OptimizeRx Corp (OPRX) 2025 Q1 法說會逐字稿

Good afternoon, everyone. Thank you for joining OptimizeRx first-quarter fiscal 2025 earnings conference call.

With us today is Chief Executive Officer, Steve Silvestro. He is joined by Chief Financial Officer, Ed Stelmakh; Chief Legal Officer, Marion Odence-Ford; and Senior Vice President of Corporate Finance, Andrew D'Silva.

At the conclusion of today's call, I will provide some important cautions regarding the forward-looking statements made by management during today's call.

The company will also be discussing certain non-GAAP financial measures, which it believes are useful in evaluating the company's operating results. A reconciliation of such non-GAAP financial measures is included in the earnings release the company issued this afternoon, as well as in the Investor Relations section of the company's website.

I would like to remind everyone that today's call is being recorded and will be made available for replay, as an audio recording of this conference call, on the Investor Relations section of the company's website.

I would now like to turn the conference over to OptimizeRx CEO, Steve Silvestro. Mr. Silvestro, please go ahead.

Thank you, operator. Good afternoon to everyone joining today's first-quarter 2025 call.

I'm delighted to share our first-quarter 2025 results, which came in ahead of both consensus estimates and our internal expectations.

Momentum from Q4 has continued into 2025, with Q1 revenues increasing 11% year over year to $21.9 million; with adjusted EBITDA coming in at $1.5 million, an improvement of nearly $2 million year over year, during what is typically our seasonally-weakest quarter.

Moreover, our contracted revenue continues to increase to more than 20% year over year, which positions us favorably, going into the back half of the year. I believe this is a clear indicator that our focus on operational excellence, while ensuring we delight our customers and forge stronger relationships with valued business partners, is bearing fruit.

In addition, despite media coverage in the market related to initiatives being implemented by the new administration, we are not seeing significant headwinds directly impacting our business, at this time. And we are closely monitoring pharma-leading indicators by continuously engaging with our clients.

With that said, I'm happy to say we are increasing our guidance for the year and are looking for revenue to come in between $101 million and $106 million, with an adjusted EBITDA to be between $13 million and $15 million.

We believe that the combination of disciplined cost management and targeted upselling strategies, centered around educating customers on budget allocation approaches that drive script lift, has positioned us strongly for success in 2025 and beyond. This progress is bringing our goal of achieving Rule of 40 performance in the coming years, well within reach.

Additionally, we are seeing early momentum in our transition to a subscription-based model, with over 5% of our projected annual revenue already converted to subscription contracts for 2025.

Before moving on, I want to take a moment and thank our market-leading team. We deeply appreciate the dedication and hard work of everyone at OptimizeRx, as we navigate an increasingly complex dynamic and the still emerging digital pharma marketing landscape.

The industry is undergoing a significant shift. And our products and services are poised to fundamentally reshape how pharmaceutical companies, patients, and prescribers engage.

Our mission-driven culture not only fuels this transformation but, also, positions us to attract, retain, and strengthen the critical relationships a leading technology company needs to be a trusted and enduring partner.

We believe OptimizeRx is uniquely positioned to drive significant value creation and deliver long-term sustainable shareholder growth. By leveraging one of the largest point-of-care networks in the country, we enable pharmaceutical manufacturers to reach health care providers directly at the point of care.

Building on this foundation, we have combined our unmatched network with a purpose-built omnichannel technology platform with leading patient finding-capabilities through DAAP and micro neighborhood targeting that is redefining how pharmaceutical companies, physicians, and patients engage, receive, and digest information; ultimately helping to improve patient outcomes.

These advantages give us a distinct and durable competitive edge. With unrivaled reach at the point of care and directly to consumers, we believe we are the only company in the industry capable of effectively connecting with both doctors and patients, at scale.

This unique position has allowed us to develop the broadest suite of solutions in the market, empowering us to meet the diverse and evolving needs of our customers across every stage of the product life cycle.

As mentioned on our last call, our business continues to evolve. A key focus for the company will be drawing greater attention to our reach and scalability, while positioning ourselves as a strategic partner in addressing some of the most critical commercialization challenges facing pharma today.

These include improving brand visibility, reducing script abandonment, enhancing interoperability, and supporting a growing shift toward more complex and costly specialty medications.

I'm confident that success in these areas, combined with the strong performance we are already delivering, including ROI exceeding 10:1 and script lift of 25% on programs running just six months, will drive significant short- and long-term shareholder value.

Moreover, this momentum will position us to capture greater market share, while also expanding the overall size of pharma's digital spend, which already exceeds $10 billion, annually.

Our customers remain deeply embedded within our ecosystem of offerings. And it remains our goal to help them stay present throughout the patient care journey, across the integrated HCP and DTC business, at OptimizeRx.

With that, I'd like to turn the time over to our CFO, Ed Stelmakh, who will walk us through our financial details. Ed?

Thanks, Steve. Good afternoon, everyone.

As with all our calls, the press release was issued this afternoon, with the results of our first quarter ended March 31, 2025. A copy is available for viewing and may be downloaded from the Investor Relations section of our website; and additional information could be obtained through our forthcoming 10-Q.

First-quarter 2025 revenue was $21.9 million, an increase of 11% from the $19.7 million we recognized during the same period in 2024.

Gross margin for the quarter decreased from 62% in the quarter ended March 31, 2024, to 60.9% in quarter ended March 31, 2025. Year-on-year change in gross margin was primarily due to product and channel partner mix, as we did see an increase in DTC-related managed service revenue.

Our operating expenses for the quarter ended March 31, 2025, decreased $1.8 million year over year, primarily driven by stock-based compensation and cost savings implemented last year.

The company had a net loss of $2.2 million or $0.12 per basic and diluted share for the three months ended March 31, 2025, as compared to a net loss of $6.9 million or $0.38 per basic and diluted share for the three months during the same period in 2024.

On a non-GAAP basis, the company's net loss for the first quarter of 2025 was $1.5 million or $0.08 per diluted share, as compared to a non-GAAP net loss of $2 million or $0.11 per diluted share in the same year ago period.

Meanwhile, our adjusted EBITDA came in at $1.5 million for the quarter, compared to $0.3 million loss during the first quarter of 2024.

Operating cash flow came in at $3.9 million for the first quarter and the cash balance at the end of the quarter was $16.6 million, as compared to $13.4 million on December 31, 2024.

Our debt balance currently stands at $33.8 million. And we paid off $6.2 million of principal through the first quarter of 2025.

Given our strong working capital position and operating cash flow, we are confident in our ability to fund our operating needs, as well as key strategic priorities, to achieve the Rule of 40.

Our committed contracted revenue, as of the end of the first quarter of 2025, exceeded $70 million, which is a greater-than-25% improvement over the same period last year. This is a testament to all the investments that have been made in building market-leading solutions that meet and exceed our clients' expectations and positions us well to continue our march towards becoming a Rule of 40 company.

Now, let's turn to our KPIs for the first quarter of 2025.

Average revenue per top 20 pharmaceutical manufacturer now stands at approximately $3 million, with these top 20 companies representing 63% of our business in Q1 2025.

Net revenue retention rate remains a strong 114%. Meanwhile, revenue per FTE came in at $710,000, stopping the $641,000 we posted in Q1 2024.

We are encouraged by our continuous improvement in our KPIs and the overall progress in the business performance, so far.

With that, I would like to turn the call back over to Steve. Steve?

Thank you, Ed. Operator, let's go ahead and move to Q&A.

(Operator Instructions)

Ryan Daniels, William Blair.

Guys, did you hear the question?

No. We couldn't hear the question.

Congrats on the strong performance.

I hate to ask this because you've increased your guidance and said you're not seeing anything. But, by far, the biggest question we keep getting is just all the noise in the end market, with tariffs and with price negotiations, et cetera.

I'm curious how real-time your feedback is from your sales team; and, number 2, if you've seen any hesitation in any of your customers or if they're just not, at this point, making any changes because it's so uncertain in the marketplace today.

We've not seen really any pull-back from our clients. We are getting real-time information and updates, as we're, daily, dealing with them. What we have seen, really, is just a leaning in and trying to drive a little bit harder at these markets.

Jury is still out on how things will be impactful, going forward into the future; and how things will be rolled out. But, right now, no indication of any pull-back in the business, at all.

We actually see the opposite: people leaning in, trying to leverage digital channels a little bit more than before.

And I think that the other thing to look for is just, I would say, the cost effectiveness of digital versus some of the other channels that they use to promote. And if they get in a cost-cutting state, we'll probably see some of the other things ratchet back faster than digital. You may see even more acceleration in our favor, if they go down that road.

But, yeah, to date, no; nothing, really, to panic about.

Okay. No. That's super helpful color, actually.

And then, can you remind us -- when you moved to subscription-based revenue -- upon removal, how does that impact the revenue recognition, over a 12-month period, in the margins? Does that -- just, I'll leave it there. How does it really impact margins in rev rec, if we think about the total revenue?

I'd be more (multiple speakers). Go ahead. You take it.

Yeah. Basically, it's relatively simple. It spreads your revenue over the 12-month period. It takes the dollars associated with subscription-related solutions and services and spread it over the course of the year.

But it's actually accretive to us because of the revenue share perspective. We keep most of that revenue to ourselves. And the cost of sales for their revenues pretty low.

Okay. I just wanted to confirm.

And then, you mentioned, I think, the direct-to-consumer managed services mix diluting gross margins a little bit. How should we think about the gross margin profile of the company, going forward? Is that low 60% range still the right target? Or might you see more growth there that pushes it slightly below that?

Yeah. We're certainly working on trying to increase that above the low 60% mark. But, right now, our make-up of our portfolio is such that when we do have some solutions that are a little bit lower on the margin side, you will see that through a dilution.

The good news is we're diversified enough, where none of our solutions really will have an impact that material, at this point. So we feel pretty comfortable with the current range.

Yeah. Ryan, what we've historically talked about is a high 50% range to the low to mid-60% range for gross margins. And so, first quarter was well within that range.

David Grossman, Stifel.

I think, in your prepared remarks, Steve, you said that -- or maybe it was (inaudible) -- that you had $70 million in committed revenue. I assume you're speaking to visibility on the year, that was up 25%.

So just back-of-the-envelope math, does that suggest that you've got a little over -- about 70% visibility today, at this point in the year, versus 60% last year? Did I get that right?

You're in the ballpark. It's north of 80%, where we currently sit; that's what's in the prepared remarks.

You're in the ballpark, David.

What was being said in the prepared remarks was at the end of the first quarter. So end of March, that's where we stood.

I'll get (inaudible). Steve just said that's where we're at, right now; as in the release in the (inaudible).

But just on an apples-to-apples basis, it sounds like you're up about 10 points at the end of March, in terms of visibility on the year, right?

Well, we're actually up about 25% from last year, yeah, on the committed backlog, as of the end of Q1; which has given us so much optimism by the year.

Got you. And then, in terms of the amount or how much more revenue we can convert to subscription; just think about it over the balance of the year. How should we think of how that 5% may migrate? .

(multiple speakers)

Yeah. Basically, if this works out the way we're planning and the way we hope, the subscription revenue will convert into next year. And we'll have some legs in the following several years versus what we had in the past, where most of our revenue was in one year in tenure or less.

Hopefully, subscription will have a little bit more of a lift equal to it. We're hoping current percentage will continue to grow and expand and it will smooth out our revenue recognition, over time.

David, you can think about it in terms of all of the DAAP business and the audience business. All the components of data, both from the legacy Medicx business that's producing audiences, as well as the data business coming out of DAAP.

Those two components are what have the potential for subscription-based revenue. So that's the component that we can push on.

The transactional components of the business will continue to be transactional, over time. And so, that's the target. That would be the high watermark.

And what you're seeing now is early signs of good progress against the conversion and prosecuting that work. But we still have a lot of work to do on that.

We did want to report out on it because it's substantial, considering that we've been at it for a little bit more than a quarter and made some good progress on it, but lots more work to do there, (inaudible).

Can you just remind us what percentage of revenue is represented by the data business?

We don't break it out that way. We were breaking out a DAAP and core stuff for a bit. But we can circle back and give you a little bit better view. We haven't broken it out, to date, that way.

Got it. And then, just one last one for me. I know it's a modest decline. But anything to call out on what may be impacting the NRR sequentially?

Yeah. I can take that question.

We talked about this on the last call. That's a trailing 12-month look.

Now, we're running into trailing 12-month comps year over year that have the benefit of Medicx acquisition. And so, as you go more into time, there's just more Medicx revenue on the year-over-year comps.

So it becomes less favorable year-over-your comp on NRR. That's all.

Richard Baldry, ROTH Capital.

Just back to the NRR. Curious: Is there any further headwinds in the second half? And the reason I ask is the top-line guide at the high end would be 15% growth and your NRR is [114%] -- so, essentially, accounts for the upper end of revenue guide.

I just want to make sure I know this: there's nothing else that has an incremental headwind in the second half?

NRR, like we said on the last call, back-of-the-envelope, would end up around [100%] by the end of the year, right, based on our guidance.

So, call it, 5% to 15% of our business every year comes from new logos. And so, obviously, NRR, the maximum we grow, if you went and grew 15%, would be an NRR of 115%. So if it's 5% to 10% -- or 5%, 50% of our business comes from new logos. By the end of the year, you'll be about 100%.

We made the acquisition in October of 2023, of Medicx. So it's a trailing 12-month look-back comparison. Even at the first quarter of 2024, the trailing 12 months there, we didn't have a full year of Medicx, as a reported entity.

Got it. And when we look at the OpEx side now -- has come down pretty substantially. Is this a pretty good run rate, on a go-forward basis? How do you think about your leverage on OpEx, as the top-line grows?

Yeah. I can take that.

I think the (technical difficulty) about $5 million out of it last year, as you know, (inaudible) the fourth quarter, right? So we're in a good, I think, run rate now.

We don't really need to take more out. And I don't think we want to add more. So I think what we've demonstrated here is (technical difficulty).

I think Steve was breaking up a bit on my end.

Yeah. He broke up a little at the end. But I think I got it.

I'm curious, in terms of new business, can you talk about how RFP season played out on the DTC side and how you view new wins on that side of the table?

And then, I think you gave the number last quarter of paying debt deals -- was 48% versus 24%, starting the year. I'm not sure if you're willing to update that number. Just talk generically about new wins in the DAAP side.

Yeah. I can take the DAAP question.

Just given it's such a large percent of our business right now, for competitive purposes, we're no longer breaking out like how many deals were getting or anything like that. That was just really to show initial adoption.

And then, Steve can give a little bit more detail on the DTC side of the business. But both parts of the business have been performing well this year and are contributing to our increased guidance.

Yes. Just to double down on that, Rich -- hopefully, you can hear me okay. I'm not sure why the signal was cutting there for a second.

But DAAP continues to perform at the same speed as it was before. So everything is in line.

As Andy said, we're not going to count the number of deals just because competitively, we're not wanting to disclose that. But in addition to that, I think what we can safely say is we've seen a strong DTC recovery in the fourth quarter and into the first quarter of this year.

And we anticipate that that acceleration will continue for the DTC component of the business.

Maxwell Michaelis, Lake Street Capital Markets.

Great job on the quarter. When we look at Q2 -- now that we're about halfway through, now -- should we expect typical seasonality: Q1 to Q2, pretty much flat? Or are you seeing more outsized demand here in Q2 and we should expect sequential growth?

I know you, guys, didn't give quarterly guidance. But maybe, directionally, you can help.

Yeah. Sure. Happy to do it, Maxwell.

Andy, why don't you take that one?

Yeah. We would expect a small step-up sequentially.

First-half-of-the-year revenue is typically between 35% and 45% of full-year revenue.

I think we're in a pretty good pace, compared to historicals.

Constantine Davides, Citizens.

I just wanted to, maybe, drill into the pipeline a little bit more and what you're seeing there. Is it bigger, on an absolute basis, year over year? Maybe, talk a little bit about -- are your win rates changing, relative to what they were last year.

And then, maybe, just some commentary on average deal size; and if you're having any success with double-barreled sales?

I know I just threw a lot at you. But just curious if we can get a little more color on what's in the pipe.

Good to hear from you. I'll give the first couple of answers. And ask Andy and (inaudible).

Basically, pipeline continues to grow at a steady rate. I think we feel confident with where it is.

We continue to convert, I think, at a good case. But our conversion ratio has become better.

We're finding that we're winning, particularly with the data and subscriptive component of our business. We're winning more as our audience qualities improved. And our data has been better so that's been helpful. We've seen those pieces of the business go.

And then, Andy, feel free to chime in on the other components. But I just wanted to call those out.

Sorry, guys, for the quality of the audio. I'm not sure what's going on on the (inaudible) side.

But, Andy, you had anything else to add in there for Constantine?

Yeah. We're not going to break out average deal size or anything like that anymore. But I think Steve hit the nail on the head.

Okay. And then, just one more follow-up on the subscription. Are the subscription deals multi-year? Are they just one-year evergreen arrangements?

Right now, they're one-year evergreen arrangements. The goal would be to get them to multi-year status. But that's difficult to do, Constantine, in this space because marketing basically ascribes dollars on a yearly and an annual basis, based on previous year's full -year performance.

So it's going to be difficult to do three-year, four-year, five-year deals. So, for right now, we're looking at 12 months and scaling as many of those as we can.

As time progresses, if we can get that data component of the business to two- and three-year deals, that will be an enormous win for the business.

Understood. And then, this last one for Ed. On the guidance, should we assume that the high end of revenue correlates with the high end of EBITDA? Or is there some dynamic here where you're investing more to get to the top end? Just trying to understand that.

Yeah. It's less about investing more to get to the top end. We feel pretty confident that with the backlog build up and some of the tailwinds we're experiencing now, we will get to that number.

Really, the hedge there is around gross margin. The mix of solutions is one thing that is not appreciable.

So we're probably betting on a little bit of a more considerable number on the gross margin side of the business, with OpEx, more or less, been set for the year.

Jeff Garro, Stephens.

I wanted to follow up on the visibility topic and the, roughly, remaining 20% of revenue that you need to land for the year. Could you discuss what needs to be landed, in terms of renewals or upsells or adding new logos?

Yeah. I'm happy to take that one. And then, let Ed and Andy chime in as well. Thanks for the question, Jeff.

As Ed said, we've got greater-than-80% contracted revenue on the backlog for the full year. So that gives us good visibility into where we're headed.

Basically, for what we need to do for that component, the delta is really just delivery over time, which will happen organically, as we prosecute these programs. The delta between what we've contracted and where we need to go is the difference between the guidance and the visibility that we've got and.

We are at the top end of that guidance with the visibility that we've got. And so, what needs to happen there is just conversion of the pipeline. Very simple.

And the pipeline -- like I responded to Constantine -- is very healthy, right now. So I think we're feeling confident in that.

Ed and Andy, anything else you want to chime in on?

(inaudible) I think you've got the gist of it. I will say, again, pipeline is building (inaudible) constantly over the quality of the pipeline.

We're staying on top of operational execution, as we said at the beginning of the year. So there's definitely a very strong hyper focus on making sure that we have conversion that takes place within the quarter to drive that revenue earlier.

We feel pretty confident that we'll be able to get that remaining 20% and then some, this year.

Understood. Appreciate that. And one more for me. Maybe, back to the topic of gross margins and the mix involved there.

I was hoping you could help us understand, a little bit further, the progress you've made on conversion to data subscriptions and the benefits there; and the comments about the gross margin percentage in the quarter being down a little bit year over year, from an increase in managed services.

Maybe, it's really around the appetite for customers to rebound demand for that managed service offering versus it going one way towards data subscriptions.

Go ahead, Ed.

Yeah. Look, we have a portfolio now that's diversified enough that was built around meeting and exceeding customer needs. In some cases, we'll need to take some business that is lower margin.

But, really, the focus for us, as a company, is to continue to build out the higher margin side of the business. And that's exactly was happening.

Our current gross margin profile is right there where it seems to be. And we feel like as the year goes on, we should see more and more of the expansion takeaways.

And, certainly, as part of the Rule of 40 and a ramp up, margin expansion as part of the (technical difficulty).

Jeff, I'd also add to that: part of what we're trying to capitalize on is a flywheel effect within the business, right? So in order for us to be able to do that, we've got to grow that subscriptive data component of the business, which, as Ed said, will positively impact the gross margin over time.

There's (inaudible) share with that, it's intellectual property that we own. But, in addition to that, it will unlock the ability to distribute more messages and transactions across the entire network, as we plug into that.

And ,so we're laser-focused on driving those audiences and that data as a key component of our business. So you'll expect to hear more updates from us on that, as we go.

This concludes our question-and-answer session.

I would like to turn the conference back over to Mr. Silvestro for any closing remarks.

Yeah. Thank you, guys. No closing remarks. We can go ahead and close out the call.

Thank you, Mr. Silvestro.

Before we conclude today's call, I would like to provide the company's Safe Harbor statement that includes caution regarding forward-looking statements made during today's call.

Statements made by management during today's call may contain forward-looking statements within the definition of Section 27A and the Securities Act of 1933, as amended in Section 21E of Securities Act of 1934 -- as amended.

These forward-looking statements should not be used to make investment decisions. The words anticipate, estimate, expect, possible, and seeking and similar exploration identify forward-looking statements. They may speak only to the date that such statements are made.

Forward-looking statements in this call include statements regarding our growth plans, plans for shareholder value creation, becoming a Rule of 40 company, transitioning to a subtraction-based model, achieving our goal to help patients stay present throughout the patient care journey across our integrated HCP and DTC businesses, initiatives being implemented by the new administration, cost management, targeted upselling, estimated 2025 revenue, and adjusted EBITDA range estimation of total addressable market size, market penetration, technology, investment, growth opportunities, acquisition, and upcoming announcements.

Forward-looking statements also include the management's expectations for the rest of the year. The company undertakes no obligation to publicly update or revise any forward-looking statements, whether because of new information, future events, or otherwise.

Forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified. Future events and actual results could differ, materially, from those set forth in, contemplated by, or underlying these forward-looking statements.

The risks and uncertainties to which forward-looking statements are subject to, include, but are not limited to, the effect of government regulation, competition, dependence on a concentrated group of customers, cybersecurity incidents that could disrupt operations, the ability to keep pace with growing and evolving technology, the ability to maintain contracts with electronic prescription platforms and electronic health records networks, and other material risks.

Risks and uncertainties to which forward-looking statements are subject could affect business and financial results -- are included in the company's annual report on Form 10-K for the year-end December 2024 and in other filings the company has made and may take with the SEC in the future.

This filings were available on the company's website and on the SEC website at sec.gov.

Before we end today's conference, I would like to remind everyone that an audio recording of this conference call will be available for replay starting later this evening, running through for a year, on the Investors section of the company's website.

Thank you for joining us today.

This concludes today's conference call.

You may now disconnect your lines.