC believes the exclusion of these items assists in providing a more complete understanding of the company’s underlying operations
results and trends and allows for comparability with TRHC’s peer company index and industry and to be more consistent with TRHC’s expected
capital structure on a going forward basis.
2014 2015 2016 2017
Net income ($1,107) ($2,864) $5,521 $12,791
Add:
Interest expense 1,354 5,915 4,488 688
Income tax (benefit) expense (409) 328 541 (9,339)
Depreciation and amortization 1,817 3,933 5,115 9,512
Change in fair value of acquisition-related contingent consideration expense 790 (2,059) (338) (6,173)
Change in fair value of acquisition-related consideration expense 55
Change in FV of warrant liability 269 2,786 (639) -
Loss on extinguishment of debt - - 6,411 -
Acquisition-related expenses - - - 921
Payroll tax expense related to stock option exercises 95
Stock-based compensation expense 254 565 4,250 8,752
Adjusted EBITDA $2,968 $8,604 $14,362 $17,247
Guidance Reconciliation of GAAP Net Income to Adjusted EBITDA
32
Adjusted EBITDA consists of net income (loss) plus certain other expenses, which includes interest expense, provision (benefit) for income tax,
depreciation and amortization, loss on extinguishment of debt, change in fair value of acquisition-related contingent consideration expense, change
in fair value of warrant liability, acquisition-related expense, payroll tax expense related to stock option exercises and stock-based compensation
expense. TRHC believes the exclusion of these items assists in providing a more complete understanding of the company’s underlying operations
results and trends and allows for comparability with TRHC’s peer company index and industry and to be more consistent with TRHC’s expected
capital structure on a going forward basis.
2Q18 2018
Low High Low High
Reconciliation of Adjusted EBITDA to Net Income
Net income $0.4 $0.9 ($11.4) ($7.4)
Add:
Interest expense 0.1 0.1 0.4 0.4
Income tax benefit (0.5) (0.5) 1.2 1.2
Depreciation and amortization 3.8 3.8 15.5 15.5
Stock-based compensation expense 2.2 2.2 8.6 8.6
Change in fair value of contingent consideration - - 13.5 13.5
Transaction based costs - - 0.2 0.2
Adjusted EBITDA $6.0 $6.5 $28.0 $32.0
($ in millions)