Segment Reporting

6 Months Ended

Jun. 30, 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 primarily provides services to PACE organizations that include medication fulfillment pharmacy services and PACE solutions such as medication safety services and health plan management services.

MedWise HealthCare clients include health plans, pharmacies, and healthcare providers. Services provided to these clients include 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 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 June 30, 2020
Product revenue	$	38,930	$	443	$	39,373
Service revenue
PACE solutions		11,522		—		11,522
Medication safety services		—		15,707		15,707
Software subscription and services		—		10,232		10,232
Total service revenue		11,522		25,939		37,461
Total revenue	$	50,452	$	26,382	$	76,834
Three Months Ended June 30, 2019
Product revenue	$	33,372	$	—	$	33,372
Service revenue
PACE solutions		11,437		—		11,437
Medication safety services		—		22,498		22,498
Software subscription and services		—		8,948		8,948
Total service revenue		11,437		31,446		42,883
Total revenue	$	44,809	$	31,446	$	76,255
Six Months Ended June 30, 2020
Product revenue	$	76,017	$	443	$	76,460
Service revenue
PACE solutions		23,093		—		23,093
Medication safety services		—		30,027		30,027
Software subscription and services		—		20,081		20,081
Total service revenue		23,093		50,108		73,201
Total revenue	$	99,110	$	50,551	$	149,661
Six Months Ended June 30, 2019
Product revenue	$	64,354	$	—	$	64,354
Service revenue
PACE solutions		22,611		—		22,611
Medication safety services		—		37,849		37,849
Software subscription and services		—		12,400		12,400
Total service revenue		22,611		50,249		72,860
Total revenue	$	86,965	$	50,249	$	137,214

	CareVention HealthCare		MedWise HealthCare		Shared Services		Consolidated
Adjusted EBITDA (loss):
Three Months Ended June 30, 2020
Adjusted EBITDA (loss)	$	12,077	$	4,697	$	(9,640)	$	7,134
Three Months Ended June 30, 2019
Adjusted EBITDA (loss)	$	11,466	$	9,059	$	(6,873)	$	13,652
Six Months Ended June 30, 2020
Adjusted EBITDA (loss)	$	23,825	$	7,528	$	(19,412)	$	11,941
Six Months Ended June 30, 2019
Adjusted EBITDA (loss)	$	22,086	$	10,707	$	(13,450)	$	19,343

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 June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
Reconciliation of net loss to Adjusted EBITDA
Net loss	$	(14,310)	$	(6,529)	$	(28,747)	$	(17,508)
Add:
Interest expense, net		4,668		4,308		9,278		7,001
Income tax benefit		(508)		(2,539)		(3,875)		(6,580)
Depreciation and amortization		10,211		9,078		20,124		15,377
Change in fair value of acquisition-related contingent consideration (income) expense		(100)		1,830		600		3,006
Acquisition-related expense		—		598		251		4,289
Stock-based compensation expense		7,173		6,906		14,310		13,758
Adjusted EBITDA	$	7,134	$	13,652	$	11,941	$	19,343

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.