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spk04: Please stand by. Your program is about to begin. If you need audio assistance during today's program, please press star zero. Good afternoon, everyone, and thank you for joining OptimizeRx's second quarter fiscal 2024 earnings call. With us today is the Chief Executive Officer of OptimizeRx, William Thiebaud. He is joined by Chief Financial Officer, Ed Stillmock, President, Steve Silvestro, General Counsel Marion Odense Ford, and Senior Vice President of Corporate Finance Andrew DeSilva. 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 investor section of the company's websites. Now I'd like to turn the call over to OptimizeRx CEO, William Febo. Sir, please go ahead.
spk08: Thank you, operator. Good afternoon to everyone joining today's second quarter 2024 earnings call. While we welcome 36% year-over-year revenue growth, positive cash flow from operations, and a feed for adjusted EBITDA, we fell short on revenue expectations and consensus midpoints. This was primarily a result of a timing issue with one of our largest DAP deals to date. We are having success in converting our DAP pipeline into closed deals. However, because DAP is new, innovative solution in the market, there are additional approvals at the pharma customer level required to close out all the items that would allow us to take the revenue into the quarter. We were working hard with our client to get everything documented, but we didn't get it there before the end of the quarter. That said, we are building momentum with our clients and partners that have embraced our DAP solution and proprietary network, and this is getting us closer to being Pharma's preferred partner for brand marketing. As you're aware, Pharma as an industry runs all new commercial tactics through internal multifunctional approvals, particularly for multimillion-dollar deals, and we needed these additional approvals to close. In this particular instance, one of our longest standing clients committed to moving forward with approximately $6 million multi-brand DAP program that was due to launch in Q2 24 and got slightly delayed in their internal approval process. This customer is now nearly complete with its approval process and we expect full contract approvals to be completed in Q3 with conversion to revenue in the second half of 2024. I believe we would have surpassed consensus expectations on the top as well as the bottom had this timing shift not taken place. But the great news is that we're moving forward and the size of the transaction illustrates the power of the DAP platform. Our objective continues to remain very clear. to convert as many of the over 300 brands we currently support to DAP. And since the second half of 2023, we have made significant progress with this initiative and have seen tremendous momentum with our clients who want to convert to DAP. As the number of deals continues to grow, we have accumulated enough market pricing knowledge to establish a more consistent pricing mechanism as a way of making our revenue recognition less lumpy, stickier, and more consistent over time. We are in the process of rolling these changes out in Q3 as we continue along our evolution as a strategic partner to the top pharma companies in the world. In fact, We've seen a material separation between our top three pharma clients with average revenue per client at $9.7 million versus our top 20 pharma clients with an average revenue of $2.7 million, which we believe is a testament to the value our top clients see in our solutions as they continue to award larger share of their commercial wallet to optimize RX. While we are dealing with the timing issue, we are not seeing pull back from our clients on their spending in the second half of the year. Supported by an amazing team and a solid technology platform, our momentum is being driven by our ability to address our clients' largest challenge, to find and engage brand-eligible patients seamlessly. It's not just about purchasing media. It's about precise targeting with machine learning and a compliant methodology, which is delighting our clients and yielding positive ROIs to them. We are seeing continued customer adoption as pharma is looking for partners with scalable solutions with both HCP and DTC reach, interoperability across multiple points of care, and capability to accurately report insights back in a timely manner. Since the second half of 2023, we've seen accelerated success in converting the 300-plus brands that we support to DAPT. In the first half of 24, we closed 17 DAP deals, including eight in the second quarter, building on the 24 deals we closed in 23. These deals are direct farm engagements, which generally are more sticky, enjoy a very high ROI, have a higher gross margin for our business, and continue to support a higher annualized contract value of around $1 million. As we have said, tracking our ability to convert from tactical to DAP will provide a clear view of the longer-term growth potential of this business. Of note, we closed our first cross-sell for the DTC side of the business into a DAP program and enhanced our overall commercial team and leadership as well as approach to the second half for renewals, new launches, and year-end reallocations, not to mention all the planning for 2025 that takes place in the last four months of the year. We are ready with our best team to date. In addition, we have dozens of DAP deals in our pipeline, and as shared previously, approximately 50% is coming from the DTC side of the business, with numerous opportunities in late-stage negotiations. OptimizeRx remains a leading company with combined technologies to both create dynamic audiences and execute messaging across proprietary point-of-care network for our clients. We continue to see organic growth as the key driver of our business, The team is focused on executing against our thesis of driving more cross-selling to our TCC and HCP clients and continuing to fine-tune the platform to maximize its revenue potential. Given our traditional close rate and pipeline conversion, we have over an 80% view for our revenue guidance for the year at this point and have approximately 15 million GO-CAT remaining for the second half of the year. to fall within consensus current expectations. We believe this is possible. We will keep everyone up to date as we go through the year. And with that, I would like to turn the call over to our CFO, Ed Stalmach, who will walk us through our financial details. Ed.
spk06: Thanks, Will, and good afternoon, everyone. A press release was issued with the financial results of our second quarter, ended June 30, 2024, and 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 tent queue. Second quarter revenue came in at 18.8 million, an increase of 36% from the 13.8 million we recognized during the same period in 2023. Gross margin for the quarter increased from 56.6% in the quarter ended June 30th, 2023 The 62.2% in the quarter ended June 30, 2024. Year-on-year gross margin expansion is tied to higher DAP-related revenue as well as a favorable channel partner mix. Our operating expenses for the quarter ended June 30, 2024, increased by $2.7 million year-over-year, largely due to the Medics' cost acquisition. We had a net loss of $4 million, or 22 cents, per basic and fully diluted share for the three-month end of June 30th, 2024, as compared to a net loss of 4.1 million, or 24 cents, per basic and fully diluted share for the same three-month period in 2023. On a non-GAAP basis, our net income for the second quarter of 2024 was 0.3 million, or 2 cents, per fully diluted share outstanding. as compared to non-GAAP net loss of 0.2 million, or one cent, for a fully diluted share of spending in the same year-ago period. Adjusted EBITDA came in at 0.5 million gain for the second quarter of 2024, compared to a 0.8 million dollar loss during the second quarter of 2023. Operating cash flow came in at 2.9 million for the first half of 2024, and we ended the quarter with a $15 million cash balance, as compared to a $13.9 million balance on December 31st, 2023. The remaining principal of our debt financing currently stands at $37.3 million. If you recall, to help fund the $84.5 million cash portion of last October's MedicsHealth acquisition, the company took on a $40 million debt financing, and we paid off $2.7 million of principal through the second quarter of 2024. We continue to believe we're well-funded to execute against our operational goals. Now let's turn to our KPIs for second quarter of 2024. Average revenue per top 20 pharmaceutical manufacturers now stands at $2.7 million, and we work with all of the top 20 largest pharma companies in the world. Net revenue retention rate is showing improvement at 124%, up from 89% in Q2 2023. Meanwhile, revenue per FTE came in at 658,000, topping the 565,000 we posted in Q2 2023. We're encouraged by the continuing improvement in our KPIs as we move past the external market challenges and return to growth and profitability as a leader in our space.
spk07: And now with that, I'll turn the call back over to Will. Will? Hey, operator. Why don't we turn to Q&A? Thank you.
spk04: Thank you. And at this time, if you'd like to ask a question, please press the star 1 on your telephone keypads. You may remove yourself from the queue at any time by pressing star 2. Once again, that is star 1 to ask a question. We'll pause for just a moment to allow those questions to enter the queue. And while we wait, we'll take our first question from Ryan Daniels from William Blair.
spk02: Hey, guys. Thanks for taking the questions tonight. First one may be on the large client that was postponed. You didn't say it directly, but I assume that's stuck in medical legal review, number one. And number two, was there anything unique about this relative to other customers or the experience with this client in the past that caused that? What's the level of your conviction that this will definitely start up at least by the end of the third quarter so that you can see some revenue recognition?
spk08: Hey, Ryan, thanks. Good question. Yeah, we have complete conviction that it will start inside of Q3. The distinction here is how large it is, and obviously that is just very telling against outscaling the DAP solution. And not so much legal review, just process review. It's You know, as pharma gets their arms around language, around machine learning and marketing, it's new, and that needs to be reviewed. But it's gone very well. Obviously, we wanted it to happen faster. We always do. But high conviction, very meaningful, and it's with our largest standing, our longest-lasting client, which the team just gets really excited about.
spk02: Okay, that's very helpful, Culler. If we think about the sales pipeline, maybe a few questions related to that. Any change in regards to what you're seeing with appetite for HCP versus DTC? I think the DAP pipeline was kind of 50-50 last quarter. And then number two, I'm curious if you're also seeing more interest in bundles as you've kind of integrated the two offerings and really have brought to market the first bundle. integrated model for traditional digital media with point of care marketing.
spk08: Yeah, Steve, you want to grab that one?
spk03: Yeah, happy to. Hey, Ryan, thanks for the question. You know, we continue to see in the pipeline requests coming in now for opportunities to bid both on HCP and DTC connected activity. And I think that's something we're really excited about. We just participated in our third innovation platform with a top five client where the goal of that platform, the goal of the event was innovative ways to connect HCP and DTC marketing to drive efficiency. And as you know, we had won the last couple that we were in with what we've done with DAP. So very excited to see that go forward. And we see that same activity level reflected in the pipeline. I think the demand from the market is very, very clear. And I think pharma has really wrapped their head around creating efficiencies of bringing those two together. I think what they don't know yet, and we're all sort of waiting through it together as we go, is what execution looks like at scale, rather. And so we'll have more to report back on that next time we speak. But as you heard from Will's prepared comments, we've already closed the first HCP DTC cross-sell via DAP. So we're excited to now see how that goes and performs. And as with everything that we've seen in pharma together and over the last 20 years in my career, They'll do something, test it. If it works well, they'll scale it. That's consistent with what we've seen across the board in the business.
spk02: Okay. And then just in regards to the overlap with Medix, I know maybe two or three quarters ago you indicated it was about a 20% overlap. Given the integration of the asset in your sales, can you give an update on how that's trended so we can view what potential upsell, cross-sell opportunity is there? Thanks. Sure.
spk08: Yeah, I'd say there's been really good movement there. Relative to the closing of brands, as we've messaged, we expect a lot of that to really trigger in the second half because we're coming up – October will be the one-year anniversary. Everyone tells you it takes a year, even though you hope it takes a month. And we've seen – just great cooperation among the team. We've seen curiosity from the client, which drives meetings. And so I would say come Q3, we'll be able to sort of quantify that relative to the 20%. I can't do that today, but all signs are positive that the groups are working as a group and as a team, not as different groups. And we've done a good job with the training to make sure they feel they've got the the skills and the resources to represent everything we do.
spk02: Got it. All right, well, thanks for the questions. And, again, I know it fell short given a timing issue, but given that it's just timing, I'll still say congrats on the strong performance and the momentum you're seeing. Thanks.
spk07: Thanks, Ryan. Thanks, Ryan.
spk05: And next we'll go to Kyle Bowser with B. Reilly Securities.
spk10: Great. Thanks for taking my question. So just, Will, I think you mentioned in the prepared remarks that in relation to full-year guidance, you've got about 80% visibility in revenues with $15 million to go get. Can you maybe help put that into perspective? For example, you know, this time last year, how much incremental sales did you generate? Or, you know, maybe in another way, just trying to understand kind of your conviction here. Thank you.
spk08: Yeah, so strong conviction, otherwise wouldn't say it. The last year was a little bit of an anomaly because we actually saw business turn up faster than we thought. But generally we're between, you know, 75 and 85% at this point. So I feel good about where we are. You know, when you're scaling a new solution inside of a business, it's always, you know, there's always challenges like this timing. And also we bought a company last year, right, and we expect them to start to show some nice growth in the second half just based on some of the fine-tuning we've done around the team, the messaging, and the training. So strong conviction, not atypical of where we are, not tremendously better. Either I don't want to paint the wrong picture, but feel good about it.
spk10: Got it. Appreciate that. It's helpful. And then maybe two more questions. First, seasonality. I know we're kind of on track for doing about 60% of total sales in the back half of the year. So any color you can provide on kind of Q3, Q4 seasonality. And then separately, you've talked about streamlining reporting and analysis to kind of engage with executives and the data analytics teams. Can you talk about improvements here and how that's kind of been paying off by either winning follow-on projects or referrals, et cetera? Thank you.
spk08: Sure. Let me start with that second one first, and then maybe Andy can talk to the seasonality relative to the numbers. On the additional insights and automating insights, that is what we've really focused on over the last year is fine-tuning data and reporting. because the industry really adopted fully what we're doing in this space at Point of Care. And when they do that, they want every data point they can get, which is terrific. That's how they make their decisions. And so we've worked very hard to get to that point. In that process, we realized that, you know, 10 years doing something no one else has done gets you a lot of really unique skill set and data And as we invested in our team, the reporting team and the data stack and data management, we realized that we actually have some really interesting proprietary insights. Those are early days. Right now, we're focused on, you know, getting DAP to scale, getting DTC to grow, and bring those two together as a combined value prop and probably build you know, inside of RFP season is when we'll start to talk to clients about 25 relative to incremental insights. If it happens sooner, that'd be great, but we're not counting on that.
spk07: Yeah.
spk09: Yeah. As far as seasonality goes, um, roughly 25% at max, 30% of our full year revenue would be in the third quarter and then the remainder would fall into the fourth. So, um, yeah, that's pretty much the, the,
spk07: general cadence over the last few years. Got it. That's perfect. Well, thanks for taking my questions, and I'll jump back in queue.
spk05: Thank you. And next, we'll go to Max McAllis with Lake Street Capital. Please go ahead.
spk11: Hey, guys. Thanks for taking my questions. If we're looking at the size of your DAP deals in the pipeline, so the $6 million DAP deal you mentioned this quarter, I mean, have you seen material change, I guess, in the level or the size of DAP deals going forward in the pipeline? And then I guess on top of that, if we look at your top 20 customers, top three are spending $9.7 million and the average at $2.7 million. Have you seen that average creep up, I guess, going forward? Do you expect that to creep up going forward with the remaining 17 pharmaceutical companies? Thanks.
spk08: So, yeah, you know, it's interesting. I think the DAP size is proportional to our tenure with clients, right? There's just more trust, more adoption, and they were some of the early adopters. And those would clearly fall in the top three, so it kind of answers both. We're seeing – and that's why we called it out. We're seeing, you know, quite a big difference between the top three average and our top 20. And, you know, our job is pretty straightforward. You know, get the other 17 – to do the same thing and we're a much bigger business. So, you know, when we talk about converting our 300 plus brands to, you know, DAP related that's, that is the mission. It's very straightforward. Steve, any other color you want to put on that relative to the process and how it's going?
spk03: Yeah, I would just add that the 6 million was not for one single DAP deal. It was several deals. So with the same client, same multiple assets supporting in line, And then the other thing I would say is ACV continues to be either consistent or ticking up, Max. And I think that was one of the questions that you asked. So it's very consistent and linear in terms of the progress that we're seeing. But what we're seeing, we're seeing an acceleration of interest. And I think that's what, you know, you're hearing the positivity in our voice because of the acceleration of interest. And as Will said, it's pretty clear. We know what we need to do. We just need to be about it, so to speak.
spk07: But good, good questions. All right. Thanks, guys. That's it for me.
spk04: And, ladies and gentlemen, as a reminder, that is star one for a question. We'll next go to Stephanie Davis with Barclays.
spk01: Hey, guys. This is Anna Krasinski on for Stephanie. Thank you for taking our questions. I was wondering if we could talk a little more about the cross-sales into the Med-X customer base and just more on how that's trended versus your expectations and how if you think you have adequate sales headcount to block and tackle all of these prospects, or if there are more investments as part of your forward strategy. Thank you.
spk08: Steve, you want to grab that one?
spk03: Yeah, happy to. Thanks for the question. I think what we've seen is good integration and teamwork between the teams as far as approaching clients. We definitely are fully staffed right now. We've hired several additional sales folks, which I think are reflected in the numbers that are from key competitors that Medix had that are sort of top performing businesses in the space. So we feel really good about the talent that is on board and working on behalf of the business. At this point, I think it really is just about focusing and we spent the first half of the year investing in getting those people on board, making sure that we were appropriately staffed, trained, et cetera. I think we'll start to see the fruits of that bear coming. in the second half. And so our confidence is very strong in the medics business performing well in the second half. In terms of first half performance, I think it's about where we expected it to be, maybe a little bit behind. As Will said, we all want to microwave success when we first acquire something. It's never really as easy as we think it's going to be in spite of our best efforts. So We continue to work on it. We've got great leadership on it, and we'll continue to chop the wood.
spk01: Got it. That's super helpful. Thank you. And then just as a quick follow-up, so last quarter you talked about, like, the macro stabilizing. And just curious, given, like, the recent volatility in the market, is this trend still intact or if you have any sort of updated macro forecast to share?
spk08: Nothing more than we said in the prepared remarks, just that we're not seeing a pullback. You know, the headwinds that we had a year ago are largely gone. FDA is cranking. You know, pharma is very focused on allocating funds to digital reach and measuring it, make sure it's scalable and effective. You know, we have an election coming up. I think that that won't largely affect pharma spending. Certainly, if we were, you know, all media only, you could argue there's sometimes a squeeze around that time, but we don't see that impacting our business.
spk01: Got it. Super helpful. Thanks, guys.
spk07: Have a good day, Anna. Take care.
spk05: Thank you. And I'd like to turn the call back to our speakers for any closing remarks.
spk07: Terrific.
spk08: Thank you, Operator, and thanks, everyone, for joining us today. While we needed to address a timing issue during the second quarter with our largest client buying more DAP, as a team, we're excited with the positive momentum and the impactful platform that we've built in this market. We're evolving to be a much stronger place than a year ago, and that's what motivates us as a team. Our collaboration with pharma manufacturers to reach healthcare professionals and patients is meaningful in the market. fueled by our innovative AI-generated models, proprietary data sets, and a decade of point-of-care marketing. This market advantage helps us address and overcome many challenges. Today, we proudly offer a comprehensive solution that integrates various components into agile, powerful, AI-enabled commercialization strategies. These strategies effectively tackle crucial issues, such as brand awareness, education, affordability, and the recruitment of hard-to-find patients. These are daily challenges our clients, doctors, and patients face in the current healthcare environment, and we're thrilled to be part of that solution. Our dedication to supporting doctors and patients and aligning on quality of care is a driving force behind our team and our culture. We look forward to connecting with everyone in the upcoming investor events and our next earnings call. We will provide updates on our annual outlook if there is any changes to our current guidance range. Thank you for your time and belief in the OptimizeRx team. Thank you. Operator?
spk04: Thank you, sir. Before we conclude today's call, I'd like to provide the company's safe harbor statement that includes important cautions regarding forward-looking statements made during today's call. Statements made by management during today's call may be contained forward-looking statements within the definition of Section 27A and the Securities Act of 1933, as amended, and Section 21E of the 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 expressions identify forward-looking statements. They may speak only to the date that such statements are made. Such forward-looking statements in this call include statements regarding estimation of total addressable market size, market penetration, revenue growth, gross margin, operating expenses, profitability, cash flow, technology, investments, growth opportunities, acquisitions, upcoming announcements, and the need for raising additional capital. They also include the management's expectations for the rest of the year and adoption of the company's digital health platform. 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 effects of government regulation, competition, and other material risks, risks and uncertainties to which Forward-looking statements are subject to, could affect business and financial results, and are included in the company's annual report on Form 10-K for the quarter ended December 31, 2023. Its subsequent quarterly reports on Form 10-Q and its other filings with the Securities or Exchange Commissions. These forms and filings are 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 this call will be available for replay via webcast only. starting later this evening, running through for a year. Please refer to today's press release for replay instructions available via the company's website at www.optimizerx.com. Thank you for joining us today. This concludes today's conference. You may disconnect your lines.
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