OptimizeRx Corporation

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.

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.

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.