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spk11: Thank you for standing by, and welcome to the Tabula Rasa Healthcare First Quarter 2022 Earnings Conference Call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you'll need to press star 1 on your telephone. As a reminder, today's program may be recorded. I would now like to introduce your host for today's program, Mr. Kevin Dill, Program Counsel. Please go ahead.
spk05: Thank you and good morning. I'm Kevin Dill, Corporate Counsel for Tabula Rasa Healthcare. The company intends to avail itself of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Certain statements made during this call will be forward-looking statements within the meaning of that law. These forward-looking statements are subject to risk. uncertainties and other factors that could cause Tabula Rasa Healthcare's actual results to differ materially from those expressed or implied by the forward-looking statements. These risks and uncertainties include the developing nature of the market for technology-enabled healthcare products and services and potential changes to laws and regulations that may impact our clients. For additional information on the risks facing Tabula Rasa Healthcare, Please refer to our filings with the SEC, including the risk factor section of our 10-K filed on February 25th, 2022. A recording of this call is accessible through a link on the investor relations page of our website, and it will be available for 90 days. I'll turn the call over to Dr. Calvin Knowlton, CEO, chairman, and founder of Tabula Rasa Healthcare.
spk06: Thank you, Kevin. Good morning, and thank you for joining us. Since the start of the year, we have been working diligently on our ongoing transformation. We're executing three major initiatives we highlighted in the latter part of 2021. We delivered 14% revenue growth from continuing operations during the first quarter of 2022, including 19% from our carevention healthcare business unit. One of the major initiatives is unlocking value from non-core assets. As noted in our earnings release, we intend to divest prescribed wellness, Symfony Rx, and Dosme. Given the active nature of these discussions, we will not comment any further than what has been publicly stated in the press release dated May the 5th. A second major initiative is forming strategic partnerships to advance our growth and MedWise market penetration. And we are making progress toward that goal. Taking a step back to reflect on the vision of TRHC, we remain focused on optimizing drug regimens using MedWise, which is our advanced medication decision support tool. Our primary market continues to be seniors and at-risk healthcare provider organizations, led by PACE, to deliver a lower cost of care improve the lives of this vulnerable population, and extend longevity, as we published in the Journal of Patient Safety last April. During the first quarter of this year, we published a milestone peer-reviewed research paper in the Journal of Healthcare, which demonstrated that PACE organizations using our medication risk mitigation and comprehensive pharmacy services experienced $5,024 less in medical expenditures per participant per year versus PACE organizations that were not using these services. The problem we are addressing, medication-related harm unintended, is large and is growing more acute as the number of patients with chronic conditions rises. In 2019, the population of ages 65 and over was 54 million people. And by 2034, this figure is expected to reach 77 million for one in every five Americans. Patient treatment plans involve medications more than 80% of the time. And as a result, prescription drug use reached a record level of 194 billion daily doses in 2021. That's a growth of 3% versus 2020. Brian is going to address our strategy to capitalize on these favorable trends and the unique portfolio of solutions we offer. Before that, I want to turn the call over to Ursula to talk about our largest market today, PACE. Ursula?
spk04: Good morning. For those new to Tabular Rasa Healthcare, our comprehensive offering is designed to help value-based care organizations such as PACE from startup to maturity and includes One are flagship medication risk mitigation and personalized pharmacy services, two, PBM solutions, three, Medicare risk adjustment coding and consulting, and four, third-party administration network management, and five, electronic health records. I am pleased to share that the first quarter of 2022 marked one of our best-sailed quarters. led by a major win of a California PACE organization that will adopt several of our services, including our care kinesis, personalized pharmacy services, along with our risk adjustment and coding, starting later this year. We had a number of important and sizable contracts for our capstone risk adjustment services, both inside and outside of PACE. As highlighted in our press release, our April 2022 Net enrollment for our care kinesis, pharmacy, medication risk identification, and mitigation services increased 10% versus a year ago and 0.8% on a sequential basis, showing steady improvement each month during the first four months of 2022. We continue to grow faster than the most recently published figures from CMS due to a combination of factors, including a higher percent of Medicaid-only participants and strong presence in the largest and fastest growing state of California. The current and future growth of PACE continues positively as existing states and clients open new centers and expand service areas. As an example, existing clients such as WellBe Health, Inns for a Life, and Brandman Senior Centers are expanding to service new zip codes and new locations. Clients in the state of North Carolina are working to expand their zip code service areas to meet the needs of all of those eligible for the PACE in the state. Our strong PACE implementation backlog includes a number of centers opening in both California and Florida. Looking further ahead, new states are coming online, with Washington, D.C. recently selecting two organizations to begin serving residents in 2023, and Illinois, passing legislation to adopt PACE for 2024. As a reminder, the National PACE Association's call to action for growth, known as PACE 2.0, has a goal of 200,000 participants from about 60,000 today by 2028. Now I'll turn it over to Brian Adams.
spk12: Thanks, Ursula. In addition to continuing to grow our footprint within PACE, Our focus going forward is twofold, expand outside of PACE to adjacent value-based care markets and grow med-wise. Inside of CareVention Healthcare, we have a growing list of clients that include senior-focused, at-risk provider organizations and a few different types of health plans. In 2021, these clients in aggregate generated revenue in excess of $10 million and and our short-term strategy involves deeper penetration within the existing base as we cross-sell our full suite of services. It's worth noting that due to our revenue models with these clients, Tabula Rasa's revenue grows as our clients continue to grow, often at aggressive rates. In addition, we aim to sign new logos with a targeted sales and marketing approach. The at-risk provider groups are an attractive market for Tabula Rasa given they share many of the same characteristics at PACE specifically a capitated payment model for managing high-risk and or high-cost populations, a high prevalence of chronic conditions, and a complicated polypharmacy medication regimen. Shifting to the plan side, we are working with a number of startup Medicare Advantage, managed long-term care, and SNP plans. SNP, or special needs plans, account for one in every six Medicare Advantage enrollees, and as of April 2022, DSNP plans covering dual eligible beneficiaries grew 22% versus a year ago to 4.2 million lives. As a reminder, 90% of PACE participants nationwide are dual eligible. We have a broad portfolio of solutions that are relevant to these plans, including our capstone risk adjustment services to address revenue optimization and our MedWise platform to reduce the total cost of care. As we talked about last quarter, We embarked on a new strategy to commercialize our MedWise science that includes taking a disease-focused approach starting with diabetes and pursuing partnerships to embed MedWise as part of a broader technology or technology-enabled service platform. We're making progress with our MedWise strategy to position the company for future growth, and I look forward to updating you throughout the year with our progress. I will now turn it over to Tom.
spk07: Good morning. I joined TRHC towards the very end of the first quarter, and I'm excited to be here. I want to focus my comments on three areas. First quarter results, our cash position, and guidance for continuing operations. Revenue from continuing operations of $67.1 million increased 14%, driven by strong growth in our product revenue to $51 million, which represents growth of 22% versus a year ago. Note that this excludes revenue of $16.5 million from prescribed wellness, Symphonia, and Dosme, all of which are now shown netted against expenses for those operations as income from discontinued operations. Our service revenue of $16.1 million decreased 4.7%, but excluding EMTM revenue, a program which concluded in 2021, service revenue increased 11%. Adjusted EBITDA of $2.5 million is down from $3.6 million a year ago. Starting with gross margin, we experienced headwinds, as outlined in the press release. That resulted in a decline in gross margin dollars of 2.7% to $14.4 million. Our guidance assumes the elevated shipping costs experienced during the first quarter of the year that negatively impacted product gross margin by 100 basis points persists for the remainder of 2022. Our R&D, sales and marketing, and G&A expense, which were a combined $22.5 million in the quarter, increased 9% versus a year ago. The largest percent increase versus the year-ago period was within R&D and reflects a shift in investment from our MedWise healthcare segment to our CareVention healthcare segment, with a focus on driving greater automation and efficiency in our care kinesis pharmacy services. Moving to cash. We ended the first quarter with $14.4 million in cash. The intangible asset impairment charge of $4.1 million recorded during the quarter is a non-cash item and is attributable to the company's decision to sell Scribe Wellness, Symphonia, and Dosme. Currently, our cash balance is over $21 million. This improvement is due to greater cost discipline and an increased focus on managing working capital. As we noted during our last call, our first quarter cash burn reflects seasonality, as well as the timing of certain working capital items. We expect the second quarter of 2022 to show significant improvement. After the divestiture of non-core assets referred to previously, we expect to generate positive free cash flow during the second half of 2022 and significantly enhanced free cash flow in 2023 and beyond. We capitalized $8.7 million of software development costs versus $5.9 million in the year-ago quarter and expect this number to trend downward over the remaining three quarters, particularly after the planned divestitures noted above. These planned divestitures will provide the company with significant financial flexibility and allow us to focus on executing on our strategy and on enhancing profitability. Now turning to guidance, which we are providing only for continuing operations, we are introducing second quarter 2022 revenue guidance as follows. Revenue of 66 to 69 million, which represents growth of 3 to 7 percent, including carevention healthcare growth of 8 to 11 percent. The absence of EMTM revenue represents a 4 percent headwind compared to the year-ago quarter. As we noted above, that program ended in 2021. For the full year 2022, we expect revenue of $278 million to $286 million, which represents growth of 7% to 10%, including carevention health care growth of 11% to 14%. With that, I will now turn it back to the operator for Q&A.
spk11: Thirdly, ladies and gentlemen, if you have a question at this time, please press star then 1 on your touchtone telephone. If your question has been answered and you'd like to remove yourself from the queue, please press the pound key. Our first question comes from the line of Sean Dodge from RBC Capital Markets. Your question, please.
spk09: Yep. Thanks, Sean. Good morning. Starting with the key intervention guidance, Tom, I think you said you changed things there. You're now assuming... seven-tenths of a percent sequential monthly growth in census versus the 1% you all were targeting for. Can you just give us a little bit more detail on what you think is behind that slower census growth trajectory?
spk07: I mean, that's just what we're seeing in the business right now. That's consistent with what we've seen over the last quarter. And we thought that was the best way to project it going forward.
spk09: Is that a little bit of a hangover from COVID? Is that, do you think, maybe an effect of Omicron, or do you think there's something kind of structurally different?
spk06: Yeah, no, this is Cal. The National Center reported in PACE that February had the highest death rate of any month in the last 14 months in PACE participants. So that's now come down immensely in March, April, and 12-month we have already today in May. So that's part of it. It was a real spike for the Omicron, as you alluded to, in the end of January and through February.
spk09: Okay. And I know you said you're not providing EBITDA guidance for the time being, but is there any help you can give us just directionally on how to think about costs within care invention going forward? Are you working to rationalize expenses there? I know you mentioned a little bit of a reallocation of R&D from MedWise to CareVenture. Are you rationalizing there, or with this being the go-forward business, are you continuing to invest in CareVenture so we should expect expenses there to go up over the course of the year?
spk07: Yeah, so there's two questions in there. I would not expect our margins going forward to necessarily be consistent with where they were this quarter, which was nearly four points down. There were several factors that impacted margins this quarter. One of the largest ones, it was probably about a point and a half, was fuel and shipping surcharges. And a lot of companies, a lot of industries have experienced that. And in the short run, there's not that much you can do about that, but as contracts renew, you can build in a CPI adjuster, and you can start to recapture some of that. So that is something that will be with us in the short run. To de-risk earnings, we've modeled that out to persist for the remainder of the year, but I don't think it persists for the rest of the year. I don't think it persists beyond the rest of the year. Some of the margin decline was mixed, and that happens in every business. A lot of it was a shift of R&D to, and this is more You know, on the EBITDA, what I was speaking a moment ago was more gross margin. But getting down below to EBITDA, we did shift a lot of R&D to the surviving, you know, the remaining business, if you will.
spk09: Okay. Great. That's all I had. Thanks.
spk11: Thank you. Our next question comes from the line of Glenn Santangelo from Jefferies. Your question, please.
spk01: Oh, yeah, thanks for your warning. I just wanted to follow up on sort of the carevention business at a high level. Assuming you're successful in sort of selling these assets, if I look at the business on a continuing ops basis, it looks about 75% of your revenues are coming from product and only about 25% from services. Cal, could you maybe unpack that 25% of your revenue in services and talk about maybe which products you're seeing the most traction in and what the growth outlook is for the services piece of that business?
spk06: Well, the services piece of that business is looking good because we've got additional services that we're offering into the PACE groups, including a number of them now have for next year signed up for pharmacogenomics for every member, for example, every participant. And we have some other things that we're putting out in the next couple of months. So, as long as we can continue to add services, that will continue to grow in the whole care invention model. And a lot of it is because we've done so much traction with our PBM right now, too. They've picked up traction on just about every new program that's starting in PACE.
spk12: Brian Lovett Glenn, I would just add to that. This is Brian. We quoted at the last earnings call the success we've had around cross-selling between the CareVention businesses, and this has been evident over the past few quarters. And if you look, one, at our backlog, that does represent a significant portion of services in there, too. So we do see that the services element of the business should grow in parallel with
spk07: with the product side. And Glenn, this is Tom. It's hard to see that on the income statement, right? You see, you know, a decline of whatever, $800,000 or so in services. But you've really got to break that apart. You know, a big chunk of that, you know, there's several million dollars in there from E&PM, which is a project that's a program that concluded in 21. So that is absent in the first quarter. If you strip that out, nearly all of our service offerings, you know, risk, TPA, PBM, are all up substantially in revenue. And you'll start to see that when the quarter-over-quarter comparisons aren't burdened by the end of the EMTM program.
spk01: Maybe if I could just follow up with a question around these asset sales. I know you don't want to comment at all, but Cal – Do you feel confident that there's a market for assets in this sort of overall macro environment? I mean, obviously, we're starting to see valuations come down. I don't know if there's any high-level commentary you can talk about in the market in general. And then, you know, Tom, I guess maybe a question for you. You know, assuming a successful sale of these assets, right, that will give you more liquidity. It will reduce the debt. You know, what can the company do operationally different in that environment with that type of liquidity versus what it's doing today that could potentially enhance the growth rate of the overall enterprise? Thanks.
spk06: Well, the first question is an easy one, and the answer is absolutely yes. We've had really strong, even in, you know, whatever the headwinds are in the general market, public financially, it's strong. We've got a number of companies that started down the process that we went through a fairly stringent process starting with the culture and different, we had four or five different criteria. And so the funnel came down to less than a dozen and a half or so companies and they're still in play and we expect to see something finalized. Our hope is in the next few weeks
spk01: Oh, wow. All right. That's sooner than I think most people are thinking. So hopefully this quarter we'll see some announcements, right? Is that the hope?
spk06: That's the hope.
spk01: And then maybe that other question about the operations going forward with more liquidity?
spk07: Yeah. Well, I'll touch on liquidity for a second, and then I'll touch on your question about costs and cost savings. Liquidity kind of speaks for itself, right? You have a big liquidity event. I do not intend to – deliver the convert because it's very cheap paper and it doesn't mature until 2026. But that cash on the balance sheet, you know, effectively reduces your net debt. And gosh, where, you know, treasuries are today, instead of having negative care, you might even have positive care on that. We learn as much interest, at least on the portion of the that sits on your ballot that you get. offsets that portion of interest expense. So that just is a cash cushion. On the cost side, I think this is an enormous opportunity for us to refocus. And I see a management team and a board starting to align now that you have a more focused, tighter business model. And let's start with first principles, right? You've got a core business growing at double digits, mid-teens. in an addressable market that's growing significantly. There's not as much volatility in that revenue stream as maybe the businesses that we're proposing to dispose of. The demographics around healthcare and aging are pretty clear. So a lot of companies would give their right arm for a market like that. There is a lot of leverage in that model. There's a lot of shareholder value that should be unleashed from effective cost management. And the completion, you know, Cal alluded to a moment ago, it was hopefully getting to an agreement, and when and if you get to a close, that enables a real big-ticket cost savings that ought to proceed from the dispositions we're seeking to undertake. I mean, you're at 1,600 employees at the start of the year, right? You know, probably 600 of them are associated with the businesses we're disposing of. But that's just the direct costs, right? There's all the indirect costs that we can push on, you know, things like business services, legal fees, insurance, real estate, accounting fees, you know, other areas that should scale with a smaller organization. I'm not ready to project anything on that and probably won't until we, you know, have line of sight to a close. But the point of these transactions are to get these businesses cash flowing in a meaningful way.
spk01: All right, thanks for all that detail. Appreciate it.
spk11: Thank you. Our next question comes from the line, Ryan Danielson, William Blair. Your question, please.
spk10: Yeah, good morning. This is Jack Sons in for Ryan. The majority of my questions have already been asked, but I just have a couple quick follow-ups. First, I guess, how are you thinking about the potential proceeds? And, you know, I think you just mentioned that you do not plan to deliver post-investiture. So, I guess, do you have any thoughts on, you know, a targeted capital structure longer term? And, you know, is it similar to what we're seeing now? Any additional color on this would be appreciated.
spk07: Yeah. So I should be more specific. I don't intend to – I wouldn't expect to deliver the convert. It's very frictionless and easy to take down your revolver balance. And that – does have negative carry because it's floating rate debt, and you see where rates are going. Convert, you know, something that doesn't mature for 2026. If I think about capital structure in sort of a traditional way, I think you put this cash on the balance sheet until, because I think investors will take comfort in that liquidity. Once the business is cash flowing, which, right, that's all of our goals here. Then I think you can start to think about, well, okay, at what point do you refund this or does it make sense to start to think about opportunistically doing open market repurchases? I think that's a ways off. I think our mission to you guys is to be a good steward of all that cash which buys us liquidity and safety and to become a positive cash flow generator. At that point, you start thinking about Do I tweak my capital structure?
spk10: Great. Understood. Thanks. And I guess just as a quick follow-up, with the refocus around carevention and the PACE end market, do you have any thoughts on the overall portfolio? And I guess specifically, are there any areas of interest you might look out to build either, you know, on an organic or inorganic basis?
spk12: You know, I'll take this, and then Ursula, Cal, feel free to jump in. But I think at this point, we feel really comfortable with the portfolio of solutions that we have. They all are extremely relevant, and we're getting very nice uptake within the PACE market, and we believe that these are solutions that are relevant to some of the adjacent markets. Like I talked about in my part of the script, you know, we've got at-risk providers that are focused on seniors. They're under at-risk capitated models. You've got special needs plans and others that would and have been interested in our services. We've got a number of these that are already clients today, so we've got a demonstration. I don't think we need to go out and develop new services at this point or require any
spk04: Yeah, I would agree. I think our focus is on innovating around our current clients and providing them the services we've always provided as what their changing needs continue to evolve to.
spk06: I could just say one thing. If you look at, if you do, just do the numbers about where the National Pace Association is trying to go to 200,000 people in the next three years, I think it is. 2028, yeah. The TAM to that for us, if you just take the services we have, the TAM to that is exceed $3 billion. So it's a large pool right now. It's growing nicely.
spk11: Thanks, guys. Thank you. Our next question comes from the line of Stephanie Davis from SVB Securities. Your question, please.
spk03: Hey, guys. Thank you for taking my question. Following up on the last question, I'd like to talk a little bit more about broader strategy. The story moves more to a PACE-centric pitch. Could you refresh us on any learnings since the IPO around the go-to-market strategy for PACE and kind of where we are so far in the opportunity in terms of penetration?
spk12: Crystal, do you want to talk a little bit about... you know, the evolution since the IPO in terms of how we go to market in the PACE?
spk04: Yeah, absolutely. I mean, we actually have a pretty, we talked about this on our last earnings call, our focus on the notion of account management and really supporting our clients' needs from that perspective, being able to build relationships and trust to be able to have them understand other services that we could be providing them. So for the existing PACE organizations, that we partner with. And then also on the new, which is the fastest-growing part of the market segment, are de novo startups, both for-profit and non-for-profit. You know, the value of partnering with one organization that can provide multiple service lines when they're very small. I mean, to be able to go out and get PBM or TPA services as a startup is very difficult. So we really bring tremendous value to that segment of the market as well.
spk12: I would just add to that, I think what we're saying there is we've got a ton of experience in managing risk with these organizations, and there are some emerging areas in the healthcare landscape right now that look and feel a lot like PACE. And so we think that there's a great opportunity to bring some of these solutions that we know are very relevant, are already being used by a number of these healthcare companies to manage risk in a different way, and so we think we're very well suited to do that, and that's part of the strategy going forward is to look at some of these adjacencies that we've already got a foothold in.
spk04: Yeah, and I think that the strategy that we had was really to try and get pharmacogenomic testing, for instance, to be covered in people's bids for 2020 And we found that it wasn't going to be covered as a lab test. However, all of our clients decided to continue to support that and to purchase that, which is a great demonstration that they're focused on personalizing care to improve outcomes. And that's how they'll win, just by doing that.
spk06: Stephanie, this is Cal. I think if you go outside of PACE just for a second, one of our bullets we've been talking about for the last two learning calls, now the third one today, is strategic partnerships alignment. And what we're doing here is we're going to be aligning, and we're working on a number of them now, we're going to be aligning with groups that can help us, we can use their coattails actually, to get into some of these other adjacencies that Brian was talking about, without us having to be the vanguard from a sales perspective. So we think that's going to be, it's a different model to attack the non-pace areas, that we're going to be exploring and we are working on diligently right now, actually. Hope that's helpful.
spk03: Does that partnership strategy mean that we'll need a lower lift for investment in order to get in some of these adjacencies?
spk05: Yes. Yep.
spk03: Helpful. And then one last one out of me. Just as we look at the guidance ranges, What level of new wins are factored into the updated range? I know I ask this every quarter, but what's the low-end factor, what's the high-end factor, and what gives you confidence in hitting the figures?
spk07: I'm sorry, Stephanie, I didn't hear your question. What level of what?
spk03: New wins.
spk07: New wins. I don't know, and being the new guy, help me out here. I don't know if we've disclosed the new wins that we've put in there, but there are some. It's not large. The thing with new WINS, of course, is when are they implemented. And I think in the past, you know, we said that the signed contracts that we have, which are significant, start second half of the year. And I think that's currently still what we're seeing. And, you know, maybe to de-risk earnings a little bit, we may have, you know, assumed maybe it's closer to the, far into the second half of the year.
spk03: All right. Thank you, guys.
spk09: Thank you.
spk11: Thank you. Our next question comes from the line of Jessica Taffin from Piper Sandler. Your question, please.
spk02: Hi. Thank you for taking the question. So maybe I was just hoping you could elaborate a little bit on what the disease-focused approach to MedWise sales might be, like what products are you bundling and then what's the revenue model? And I think you guys mentioned risk-bearing provider groups, but interested to know what the end market for that product might be as well. Thanks.
spk12: Sure. So I'll start on what we're kind of coining as MedWise clinical solutions. The first one being focused around type 2 diabetes. And there's a lot of attention being paid to chronic disease. And this is a high cost area for whether it be Medicare population or commercial population too. And so we're expanding that to include a number of different either disease states or other areas of focus around either rheumatoid arthritis or opioids. These are just a couple of examples. But at this point, we're looking at a model that typically is on a PM-PM basis, covering a number of lives. And we should be in a position to launch that. This was what we communicated last quarter during Q2. So we're still on target with that. And so we'll be kind of bringing that to market, and we're pretty excited about the opportunity there. We've had an early interest from a number of different provider groups, in fact. So overlapping with your second part of your question, Jessica, is we've had success selling a number of our services into the at-risk provider groups, just namely Oak Street, Dooley. We've got a few others recently that we've partnered with. And we believe that there's a real opportunity to go deeper in those relationships. Some of those have been more focused around our capstone risk adjustment services. And we think a nice balance to that is our MedWise solution to help manage total cost of care. So ultimately helping these organizations to improve profitability. But we've got what we think are really compelling offerings to help them manage risk. And we've already seen evidence that there is a lot of interest and we've got contracts to date. So we're excited about the opportunity to put more focus around that as it is a very relevant adjacency to PACE today.
spk06: Let me follow up on that and put a point on the spear. Our real interest, as you know, is in medication, medication safety. And when we talk about the diseases that Brian mentioned appropriately, as he did, The common denominator between RA and type 2 diabetes and a couple others is they are chronic low inflammatory diseases. And chronic low inflammatory diseases downregulate some of the genes, 3A4 and 5 and 2C19, which are responsible for metabolizing a lot of drugs and activating other drugs. So that's where our focus is. It's because we can help them optimize the use of medication in these diseases, which they're not doing now. And it's the same thing with the opioids. As you, well, I shouldn't put that. As we indicated before, that the opioids, most all are pro-drugs and require the gene CYP2D6 to get activated. And a lot of other drugs that people are taking impede 2D6. So that's why we're involved in these. We're involved in them because we have an attribute to bring to the market that no one else is doing now in those chronic diseases that are low inflammatory and in the opioids, plus a bunch of others. But that's where we're starting.
spk02: That's really helpful. Thank you. So then I guess can you just help us understand if this product, this MedWise Clinical Solutions product is factored into the revised guidance for 2022? And then just maybe F, prescribe wellness, Symphonia, DOSME, and EMTM. What is kind of the new seasonality of revenue and EBITDA in the model? Thanks.
spk07: So let me address that first question. No, there is not any what I'll call speculative contracts in the guidance, and it ties to Stephanie's question from a moment ago. I referred to signed contracts. and the estimated implementation, but there's no go-get revenue in this model from either the PACE side or the MedWISE side. So there's upside to that if it should happen. And repeat your second question for us, please.
spk02: Yep, so just on the seasonality of the model X prescribed wellness, Symphonia, and dosing, and EMTM, how should we think about the quarterly cadence of revenue in EBITDA?
spk12: Yeah, Jess, you know, just thinking back to a few years ago when we went public and we were primarily a PACE business, you probably recall, I mean, we had a very predictable, steady quarterly increase in terms of revenues as PACE operators are adding new lives every single month. We benefit from that in addition to the new contracts that are signed and coming online. So we do expect that it's pretty much a stair step throughout the year going forward where we see a sequential quarterly growth from a top line perspective.
spk02: Got it. Thank you so much. I appreciate it. Sure.
spk04: Thank you.
spk11: Thank you. As a reminder, if you have a question, please press star than one. Our next question comes to the line of David Grossman from Stifel. Your question, please.
spk08: Great. Thank you. Good morning. I wonder if we can just go back, you know, to the liquidity situation a little bit. So it looks like you burned about $25 million in free cash flow during the quarter. And you borrowed another $28 million under the revolver. And so I guess my first question is, how much is available? Because it looked like you had about $28 million available under the revolver on the last filing. So maybe you could just clarify what's available today under the revolver, if any, of that $90 million. Or maybe I just misunderstood the filing.
spk07: Yeah. So let me address that. As I noted when I started in my remarks, we've got over $21 million in cash today, which means we have not burned any cash through the first five weeks of the quarter. That's been done through a combination of working capital management, a focus on rating and spending. There is a little bit of capacity or borrowing availability, I should say, on the revolver, not a whole lot at the moment. But I don't expect you to need any additional borrowings. You're not going to burn through $21 million in cash that quickly. And sometimes, you know how this goes, the numbers can be, from quarter to quarter, can distort the real picture. So you get a collection on March 29th versus April 2nd. or you make a payment the last week of the quarter versus the first, and you can swing $10 or $15 million easily. And so most of the delta in that large cash burn last quarter versus the run rate prior quarters was Fortune Capital. Just, you know, like I said, the timing of a payment, you can't really control if your customer pays you on a Friday or a Monday, and that happens to cross over a quarter end. It is not indicative of you know, a much greater cash burn. So I think our liquidity situation is, you know, okay. If I needed additional capital before any of these three proposed sales were to close, there are buckets under the revolver that we could avail ourselves of. Companies that believe they have line of sight to a large liquidity event like the proposed divestitures usually also believe, they can get bridge financing to that event. We have a very strong relationship with our senior lenders. We're in compliance with all our covenants. So I'm not overly concerned about that. And as the new guy here, I'm looking forward to digging into our spend more, as I've done since I arrived at the end of the first quarter, and seek to continue cash performance we've had quarter to date.
spk08: So Tom, maybe you could just go into that a little more detail about the components here. So of the burn in the first quarter, how much of that were the assets available for sale versus the continuing ops? Can you break it out that way? Is there a way to think of it? way to think about it?
spk07: Well, yeah, there's a way to think about it, and I don't have a breakout at my fingertips of it, but I can tell you a large part of the R&D spin, the software development, I shouldn't say R&D, I misspoke, I should say the software development has always been on the software-related businesses, the ones, you know, PW and Symphony, et cetera. A lot of that goes away. I mentioned earlier all of the other opportunities for not just direct costs associated with the 600 people who will be rebadged, but the back office stuff. So there's a lot of opportunities for enhanced cash flow post-devastature. And our focus has got to be to watch cash judiciously until that close. At that close, you have a large liquidity event. You don't have liquidity issues. As I mentioned, there are any number of levers we can pull to bridge us to that. But more importantly, the sort of things I just mentioned, the sort of cost-saving opportunities are not just what preserves the proceeds of that divestiture, but which allows the business to start cash flowing in a manner that you all and we all wanted to and needed to.
spk08: Right. So maybe just ask slightly differently. I mean, can, can the continuing ops, you know, go cash positive, you know, relatively soon post divestiture without any big working capital, you know, kind of contributions?
spk07: Yes. Okay.
spk08: And I think you may have just answered this, but the comment about R&D, I thought you said that the R&D shifted from Medwise to the PACE businesses, or maybe it was the residual service businesses. Can you just clarify that comment and reconcile that with your comment about the capitalized software? being largely attributable to the assets for sale. Maybe I'm not just understanding that dynamic.
spk07: Yeah, I misspoke when I said that a large, large chunk of the R&D is associated with the to-be-disposed of assets. I meant to say a large chunk of the cap software. There has been a shift. Some shifts in R&D, obviously, to the continuing businesses, you're not going to throw too much cash to businesses that someone else is going to be running shortly.
spk08: Got it. Okay, that's it for me. Thanks very much. Good luck.
spk11: Thank you, David. Thank you. This does conclude the question and answer session as well as today's program. Thank you, ladies and gentlemen, for your participation. You may now disconnect. Good day.
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