OptimizeRx Corporation

Good afternoon, everyone, and thank you for joining OptimizeRx's second quarter fiscal 2023 earnings discussion. With us today is the Chief Executive Officer of OptimizeRx, William Febo. He is joined by Company Chief Financial Officer, Ed Stelmack, Chief Commercial Officer, Steve Silvestro, General Counsel and Chief Compliance Officer, Marion Audence Ford, and Senior Vice President of Corporate Finance, Andrew De Silva. At the conclusion of today's earnings call, I will provide some important cautions regarding the forward-looking statements made by management during today's call. I would like to remind everyone that today's call is being recorded and will be made available for replay via webcast only. Instructions are included in today's press release and in the Investors section of the company's website. Now, I would like to turn the call over to OptimizeRx CEO, William Febo. Sir, please go ahead.

Good afternoon, everyone, and thank you for joining our second quarter earnings call today. While we are disappointed with the quarter's results, we are seeing unprecedented change in the pharma industry in their adoption of digital and tech-enabled marketing solutions. We are now coming out of the post-COVID-heavy piloting phase within pharma, and the pace of decision-making has slowed as they look for scalable partners. We saw this firsthand with many clients re-evaluating their marketing models, product delays, and a higher demand for data-driven solutions. Despite this, we remain excited about our business, and we are laser focused on optimizing our resources on the future of digital marketing in healthcare. In Q2, we saw revenue push into the second half due to clients needing more time for medical, legal, and regulatory review. While delays are frustrating and impactful at our stage, They are typical in today's environment, and we do not view them as a negative indicator. We have solid confidence in our core offerings, which built us up to where we are today, and we believe it will drive growth into the future as we get past the headwinds mentioned on previous calls. Our clients are still experimenting with new digital solutions for customer engagement and patient access. As we've partnered alongside them on their journey, we've seen many areas of opportunity, We've identified those which we believe we are best positioned to address based on how our customers buy from us today, and we plan to optimize those prospects through the second half of 2023 to position for growth in 2024. We have a strong presence and awareness among our clients, partners, and the market. Our balance sheet and shareholder base are terrific, and as you will see when you review the numbers, even with lighter top line than expected, we were able to limit spend and post an effectively break-even non-get net income. Our team is solid, and we're very focused on delighting our clients by continuing to expand with additional channels and technology our clients want to leverage into the future. So how do we address this dynamic market and come out stronger and bigger? With COVID, the enablement of physicians and patients to rely on digital connectivity has skyrocketed. In response, we've seen a rapid rush of startups, company pivots, and roll-up strategy, which has crowded and distracted the market. As a result, our clients are looking for a higher level of transparency as to their reach and return with point of care than even six months ago. The compounding effect of this dynamic has been a slowdown in decision-making and spending within the pharma community. While we are not alone in seeing the effect among our peers, We believe this will subside as we get through 2023. Pharma will have a clearer view of their preferred partners around digital commercialization, and we believe we will be one of those partners. To ensure we remain at the forefront of our pharma clients' needs, we will deploy our resources to the areas with the overwhelming majority of our revenue. In the second half of 2023, we will also reduce our cash OpEx run rate going into 2024 by at least 10%, which would be based on the expense run rate we had during the first quarter of 2023. Our focus will be to continue to build out our platform for our clients with renewed attention on innovation and scaling closer to our core. Going forward, our primary emphasis will be on our AI-enabled healthcare technology platform, which helps pharma acquire and onboard patients. This is the most differentiated and growth-oriented part of our business, one in which we have seen 186% year-over-year growth, and it is still climbing. We intend to keep it that way in the face of shifting markets and customer expectations by directing our efforts towards that part of the business that is best performing. Three years ago, we launched an RWD AI solution, enabling life science organizations to engage doctors at point of care. We have expanded our AI solutions this year to accommodate data sources that go beyond the traditional RWD and to incorporate digital mass media channels alongside a point of care to build a truly integrated healthcare-focused omnichannel platform, which is already producing excellent results for our clients. We have top pharma clients engaged and a pipeline here which will get us back to growth. In Q2, we closed three additional AI deals with our clients. Recall, we started this offering over three years ago, meaning we have been in the market longer than anyone in this space. More importantly, the wins are indicative of a rapid industry adoption of AI for customer engagement and the use of machine learning to digest, distill, and interpret massive datasets to drive valuable connections between doctors, patients, and manufacturers. This enables our customers to streamline precise engagement at scale and changes the dynamic of decision-making along the patient journey for patients and providers alike. We expect to see continued infusion of new data and customer scrutiny into the marketing approach. We have a head start here with both years of our own proprietary engagement data experience putting that alongside clinical data, and patent pending AI methods at the point of care to bring healthcare stakeholders together in support of better care. We are the company best positioned to even the playing field for pharma between traditional digital media, such as social and web, and provider focused engagement at the point of care. As we scale, we will help our clients be agile and data driven with their marketing efforts. While all of these changes have implication in the short term, we firmly believe that we are in the right space at the right time of a very nascent but growing AI movement as it relates to commercialization at point of care. Our long-term trajectory remains unchanged as per our update in the spring. In the near term, aside from differences between origination of proposals and the closing of deals, our pipeline remains very healthy And we currently have nearly 50 active contracted enterprise deals worth approximately 25 million. We are very excited about our new path forward as we differentiate ourselves from our competitors that don't have our point of care connectivity alongside AI at their disposal. We are choosing to focus on the fastest growth segment of business where we are ahead of the new market entrance. We believe AI driven engagement is an area that will come full circle in the next two to five years. and where we will become the market-leading, transforming standard industry best practices and being a true partner with our clients. Now with that, I'd like to turn the call over to our CFO and COO, Ed Stalmach, who will walk us through the financial details for Q2. Ed?

Thanks, Will. As with all our calls, the press release was issued with results of our second quarter and the June 30th, 2023. A copy is available for viewing and may be downloaded from the investor relations section of our website. And additional information can be obtained through our forthcoming 10Q. Second quarter revenue was $13.8 million, a slight decrease from the $14 million we generated in the same period in 2022. The decrease in revenue was primarily due to macro headwinds and program approval delays. Meanwhile, a gross margin decreased from 64.3% in the quarter ended June 30, 2022 to 56.6% in quarter ended June 30, 2023, slightly below the lower end of our previous annual gross margin guidance range. The decrease was due to solution and channel partner mix, including the impact of delayed decisions on our RWD AI programs, Given these dynamics, we're adjusting our gross margin range for the year from 58 to 62% to a new range of 55 to 59%. Our operating expenses remained relatively consistent year over year and came in at $12.7 million for the three months ended June 30th, 2023 versus $12.9 million for the same period in 2022. We had a net loss of 4.2 million, or 24 cents, per basic and fully diluted share for the three months ended June 30th, 2023, as compared to a net loss of 3.9 million during the same period in 2022. On a non-GAAP basis, net loss for the second quarter of 2023 was 0.2 million, or one cent, per basic and fully diluted share outstanding, as compared to a non-GAAP net income of 0.7 million, for $0.04 per basic and fully delivered share in the same year-ago period. Upgrading cash flow came in at a loss of $2.4 million for the quarter and was materially impacted by upfront integration fees paid to our channel partners, which are being amortized on our P&L over the life of the contract. Our balance sheet remains strong with cash and cash equivalents totaling $62.7 million on June 30, 2023, compared to $74.1 million on December 31, 2022. The majority of the decline was due to our share repurchase program, for which we bought back 526,999 shares of common stock for $7.5 million during the quarter. We remain well-capitalized to execute against our growth strategy and believe our balance sheet positions us to further invest in our core business while driving profitable growth. In addition, we are actively looking at M&A opportunities that fit within our strategic priorities as more attractive valuations were compared to last year. We remain confident in our long-term growth outlook. However, given current market conditions, we are revising our 2023 full-year revenue projections to come in between the mid-50 to low-60 million dollar range. Our new range is built around reasonable applications for existing backlog, mid-year upsells, and new program launch opportunities. Now let's turn to our KPIs for the second quarter of 2023, which have largely stabilized compared to the prior quarter. Average revenue per top 20 pharmaceutical manufacturer is stable at $2 million. It will continue to work with 18 of the top 20 largest pharma companies in the world. and 100% of the top 20 that don't have the majority of their sales tied to COVID-19 vaccines. Net revenue retention rate is showing improvement at 89% from 86% in Q1 2023. Meanwhile, revenues per FTE came in at 560,000, slightly below 605,000 in Q1 2023. As you can see from our KPIs, our sequential quarterly metrics are starting to show signs of stability and, in some cases, modest improvements as we continue to work our way through the external market dynamics. And now with that, I would like to turn the call back over to Will.