OptimizeRx Corporation

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 earning 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 has been 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, and 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 to 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 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 ScriptLift 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're 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 wanna 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 healthcare providers directly at the point of care. Building on this foundation, we have combined our unmatched network with a purpose-built omni-channel technology platform with leading patient finding capabilities through DAP 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 lifecycle. 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 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 to one, and script lifts 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. And with that, I'd like to turn the time over to our CFO, Ed Stelmak, who will walk us through our financial details. Ed?

Thanks, Steve, and good afternoon, everyone. As with all our calls, the press release was issued this afternoon with the results of our first quarter ended March 31st, 2025. A copy is available for viewing and may be downloaded from the best of relations section of our website. And additional information can be obtained through our forthcoming 10Q. 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 31st, 2024, to .9% in quarter ended March 31st, 2025. -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 31st, 2025, decreased $1.8 million -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 12 cents for basically in the Luttre share, where the three months ended March 31st, 2025, as compared to a net loss of 6.9 million or 38 cents per basic and Luttre share to 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 eight cents per Luttre share, as compared to a non-GAAP net loss of 2 million or 11 cents per Luttre share in the same year-goal 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 31st, 2024. Our debt balance currently stands at $33.8 million, and we paid off 6.2 million of principal 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 contractor 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 as 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 from a serial 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, topping 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. And 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.

Thank you. We will now begin the question and answer session. To ask a question, you may press star, then one, on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star, then two. At this time, we will pause momentarily to assemble our roster. The first question comes from Ryan

Daniels with William Blair, please go ahead. Thank you. Guys, did

you hear the

question?

No. We

couldn't hear the question, sorry. We couldn't

hear anything, yeah. Sorry about that. Thanks for taking the question and congrats on the strong performance. And I hate to ask this because you 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 two, 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, thanks. Thanks

for the question. We've not seen really any pullback from our clients. We are getting real-time information and updates as we're kind of 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. You know, jury's 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 sort of pullback 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, I know that's super helpful, Coler, actually. And then can you remind us when you move to subscription-based revenue, upon removal, how does that impact the revenue recognition over a 12-month period in the margins? I'll leave it there. How does it really impact margins in RevRec if we think about the total revenue?

It'd be more, I'll take a stab at it and ask. Oh, go ahead, you take it, go ahead.

Yes, sir, on the phone. Hey, Ryan. Yeah, basically, I mean, it's relatively simple. It kind of spreads your revenue over a 12-month period. It takes the dollars associated with subscription-related solutions and services and spreads those over the course of the year.

Okay, but it doesn't dilute. You're not giving me.

It's actually accredited to us because of the revenue share perspective. We kind of keep most of that revenue to ourselves and the cost of sales for that revenue is pretty low.

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

Yeah, we're certainly working on trying to increase that above the low 60% mark, but right now, our kind of make-up for our portfolio is such that when we do have some solutions that are a little bit lower on the margin side, you'll see that sort of dilution. The good news is we're diversified enough where none of our solutions really will have an impact with that material at this point, so we feel pretty comfortable with the current range. Okay.

Yeah, Ryan, so what we 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. Okay,

perfect. Thanks a lot, guys, appreciate it. Yeah, good to hear your voice, Ryan. Thanks for the questions.

Thank you. The next question comes from David Grossman with Stiefel. Please go ahead.

Thank you very much. I think in your prepared remarks, I think Steve, you said that, or maybe it was Ed, that you had $70 million in committed revenue and I assume you're speaking to visibility on the year and that was up 25%, so just back the envelope of math, does that suggest that you've got a little over 70%, about 70% visibility today, this point in the year versus 60% last year? Did I get that right?

Yeah, it's north of 80.

Yeah, you're in the ballpark, it's north of 80 where we currently sit, that's what's in the prepared remarks and you're in the ballpark, David.

Okay, so we're on with the timing, but. So 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. So what Steve just said

was where we're at right now. Was in the release. Yeah, it was in the release. So just on an apples to apples basis, it sounds like you're up about 10 points though at the end of March in terms of visibility on the year, right?

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

Gotcha, and then in terms of the amount or how much more revenue we can convert to subscription, you know, kind of just think about it over the balance of the year, how should we think of how that 5% may migrate? Yeah,

I mean, just think about it. Go ahead, Steve. Go ahead, Ed. Yeah, I guess. Yeah, think about it.

Sorry, I've got

a delay. Go ahead, Ed. No, you go, go ahead. 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. So versus, you know, we've had in the past where most of our revenue was, you know, one year in tenure or less. Hopefully subscription will have a little bit more of a life cycle to it. So we're hoping current percentage will continue to grow and expand and it will smooth out our revenue recognition over time.

So as we think about 25. You can think about,

David, you can think about it in terms of all of the gap business and the audience business. So all the components of data, both from the legacy medics business that's producing audiences, as well as the data business coming out of DAP. So 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 role continue to be transactional over time. And so that's kind of the target. That'd be the high water mark. And yeah, 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, lots of work to chop.

So thanks for that, Steve. Can you just remind us what percentage of revenue is represented by the data business?

We don't break it out that way. We're breaking out sort of the DAP 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 kind of decline, but anything to call out on what may be impacting the NRR sequentially?

Yeah, I can take that question. So we talked about this on the last call. It's a trailing 12-month look. So now we're running into trailing 12-month comps year over year that have the benefit of medics, the acquisition. And so as you go more into time, there's just more medics revenue in the year over year comp. So it becomes less favorable over year over year comp on NRR, that's all. Got it.

All right, guys, thanks for the job. Thanks very much. Thanks, David. Great to talk to you.

Thank you. The next question comes from Richard Baldry with Roth Capital, please go ahead.

Thanks. Just back to the NRR, I'm sort of 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 it counts for the upper end of revenue guide. So I just wanna make sure I know this. Nothing else has an incremental headwind in the second half.

Well, NRR, like we said,

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 five to 15% of our business every year comes from new logos. And so obviously NRR, the maximum we grow, if you went through 15% would be an NRR of 115%. So if five to 10% or five, 15% of our business comes from new logos, by the end of the year, you'll be about 100%. So we made the acquisition in October of 2023 of Medics. So it's a trailing 12 months look back comparison. So even at the first quarter of 2024, the trailing 12 months there, we didn't have a full year of Medics as a reported entity.

Got it.

And when

we look at the OpEx side now, it had to come down pretty substantially. So 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 OpEx, we had about five million out of it last year, as you know, about the fourth quarter, right? So we're at a good, I think, run rate now. We don't really need to take more out and I don't think we'll need to add more. So I think what we've demonstrated here is

how do you feel for your time?

Yeah,

that's Richard. I think Steve was breaking up a bit on my end.

Yeah, I broke up a little at the end. I think I got it. You

got it,

okay. I'm curious. Then in terms of new business, you talk about sort of how RFP season played out on the DTC side and how you view sort of new wins on that side of the table. And then I think you gave the number last quarter of paying DAP 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 DAP side. Yeah, I can take the DAP

question. So we're 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 we're getting or anything like that. That was just really to show initial adoption. And then, I mean, 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.

Yeah, just to sort of double down on that, Rich, hopefully you can hear me okay. I'm not sure what the signal was cutting there for a second, but DAP continues to perform at the same speed as it was before. So everything's sort of in line. As Andy said, we're not gonna 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.

Right,

thanks.

Thank you. The next question comes from Maxwell Michalis with Lake Street Capital Markets. Please go ahead.

Hey guys, thanks for taking my question. Great job of the quarter. When we look at Q2, now we're about halfway through now, should we expect typical seasonality, Q1 to Q2 pretty much flat? Are you seeing demand here, more outsized demand here in Q2 and we should expect sequential growth? No, you guys didn't give quarterly guidance, but maybe directionally you can help. Thanks for taking my question.

Yeah, sure, happy to do it Max and thanks. Andy, why don't you take that one?

Yeah, we would expect a small step up sequentially. You know, first half of a year revenue is typically between 35 and 45% of full year revenue. So I think we're in

a pretty good pace compared to historicals.

Michael, I hope that answers your question. Yep, that was awesome. Great, thank you.

The next question comes from Constantine Davidis with Citizen, please go ahead.

Thanks, I just wanted to maybe drill into the pipeline a little bit more and kind of 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 kind of curious if we can get a little more color on kind of what's in the pipe. Hey

Constantine, good to hear from you. I'll give the first couple of answers and then ask Andy and Ed to chime in. But 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 pace, 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 quality's improved and our data's been better, so that's been helpful. And we've seen those pieces of the business go. And then Andy, Ed, 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. Not sure what's going on on the call side, but Andy, Ed, anything else to add in there for Constantine?

Yeah, we're not gonna 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 or are they just sort of 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 kind of 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 gonna 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'll be an enormous win for the business.

Understood. And then I guess 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, thanks.

Yeah, so it's worth about investing more to get to the top end. We feel pretty confident that with the backlog buildup and some of the tailwinds we're experiencing now, we'll get to that number. Really the hedge there is around gross margin. The mix of solutions is one thing that is not as predictable. So we're probably betting on a little bit of a more conservative number on the gross margin side of the business, but OPEC's more or less being

kind

of set for the year.

Thank you. The next question comes from Jeff Garo with three fins. Please go ahead.

Yeah, good afternoon and thanks for taking the questions. 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? Thanks.

Yeah, I'm happy to take that one and then let Ed and Mandy chime in as well, but and thanks for the question, Jeff. So 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 sort of the delta. So that's the difference between the guidance and the visibility that we've got or the top end of that guidance and 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. Eddie, Andy, anything else you'd want to chime in on?

No, I think you've got the gist of it. I would just say again, pipeline is building with the quality of the pipeline. We're staying on top of operational execution, as I said, at the beginning of the year. So there's definitely a very strong hyper-focus in making sure that we have conversion that takes place within the quarter, drive that revenue earlier. So we feel pretty confident that we'll be able to get that remaining 20% and then

some this year.

Understood, I appreciate that. And one more for me, maybe back to the topic of gross margins and the mix involved there. We're 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 comment about the gross margin percentage in the quarter being down a little bit year over year from an increase in managed services. So maybe it's really around the appetite for customers to kind of rebound demand for that managed service offering versus it going one way towards data subscriptions. Thanks.

Go

ahead, Ed. Yeah, look, I mean, 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 what's happening. Our current gross margin profile is right there where it needs to be. And we feel like as the year goes on, we should see more and more of the expansion take place. And certainly as part of the rule of 40, kind of ramp up margin expansion as part of the equation.

Jeff, I'd also add to that, part of what we're trying to capitalize on is a flywheel effect within the business. 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, it will positively impact the gross margin over time. There's no rev 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 in that data as a key component of our business. So you'll expect to hear more updates from us on that as we go.

Great, thanks again for taking the questions.

Yeah, great questions.

Thank

you.

Thank you. This concludes our question and answer session. I would like to turn the conference back over to Mr. Silvestro for any closing remarks.

Yep, 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 and Section 21E of Securities Act of 1934 as amended. This forward-looking statement should not be used to make investment decisions. The words anticipate, estimate, expect, possible, and seeking, and similar expression identify forward-looking statements. They may speak only to the date that such statements are made. The 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 suppression-based model, achieving our goals to help patients stay present throughout the patient care journey across our integrated HCP and TTC businesses, initiative 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 risk 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 risk and uncertainties to which forward-looking statements are subject to include, but are not limited to, the effects 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 risk. Risk 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 10K for the year end December 31st, 2024, and in other filings the company has made and may take with the SEC in the future. This filing when 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 investor section of the company's website. Thank you for joining us today. This concludes today's conference call. You may now disconnect your lines.