Tabula Rasa HealthCare Inc (TRHC) 2022 Q1 法說會逐字稿

Thank you for standing by, and welcome to the Tabula Rasa HealthCare First Quarter 2022 Earnings Conference Call. (Operator Instructions) As a reminder, today's program may be recorded. I would now like to introduce your host for today's program, Mr. Kevin Dill, Corporate 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 health care 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 25, 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.

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 3 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 PrescribeWellness SinfoniaRx and DoseMe.

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 5. The second major initiative is forming strategic partnerships to advance our growth and MedWise market penetration, and we are making progress towards 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 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 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 condition 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 or 1 in every 5 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 Orsula to talk about our largest market today; PACE. Orsula?

Good morning. For those new to Tabula Rasa HealthCare, our comprehensive offering is designed to help value-based care organizations, such as PACE, from start-up to maturity and includes: one, our 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 sales quarters led by a major win of a California PACE organization that will adopt several of our services, including our CareKinesis 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-adjusted services, both inside and outside of PACE.

As highlighted in our press release, our April 2022 net enrollment for our CareKinesis 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 4 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 Welby Health, Inspira 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 States.

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. selecting 2 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.

Thanks, Orsula. 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 MedWise. 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 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 with PACE, specifically a capitated payment model for managing high-risk and/or high-cost population, a high prevalence of chronic conditions and a complicated polypharmacy medication regimen.

Shifting to the plan side. We are working with a number of start-up Medicare Advantage, Managed Long-Term Care and SNF plan. SNP or special needs plans account for 1 in every 6 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 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.

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 3 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 Sinfonia and DoseMe, 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 CareKinesis pharmacy services.

Moving to cash. We ended the first quarter with $14.4 million of 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 PrescribeWellness, Sinfonia and DoseMe. 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. And 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 3 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 million to $69 million, which represents growth of 3% to 7%, including CareVention health care growth of 8% to 11%. The absence of EMTM 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 CareVention HealthCare growth of 11% to 14%.

With that, I will now turn it back to the operator for Q&A.

(Operator Instructions) Our first question comes from the line of Sean Dodge from RBC Capital Markets.

Starting with the CareVention guidance, Tom, I think you said you changed things, that you're now assuming 0.7% 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 slower census growth trajectory?

Tom Sims: 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.

Sean Dodge: 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?

Yes. 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 participants. So that's now come down immensely in March, April and from what we have already today in May. But -- 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.

Okay. And I know I know that 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 CareVention 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 CareVention. Are you rationalizing there, or would this be in the go-forward business? Are you continuing to invest in CareVentures, so we should expect expenses there to go up over the course of the year?

So there's 2 questions in there. I would not expect our margins, going forward, to necessarily be consistent with where they were this quarter, which was nearly 4 points down. There were several factors that impacted margins this quarter. One of the largest ones was probably about 1.5 points 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 for -- 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 on the EBITDA that I was speaking a moment ago was more gross margin. But getting down below the EBITDA, we did shift a lot of R&D to the remaining business, if you will.

Our next question comes from the line of Glen Santangelo from Jefferies.

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?

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 the pharmacogenomics for every member, for example, every participant. 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 in the whole CareVention 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.

And Glen, 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 with that. 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 product side.

And Glen, this is Tom. It's hard to see that on the income statement, right? You see a decline of whatever, $800,000 or so in services. But you've really got to break that apart. A big chunk of that, there's several million dollars in there from [EM to PM], which is 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, 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.

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 Tom, I guess, maybe a question for you. Assuming a successful sale of these assets, right, that will give you more liquidity, it will 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?

Well, the first question is an easy one. And the answer is absolutely yes. We've had really strong even in whatever the headwinds are in the general 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 4 or 5 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.

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?

That's the hope.

And then maybe the other question about the operations going forward with more liquidity?

Well, I'll touch on liquidity for a second, and then I'll touch on your question about costs and cost savings. The 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 negative carry, you might even have positive clarity on that. We learn as much interest, at least on the proportion of -- that sits on your bound that you get, it 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 health care and aging are pretty clear. So a lot of companies would give the 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, as 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 saving that ought to proceed from the dispositions we're seeking underpay. I mean you're at 1,600 employees at the start of the year, right? Probably 600 of them are associated with the businesses we're disposing of. 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, accounting 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 have a line of sight to a close. But the point of these transactions are to get these businesses cash flowing in a meaningful way.

Our next question comes from the line of Ryan Daniels from William Blair.

This is Jack Senft in for Ryan. 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? And I think you just mentioned that you do not plan to delever post divestitures. So I guess, do you have any thoughts on a targeted capital structure longer-term? And is it similar to what we're seeing now? Any additional clarity on this would be appreciated.

Yes. So I should be more specific. I don't -- we tend to -- I wouldn't 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 see we're floating right where rates are going. To convert 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 could start to think about, well, okay, at what point do you refund this, or it doesn't 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. And at that point, you start thinking about, do I tweak my capital structure.

Great. Understood. 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 on an organic or inorganic basis?

I'll take this, and then Orsula and 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, 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 acquire any.

I would agree. Our focus is on innovating around our current clients and providing them the services we've always provided as their changing needs continue to evolve to.

I could just say one thing. If you look at the numbers about where the National Pace Association is trying to go to 200,000 people in the next 3 years, I think it is... 2028. The TAM to that for us, if you just take the services, we have the TAM to that exceeds $3 billion. So it's a large pool right now. It's growing nicely.

Our next question comes from the line of Stephanie Davis from SVB Securities.

Following up on the last question, I'd like to talk a little bit more about broader strategy. The story move more to a pay-centric pitch. Could you refresh us on any learnings since the IPO around your go-to-market strategy for PACE, and kind of where we are so far and the opportunity in terms of penetration?

Orsula, do you want to talk a little bit about the evolution of the IPO in terms of how we go to market and the fee?

Absolutely. I mean we actually talked about this on our last earnings call, our focus on the notion of account management and really supporting our clients' needs on 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 startup, both for-profit and non-for-profit, the value of partnering with one organization that can provide multiple service lines. And when they're very small, I mean to be able to go out and get PBM or TPA services as a start-up, it's very difficult. So we really bring tremendous value to that segment of the market as well.

I would just add to that. The -- 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 health care 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 health care 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.

Yes. 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 2023. 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; is by doing that.

Stephanie, I would -- 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 2 earnings calls now the third one today, is strategic partnerships alignment. And what we're doing there 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 going -- 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.

That partnership strategy means that we'll need a lower lift for investment, and are we getting some of these adjacencies?

Yes.

Helpful. And then one last one out of me. Just as we look at the guidance ranges, what level of new wins are factored in the updated range? I know I ask this every quarter. But once the low-end factor was the high-end factor and what gives you confidence in hitting the (inaudible).

I'm sorry, Stephanie, I didn't hear your question. What level of what?

New wins.

I'm New wins I don't know if you - and I'm thinking that you can 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, 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 maybe to derisk earnings a little bit, we may have assumed maybe it's closer to the far into the second half of the year.

Our next question comes from the line of Jessica Tassan from Piper Sandler.

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 in, and 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.

Sure. So I'll start, and what we're kind of pointing at MedWise clinical solution. 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 PMPM 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, we've had success selling a number of our services into the at-risk provider group, just namely [Oak Street duly]. 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.

Let me follow up on that and put a point on the spear. But 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 of others is they are chronic low inflammatory diseases. And chronic low inflammatory disease is down regularly some of the genes [384 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 the same thing with the opioids. As we've indicated before that the opioids, most -- all are prodrugs and require the gene CYP2D6 to get activated.

And a lot of other drugs that people are taking in P2D6. 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 chronic low inflammatory and in the opioids plus a bunch of others. But that's where we're starting.

That's really helpful. 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 for Tri Wellness, Sinfonia, DoseMe and EMTM, 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 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 are no -- there's no go-get revenue in this model from either the pace of side or the MedWise side. So there's upside to that if it should happen. And repeat your second question for us, please?

Yes. So just on the seasonality of the model as PrescribeWellness, Sinfonia and DoseMe, and EMTM, and how should we think about the quarterly cadence of revenue and EBITDA?

Yes. Jess, 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.

(Operator Instructions) Our next question comes from the line of David Grossman from Stifel.

I wonder if you can just go back 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?

Yes. 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 5 weeks of the quarter. And that's been done through a combination of working capital management and 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 to need any additional borrowings. You're not going to burn through $21 million in cash, that quickly.

And sometimes, 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 2. Or you make a payment to the last week of the quarter versus the first, and you could swing $10 million or $15 million easily.

And so most of the delta in that large cash burn last quarter versus the run rate of prior quarters was working capital, just like I say, the timing of the payment, you can't really control if your customer pays you on a Friday or a Monday, and that happens across over a quarter-end. It is not indicative of a much greater cash burn. So I think our liquidity situation is okay.

If I needed additional capital before any of these 3 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 the rig at the end of the first quarter and seek to continue the cash performance we've had quarter-to-date.

So Tom, maybe you could just go into that in 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 about it?

Well, yes, there's a way to think about it. And I don't have a breakout at my fingertips to it, but I could tell you a large part of the R&D spend, the software develop -- I shouldn't say R&D, I misspoke. I should say the software development. It has always been on the software-related business the ones PW and Sinfonia, 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 divestiture. 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, that 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 flow in a manner that you all and we all wanted to and need it to.

Right. So maybe just ask slightly differently. I mean, can the continuing ops go cash positive relatively soon post divestiture without any big working capital kind of contributions?

Yes.

Okay. And that just -- 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. But -- maybe can you just clarify that comment? So -- 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.

Yes, I misspoke when I said that a large, large chunk of the R&D would -- is associated with the -- to be disposed of us. 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. You're not going to or too much cash businesses that someone else's is going to be running shortly.

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.