Q1 2022 Tabula Rasa HealthCare Inc Earnings Call
[music].
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 will need to press star one on your telephone as a reminder, today's program may be recorded.
I would now like to introduce your host for today's program because you cannot counsel.
Counsel. Please go ahead.
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 risks 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 factors 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 will turn the call over to Dr. Calvin Knowlton.
<unk>, chairman and founder of Tabula Rasa healthcare.
Thank you, Kevin and 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 care mentioned healthcare business unit.
One of the major initiatives.
Locking value from noncore assets.
As noted in our earnings release, we intend to divest prescribe wellness Symphony Rx and dosed me.
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 fifth.
A second major initiative is forming strategic partnerships to advance our growth and.
And med wise market penetration.
And we are making progress towards that goal.
Taking a step back to reflect on the vision of TRA.
We remain focused on optimizing drug regimens using med wise, which is our advanced medication decision support tool or.
Our primary market continues to be seniors and at risk health care 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 patient safety last April .
During the first quarter of this year.
We published a milestone peer reviewed research paper in the journal of health care, which demonstrated that pace organizations, using our medication risk mitigation and comprehensive pharmacy services.
Experienced $5024 less and 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 condition rises.
In 2019, the population of aged 65 and over was 54 million people and by 2034. This figure is expected to reach 77 million, where 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 <unk> to talk about our largest market today pace.
Yep.
Good morning for.
For those new to Tabula Rasa healthcare, our comprehensive offering.
Turning to help value based care organization, such as pace from startup to maturity and include one our flagship medication risk mitigation and personalized pharmacy services to Pbms solution, three Medicare risk adjustment coding and consulting.
And for it third Party administration network management and electronic Health Records.
I'm pleased to share that the first quarter of 2022 marked one of our best sales quarters led by a major win of a California paced organization that will adopt several of our services.
<unk>, our care Kinesis, Personalised 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.
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 8% on a sequential basis showing steady improvement each month during the <unk>.
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 area.
As an example existing clients such as well be health <unk> life and Redmond senior centers are.
Spanning to service new Zip codes in 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. At least selecting two organizations to begin serving residents in 2023.
In Illinois, passing legislation to adopt piece for 2024.
As a reminder, the national Pace Association call to action for growth.
<unk> pays to Plano has a goal of 200000 participants from about 60000 today like 2028.
Now I'll turn it over to Brian Adam.
Thanks first of all 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 care bench in health care, 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 our short term strategy involved 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 is revenue growth as our clients continued to grow often at aggressive rates.
In addition, we aim to sign new logos with a targeted sales and marketing approach.
Risk provider groups are an attractive market for tabula rasa, given they share many of the same characteristics at pace.
Specifically, our capitation payment model for managing high risk <unk> high cost populations.
A high prevalence of chronic conditions and a complicated polypharmacy medication regimen.
Shifting to the plant side, we're working with a number of startup Medicare advantage managed long term care and SNP plan.
Sniff for special needs plans account for one in every six Medicare advantage enrollees and as of April 2022, D. SNP 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 <unk> platform to reduce the total cost of care.
As we talked about last quarter, we embarked on a new strategy to commercialize our med wide science that includes taking a disease focused approach starting with diabetes and pursuing partnerships to embed met wise as part of a broader technology or technology enabled service platform.
We're making progress with our <unk> 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.
Good morning.
Joined trh see towards the very end of the first quarter and I am excited to be here.
I want to focus my comments on three areas first quarter results, our cash position and.
And guidance for continuing operations.
Revenue from continuing operations of $67 1 million increased 14% drew.
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 prescribe wellness.
Symphony and dosed me.
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 four 7%, but excluding E MTM revenue.
Graham, 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 or two 7% to $14 4 million.
Our guidance assumes the elevated shipping costs experienced during the first quarter of the year.
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.
And reflects a shift in investment from our <unk> healthcare segment to our care bench and health care 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 of cash.
Intangible asset impairment charge of $4 1 million recorded during the quarter as a noncash item.
And is attributable to the Companys decision to sell prescribed wellness Symphony and dosing.
Currently our cash balance.
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 noncore assets for two 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 were $5 9 million in the year ago quarter and.
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 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 million to $69 million.
Which represents growth of 3% to 7%, including care venture health care growth of 8% to 11%.
The absence of E. M. T M revenue represents a 4% 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 care venture health care growth of 11% to 14%.
With that I will now turn it back to the operator for Q&A.
Certainly ladies and gentlemen, if you have a question at this time. Please press Star then one on your Touchstone telephone. If your question has been answered maybe 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.
Yeah, Thanks, Todd and good morning.
Starting with the key invention guidance, Tom I think you said.
You change things are you now assuming.
Seven tenths of a percent sequential monthly growth incentives versus the 1% you all were targeting before can you just give us a little bit more detail on what you think is behind.
That's lower census growth trajectory.
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.
I thought that was we thought that was the best way to projected going forward.
Is that.
Is that a little bit of a hangover from Covid that you think maybe.
Effective omicron or do you think there is something structurally different.
Yes. This is cathy.
The national.
Center reported in pace that February had the highest death rate.
Have any months in the last 14 months and patient participants. So that's now come down immensely in March April and told them. What we have already today in may but so that's part of it.
A real spike for the Omicron as you alluded to in the end of January and through February .
Okay.
No.
And you said youre not providing EBITDA guidance for the time being but is there any help you can give us just directionally.
How to think about costs, we think convention going forward or are you working to rationalize expenses. There I know you mentioned a little bit of a reallocation of R&D from Midwest to care Gotcha.
Are you rationalizing their or with this being the go forward business are you continuing to invest in <unk>. So we should expect expenses.
They go up over the course of the year. So there is theres two questions in there.
I would not expect our margins going forward to necessarily be consistent with.
When there 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.
Derisk earnings we've modeled that out for <unk>.
Persist for the remainder of the year, but I don't think it persists.
The rest of the year I don't think it persist beyond the rest of the year. Some of the margin decline was mix and that happens in every business.
A lot of it was a shift of R&D.
Two and this is more.
On the EBITDA.
Speaking a moment ago was more gross margin.
We're getting down below to EBITDA, we did shift a lot of R&D.
To the.
Surviving the remaining business if you will.
Okay.
Great Thats, all I had thanks.
Thank you. Our next question comes from the line of Glen Santangelo from Jefferies. Your question. Please.
Oh, yes, thanks here in the morning.
Just wanted to follow up on sort of the <unk> business at a high level.
Assuming.
Youre 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 products and only about 25% from services.
Could you maybe unpack that that 25% of your revenue in surfaces 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.
Well the services piece that businesses.
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 <unk>.
Good genomics for every every member for example to repurchase.
And we've had 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.
The whole care mentioned model and a lot of it is because we've done so much.
Traction with our with our ppm right now too.
They picked up traction on just about every new program starting in pace.
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 Kerr mentioned businesses and this has been evident over the past few quarters that that and.
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 the.
With the product side and Glenn This is Tom it's hard to see that on the income statement right you see a decline of whatever 800000 or so in services, but you've really got to break that apart.
A big chunk of that.
There are several million dollars in there.
Which was a problem project program that concluded in 'twenty one.
Is absent in the first quarter, if you strip that out nearly all of our service offerings risk.
The Tpa <unk> are all up substantially in revenue.
And youll start to see that when the when the quarter over quarter comparisons aren't burdened by the end of the MTM program.
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 do.
Do you feel confident that.
There is 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 theres any high level commentary you can talk about in the market in general and then.
I guess, maybe a question for you.
Assuming a successful sale of these assets right that will give you more liquidity to reduce the debt.
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.
The first question is an easy one and the answer is absolutely, yes, we've had really strong even.
Even in whatever the headwinds are in and the general <unk>.
Financially it's.
I mean, we've got a number of companies that started down the process that.
We went through a fairly stringent process, starting with culture different we had four or five different criteria and so in the funnel came down too.
Less than doesn't have for sale companies and they are still in play and we expect to see something finalized.
Our hope is in the next few weeks.
Oh, Wow, alright, that's sooner than I think most people are thinking so hopefully hopefully this quarter will see some some announcements right does that though.
That's the hope.
And then maybe the other question about the operations going forward and with more liquidity.
Yes, 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.
Delever the convert because it's very cheap paper and it doesn't mature until 2026, but that.
Cash on the balance sheet.
Effectively reduces your net debt and gosh, where.
Treasuries are today.
Instead of having a negative carry you might find even a positive clarity on that.
As much interest at least on the proportion of the.
Sits on your balance.
Yet.
That's a 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 our board.
Starting to align now that you have a.
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.
The addressable market, that's growing significantly there's not as much volatility in that revenue stream is maybe the businesses that we're proposing to dispose of the demographics around health care and aging are pretty clear. So a lot of companies would give the right arm for a market like that there was a lot of leverage in that model.
Lot of shareholder value that should be unleashed from effective cost management.
And the completion with Cal alluded to a moment ago was hopefully.
Getting to an agreement and when and if.
You get to a close.
That.
Enables a real big ticket cost savings that are proceed from the dispositions were seeking.
You were at 1600 employees at the start of the year right.
Probably 600 of them are associated with the businesses. We're just disposing up but that's just the direct cost right because all the indirect costs that we can push on things like business services.
Legal fees insurance real estate.
<unk> fees other areas that should scale with a smaller organization I'm not ready to project anything on that and probably won't until we.
Now have line of sight to a close.
But the point of these transactions are get these business is cash flowing in a meaningful way.
Alright, thanks for all that detail I appreciate it.
Thank you. Our next question comes from the line of Ryan Daniels from William Blair. Your question. Please.
Yes. Good morning, this is Jack.
Brian .
The majority of my questions have already been asked but I just have a couple of quick follow ups.
First I guess, how are you thinking about the potential proceeds in.
I think you just mentioned that you do not plan to Delever post the divestitures so I.
I guess do you have any thoughts on targeted capital structure longer chairman.
Is it similar to what we're seeing now any additional color on this would be appreciated.
So.
I should be more specific I don't intend to.
<unk> expect to Delever the convert.
It's very frictionless and easy to take down your revolver balance.
And that does have a negative carry.
Because it's floating rate debt and you can see the floating rate where rates are going.
The convert something doesn't mature for 2026, if I think about capital structure.
In sort of a traditional way I think you put the cash on the balance sheet until it because I think investors will take comfort in that liquidity.
Once the business is cash flowing.
Which all.
All of our goals.
Dan 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 with five.
Liquidity and safety.
And to becoming positive.
Cash flow generator and at that point, you start thinking about do I tweak my capital structure.
Great understood. Thanks.
I guess, just as a quick follow up with a refocus around care pension 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.
On an organic or inorganic basis.
Thanks.
I'll take this and then look out 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 there.
Very nice uptake within the pace market and we believe that these are solutions that are relevant to some of the adjacent market like.
Like I talked about in my part of the script.
Got at risk providers that are focused on seniors there under at risk appetite. It models, you've got special needs plans and others that.
Wood.
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 developed new services at this point or.
Or require any.
Yes, I would agree I think where our focus is on innovating around our current clients and providing them with services. We've always provided what their changing needs continue to evolve too.
I could just say one thing if you look at if you just do the numbers about where the National Pace Association is trying to go to.
200000 people in next three years I think it is a 2000 22020.
Tam to that for us if you just take the services we have the team to that is exceed $3 billion.
So it's.
It's a large.
For right now it's growing nicely.
Great. Thanks, guys.
Thank you. Our next question comes from the line of Stephanie Davis from SBB Securities. Your question. Please.
Hi, 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.
So I move more to a pay centric pitch could you refresh us on any learning since the IPO about them to go to market strategy for pace on kind of where we are so far and the opportunity in terms of penetration.
Okay.
So do you want to talk a little bit about.
The evolution since the IPO in terms of how we go to market and say yes.
Yes, absolutely I mean, we actually have a pretty <unk> 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, our de Novo startup.
For profit and non for profit the value of partnering with one organization that can provide multiple service lines.
When theyre very small I mean to be able to go out and get PVM or Tpa services as a startup is very difficult. So we really bring tremendous value to that segment of the market as well.
I would just add to that.
<unk>.
I think what we're saying there so we've got a ton of experience in managing risk with these organizations and their <unk>.
Some emerging areas in the health care landscape right now that look and feel a lot like pace.
So we think that Theres, a great opportunity to bring some of these solutions that we know are very relevant are already being used by a number of these <unk>.
Health care companies to manage risk in a different way and so we think we're very well suited to do that.
As part of the strategy going forward is to look at some of these adjacencies that we've already got a foothold then yes, and I think thats. The strategy that we had was related to try and get pharmacogenomics testing for instance to be covered.
In People's bids for 2023, and what 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 theyre focused on personalizing care to improve outcomes and that's how the width.
By doing that.
I would discount 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 earning 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 wanted to be aligning with.
Groups that can help us.
We can use their coat tails 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 thats going to be it's a different model.
Tac the non pace areas that we're going to be exploring and we are working on diligently right now actually helped.
Thats helpful.
Does that partnership strategy mean that we'll need lower lift for investment and are you getting some of these adjacencies.
Yes, yes.
Helpful. And then one last one out of me just as we look at the guidance ranges.
What level of new England are factored into the updated range I know I ask this every quarter, but.
The low end factor with the high end back here and what gives you confidence in hitting scale.
Great.
I'm, sorry, I didn't hear your question what level of what <unk>.
New wins.
With new wins.
I don't know.
And being the new Guy help me out here I don't know 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.
We said that the signed contracts that we have which are significant.
Start second half of the year and I think Thats currently still what we're seeing.
And.
Maybe the Derisked earnings a little bit we may have.
Assume maybe it's closer to them.
Far into the second half of the year.
Alright, Thank you guys.
Thank you.
Thank you. Our next question comes from the line of Jessica <unk> from Piper Sandler Your question. Please.
Hi, Thanks for taking the question.
I was just hoping you could elaborate a little bit on what the disease focused approach to med why sales might be.
What products are you bundling and what's the revenue model and I think you guys mentioned risk bearing provider groups that are interested to know what the end market for that product might be as well.
Sure So I'll start pond.
Kind of.
Pointing at bed wise clinical solution.
The first one being focused around type two diabetes.
And there's a lot of attention being paid to.
Chronic disease.
And this is a high cost area for whether it would be Medicare population or a commercial population too.
And so we're expanding that to include a number of different either disease states.
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 tip.
Typically it's on.
<unk> basis.
Covering a number of of lives.
And we should be in a position to launch that this was what we communicated last quarter. During during Q2, So we're still on target with that and so it will be.
Kind of bringing that to market and we're pretty excited about the opportunity there we've had.
Early interest from a number of different provider groups. In fact, so overlapping with your second part of your question Jessica as we've had success selling a number of our services into the at risk provider groups.
Namely <unk>.
<unk> Street Dooley.
Got a few others.
Recently.
We've partnered with and.
And we believe that Theres, 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 med wise so.
Lucian 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.
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 relevant adjacency to to pace today.
Let me let me, let me follow up on that and put a point on the sphere.
Our real interest as you know is in medication medication safety.
And when we're talking about diseases that Brian mentioned appropriately.
As you did.
The common denominator between raw and type two diabetes and a couple of others as they are chronic low inflammatory diseases.
And chronic low inflammatory diseases down regulate.
Some of the genes three four and 5% in 2019, which are responsible for metabolizing a lot of drugs and activating other drugs. So that's where our that's where our focus because we can help them.
Optimize the use of medication in these diseases, which theyre not doing now.
And it's the same thing with the opioids as you.
With that.
As we've indicated before that the opioids, most all our pro drugs and require the gene shipped $2 six to get activated.
And a lot of other drugs that people are taking impede two <unk> six.
So so that's why we're involved in these were involved in them because we haven't attributes to bring to the market that no. One else is doing now and those chronic diseases that are chronic low inflammatory and then the opioids plus a bunch of others.
But that's where we're starting.
That's very helpful. Thank you. So then I guess can you just.
Help us understand if this product this metlife clinical solutions products at.
Factored into the revised guidance for 2022.
And then just maybe.
With Broadwell, most sinfonia, both me and MTN.
What is kind of the new seasonality of revenue and EBITDA in the model. So let me address that first question.
No there is not any.
What I'll call speculative contracts and the guidance and it ties to.
Stephanie's question from a moment ago I referred to signed contracts.
And the <unk>.
Estimated implementation, but there are no.
There is no go get revenue in this model from either the PC side.
The megawatts.
So there is upside to that if that should happen.
And repeat your second question for Us please.
Yes.
On the seasonality of the model.
<unk> wellness, Zonian destiny, and MTN and how should we think about the quarterly cadence of revenue and EBITDA.
Yes, Jeff just thinking back to a few years ago. When when we went public and we were primarily a pace business.
Probably recall I mean, we had a very predictable steady.
Really increase in terms of revenues.
As you know.
Paste 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 sequential quarterly growth.
From a topline perspective.
Got it. Thank you so much I appreciate it sure. Thank you.
Speak to you as a reminder.
If you have a question. Please press Star then one our next question comes from the line of David Grossman from Stifel. Your question. Please.
Great. Thank you good morning.
I Wonder if you could just go back.
To the.
Liquidity situation a little bit so.
And 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 looks like you had about $28 million available under.
Under the revolver.
On the last filings so.
Maybe you could just clarify whats available today under the revolver if any.
Of that $90 million or maybe I just misunderstood the filing.
Yeah, So let me address that.
And as I noted when I.
Started in my remarks, we've got over $21 million in cash today.
Which means we have not burning any cash through the first five weeks of the quarter.
That's been done through a combination of working capital management and focus on reining in spending.
They are.
He 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 to need any additional borrowings.
Arne through $21 million in cash 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 29 versus April seconds.
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 in prior quarters.
It was working capital just.
Like I say the timing of a payment you can't really control if youre a customer pays you on a friday or a Monday and that happens to crossover at quarter end.
It is not indicative of.
A much greater cash burn.
So I think our liquidity situation.
As you know.
Okay.
If I needed additional capital.
Before any of these proposed sales were to close there are buckets under our revolver that we could avail ourselves.
Companies that believe they have line of sight to wait.
Large liquidity event like the proposed divestitures, usually also believes they can get bridge financing to that.
Event, we have a very strong relationship with our senior lenders were in compliance with all our covenants.
So.
I'm not overly concerned about that and as the new Guy here and looking forward to digging into our spend more as ive done since I arrived at the end of the first quarter and seek to continue.
Cash performance, we've headquarter to date.
So Tom maybe you could just go into that a little more detail about.
The components here so.
Of the of the burn.
The first quarter or how much of that where the assets available for sale versus.
Continuing ops can you break it out that way.
I don't think so.
Way to think about it.
Yes, there is a way to think about it and I don't have a breakout at my fingertips, but.
I can tell you a large part of the R&D spend.
The software developed I shouldn't say R&D I misspoke, I should say the software development.
It has always been on the software related businesses the ones with PW in 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 re badge.
But the back office stuff. So there is a lot of opportunities for enhanced cash flow.
<unk> divestiture.
Our focus has got to be to watch cash judiciously until that close.
I close you have a large liquidity event, you don't have liquidity issues as I mentioned.
Any number of levers we can pull to.
Bridge us to that.
But more.
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 or needed to.
Right. So maybe just asked slightly differently.
Can the continuing ops.
Co cash positive.
Relatively soon post divestiture.
Without any big working capital.
Kind of contributions yes.
Okay.
And that just I think he may have just answered this but the comment about R&D I thought you said that.
R&D shifted from.
From med wise to the pace businesses.
Or maybe it was the <unk>.
Residual service businesses, but.
Maybe can you just clarify that comment so and reconcile that with your comment about the capitalized software.
A lot of affiliate attributable to assets for sale maybe not.
Just understanding that dynamic.
I misspoke.
When I said, a large large chunk of the.
R&D wood.
Associated with the.
To be disposed diverse I meant to say a large chunk of the cap software.
There has been a shift.
Some shift in R&D, obviously to the continuing businesses youre not going to.
For too much cash businesses.
What else is going to be running shortly.
Got it okay. That's it for me thanks very much good luck.
You did.
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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