Segment Reporting

3 Months Ended

Mar. 31, 2020

Segment Reporting

Segment Reporting

16.    Segment Reporting

The Company operates its business through two segments. The Company's chief operating decision maker (“CODM”), the Chief Executive Officer, allocates resources and assesses performance based upon financial information at the reportable segment level. Substantially all revenues are generated and substantially all tangible assets are held in the U.S. The Company classifies its operations into two reportable segments as follows:

CareVention HealthCare provides services to PACE organizations, including medication fulfillment pharmacy services, and PACE solutions, such as medication safety services and health plan management services.

MedWise HealthCare provides services to health plans, pharmacies, and healthcare providers, including medication safety services and software subscription solutions, which allow for the identification of individuals with high medication-related risk, patient communication and engagement, documentation of clinical interventions regarding optimizing medication therapy, targeting adherence improvement and precision dosing.

Shared services primarily consist of unallocated corporate sales and marketing expenses and general and administrative expenses associated with the management and administration of the Company’s business objectives.

The CODM uses revenue in accordance with U.S. GAAP and Adjusted EBITDA as the relevant segment performance measures to evaluate the performance of the segments and allocate resources.

Adjusted EBITDA is a segment performance financial measure that offers a useful view of the overall operation of the Company’s businesses and may be different than similarly-titled segment performance financial measures used by other companies.

Adjusted EBITDA is defined as net income (loss) plus certain other expenses, which includes interest expense, provision (benefit) for income tax, depreciation and amortization, change in fair value of acquisition-related contingent consideration expense (income), acquisition-related expense and stock-based compensation related expense. The Company considers acquisition-related expense to include nonrecurring direct transaction and integration costs, severance, and the impact of purchase accounting adjustments related to the fair value of acquired deferred revenue.

Management considers revenue and Adjusted EBITDA to be the appropriate metric to evaluate and compare the ongoing operating performance of the Company’s segments on a consistent basis across reporting periods as they eliminate the effect of items which are not indicative of each segment's core operating performance.

The following tables present the Company’s segment information:

	CareVention HealthCare		MedWise HealthCare		Consolidated
Revenue:
Three Months Ended March 31, 2020
Product revenue		37,087		—		37,087
Service revenue
PACE solutions		11,571		—		11,571
Medication safety services		—		14,320		14,320
Software subscription		—		9,849		9,849
Total service revenue		11,571		24,169		35,740
Total revenue	$	48,658	$	24,169	$	72,827
Three Months Ended March 31, 2019
Product revenue		30,982		—		30,982
Service revenue
PACE solutions		11,174		—		11,174
Medication safety services		—		15,351		15,351
Software subscription		—		3,452		3,452
Total service revenue		11,174		18,803		29,977
Total revenue	$	42,156	$	18,803	$	60,959

	CareVention HealthCare		MedWise HealthCare		Shared Services		Consolidated
Adjusted EBITDA (loss):
Three Months Ended March 31, 2020
Adjusted EBITDA (loss)	$	11,748	$	2,831	$	(9,772)	$	4,807
Three Months Ended March 31, 2019
Adjusted EBITDA (loss)	$	10,620	$	1,648	$	(6,577)	$	5,691

The following table presents the Company’s reconciliation of the segments’ total Adjusted EBITDA to net loss as presented in the consolidated statements of operations:

	Three Months Ended March 31,
	2020		2019
Reconciliation of net loss to Adjusted EBITDA
Net loss	$	(14,437)	$	(10,979)
Add:
Interest expense, net		4,610		2,693
Income tax benefit		(3,367)		(4,041)
Depreciation and amortization		9,913		6,299
Change in fair value of acquisition-related contingent consideration expense		700		1,176
Acquisition-related expense		251		3,691
Stock-based compensation expense		7,137		6,852
Adjusted EBITDA	$	4,807	$	5,691

Asset information by segment is not a key measure of performance used by the CODM. Accordingly, the Company has not disclosed asset information by segment.